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<SEC-DOCUMENT>0000950131-02-000853.txt : 20020415
<SEC-HEADER>0000950131-02-000853.hdr.sgml : 20020415
ACCESSION NUMBER:		0000950131-02-000853
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020312

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NORTHERN TRUST CORP
		CENTRAL INDEX KEY:			0000073124
		STANDARD INDUSTRIAL CLASSIFICATION:	STATE COMMERCIAL BANKS [6022]
		IRS NUMBER:				362723087
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-05965
		FILM NUMBER:		02573015

	BUSINESS ADDRESS:	
		STREET 1:		50 S LASALLE ST
		CITY:			CHICAGO
		STATE:			IL
		ZIP:			60675
		BUSINESS PHONE:		3126306000

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NORTRUST CORP
		DATE OF NAME CHANGE:	19780525
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              --------------------

                                    FORM 10-K

[X]              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
- --------------------------------------------------------------------------------

                   For the fiscal year ended December 31, 2001

                                       OR

[_]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

            For the transition period from ___________ to __________

                           Commission File No. 0-5965

                           NORTHERN TRUST CORPORATION
             (Exact name of registrant as specified in its charter)

                Delaware                                         36-2723087
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                          Identification No.)

        50 South La Salle Street
            Chicago, Illinois                                       60675
(Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code: (312) 630-6000
                            ------------------------
        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                        Common Stock, $1.66 2/3 Par Value
                            ------------------------
                         Preferred Stock Purchase Rights
                            ------------------------
  Floating Rate Capital Securities, Series A of NTC Capital I, and Series B of
                                 NTC Capital II
             Fully and Unconditionally Guaranteed by the Registrant
                            -------------------------
                  Floating Rate Junior Subordinated Debentures,
                     Series A and Series B of the Registrant
                                (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[X] No [_]

     Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

     At February 12, 2002, 221,643,659 shares of Common Stock, $1.66 2/3 par
value, were outstanding, and the aggregate market value of the Common Stock
(based upon the last sale price of the common stock at February 12, 2002, as
reported by The Nasdaq Stock Market) held by non-affiliates was approximately
$10,750,199,210. Determination of stock ownership by non-affiliates was made
solely for the purpose of responding to this requirement and the registrant is
not bound by this determination for any other purpose.

     Portions of the following documents are incorporated by reference:

          Annual Report to Shareholders for the Fiscal Year Ended December 31,
     2001 - Part I and Part II

          2002 Notice and Proxy Statement for the Annual Meeting of Stockholders
     to be held on April 16, 2002 - Part III

================================================================================


<PAGE>

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                      [THIS PAGE INTENTIONALLY LEFT BLANK]




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                           Northen Trust Corporation

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
<S>          <C>                                                                                          <C>
PART I
Item 1       Business...................................................................................   4

             Supplemental Item-Executive Officers of the Registrant.....................................  24

Item 2       Properties.................................................................................  25

Item 3       Legal Proceedings..........................................................................  25

Item 4       Submission of Matters to a Vote of Security Holders........................................  25


PART II
Item 5       Market for Registrant's Common Equity and Related Stockholder Matters......................  26

Item 6       Selected Financial Data....................................................................  26

Item 7       Management's Discussion and Analysis of Financial Condition and Results of Operations......  26

Item 7A      Quantitative and Qualitative Disclosures About Market Risk.................................  26

Item 8       Financial Statements and Supplementary Data................................................  26

Item 9       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......  26


PART III
Item 10      Directors and Executive Officers of the Registrant.........................................  27

Item 11      Executive Compensation.....................................................................  27

Item 12      Security Ownership of Certain Beneficial Owners and Management.............................  27

Item 13      Certain Relationships and Related Transactions.............................................  27

PART IV
Item 14      Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................  28

Signatures..............................................................................................  30

Exhibit Index...........................................................................................  31
</TABLE>

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                                     PART I
Item 1-Business

                           NORTHERN TRUST CORPORATION

     Northern Trust Corporation (Corporation) was organized in Delaware in 1971
and that year became the owner of all of the outstanding capital stock, except
directors' qualifying shares, of The Northern Trust Company (Bank), an Illinois
banking corporation headquartered in the Chicago financial district and the
Corporation's principal subsidiary. The Corporation also owns national bank
subsidiaries 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 an investment management company owned through the Bank,
a securities brokerage firm, an international investment consulting firm and a
retirement services company. The Corporation expects that, although the
operations of other subsidiaries will be of increasing significance, the Bank
will in the foreseeable future continue to be the major source of the
Corporation's assets, revenues and net income. Except where the context
otherwise requires, the term "Northern Trust" refers to Northern Trust
Corporation and its consolidated subsidiaries. Northern Trust has not utilized
unconsolidated special purpose entities in order to provide financing, improve
liquidity, transfer assets or manage credit risk.

     At December 31, 2001, Northern Trust had consolidated total assets of
approximately $39.7 billion and stockholders' equity of approximately $2.8
billion. As of December 31, 2001, Northern Trust was the third largest bank
holding company in Illinois and the 26th largest in the United States based on
consolidated total assets on that date.

                           THE NORTHERN TRUST COMPANY

     The Bank was founded by Byron L. Smith in 1889 to provide banking and trust
services to the public. Throughout its 113 years, the Bank's growth has come
primarily from internal sources rather than through merger or acquisition. At
December 31, 2001, the Bank had consolidated assets of approximately $32.8
billion and common equity capital of approximately $2.0 billion. At September
30, 2001, the Bank was the third largest bank in Illinois and the 36th largest
in the United States, based on consolidated total assets of approximately $28.6
billion on that date.

     The Bank currently has 19 banking offices in the Chicago area and the
following active wholly-owned subsidiaries. Northern Trust Investments, Inc.
provides investment management services and products to domestic and
international institutional clients. Norlease, Inc. conducts leasing and
leasing-related lending activities. MFC Company, Inc. holds properties that are
received from the Bank in connection with certain problem loans. NT Mortgage
Holdings LLC, a real estate investment trust, holds a 100% participation in a
significant portion of the Bank's residential mortgage portfolio, and its
parent, NTG Services LLC, conducts market and other studies for the Bank's
global businesses. Nortrust Nominees Limited, located in London, is a United
Kingdom trust corporation organized to hold United Kingdom real estate for
fiduciary accounts. The Northern Trust Company U.K. Pension Plan Limited,
located in London, was established in connection with the pension plan for the
Bank's London Branch. The Northern Trust Company, Canada, located in Toronto,
offers institutional trust products and services to Canadian entities.

     Also a subsidiary of the Bank, The Northern Trust International Banking
Corporation in New York is an Edge Act corporation organized for the purpose of
conducting international business. Its business is conducted through the
following subsidiaries. Northern Trust (Ireland) Limited, through its three
principal subsidiaries, provides trust, custody, fund administration, fund
accounting and shareholder registration services to international fund sponsors
offering off-shore investment funds. Northern Trust Global Investments (Europe)
Limited provides investment management services to institutional clients in the
United Kingdom and continental Europe. The Northern Trust Company of Hong Kong
Limited provides securities lending and relationship servicing for large asset
custody clients in Asia and the Pacific Rim. Northern Trust Trade Services
Limited facilitates the issuance and processing of commercial letters of credit
in Hong Kong. Northern Trust Fund Managers (Ireland) Limited facilitates the
offering of off-shore collective investment products to institutional clients.

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                                       4

<PAGE>

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                  OTHER NORTHERN TRUST CORPORATION SUBSIDIARIES

     The Corporation's Florida banking subsidiary, Northern Trust Bank of
Florida N.A., at December 31, 2001 had 27 offices located throughout Florida and
consolidated total assets of approximately $4.7 billion. The Corporation's
Arizona banking subsidiary, Northern Trust Bank, N.A., at December 31, 2001 had
consolidated total assets of approximately $920 million and served clients from
nine office locations in Arizona. The Corporation's Colorado banking subsidiary,
Northern Trust Bank of Colorado, was acquired in 1998 and, effective February
18, 2002, was merged into Northern Trust Bank, N.A. Its one location is in
Denver and, at December 31, 2001, it had consolidated total assets of
approximately $99 million. The Corporation's Texas banking subsidiary, Northern
Trust Bank of Texas N.A., had seven office locations and consolidated total
assets of approximately $820 million at December 31, 2001. At December 31, 2001,
Northern Trust Bank of California N.A., the Corporation's California banking
subsidiary, had 11 office locations in California and consolidated total assets
of approximately $1.1 billion. The Corporation's Federal Savings Bank
subsidiary, Northern Trust Bank, FSB, commenced operations in 1998. It currently
has branch offices in Michigan, Missouri, Washington and Wisconsin and trust
offices in Nevada and Ohio. At December 31, 2001, Northern Trust Bank, FSB had
consolidated total assets of approximately $232 million.

     The Corporation has several nonbank subsidiaries. Among them is Northern
Trust Securities, Inc., which provides full brokerage services to clients of the
Bank and the Corporation's other banking and trust subsidiaries and selectively
underwrites general obligation tax-exempt securities. Northern Trust Retirement
Consulting, L.L.C. is a retirement benefit plan services company in Atlanta,
Georgia. Northern Trust Global Advisors, Inc., in Stamford, Connecticut, is an
international provider of institutional investment management services and is
the parent of The Northern Trust Company of Connecticut. Northern Investment
Corporation holds certain investments, including a loan made to a developer of a
property in which the Bank is the principal tenant. The Northern Trust Company
of New York provides security clearance services for all nondepository eligible
securities held by trust, agency, and fiduciary accounts administered by the
Corporation's subsidiaries. Northern Trust Cayman International, Ltd. provides
fiduciary services to certain clients residing outside of the United States.

                              INTERNAL ORGANIZATION

     Northern Trust, under Chairman and Chief Executive Officer William A.
Osborn, organizes client services around two principal business units: Corporate
and Institutional Services and Personal Financial Services. Two other business
units provide services to the two principal business units: Northern Trust
Global Investments, which provides investment management products, and Worldwide
Operations and Technology, which provides trust and banking operations and
systems activities. The presidents of all four business units report to
President and Chief Operating Officer Barry G. Hastings. A Risk Management unit,
which focuses on financial and risk management, reports directly to Mr. Osborn.

     The following is a brief summary of each unit's business activities.

Corporate and Institutional Services (C&IS)

     Headed by Peter L. Rossiter, President - Corporate and Institutional
Services, 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. At December 31, 2001, total assets under administration,
excluding personal trust assets, were $1.5 trillion, of which $236 billion were
managed.

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                                       5

<PAGE>

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     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
other products and services to accelerate cash collections, control disbursement
outflows and generate information to manage cash positions. In June 2001,
Northern Trust sold an 80% interest in its lockbox operations for which it
received cash, and formed a joint venture with Fiserv, Inc. in connection with
that sale to provide receivables management or lockbox services to Northern
Trust for its clients. The venture plans to expand by selling services to
additional financial institutions.

Personal Financial Services (PFS)

     Headed by Mark Stevens, President - Personal Financial Services, PFS
encompasses personal trust and investment management services, estate
administration, banking (including private banking) and residential real estate
mortgage lending. PFS services are delivered through the Bank in Illinois and
also through a network of national bank subsidiaries with offices in Arizona,
California, Colorado, Florida and Texas, and a federal savings bank subsidiary
with branch offices in Michigan, Missouri, Washington and Wisconsin and trust
offices in Nevada and Ohio. During the year, Northern Trust opened the Weston
and Belleair Bluffs offices in Florida and expanded or remodeled several
existing PFS offices. It is currently estimated that there will be approximately
100 PFS offices operating within as many as 15 states by the end of 2005. PFS is
one of the largest bank managers of personal trust assets in the United States,
with $94 billion in assets under management and $167 billion in assets under
administration at December 31, 2001.

     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 generally exceeding $100 million
are served through its Wealth Management Group.

Northern Trust Global Investments (NTGI)

     Headed by Stephen B. Timbers, President - Northern Trust Global
Investments, NTGI, through various subsidiaries of the Corporation, provides a
broad range of investment management and related services and products to
clients of C&IS and PFS. 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. In 2001, NTGI strategically expanded its equity and fixed income
product lines, and introduced 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. NTGI's activities also
encompass brokerage, securities lending and related services.

     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 an 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.

Worldwide Operations and Technology (WWOT)

     Headed by James J. Mitchell, President - Worldwide Operations and
Technology, WWOT supports all of Northern Trust's business activities, including
the sales, relationship management, asset management, securities lending,
transaction processing and product management activities of C&IS, PFS and NTGI.
These activities are conducted principally in the operations and technology
centers in Chicago and London. The Northern Trust Company of New York is also
part of this unit.

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                                       6

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Risk Management

     The Risk Management Unit, headed by Vice Chairman and Chief Financial
Officer Perry R. Pero, includes the Credit Policy and Treasury functions. The
Credit Policy function is described in the sections of the Annual Report to
Shareholders for the year ended December 31, 2001 referenced on page 49. 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 under the direction of the Corporate Asset and
Liability Policy Committee. 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.

     The Risk Management Unit also includes the Corporate Controller, Corporate
Treasurer, Investor Relations and Economic Research functions.

                               GOVERNMENT POLICIES

     The earnings of Northern Trust are affected by numerous external
influences. Chief among these are general economic conditions, both domestic and
international, and actions that the United States and foreign governments and
their central banks take in managing their economies. These general conditions
affect all of the Northern Trust's businesses, as well as the quality, value and
profitability of their loan and investment portfolios.

     The Board of Governors of the Federal Reserve System is an important
regulator of domestic economic conditions and has the general objective of
promoting orderly economic growth in the United States. Implementation of this
objective is accomplished by its open market operations in United States
Government securities, its setting of the discount rate at which member banks
may borrow from Federal Reserve Banks and its changes in the reserve
requirements for deposits. The policies adopted by the Federal Reserve Board may
strongly influence interest rates and hence what banks earn on their loans and
investments and what they pay on their savings and time deposits and other
purchased funds. Fiscal policies in the United States and abroad also affect the
composition and use of Northern Trust's resources.

                                   COMPETITION

     Northern Trust's principal business strategy is to provide quality
financial services to targeted markets in which it believes it has a competitive
advantage and favorable growth prospects. As part of this strategy, Northern
Trust seeks to deliver a level of service to its clients that distinguishes it
from its competitors. In addition, Northern Trust emphasizes the development and
growth of recurring sources of fee-based income and is one of a select group of
major bank holding companies in the United States that generates more revenues
from fee-based services than from net interest income. Northern Trust seeks to
develop and expand its recurring fee-based revenue by identifying selected
markets with good growth characteristics and providing a high level of
individualized service to its clients in those markets. Northern Trust also
seeks to preserve its asset quality through established credit review procedures
and to maintain a conservative balance sheet. Finally, Northern Trust seeks to
operate with a strong management team that includes senior officers having broad
experience and long tenure.

     Active competition exists in all principal areas in which Northern Trust
presently engages in business. C&IS is a leading provider of master trust and
custody services. The primary providers in this market, in addition to Northern
Trust, are State Street Corporation, The Bank of New York Company, Inc., Mellon
Financial Corporation, J. P. Morgan Chase & Co., Deutsche Bank A.G. and
Citigroup Inc. In providing commercial banking and treasury management services,
Northern Trust competes with domestic and foreign banks. Within the middle
market segment, Northern Trust's competitors are primarily other Chicago banks,
including Bank One Corporation, LaSalle Bank N.A., and Harris Bankcorp, Inc.
Credit services, especially those provided to Fortune 500 companies, face
increased competition due to the general trend for corporations to rely more
upon direct access to the credit and capital markets (such as through the direct
issuance of commercial paper) and less upon traditional financial intermediaries
such as commercial banks.

     PFS competition is specific to each geographic market, but typically
consists of local banks and trust companies, brokerage firms, mutual fund firms
and asset management companies. In the Chicago area Northern Trust has the
leading share of the personal trust market.

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                                       7

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                           REGULATION AND SUPERVISION

Bank Holding Company Act

     The Corporation is a bank holding company subject to the Bank Holding
Company Act of 1956, as amended (the BHCA), and to regulation by the Board of
Governors of the Federal Reserve System. The BHCA limits the activities which
may be engaged in by the Corporation and its nonbanking subsidiaries to those so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. Also, under section 106 of the 1970 amendments to the BHCA and
subject to certain exceptions, subsidiary banks are prohibited from engaging in
certain tie-in arrangements with nonbanking affiliates in connection with any
extension of credit or provision of any property or services.

     The BHCA also prohibits bank holding companies from acquiring substantially
all the assets of or owning more than 5% of the voting shares of any bank or
nonbanking company which is not already majority owned without prior approval of
the Board of Governors.

Gramm-Leach-Bliley Act

     Enacted in late 1999, the Gramm-Leach-Bliley Act (the GLB Act)
significantly changed financial services regulation by expanding permissible
nonbanking activities of bank holding companies and removing certain barriers to
affiliations among banks, insurance companies, securities firms and other
financial services entities. These activities can be conducted through a holding
company structure or, in the case of many of these activities, through a
financial subsidiary of a bank. The GLB Act also establishes a system of federal
and state regulation based on functional regulation, meaning that primary
regulatory oversight for a particular activity generally resides with the
federal or state regulator designated as having the principal responsibility for
that activity. Banking is supervised by banking regulators, insurance by state
insurance regulators and securities activities by the Securities and Exchange
Commission (SEC) and state securities regulators. The GLB Act also establishes a
minimum federal standard of financial privacy by, among other provisions,
requiring banks to adopt and disclose privacy policies with respect to consumer
information and setting forth certain rules with respect to the disclosure to
third parties of consumer information. The Corporation has adopted and
disseminated its privacy policies pursuant to the GLB Act. The GLB Act also
requires the disclosure of agreements reached with community groups that relate
to the Community Reinvestment Act, and contains various other provisions
designed to improve the delivery of financial services to consumers while
maintaining an appropriate level of safety in the financial services industry.

     The GLB Act repealed the anti-affiliation provisions of the Glass-Steagall
Act and revised the BHCA to permit qualifying holding companies, called
"financial holding companies," to engage in, or to affiliate with companies
engaged in, a full range of financial activities including banking, insurance
activities (including insurance underwriting and portfolio investing),
securities activities, merchant banking and additional activities that are
"financial in nature," incidental to financial activities or, in certain
circumstances, complementary to financial activities. A bank holding company's
subsidiary banks must be "well-capitalized" and "well-managed" and have at least
a "satisfactory" Community Reinvestment Act rating for the bank holding company
to elect status as a federal securities financial holding company. The
Corporation's banking subsidiaries currently meet these requirements.

     A significant component of the functional regulation provided in the GLB
Act relates to the application of laws and SEC oversight of some bank securities
activities previously exempt from broker-dealer regulation. Among other things,
the GLB Act amends the definitions of "broker" and "dealer" under the Securities
Exchange Act of 1934 to remove the blanket exemption for banks. Banks now may
conduct securities activities without broker-dealer registration only if the
activities fall within a set of activity-based exemptions designed to allow
banks to conduct only those activities traditionally considered to be primarily
banking or trust activities. Securities activities outside these exemptions, as
a practical matter, need to be conducted by a registered broker-dealer
affiliate. Interim final rules of the SEC currently defer the time for
compliance with these provisions of the GLB Act until May 12, 2002. These
interim final rules are subject to further revision. The GLB Act also amended
the Investment Advisers Act of 1940 to require the registration of any bank or
separately identifiable division of the bank that acts as investment adviser for
mutual funds.

     The Corporation has completed its evaluation of the effects of the GLB Act
on its activities. The Bank and the Corporation's other banking subsidiaries
have also evaluated their securities activities, particularly the fiduciary

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                                       8

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aspects of those activities, in light of the amendments to the Securities
Exchange Act of 1934 and the Investment Advisers Act of 1940 discussed above, to
determine what, if any, additional registrations may be required and whether
certain activities currently engaged in by any of the banks should instead be
conducted by a nonbanking affiliate. The Corporation believes that it has taken
the necessary actions in light of this evaluation.

     The Corporation has not elected to become a financial holding company and
would expect to do so if and when it proposes to conduct, outside a financial
subsidiary, one of the activities specifically authorized for financial holding
companies by the GLB Act. The Corporation does expect that the affiliations and
activities permitted financial services organizations will over time change the
nature of its competition, but it is not possible to predict the full nature and
effect of the changes that may occur.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994

     The Interstate Act permits an adequately capitalized and adequately managed
bank holding company to acquire, with Federal Reserve Board approval, a bank
located in a state other than the bank holding company's home state, without
regard to whether the transaction is permitted under any state law, except that
a host state may establish by statute the minimum age of its banks (up to a
maximum of 5 years) subject to acquisition by out-of-state bank holding
companies. The Federal Reserve Board may not approve the acquisition if the
applicant bank holding company, upon consummation, would control more than 10%
of total U.S. insured depository institution deposits or more than 30% of the
host state's total insured depository institution deposits except in certain
cases. The Interstate Act also permits a bank, with the approval of the
appropriate federal bank regulatory agency, to establish a de novo branch in a
state, other than the bank's home state, in which the bank does not presently
maintain a branch if the host state has enacted a law that applies equally to
all banks and expressly permits all out-of-state banks to branch de novo into
the host state. Banks having different home states may, with approval of the
appropriate federal bank regulatory agency, merge across state lines, unless the
home state of a participating bank opted-out of the Interstate Act prior to June
1, 1997. Two states opted-out prior to that date: Montana and Texas. In
addition, the Interstate Act permits any bank subsidiary of a bank holding
company to receive deposits, renew time deposits, close loans, service loans and
receive payments on loans and other obligations as agent for a bank or certain
grandfathered thrift affiliates, whether such banks and thrifts are located in a
different state or in the same state.

Subsidiary Regulation

     The Bank is a member of the Federal Reserve System, its deposits are
insured by the FDIC, and it is subject to regulation by both these entities, as
well as by the Illinois Office of Banks and Real Estate. The Bank is also a
member of and subject to the rules of the Chicago Clearinghouse Association, and
is registered as a government securities dealer in accordance with the
Government Securities Act of 1986. As a government securities dealer its
activities are subject to the rules and regulations of the Department of the
Treasury. The Bank is registered as a transfer agent with the Federal Reserve
and is therefore subject to the rules and regulations of the Federal Reserve in
this area. State laws governing the Corporation's banking subsidiaries (directly
or indirectly in the case of the national bank subsidiaries) generally allow
each bank subsidiary to establish branches anywhere in its state.

     The Corporation's national bank subsidiaries are members of the Federal
Reserve System and the FDIC and are subject to regulation by the Office of the
Comptroller of the Currency. Northern Trust Bank, FSB is a federal savings bank
that is not a member of the Federal Reserve System and is subject to regulation
by the Office of Thrift Supervision and the FDIC.

     The Corporation's nonbanking affiliates are all subject to examination by
the Federal Reserve. In addition, The Northern Trust Company of New York is
subject to regulation by the Banking Department of the State of New York.
Northern Trust Securities, Inc. is registered as a broker-dealer with the SEC
and is a member of the National Association of Securities Dealers, Inc., and, as
such, is subject to the rules and regulations of both of these bodies. Northern
Trust Retirement Consulting, L.L.C., Northern Trust Global Advisors, Inc.,
Northern Trust Investments, Inc., and Northern Trust Bank, FSB are each
registered with the SEC under the Investment Advisers Act of 1940 and are
subject to that Act and the rules and regulations promulgated thereunder. In
addition, Northern Trust Investments, Inc. is subject to regulation by the
Illinois Office of Banks and Real Estate, and Northern Trust Retirement
Consulting, L.L.C. is registered as a transfer agent with the SEC under the
Securities Exchange Act of 1934 and is subject to that Act and the rules and
regulations promulgated thereunder. The Northern Trust Company of Connecticut is
subject to regulation by the Connecticut Department of Banking.Two families of
mutual funds

- --------------------------------------------------------------------------------

                                       9

<PAGE>

- --------------------------------------------------------------------------------

for which the Bank acts as investment adviser are subject to regulation by the
SEC under the Investment Company Act. The Bank also acts as investment adviser
of an investment company that is subject to regulation by the Central Bank of
Ireland under the Companies Act, 1990. Various other subsidiaries and branches
conduct business in other states and foreign countries and are subject to their
regulations and restrictions.

     The Corporation and its subsidiaries are affiliates within the meaning of
the Federal Reserve Act so that the banking subsidiaries are subject to certain
restrictions with respect to loans to the Corporation or its nonbanking
subsidiaries and certain other transactions with them or involving their
securities. Information regarding these restrictions, and dividend restrictions
on banking subsidiaries, is incorporated herein by reference to Note 15 titled
"Restrictions on Subsidiary Dividends and Loans or Advances" on page 76 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
2001.

Capital Regulation

     Under the FDIC's risk-based insurance assessment system, each insured bank
is placed in one of nine risk categories based on its level of capital and other
relevant information. Each insured bank's insurance assessment rate is then
determined by the risk category in which it has been classified by the FDIC.
There is currently a 27 basis point spread between the highest and lowest
assessment rates, so that banks classified as strongest by the FDIC are subject
in 2002 to no insurance assessment, and banks classified as weakest by the FDIC
are subject to an insurance assessment rate of .27%. In addition to its
insurance assessment, each insured bank is subject in 2002 to quarterly debt
service assessments in connection with bonds issued by a government corporation
that financed the federal savings and loans bailout. The first quarter 2002 debt
service assessment was .0182%.

     The federal bank regulators have adopted risk-based capital guidelines for
bank holding companies and banks. The minimum ratio of qualifying total capital
to risk-weighted assets, including certain off-balance sheet items (Total
Capital Ratio), is 8%. The minimum ratio of "Tier 1 Capital" to risk-weighted
assets (Tier 1 Capital Ratio) is 4%. "Tier 1 Capital" means that portion of
total capital that is comprised of common stock, related surplus, retained
earnings, noncumulative perpetual preferred stock, minority interests and, for
bank holding companies, a limited amount of qualifying cumulative perpetual
preferred stock, less certain intangibles including goodwill. The balance of
total capital (Tier 2 Capital) may consist of other preferred stock, certain
other instruments, limited amounts of unrealized gains on equity securities and
limited amounts of subordinated debt and the loan and lease loss allowance.

     The Federal Reserve Board risk-based capital standards contemplate that
evaluation of capital adequacy will consider other factors, including overall
interest rate exposure; liquidity, funding and market risks; the quality and
level of earnings; investment, loan portfolio, and other concentrations of
credit; certain risks arising from non-traditional activities; the quality of
loans and investments; the effectiveness of loan and investment policies; and
management's overall ability to monitor and control financial and operating
risks.

     In addition, the Federal Reserve has established minimum Leverage Ratio
(Tier 1 Capital to quarterly average total assets) guidelines for bank holding
companies and banks. These guidelines provide for a minimum Leverage Ratio of 3%
for bank holding companies and banks that meet certain specified criteria,
including having the highest regulatory rating. All other banking organizations
are required to maintain a Leverage Ratio of at least 4%. The guidelines also
provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "Tangible Tier 1 Leverage Ratio" in evaluating proposals
for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the ratio
of Tier 1 Capital, less intangibles not deducted from Tier 1 Capital, to
quarterly average total assets. As of December 31, 2001, the Federal Reserve had
not advised the Corporation of any specific minimum Tangible Tier 1 Leverage
Ratio applicable to it. At December 31, 2001, the Corporation had a Tangible
Tier 1 Leverage Ratio of 7.9%.

     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

- --------------------------------------------------------------------------------

                                       10

<PAGE>

- --------------------------------------------------------------------------------

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.

Cross-Guarantees Under the Federal Deposit Insurance Act

     Under the Federal Deposit Insurance Act (FDIA), when two or more insured
depository institutions are under common control, each of those depository
institutions may be liable for any loss incurred, or expected to be incurred, by
the Federal Deposit Insurance Corporation (FDIC) in connection with the default
of any of the others. Each may also be liable for any assistance the FDIC
provides to the other institutions. "Default" means the appointment of a
conservator or receiver for the institution. Thus, any of the Corporation's
banking subsidiaries could be liable to the FDIC if the FDIC were to suffer a
loss in connection with any of the Corporation's other banking subsidiaries.
This cross-guarantee liability for a loss at a commonly controlled institution
would be subordinated in right of payment to deposit liabilities, secured
obligations, any other general or senior liability and any obligation
subordinated to depositors or other general creditors, other than obligations
owed to any affiliate of the depository institution (with certain exceptions).
Although neither the Corporation nor any of its nonbanking subsidiaries may be
assessed for such loss under the FDIA, the Corporation has agreed to indemnify
each of its banking subsidiaries, other than the Bank, for any payments a
banking subsidiary may be liable to pay to the FDIC pursuant to these provisions
of the FDIA.

Federal Deposit Insurance Corporation Improvement Act

     In addition to the effects of the provisions described above, the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) substantially
revised the depository institution regulatory and funding provisions of FDIA and
made revisions to several other federal banking statutes.

     Under FDICIA, the federal banking regulators must take prompt supervisory
and regulatory actions against undercapitalized depository institutions. FDICIA
establishes five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution's capital tier will depend upon how
its capital levels compare to various relevant capital measures and certain
other factors, as established by regulation.

     Under current regulations, an FDIC-insured bank is defined to be well
capitalized if it maintains a Leverage Ratio (Tier 1 Capital to quarterly
average total assets) of at least 5%, a Total Capital Ratio (qualifying total
capital to risk-weighted assets, including certain off-balance sheet items) of
at least 10% and a Tier 1 Capital Ratio (Tier 1 Capital to risk-weighted assets)
of at least 6% and is not otherwise in a "troubled condition" as specified by
its appropriate federal regulatory agency. A bank is generally considered to be
adequately capitalized if it is not defined to be well capitalized but meets all
of its minimum capital requirements--that is, if it has a Leverage Ratio of 4%
or greater (or a Leverage Ratio of 3% or greater if the institution is rated in
the top category in its most recent report of examination), a Total Capital
Ratio of 8% or greater and a Tier 1 Capital Ratio of 4% or greater. A bank will
be considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it is significantly below that measure and
critically undercapitalized if it maintains a level of tangible equity capital
equal to or less than 2% of total assets. A bank may be reclassified to be in
the category that is next below that indicated by its actual capital position if
it receives a less than satisfactory examination rating by its examiners with
respect to its assets, management, earnings, liquidity or sensitivity to market
risk that has not been corrected, or it is determined that the bank is in an
unsafe or unsound condition or engaged in an unsafe or unsound practice.

     At December 31, 2001, the Bank and each of the Corporation's other
subsidiary banks met or exceeded the minimum regulatory ratios that are among
the conditions for them to be considered well capitalized. For further
discussion of regulatory capital requirements and information about the capital
position of the Corporation and the Bank, see pages 58 and 59 of "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 29, titled "Regulatory Capital Requirements" on pages 88 and 89 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
2001.

FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of dividends) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to

- --------------------------------------------------------------------------------

                                       11

<PAGE>

- --------------------------------------------------------------------------------

submit a capital restoration plan. If a depository institution fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.

     Under FDICIA, a bank that is not well capitalized is generally prohibited
from accepting or renewing brokered deposits, except with a waiver from the
FDIC, and offering interest rates on brokered deposits significantly higher than
the prevailing rate in its normal market area or nationally (depending upon
where the deposits are solicited); in addition, "pass-through" insurance
coverage may not be available for certain employee benefit accounts.

     Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions may be restricted from making payments
of principal and interest on subordinated debt and are subject to appointment of
a receiver or conservator.

                                      STAFF

     Northern Trust employed 9,453 full-time equivalent officers and staff
members as of December 31, 2001, approximately 6,775 of whom were employed by
the Bank.

- --------------------------------------------------------------------------------

                                       12

<PAGE>

- --------------------------------------------------------------------------------
                             STATISTICAL DISCLOSURES

     The following statistical disclosures, included in the Corporation's Annual
Report to Shareholders for the year ended December 31, 2001, are incorporated
herein by reference.

<TABLE>
<CAPTION>
                                                                                  2001
                                                                              Annual Report
Schedule                                                                         Page(s)
- ---------------------------------------------------------------------------   -------------
<S>                                                                              <C>
Ratios ....................................................................       36
Foreign Outstandings ......................................................       51
Nonperforming  Assets and 90 Day Past Due Loans ...........................       52
Average  Statement of Condition with Analysis of Net Interest  Income .....      94-95
- ---------------------------------------------------------------------------   -------------
- -------------------------------------------------------------------------------------------
</TABLE>

     Additional statistical information on a consolidated basis is set forth
below.

Remaining Maturity and Average Yield of Securities Held to Maturity and
Available for Sale
(Yield calculated on amortized cost and presented on a taxable equivalent basis
giving effect to the applicable federal and state tax rates)

<TABLE>
<CAPTION>
                                                                           December 31, 2001
                                       -----------------------------------------------------------------------------------------
                                       One Year or Less     One to Five Years    Five to Ten Years   Over Ten Years    Average
                                       ----------------    ------------------   ------------------   ---------------
($ in Millions)                          Book     Yield      Book     Yield       Book     Yield      Book     Yield   Maturity
- -----------------------------------    --------   -----     ------    ------     ------    -----     ------    -----   ---------
<S>                                    <C>         <C>      <C>        <C>       <C>       <C>       <C>       <C>     <C>
Securities Held to Maturity
   U.S. Government                     $     --      --%    $   --       --%     $   --      --%     $   --      --%     0 mos.
   Obligations of States and
    Political Subdivisions                 20.2    9.57       80.9     9.36       176.0    7.87       251.8    7.64    114 mos.
   Federal Agency                           1.0    7.05        2.0     6.70         1.0    6.22          .9    5.38     85 mos.
   Other-Fixed                             13.6    7.49       51.8     7.88        54.7    8.10         6.8    5.79     76 mos.
        -Floating                            --      --        2.2     4.45          .7    4.62          --      --     40 mos.
- -----------------------------------    --------   -----    -------    -----     -------    ----      ------    ----    --------
Total Securities Held to Maturity      $   34.8    8.68%    $136.9     8.68%     $232.4    7.91%     $259.5    7.59%   106 mos.
- -----------------------------------    --------   -----    -------    -----     -------    ----      ------    ----    --------
Securities Available for Sale
   U.S. Government                     $  158.9    3.35%    $   --       --%     $   --      --%     $   --      --%     6 mos.
   Obligations of States and
      Political Subdivisions                 --      --         --       --        10.2    6.58        19.8    6.65    139 mos.
   Federal Agency                       5,181.1    2.21        6.9     2.74          .9    2.90          --      --      2 mos.
   Other-Fixed                               --      --         --       --          --      --        20.2    5.97    120 mos.
        -Floating                            .1    5.29         --       --         5.9    2.77       244.6    4.84    119 mos.
- -----------------------------------    --------   -----    -------    -----     -------    ----      ------    ----    --------
Total Securities Available for Sale    $5,340.1    2.24%    $  6.9     2.74%     $ 17.0    5.05%     $284.6    5.05%     9 mos.
- -----------------------------------    --------   -----    -------    -----     -------    ----      ------    ----    --------
</TABLE>

<TABLE>
<CAPTION>
                                                                        December 31, 2001
                                      ----------------------------------------------------------------------------------------
                                      One Year or Less     One to Five Years    Five to Ten Years   Over Ten Years    Average
                                      ----------------    ------------------   ------------------   --------------
                                        Book     Yield      Book      Yield     Book      Yield      Book    Yield    Maturity
($ in Millions)                       --------   -----    -------    -------   ------    --------   ------   -----    --------
- -----------------------------------
<S>                                   <C>         <C>     <C>        <C>       <C>         <C>       <C>      <C>     <C>
Securities Held to Maturity
   U.S. Government                    $   55.0    6.64%   $    --       --%    $   --        --%     $   --     --%     4 mos.
   Obligations of States and
      Political Subdivisions              16.6    9.71       79.4    10.29      143.2      8.12       196.5   7.52    108 mos.
   Federal Agency                          1.0    7.32        2.2     7.13        1.1      6.76         1.2   5.62     69 mos.
   Other-Fixed                            10.8    7.84       41.5     8.10       51.1      8.34        30.8   6.37     86 mos.
        -Floating                           --      --        2.2     7.49         .7      7.21       145.1   7.49    119 mos.
- -----------------------------------   ---------   ----    --------   -----     ------    ------      ------   ----    --------
Total Securities Held to Maturity     $   83.4    8.32%   $ 125.3     9.46%    $196.1      8.17%     $373.6   7.41%    99 mos.
- -----------------------------------   ---------   ----    --------   -----     ------    ------      ------   ----    --------
Securities Available for Sale
   U.S. Government                    $  173.6    6.64%   $   1.0     6.88%    $   --        --%     $   --     --%     7 mos.
   Obligations of States and
      Political Subdivisions                --      --         --       --         .2      7.13        15.5   6.49    129 mos.
    Federal Agency                     6,158.6    6.85       11.7     7.03        1.7      7.03          .1   6.86      5 mos.
    Other-Fixed                             .1    2.63         --       --         --        --          .1     --     82 mos.
         -Floating                        17.9    7.20         .3     7.16        5.9      7.53        91.1   7.15    101 mos.
- -----------------------------------   ---------   ----    --------   -----     ------    ------      ------   ----    --------
Total Securities Available for Sale   $6,350.2    6.85%   $  13.0     7.02%    $  7.8      7.41%     $106.8   7.05%     7 mos.
- -----------------------------------   ---------   ----    --------   -----     ------    ------      ------   ----    --------
</TABLE>

- --------------------------------------------------------------------------------

                                       13

<PAGE>

- --------------------------------------------------------------------------------

Securities Held to Maturity and Available for Sale

<TABLE>
<CAPTION>
                                                                            December 31
                                                      -----------------------------------------------------
(In Millions)                                             2001       2000        1999       1998       1997
- ---------------------------------------------------   --------   --------    --------   --------   --------
<S>                                                   <C>        <C>         <C>        <C>        <C>
Securities Held to Maturity
   U.S. Government                                    $   --     $   55.0    $   55.1   $   55.3   $   72.0
   Obligations of States and Political Subdivisions      528.9      435.7       476.0      261.8      276.7
   Federal Agency                                          4.9        5.5          .9        3.0       14.3
   Other                                                 129.8      282.2       220.7      152.4       93.1
- ---------------------------------------------------   --------   --------    --------   --------   --------
Total Securities Held to Maturity                     $  663.6   $  778.4    $  752.7   $  472.5   $  456.1
- ---------------------------------------------------   --------   --------    --------   --------   --------
Securities Available for Sale
   U.S. Government                                    $  158.9   $  174.6    $  192.0   $  260.0   $  470.0
   Obligations of States and Political Subdivisions       30.0       15.7        15.3      266.1      130.2
   Federal Agency                                      5,188.9    6,172.1     5,105.6    4,695.4    2,969.8
   Other                                                 270.8      115.4       167.1      153.7      163.3
- ---------------------------------------------------   --------   --------    --------   --------   --------
Total Securities Available for Sale                   $5,648.6   $6,477.8    $5,480.0   $5,375.2   $3,733.3
- ---------------------------------------------------   --------   --------    --------   --------   --------
Average Total Securities                              $8,533.7   $9,687.0    $7,956.4   $7,470.8   $6,374.2
- ---------------------------------------------------   --------   --------    --------   --------   --------
Total Securities at Year-End                          $6,331.1   $7,269.6    $6,243.7   $5,856.8   $4,198.2
- ---------------------------------------------------   --------   --------    --------   --------   --------

- -----------------------------------------------------------------------------------------------------------
</TABLE>

Loans and Leases by Type

<TABLE>
<CAPTION>
                                                                             December 31
                                                      ---------------------------------------------------------
(In Millions)                                           2001         2000       1999        1998        1997
- ---------------------------------------------------   ---------   ---------   ---------   ---------   ---------
<S>                                                   <C>         <C>         <C>         <C>         <C>
Domestic
   Residential Real Estate                            $ 7,427.9   $ 6,822.8   $ 6,257.7   $ 5,885.2   $ 5,186.7
   Commercial                                           4,741.6     4,796.8     4,704.1     3,937.9     3,734.8
   Broker                                                  11.8       126.4        88.8       147.6       170.1
   Commercial Real Estate                               1,025.6       911.0       780.4       677.1       582.1
   Personal                                             2,208.8     2,289.3     1,659.9     1,463.4     1,207.2
   Other                                                  768.6     1,207.1       566.5       509.6       890.1
   Lease Financing                                      1,202.6     1,034.4       691.5       528.3       347.0
- ---------------------------------------------------   ---------   ---------   ---------   ---------   ---------
Total Domestic                                         17,386.9    17,187.8    14,748.9    13,149.1    12,118.0
International                                             593.0       956.8       625.6       497.8       470.2
- ---------------------------------------------------   ---------   ---------   ---------   ---------   ---------
Total Loans and Leases                                $17,979.9   $18,144.6   $15,374.5   $13,646.9   $12,588.2
- ---------------------------------------------------   ---------   ---------   ---------   ---------   ---------
Average Loans and Leases                              $17,850.5   $16,548.6   $14,547.8   $13,315.0   $11,812.9
- ---------------------------------------------------   ---------   ---------   ---------   ---------   ---------

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

Remaining Maturity of Selected Loans and Leases

<TABLE>
<CAPTION>
                                                                     December 31, 2001
                                                      --------------------------------------------
                                                                  One Year       One to   Over Five
(In Millions)                                            Total     or Less   Five Years      Years
- ---------------------------------------------------   --------   ---------   ----------   ---------
<S>                                                   <C>         <C>         <C>         <C>
Domestic (Excluding Residential Real Estate and
   Personal Loans)
   Commercial                                         $4,741.6    $3,500.1    $  880.7    $  360.8
   Commercial Real Estate                              1,025.6       260.9       497.5       267.2
   Other                                                 780.4       752.4        13.6        14.4
   Lease Financing                                     1,202.6        73.0       170.4       959.2
- ---------------------------------------------------   --------   ---------   ----------   --------
Total Domestic                                         7,750.2     4,586.4     1,562.2     1,601.6
International                                            593.0       404.8       174.6        13.6
- ---------------------------------------------------   --------   ---------   ----------   --------
Total Selected Loans and Leases                       $8,343.2    $4,991.2    $1,736.8    $1,615.2
- ---------------------------------------------------   --------   ---------   ----------   --------
Interest Rate Sensitivity of Loans and Leases
   Fixed Rate                                         $6,522.1    $3,877.7    $1,237.5    $1,406.9
   Variable Rate                                       1,821.1     1,113.5       499.3       208.3
- ---------------------------------------------------   --------   ---------   ----------   --------
Total                                                 $8,343.2    $4,991.2    $1,736.8    $1,615.2
- ---------------------------------------------------   --------   ---------   ----------   --------

- ---------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

                                       14

<PAGE>

- --------------------------------------------------------------------------------

Average Deposits by Type

<TABLE>
<CAPTION>
(In Millions)                                               2001          2000          1999          1998          1997
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
<S>                                                  <C>           <C>           <C>           <C>           <C>
Domestic Offices
   Demand and Noninterest-Bearing
      Individuals, Partnerships and Corporations     $   2,045.9   $   2,055.2   $   1,980.7   $   1,765.6   $   1,754.6
      Correspondent Banks                                   49.4          44.4          68.0          87.2          92.8
      Other                                              1,993.7       1,870.6       1,606.7       1,375.2       1,116.5
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
      Total                                              4,089.0       3,970.2       3,655.4       3,228.0       2,963.9
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
   Time
      Savings and Money Market                           5,753.6       5,203.9       4,845.3       4,263.3       3,895.4
      Savings Certificates less than $100,000              867.7         918.3       1,022.7       1,085.0       1,076.5
      Savings Certificates $100,000 and more             1,336.0       1,345.0       1,168.3       1,059.5         959.3
      Other                                              1,110.0         964.6         650.5         571.8         717.3
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
      Total                                              9,067.3       8,431.8       7,686.8       6,979.6       6,648.5
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
Total Domestic Offices                                  13,156.3      12,402.0      11,342.2      10,207.6       9,612.4
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
Foreign Offices
   Demand                                                  804.4         580.4         430.6         503.8         486.4
   Time                                                  8,649.2       8,064.5       6,592.1       5,781.7       4,971.2
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
Total Foreign Offices                                    9,453.6       8,644.9       7,022.7       6,285.5       5,457.6
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------
Total Deposits                                       $  22,609.9   $  21,046.9   $  18,364.9   $  16,493.1   $  15,070.0
- ------------------------------------------------     -----------   -----------   -----------   -----------   -----------

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

Average Rates Paid on Time Deposits by Type

<TABLE>
<CAPTION>
                                                 2001    2000    1999    1998    1997
- ---------------------------------------------    ----    ----    ----    ----    ----
<S>                                              <C>     <C>     <C>     <C>     <C>
Time Deposits - Domestic Offices
   Savings and Money Market                      2.84%   3.97%   3.21%   3.31%   3.23%
   Savings Certificates less than $100,000       5.18    5.66    5.40    5.79    5.86
   Savings Certificates $100,000 and more        5.18    6.02    5.31    5.60    5.63
   Other Time                                    4.96    6.13    5.03    5.35    5.50
- ---------------------------------------------    ----    ----    ----    ----    ----
Total Domestic Offices                           3.67    4.73    3.98    4.21    4.25
- ---------------------------------------------    ----    ----    ----    ----    ----
Total Foreign Offices Time                       3.62    5.35    4.34    4.95    4.82
- ---------------------------------------------    ----    ----    ----    ----    ----
Total Time Deposits                              3.65%   5.03%   4.15%   4.55%   4.49%
- ---------------------------------------------    ----    ----    ----    ----    ----

- -------------------------------------------------------------------------------------
</TABLE>

Remaining Maturity of Time Deposits $100,000 and more

<TABLE>
<CAPTION>
                                      December 31, 2001                December 31, 2000
                               -------------------------------   -------------------------------
                                 Domestic Offices                  Domestic Offices
                               --------------------              --------------------
                               Certificates   Other    Foreign   Certificates   Other    Foreign
(In Millions)                    of Deposit    Time    Offices     of Deposit    Time    Offices
- ---------------------------    ------------   -----   --------   ------------   -----   --------
<S>                                <C>        <C>     <C>            <C>        <C>     <C>
3 Months or Less                   $  985.5   $ 4.0   $8,372.0       $1,074.7   $ 5.7   $8,941.2
Over 3 through 6 Months               265.1      .8       95.6          314.6     1.8      169.4
Over 6 through 12 Months              251.2     2.2      162.0          335.3     2.8       53.2
Over 12 Months                        293.8     2.9       42.1          292.2     1.9        8.7
- ---------------------------        --------   -----   --------       --------   -----   --------
Total                              $1,795.6   $ 9.9   $8,671.7       $2,016.8   $12.2   $9,172.5
- ---------------------------        --------   -----   --------       --------   -----   --------

- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

                                       15

<PAGE>

- --------------------------------------------------------------------------------

Purchased Funds

Federal Funds Purchased
(Overnight Borrowings)

($ in Millions)                                     2001       2000       1999
- -----------------------------------             --------   --------   --------
Balance on December 31                          $  815.5   $3,615.0   $  370.2
Highest Month-End Balance                        5,389.3    3,947.2    4,586.3
Year--Average Balance                            2,839.0    2,644.7    3,226.1
    --Average Rate                                  3.87%      6.34%      4.99%
Average Rate at Year-End                            1.29       5.54       3.96
- -----------------------------------             --------   --------   --------

Securities Sold under Agreements to Repurchase

($ in Millions)                                     2001       2000       1999
- -----------------------------------             --------   --------   --------
Balance on December 31                          $1,407.4   $1,577.1   $  997.8
Highest Month-End Balance                        2,194.2    3,353.9    3,573.2
Year--Average Balance                            1,474.1    1,476.4    1,954.5
    --Average Rate                                  3.93%      6.22%      4.90%
Average Rate at Year-End                            1.42       6.16       3.36
- -----------------------------------             --------   --------   --------

Other Borrowings
(Includes Treasury Investment Program Balances, Federal Home Loan Bank
Advances and Term Federal Funds Purchased)

($ in Millions)                                     2001       2000       1999
- -----------------------------------             --------   --------   --------
Balance on December 31                          $6,841.2   $2,629.5   $1,155.3
Highest Month-End Balance                        6,841.2    6,348.5    6,995.4
Year--Average Balance                            3,254.6    3,890.0    2,177.3
    --Average Rate                                 5.18%      6.30%      5.02%
Average Rate at Year-End                            2.68       4.89       5.65
- -----------------------------------             --------   --------   --------

Total Purchased Funds

($ in Millions)                                     2001       2000       1999
- -----------------------------------             --------   --------   --------
Balance on December 31                          $9,064.1   $7,821.6   $2,523.3
Year--Average Balance                            7,567.7    8,011.1    7,357.9
    --Average Rate                                  4.45%      6.30%      4.97%
- -----------------------------------             --------   --------   --------

- --------------------------------------------------------------------------------

Commercial Paper

($ in Millions)                                     2001       2000       1999
- -----------------------------------             --------   --------   --------
Balance on December 31                          $  137.7   $  142.4    $ 145.1
Highest Month-End Balance                          149.7      150.3      145.1
Year--Average Balance                              137.5      138.3      141.0
    --Average Rate                                  4.05%      6.40%      5.15%
Average Rate at Year-End                            2.06       6.47       6.09
- -----------------------------------             --------   --------   --------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

                                       16

<PAGE>

- --------------------------------------------------------------------------------
Changes in Net Interest Income

<TABLE>
<CAPTION>
                                                        2001/2000                       2000/1999
                                              -----------------------------    -------------------------
                                                Change Due To                  Change Due To
                                              -------------------              ----------------
(Interest on a Taxable Equivalent Basis)
(In Millions)                                  Volume      Rate      Total     Volume     Rate     Total
- -------------------------------------------   --------    -------   -------    -------   ------   ------
<S>                                           <C>         <C>       <C>        <C>       <C>      <C>
Increase (Decrease) in Interest Income
Money Market Assets
   Federal Funds Sold and Resell Agreements   $    5.9    $ (16.8)  $ (10.9)   $ (28.6)  $ 13.2   $(15.4)
   Time Deposits with Banks                       40.5      (52.2)    (11.7)      14.1     27.6     41.7
   Other                                          (1.1)      (1.2)     (2.3)      (2.2)     1.4      (.8)
Securities
   U.S. Government                                (2.8)      (1.5)     (4.3)      (2.9)     2.0      (.9)
   Obligations of States and Political
      Subdivisions                                 1.6        (.5)      1.1       (1.8)    --       (1.8)
   Federal Agency                                (51.1)    (177.3)   (228.4)     113.8     90.2    204.0
   Other                                           (.3)      (3.6)     (3.9)       6.7      3.0      9.7
   Trading Account                                  .1        (.3)      (.2)      --         .1       .1
Loans and Leases                                  79.6     (149.3)    (69.7)     140.4     80.2    220.6
- -------------------------------------------   --------    -------   -------    -------   ------   ------
Total                                         $   72.4    $(402.7)  $(330.3)   $ 239.5   $217.7   $457.2
- -------------------------------------------   --------    -------   -------    -------   ------   ------

Increase (Decrease) in Interest Expense
Deposits
   Savings and Money Market                   $   15.6    $ (59.0)  $ (43.4)   $  14.2   $ 37.0   $ 51.2
   Savings Certificates                           (3.1)     (15.7)    (18.8)       4.2     11.5     17.7
   Other Time                                      7.2      (11.3)     (4.1)      19.3      7.1     26.4
   Foreign Offices Time                           21.2     (139.3)   (118.1)      78.8     66.3    145.1
Federal Funds Purchased                            7.5      (65.5)    (58.0)     (36.9)    43.7      6.8
Repurchase Agreements                              (.1)     (33.7)    (33.8)     (29.7)    25.7     (4.0)
Commercial Paper                                    --       (3.2)     (3.2)       (.2)     1.7      1.5
Other Borrowings                                 (32.9)     (43.7)    (76.6)     108.0     28.0    136.0
Senior Notes                                      (1.2)        .2      (1.0)      (5.2)     9.0      3.8
Long-Term Debt                                     7.5        (.9)      6.6        6.6       .3      6.9
Debt-Floating Rate Capital Securities               --       (5.9)     (5.9)        --      3.3      3.3
- -------------------------------------------   --------    -------   -------    -------   ------   ------
Total                                         $   21.7    $(378.0)  $(356.3)   $ 159.1   $233.6   $392.7
- -------------------------------------------   --------    -------   -------    -------   ------   ------
Increase (Decrease) In Net Interest Income    $   50.7    $ (24.7)  $  26.0    $  80.4   $(15.9)  $ 64.5
- -------------------------------------------   --------    -------   -------    -------   ------   ------
</TABLE>

Note: Changes not due only to volume changes or rate changes are included in the
change due to rate column.

- --------------------------------------------------------------------------------

                                       17

<PAGE>

- --------------------------------------------------------------------------------
Analysis of Reserve for Credit Losses

<TABLE>
<CAPTION>
(In Millions)                                    2001        2000        1999        1998        1997
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
<S>                                         <C>         <C>         <C>         <C>         <C>
Balance at Beginning of Year                $   162.9   $   150.9   $   146.8   $   147.6   $   148.3
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Charge-Offs
   Residential Real Estate                         .2          .4         1.0          .8          .8
   Commercial                                    66.7        12.1         7.2         9.6        11.4
   Commercial Real Estate                          .9          .2          .3          .3          .7
   Personal                                        .4          .7         1.1          .8         1.3
   Other                                           .8          .1          .2          .3          .2
   Lease Financing                                 --          --          --          --          --
   International                                   --          --          --          --          --
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
   Total Charge-Offs                             69.0        13.5         9.8        11.8        14.4
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Recoveries
   Residential Real Estate                         --          .1          .2          .2          .1
   Commercial                                      .5          .8          .6          .6         2.3
   Commercial Real Estate                          .5          .2          .1          .7         1.6
   Personal                                        .2          .2          .4          .3          .6
   Other                                           --          .2          .1          --          .1
   Lease Financing                                 --          --          --          --          --
   International                                   --          --          --          --          --
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
   Total Recoveries                               1.2         1.5         1.4         1.8         4.7
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Net Charge-Offs                                  67.8        12.0         8.4        10.0         9.7
Provision for Credit Losses                      66.5        24.0        12.5         9.0         9.0
Reserve Related to Acquisitions                    --          --          --          .2          --
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Net Change in Reserve                            (1.3)       12.0         4.1         (.8)        (.7)
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Balance at End of Year                      $   161.6   $   162.9   $   150.9   $   146.8   $   147.6
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Loans and Leases at Year-End                $17,979.9   $18,144.6   $15,374.5   $13,646.9   $12,588.2
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
Average Total Loans and Leases              $17,850.5   $16,548.6   $14,547.8   $13,315.0   $11,812.9
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
As a Percent of Year-End Loans and Leases
   Net Loan Charge-Offs                           .38%        .07%        .05%        .07%        .08%
   Provision for Credit Losses                    .37         .13         .08         .07         .07
   Reserve Balance at Year-End                    .90         .90         .98        1.08        1.17
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------
As a Percent of Average Loans and Leases
   Net Loan Charge-Offs                           .38%        .07%        .06%        .07%        .08%
   Reserve Balance at Year-End                    .91         .98        1.04        1.10        1.25
- -----------------------------------------   ---------   ---------   ---------   ---------   ---------

- -----------------------------------------------------------------------------------------------------
</TABLE>

International Operations (Based on Obligor's Domicile)

    See also Note 27 titled "Business Segments and Related Information" on pages
87 and 88 of the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001, which is incorporated herein by reference.

Selected Average Assets and Liabilities Attributable to International Operations

<TABLE>
<CAPTION>
(In Millions)                                    2001        2000       1999        1998        1997
- -----------------------------------------   ---------   ---------   --------   ---------   ---------
<S>                                         <C>         <C>         <C>         <C>         <C>
Total Assets                                $ 6,299.9   $5,171.0    $4,595.1    $3,883.9    $3,507.7
- -----------------------------------------   ---------   ---------   --------   ---------   ---------
   Time Deposits with Banks                   4,831.2    3,811.0     3,548.3     2,827.0     2,574.5
   Other Money Market Assets                       --         --         1.8          --          .1
   Loans                                        824.2      770.0       544.7       651.4       537.9
   Customers' Acceptance Liability                2.5        1.2          .7          .7          .5
   Foreign Investments                           22.6       26.5        26.7        27.4        22.2
- -----------------------------------------   ---------   ---------   --------   ---------   ---------
Total Liabilities                           $10,178.6   $9,355.4    $7,665.7    $6,815.5    $5,960.7
- -----------------------------------------   ---------   ---------   --------   ---------   ---------
   Deposits                                   9,909.7    9,072.9     7,443.1     6,640.9     5,747.2
   Liability on Acceptances                       2.5        1.2          .7          .7          .5
- -----------------------------------------   ---------   ---------   --------   ---------   ---------

- ----------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

                                       18

<PAGE>

- --------------------------------------------------------------------------------

Percent of International Related Average Assets and Liabilities to Total
Consolidated Average Assets

                                               2001   2000   1999   1998   1997
- --------------------------------------------   ----   ----   ----   ----   ----
Assets                                           18%    15%    15%   14%     15%
- --------------------------------------------   ----   ----   ----   ----   ----
Liabilities                                      29     27     25    25      25
- --------------------------------------------   ----   ----   ----   ----   ----

- --------------------------------------------------------------------------------

Reserve for Credit Losses Relating to International Operations

(In Millions)                                 2001   2000   1999    1998   1997
- ------------------------------------------   -----   ----   ----   -----   ----
Balance at Beginning of Year                 $ 3.4   $3.5   $3.6   $ 5.0   $3.6
Charge-Offs                                     --     --     --      --     --
Recoveries                                      --     --     --      --     --
Provision for Credit Losses                    2.4    (.1)   (.1)   (1.4)   1.4
- ------------------------------------------   -----   ----   ----   -----   ----
Balance at End of Year                       $ 5.8   $3.4   $3.5   $ 3.6   $5.0
- ------------------------------------------   -----   ----   ----   -----   ----

     The Securities and Exchange Commission requires the disclosure of the
reserve for credit losses that is applicable to international operations. The
above table has been prepared in compliance with this disclosure requirement and
is used in determining international operating performance. The amounts shown in
the table should not be construed as being the only amounts that are available
for international loan charge-offs, since the entire reserve for credit losses
is available to absorb losses on both domestic and international loans. In
addition, these amounts are not intended to be indicative of future charge-off
trends.

- --------------------------------------------------------------------------------

Distribution of International Loans and Deposits by Type

<TABLE>
<CAPTION>
                                                                December 31
                                                ------------------------------------------
Loans                                             2001     2000     1999     1998     1997
- ---------------------------------------------   ------   ------   ------   ------   ------
<S>                                             <C>      <C>      <C>      <C>      <C>
Commercial                                      $403.3   $480.5   $377.4   $298.3   $240.1
Foreign Governments and Official Institutions    108.7    172.3    150.1     84.0    115.2
Banks                                             30.5    266.6     58.0     99.3     51.2
Other                                             50.5     37.4     40.1     16.2     63.7
- ---------------------------------------------   ------   ------   ------   ------   ------
Total                                           $593.0   $956.8   $625.6   $497.8   $470.2
- ---------------------------------------------   ------   ------   ------   ------   ------
</TABLE>

<TABLE>
<CAPTION>
                                                                December 31
                                                ---------------------------------------
Deposits                                             2001           2000           1999
- ---------------------------------------------   ---------      ---------       --------
<S>                                             <C>            <C>             <C>
Commercial                                      $ 7,985.2      $ 6,926.1       $5,251.5
Foreign Governments and Official Institutions       705.9        2,320.5        2,179.2
Banks                                               952.2          589.2          888.5
Other Time                                          396.7          565.4          445.6
Other Demand                                         23.9           14.1           14.1
- ---------------------------------------------   ---------      ---------       --------
Total                                           $10,063.9      $10,415.3       $8,778.9
- ---------------------------------------------   ---------      ---------       --------

- ---------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

                                       19

<PAGE>

- --------------------------------------------------------------------------------
                             CREDIT RISK MANAGEMENT

    For the discussion of Credit Risk Management, see the following information
that is incorporated herein by reference to the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001:

<TABLE>
<CAPTION>
                                                                                              2001
                                                                                          Annual Report
Notes to Consolidated Financial Statements                                                   Page(s)
- ---------------------------------------------------------------------------------------   -------------
<S>                                                                                          <C>
 1. Accounting Policies
    F. Derivative Financial Instruments ...............................................        66
    G. Loans and Leases................................................................        66
    H. Reserve for Credit Losses.......................................................        67
    K. Other Real Estate Owned.........................................................        67
 5. Loans and Leases...................................................................       69-70
 6. Reserve for Credit Losses..........................................................        70
20. Contingent Liabilities.............................................................        80
21. Off-Balance Sheet and Derivative Financial Instruments.............................      80-83
- ---------------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of Operations
- ---------------------------------------------------------------------------------------
Asset Quality and Credit Risk Management...............................................       48-54
- ---------------------------------------------------------------------------------------       -----
</TABLE>

     In addition, the schedules on pages 18 and 19 of this Form 10-K should be
read in conjunction with the "Credit Risk Management" section:

     Analysis of Reserve for Credit Losses

     Reserve for Credit Losses Relating to International Operations

     Distribution of International Loans and Deposits by Type

- --------------------------------------------------------------------------------

                                       20

<PAGE>

- --------------------------------------------------------------------------------

                       INTEREST RATE SENSITIVITY ANALYSIS

     For the discussion of interest rate sensitivity, see the section entitled
"Market Risk Management" on pages 55 to 57 of Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Corporation's
Annual Report to Shareholders for the year ended December 31, 2001, which is
incorporated herein by reference.

- --------------------------------------------------------------------------------

                                       21

<PAGE>

- --------------------------------------------------------------------------------

     The following unaudited Consolidated Balance Sheet and Consolidated
Statement of Income for The Northern Trust Company were prepared in accordance
with generally accepted accounting principles and are provided here for
informational purposes. These consolidated financial statements should be read
in conjunction with the footnotes accompanying the consolidated financial
statements, included in the Corporation's Annual Report to Shareholders for the
year ended December 31, 2001, and incorporated herein by reference on page 26 of
this Form 10-K.

The Northern Trust Company
Consolidated Balance Sheet (unaudited)

<TABLE>
<CAPTION>
                                                                                                      December 31
                                                                                                -----------------------
(In Millions)                                                                                      2001         2000
- ----------------------------------------------------------------------------------------        ----------   ----------
<S>                                                                                             <C>          <C>
Assets
Cash and Due from Banks                                                                         $  2,517.9   $  2,088.3
Federal Funds Sold and Securities Purchased under Agreements to Resell                             3,651.3        686.5
Time Deposits with Banks                                                                           6,954.3      5,191.0
Other Interest-Bearing                                                                               280.5        342.1
Securities
   Available for Sale                                                                              5,303.8      6,165.3
   Held to Maturity (Fair Value - $639.6 in 2001 and $693.1 in 2000)                                 630.7        690.1
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Securities                                                                             5,934.5      6,855.4
- ----------------------------------------------------------------------------------------        ----------   ----------
Loans and Leases
   Commercial and Other                                                                            8,084.8      9,151.7
   Residential Mortgages                                                                           3,488.7      3,341.0
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Loans and Leases (Net of unearned income - $427.4 in 2001 and $364.8 in 2000)         11,573.5     12,492.7
- ----------------------------------------------------------------------------------------        ----------   ----------
Reserve for Credit Losses                                                                           (126.0)      (128.0)
Buildings and Equipment                                                                              360.9        338.3
Customers' Acceptance Liability                                                                        5.9          6.8
Trust Security Settlement Receivables                                                                571.4        615.2
Other Assets                                                                                       1,033.7      1,220.9
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Assets                                                                              $ 32,757.9   $ 29,709.2
- ----------------------------------------------------------------------------------------        ----------   ----------
Liabilities
Deposits
   Demand and Other Noninterest-Bearing                                                         $  5,327.8   $  3,702.1
   Savings and Money Market                                                                        3,702.6      3,146.5
   Savings Certificates                                                                            1,138.6      1,317.5
   Other Time                                                                                        210.8        200.8
   Foreign Offices--Demand                                                                           872.9        827.7
                  --Time                                                                           8,551.0      8,944.1
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Deposits                                                                              19,803.7     18,138.7
- ----------------------------------------------------------------------------------------        ----------   ----------
Federal Funds Purchased                                                                              932.8      3,715.8
Securities Sold under Agreements to Repurchase                                                     1,332.9      1,526.9
Other Borrowings                                                                                   6,337.3      2,089.4
Senior Notes                                                                                         450.0        500.0
Long-Term Debt                                                                                       780.9        631.9
Liability on Acceptances                                                                               5.9          6.8
Other Liabilities                                                                                  1,137.1      1,278.3
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Liabilities                                                                           30,780.6     27,887.8
- ----------------------------------------------------------------------------------------        ----------   ----------

Stockholder's Equity
Capital Stock--Par Value $60                                                                         213.8        213.8
Surplus                                                                                              245.3        245.3
Undivided Profits                                                                                  1,517.8      1,363.2
Accumulated Other Comprehensive Income                                                                  .4          (.9)
- ----------------------------------------------------------------------------------------        ----------   ----------
      Total Stockholder's Equity                                                                   1,977.3      1,821.4
- ----------------------------------------------------------------------------------------        ----------   ----------
Total Liabilities and Stockholder's Equity                                                      $ 32,757.9   $ 29,709.2
- ----------------------------------------------------------------------------------------        ----------   ----------
</TABLE>


- --------------------------------------------------------------------------------

                                       22

<PAGE>

- --------------------------------------------------------------------------------

The Northern Trust Company
Consolidated Statement of Income (unaudited)

<TABLE>
<CAPTION>
(In Millions)                                                                             2001       2000       1999
- -----------------------------------------------------------------------------------     --------   --------   --------
<S>                                                                                     <C>        <C>        <C>
Noninterest Income
   Trust Fees                                                                           $  852.4   $  748.5   $  599.7
   Foreign Exchange Trading Profits                                                        139.7      152.6      107.5
   Treasury Management Fees                                                                 82.0       70.1       66.8
   Security Commissions and Trading Income                                                    .6         .9         .5
   Other Operating Income                                                                   74.5       57.7       40.9
   Investment Security Gains, net                                                             .1         .3         .7
- -----------------------------------------------------------------------------------     --------   --------   --------
Total Noninterest Income                                                                 1,149.3    1,030.1      816.1
- -----------------------------------------------------------------------------------     --------   --------   --------
Interest Income
   Loans and Leases                                                                        664.4      762.0      623.0
   Securities
          - Available for Sale                                                             333.1      544.6      357.0
          - Held to Maturity                                                                27.3       36.7       29.5
- -----------------------------------------------------------------------------------     --------   --------   --------
   Total Securities                                                                        360.4      581.3      386.5
- -----------------------------------------------------------------------------------     --------   --------   --------
   Time Deposits with Banks                                                                194.3      205.9      164.3
   Federal Funds Sold, Securities Purchased under Agreements to Resell and Other            50.9       68.7       90.2
- -----------------------------------------------------------------------------------     --------   --------   --------
Total Interest Income                                                                    1,270.0    1,617.9    1,264.0
- -----------------------------------------------------------------------------------     --------   --------   --------
Interest Expense
   Deposits                                                                                501.1      670.4      465.9
   Federal Funds Purchased                                                                 116.1      175.5      163.9
   Securities Sold under Agreements to Repurchase                                           55.3       85.5       91.4
   Other Borrowings                                                                        107.7      203.7      107.0
   Senior Notes                                                                             33.4       34.3       30.6
   Long-Term Debt                                                                           52.2       44.6       37.8
- -----------------------------------------------------------------------------------     --------   --------   --------
Total Interest Expense                                                                     865.8    1,214.0      896.6
- -----------------------------------------------------------------------------------     --------   --------   --------
Net Interest Income                                                                        404.2      403.9      367.4
Provision for Credit Losses                                                                 63.7       23.5       10.8
- -----------------------------------------------------------------------------------     --------   --------   --------
Net Interest Income after Provision for Credit Losses                                      340.5      380.4      356.6
- -----------------------------------------------------------------------------------     --------   --------   --------
Income before Noninterest Expenses                                                       1,489.8    1,410.5    1,172.7
- -----------------------------------------------------------------------------------     --------   --------   --------
Noninterest Expenses
   Compensation                                                                            479.8      478.2      407.0
   Employee Benefits                                                                        86.4       78.0       71.9
   Occupancy Expense                                                                        66.3       59.5       50.7
   Equipment Expense                                                                        67.0       57.6       50.3
   Other Operating Expenses                                                                263.4      243.3      182.4
- -----------------------------------------------------------------------------------     --------   --------   --------
Total Noninterest Expenses                                                                 962.9      916.6      762.3
- -----------------------------------------------------------------------------------     --------   --------   --------
Income before Income Taxes                                                                 526.9      493.9      410.4
Provision for Income Taxes                                                                 169.8      158.6      136.1
- -----------------------------------------------------------------------------------     --------   --------   --------
Net Income                                                                              $  357.1   $  335.3   $  274.3
- -----------------------------------------------------------------------------------     --------   --------   --------
Dividends Paid to the Corporation                                                       $  240.0   $  175.0   $   75.0
- -----------------------------------------------------------------------------------     --------   --------   --------
</TABLE>


- --------------------------------------------------------------------------------

                                       23

<PAGE>

- --------------------------------------------------------------------------------

Supplemental Item--Executive Officers of the Registrant

WILLIAM A. OSBORN

     Mr. Osborn became Chairman of the Board of the Corporation and the Bank in
October 1995, and Chief Executive Officer of the Corporation and the Bank in
June 1995. Mr. Osborn, 54, began his career with the Bank in 1970.

BARRY G. HASTINGS

     Mr. Hastings became President of the Corporation and the Bank in October
1995, and Chief Operating Officer of the Corporation and the Bank in June 1995.
Mr. Hastings, 54, began his career with the Corporation in 1974.

ORIE L. DUDLEY

     Mr. Dudley joined Northern Trust in October 2000 as an Executive Vice
President and Chief Investment Officer of the Corporation and the Bank. From
June 2000 through September 2000, Mr. Dudley, 57, was Chief Executive Officer
and Acting Chief Investment Officer of Scottish Widows Investment Partnership,
Ltd. He joined Scottish Widows Investment Management in January 1998 as Chief
Executive Officer and oversaw the merger of that entity with Hill Samuel Asset
Management to form Scottish Widows Investment Partnership, Ltd. in June 2000.
Prior to joining Scottish Widows, Mr. Dudley served as Managing Director of
Barclays Asset Management from January 1995 through December 1997.

DAVID L. EDDY

     Mr. Eddy became a Senior Vice President of the Corporation and the Bank and
Treasurer of the Corporation in 1986. Mr. Eddy, 65, joined the Bank in 1960.

JOHN P. GRUBE

     Mr. Grube became an Executive Vice President of the Corporation and the
Bank in May 2000, and is currently Chairman of the Credit Policy Committee. He
had been a Senior Vice President of the Bank since November 1987 and had served
as Credit Policy representative of PFS since October 1991 and Chairman of the
Counterparty Risk Management Committee since April 1995. Mr. Grube, 55, joined
the Bank in 1983.

JAMES J. MITCHELL

     Mr. Mitchell became President - Worldwide Operations and Technology of the
Corporation and the Bank in September 1999, and has served as an Executive Vice
President of the Bank since December 1987 and of the Corporation since October
1994. Mr. Mitchell, 59, joined the Bank in 1964.

PERRY R. PERO

     Mr. Pero became Vice Chairman of the Corporation and the Bank in September
1999, and has served as Chief Financial Officer of the Corporation and the Bank
and Cashier of the Bank since September 1988. Mr. Pero is also head of the Risk
Management Unit and Chairman of the Corporate Asset and Liability Policy
Committee. He held the title of Senior Executive Vice President of the
Corporation and the Bank from 1992 until September 1999. Mr. Pero, 62, joined
the Bank in 1964.

PETER L. ROSSITER

     Mr. Rossiter became President - C&IS of the Corporation and the Bank in
September 2000, and has served as an Executive Vice President of the Corporation
and the Bank since November 1992. He held the title of General Counsel of the
Corporation and the Bank from April 1993 through July 2000, Secretary of the
Corporation and the Bank from April 1993 through November 1997 and Assistant
Secretary from December 1997 through September 2000. Mr. Rossiter, 53, was a
partner in the law firm of Schiff Hardin & Waite prior to joining the
Corporation and the Bank.

- --------------------------------------------------------------------------------

                                       24

<PAGE>

- --------------------------------------------------------------------------------

HARRY W. SHORT

     Mr. Short became an Executive Vice President of the Corporation and the
Bank in September 1999, and has served as Controller of the Corporation and the
Bank since October 1994. He held the title of Senior Vice President of the
Corporation and the Bank from 1990 through September 1999. Mr. Short, 54, joined
the Corporation and the Bank in 1990, prior to which he was a partner in the
accounting firm of KPMG Peat Marwick.

MARK STEVENS

     Mr. Stevens became President - PFS of the Corporation and the Bank in
January 1998, and has served as an Executive Vice President of the Corporation
and the Bank since February 1996. Mr. Stevens, 54, joined the Corporation in
1979.

STEPHEN B. TIMBERS

     Mr. Timbers joined the Corporation and the Bank in February 1998, when he
was named President - NTGI and an Executive Vice President of the Corporation
and the Bank. From January 1996 to December 1997, Mr. Timbers, 57, was
President, Chief Executive Officer and Chief Investment Officer of Zurich Kemper
Investments, Inc. (formerly Kemper Financial Services, Inc.), the investment
adviser to the Kemper Funds and the parent organization of Zurich Investment
Management, Inc.

KELLY R. WELSH

     Mr. Welsh joined the Corporation and the Bank in July 2000, when he was
named an Executive Vice President and General Counsel and Assistant Secretary of
the Corporation and the Bank. Mr. Welsh, 49, was an Executive Vice President and
General Counsel of Ameritech Corporation from November 1996 through November
1999.

Item 2--Properties

     The executive offices of the Corporation and the Bank are located at 50
South LaSalle Street in the financial district of Chicago. This Bank-owned
building is occupied by various divisions of Northern Trust's business units.
Financial services are provided by the Bank at this location. Adjacent to this
building are two office buildings in which the Bank leases approximately 434,000
square feet of space principally for staff divisions of the business units. The
Bank also leases approximately 40,000 square feet of a building at 125 South
Wacker Drive in Chicago for banking operations and personal banking services.
Financial services are also provided by the Bank at 17 other Chicago
metropolitan area locations, five of which are owned and 12 of which are leased.
The Bank's trust and banking operations are located in a 465,000 square foot
facility at 801 South Canal Street in Chicago, and its computer data center is
located in a 340,000 square foot facility at 840 South Canal Street in Chicago.
Space for the Bank's London and Singapore branches, Edge Act subsidiary and The
Northern Trust Company, Canada are leased. In November 2000, the Bank entered
into an agreement to lease 120,000 square feet of office space upon completion
of a building to be constructed at Canary Wharf in London. A majority of the
Bank's London-based staff will be relocated to the facility during 2002.
Northern Trust Retirement Consulting, L.L.C., located in Atlanta, Georgia,
leases approximately 140,000 square feet of office space. The Corporation's
other subsidiaries operate from 82 locations, 14 of which are owned and 68 of
which are leased. The addresses of all Northern Trust's locations can be found
on pages 98 and 99 in the Corporation's Annual Report to Shareholders for the
year ended December 31, 2001, which is incorporated herein by reference. The
Corporation believes that its owned and leased facilities are suitable and
adequate for its business needs. For additional information relating to
properties and lease commitments, refer to Note 7 titled "Buildings and
Equipment" and Note 8 titled "Lease Commitments" on pages 70 and 71 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
2001, which information is incorporated herein by reference.

Item 3--Legal Proceedings

     The information called for by this item is incorporated herein by reference
to Note 20 titled "Contingent Liabilities" on page 80 of the Corporation's
Annual Report to Shareholders for the year ended December 31, 2001.

Item 4--Submission of Matters to a Vote of Security Holders

     None.

- --------------------------------------------------------------------------------

                                       25

<PAGE>

- --------------------------------------------------------------------------------

                                     PART II

Item 5--Market for Registrant's Common Equity and Related Stockholder Matters

     The information called for by this item is incorporated herein by reference
to the section of the Consolidated Financial Statistics titled "Common Stock
Dividend and Market Price" on page 93 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001.

     Information regarding dividend restrictions of the Corporation's banking
subsidiaries is incorporated herein by reference to Note 15 titled "Restrictions
on Subsidiary Dividends and Loans or Advances" on page 76 of the Corporation's
Annual Report to Shareholders for the year ended December 31, 2001.

Item 6--Selected Financial Data

     The information called for by this item is incorporated herein by reference
to the table titled "Summary of Selected Consolidated Financial Data" on page 36
of the Corporation's Annual Report to Shareholders for the year ended December
31, 2001.

Item 7--Management's Discussion and Analysis of Financial Condition and Results
        of Operations

     The information called for by this item is incorporated herein by reference
to "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 36 through 60 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001.

Item 7A--Quantitative and Qualitative Disclosures About Market Risk

     The information called for by this item is incorporated herein by reference
to "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 55 through 57 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001.

Item 8--Financial Statements and Supplementary Data

     The following financial statements of the Corporation and its subsidiaries
included in the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001, are incorporated herein by reference.

<TABLE>
<CAPTION>
                                                                                                                    2001
                                                                                                               Annual Report
For Northern Trust Corporation and Subsidiaries:                                                                  Page(s)
- ----------------------------------------------------------------------------------------------------------     -------------
<S>                                                                                                                <C>
Consolidated Balance Sheet--December 31, 2001 and 2000....................................................            61
Consolidated Statement of  Income--Years Ended December 31, 2001, 2000 and 1999...........................            62
Consolidated Statement of Comprehensive Income--Years Ended December 31, 2001, 2000 and 1999..............            62
Consolidated Statement of Changes in Stockholders' Equity--Years Ended December 31, 2001, 2000 and 1999...            63
Consolidated Statement of Cash Flows--Years Ended December 31, 2001, 2000 and 1999........................            64
- ----------------------------------------------------------------------------------------------------------     -------------
For Northern Trust Corporation (Corporation Only)
- ----------------------------------------------------------------------------------------------------------     -------------
Condensed Balance Sheet--December 31, 2001 and 2000 ......................................................            90
Condensed Statement of  Income--Years Ended December 31, 2001, 2000 and 1999 .............................            90
Consolidated Statement of Comprehensive Income--Years Ended December 31, 2001, 2000 and 1999 .............            62
Consolidated Statement of Changes in Stockholders' Equity--Years Ended December 31, 2001, 2000 and 1999 ..            63
Condensed Statement of Cash Flows--Years Ended December 31, 2001, 2000 and 1999 ..........................            91
- ----------------------------------------------------------------------------------------------------------     -------------
Notes to Consolidated Financial Statements ...............................................................         65-91
- ----------------------------------------------------------------------------------------------------------     -------------
Report of Independent Public Accountants .................................................................            92
- ----------------------------------------------------------------------------------------------------------     -------------
</TABLE>

     The section titled "Quarterly Financial Data" on page 93 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
2001, is incorporated herein by reference.

Item 9--Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

     None.

- --------------------------------------------------------------------------------

                                       26

<PAGE>

- --------------------------------------------------------------------------------

                                    PART III

Item 10--Directors and Executive Officers of the Registrant

     The information called for by Item 10 relating to Directors and Nominees
for election to the Board of Directors is incorporated herein by reference to
pages 4 through 7 of the Corporation's definitive 2002 Notice and Proxy
Statement filed on March 11, 2002 in connection with the solicitation of proxies
for the Annual Meeting of Stockholders to be held April 16, 2002. The
information called for by Item 10 relating to Executive Officers is set forth in
Part I of this Annual Report on Form 10-K. The information called for by Item 10
relating to Item 405 disclosure of delinquent Form 3, 4 or 5 filers is
incorporated by reference to page 10 of the Corporation's definitive 2002 Notice
and Proxy Statement filed on March 11, 2002 in connection with the solicitation
of proxies for the Annual Meeting of Stockholders to be held April 16, 2002.

Item 11--Executive Compensation

     The information called for by this item is incorporated herein by reference
to pages 9 and 10 and pages 15 through 24 of the Corporation's definitive 2002
Notice and Proxy Statement filed in connection with the solicitation of proxies
for the Annual Meeting of Stockholders to be held April 16, 2002.

Item 12--Security Ownership of Certain Beneficial Owners and Management

     The information called for by this item is incorporated herein by reference
to pages 11 through 14 of the Corporation's definitive 2002 Notice and Proxy
Statement filed in connection with the solicitation of proxies for the Annual
Meeting of Stockholders to be held April 16, 2002.

Item 13--Certain Relationships and Related Transactions

     The information called for by this item is incorporated herein by reference
to pages 9 and 10 of the Corporation's definitive 2002 Notice and Proxy
Statement filed in connection with the solicitation of proxies for the Annual
Meeting of Stockholders to be held April 16, 2002.

- --------------------------------------------------------------------------------

                                       27

<PAGE>

- --------------------------------------------------------------------------------

                                     PART IV

Item 14--Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Item 14(a)(1) and (2)--Northern Trust Corporation and Subsidiaries List of
Financial Statements and Financial Statement Schedules

     The following financial information is set forth in Item 1 for
informational purposes only:

          Financial Information of The Northern Trust Company (Bank Only):
               Unaudited Consolidated Balance Sheet-December 31, 2001 and 2000.
               Unaudited Consolidated Statement of Income-Years Ended December
                 31, 2001, 2000 and 1999 .

     The following consolidated financial statements of the Corporation and its
subsidiaries are incorporated by reference into Item 8 from the Corporation's
Annual Report to Shareholders for the year ended December 31, 2001:

          Consolidated Financial Statements of Northern Trust Corporation and
            Subsidiaries:
               Consolidated Balance Sheet-December 31, 2001 and 2000.
               Consolidated Statement of Income-Years Ended December 31, 2001,
                 2000 and 1999.
               Consolidated Statement of Comprehensive Income-Years Ended
                 December 31, 2001, 2000 and 1999.
               Consolidated Statement of Changes in Stockholders' Equity-Years
                 Ended December 31, 2001, 2000, and 1999.
               Consolidated Statement of Cash Flows-Years Ended December 31,
                 2001, 2000, and 1999.

     The following financial information is incorporated by reference into Item
8 from the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001:

          Financial Statements of Northern Trust Corporation (Corporation):
               Condensed Balance Sheet-December 31, 2001 and 2000.
               Condensed Statement of Income-Years Ended December 31, 2001, 2000
                 and 1999.
               Consolidated Statement of Comprehensive Income-Years Ended
                 December 31, 2001, 2000 and 1999.
               Consolidated Statement of Changes in Stockholders' Equity-Years
                 Ended December 31, 2001, 2000 and 1999.
               Condensed Statement of Cash Flows-Years Ended December 31, 2001,
                 2000 and 1999.

     The Notes to Consolidated Financial Statements as of December 31, 2001,
incorporated by reference into Item 8 from the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001, pertain to the Bank only
information, consolidated financial statements and Corporation only information
listed above.

     The Report of Independent Public Accountants incorporated by reference into
Item 8 from the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001 pertains to the consolidated financial statements and
Corporation only information listed above.

     Financial statement schedules have been omitted for the reason that they
are not required or are not applicable.

- --------------------------------------------------------------------------------

                                       28

<PAGE>

- --------------------------------------------------------------------------------

Item 14(a)3--Exhibits

     The exhibits listed on the Exhibit Index beginning on page 31 of this Form
10-K are filed herewith or are incorporated herein by reference to other
filings.

Item 14(b)--Reports on Form 8-K

     In a report on Form 8-K dated October 15, 2001, Northern Trust incorporated
by reference in Item 5 its October 15, 2001 press release, reporting on its
earnings for the third quarter and nine months of 2001. The press release, with
summary financial information, was filed as an exhibit pursuant to Item 7 of the
Form 8-K.

- --------------------------------------------------------------------------------

                                       29

<PAGE>

- --------------------------------------------------------------------------------

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-K
Annual Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:  March 12, 2002                             Northern Trust Corporation
                                                         (Registrant)
                                              By:     William A. Osborn
                                                  --------------------------
                                                      William A. Osborn
                                                  Chairman of the Board and
                                                   Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Form 10-K Annual Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the date
indicated.

        Signature                   Title
        ---------                   -----
   William A. Osborn               Chairman of the Board,
- -----------------------
    William A. Osborn                   Chief Executive Officer and Director

      Perry R. Pero                 Vice Chairman and
- -----------------------
      Perry R. Pero                     Chief Financial Officer

      Harry W. Short                Executive Vice President and Controller
- -----------------------
      Harry W. Short                    (Chief Accounting Officer)

      Duane L. Burnham              Director*
      Dolores E. Cross              Director*
      Susan Crown                   Director*
      Robert S. Hamada              Director*
      Barry G. Hastings             Director*
      Robert A. Helman              Director*
      Arthur L. Kelly               Director*
      Frederick A. Krehbiel         Director*
      Robert C. McCormack           Director*
      Edward J. Mooney              Director*
      Harold B. Smith               Director*
      William D. Smithburg          Director*
      Bide L. Thomas                Director*


                                             *By:        Kelly R. Welsh
                                                  ---------------------------
                                                        Kelly R. Welsh
                                                        Attorney-in-Fact


                                                            Date: March 12, 2002

- --------------------------------------------------------------------------------

                                       30

<PAGE>

- --------------------------------------------------------------------------------

                                  EXHIBIT INDEX

     The following Exhibits are filed herewith or are incorporated herein by
reference.

<TABLE>
<CAPTION>
                                                                                                      Exhibit Incorporated
                                                                                                        By Reference to
                                                                                                      Exhibit of Same Name
Exhibit                                                                                                 In Prior Filing*
Number       Description                                                                               Or Filed Herewith
- -------    --------------------------------------------------------------------------------------   ------------------------
<S>        <C>                                                                                           <C>
(3)        Articles of Incorporation and By-laws

           (i)    Restated Certificate of Incorporation of Northern Trust Corporation
                  as amended to date ............................................................             (17)
           (ii)   By-laws as amended to date ....................................................             (15)

(4)        Instruments Defining the Rights of Security Holders

           (i)    Form of The Northern Trust Company's Global Senior
                  Bank Note (Fixed Rate) ........................................................             (20)

           (ii)   Form of The Northern Trust Company's Global Senior
                  Bank Note (Floating Rate) .....................................................             (20)

           (iii)  Form of The Northern Trust Company's Global
                  Subordinated Bank Note (Fixed Rate) ...........................................             (20)

           (iv)   Form of The Northern Trust Company's Global
                  Subordinated Bank Note (Floating Rate) ........................................             (20)

           (v)    Junior Subordinated Indenture, dated as of January 1, 1997,
                  between Northern Trust Corporation and The First National Bank of Chicago,
                  as Debenture Trustee ..........................................................              (4)

           (vi)   Amended Certificate of Designations of Series A Junior Participating Preferred
                  Stock dated October 29, 1999 ..................................................             (16)

(10)       Material Contracts

           (i)    Lease dated July 1, 1988 between American National Bank & Trust Company
                  of Chicago as Trustee under Trust Agreement dated February 12, 1986 and known
                  as Trust No. 66603 (Landlord) and Nortrust Realty Management, Inc. (Tenant) ...              (1)

           (ii)   Northern Trust Employee Stock Ownership Plan as amended and restated
                  effective January 1, 2002 .....................................................        Filed Herewith

           (iii)  Trust Agreement between The Northern Trust Company and Citizens and
                  Southern Trust Company (Georgia), N.A., (predecessor of NationsBank
                  which, effective January 1, 1998, was succeeded by U.S. Trust Company, N.A.)
                  dated January 26, 1989 ........................................................              (2)

                  (1)  Amendment  dated  February 21, 1995 ......................................              (6)

                  (2)  Amendment  dated  January 2, 1998 ........................................              (7)

           (iv)   Implementation Agreement dated June 26, 1996 between the Registrant,
                  The Northern Trust Company, the ESOP Trust and NationsBank (South) N.A. as
                  Trustee (effective January 1, 1998, U.S. Trust Company, N.A. as successor
                  Trustee) ......................................................................              (3)

           (v)    Deferred Compensation Plans Trust Agreement dated May 11, 1998 between
                  Northern Trust Corporation and Harris Trust and Savings Bank as Trustee
                  (which, effective August 31, 1999, was succeeded by U.S. Trust Company, N.A.)
                  regarding the Restated Supplemental Employee Stock Ownership Plan for
                  Employees of The Northern Trust Company, the Restated Supplemental
                  Thrift-Incentive Plan for Employees of The Northern Trust Company,  the
                  Restated Supplemental  Pension  Plan for Employees of The Northern Trust
                  Company, and the Northern Trust Corporation Deferred Compensation Plan** ......              (9)

                  (1) Amendment dated August 31, 1999 ...........................................             (15)

                  (2)  Amendment dated as of May 16, 2000 .......................................             (17)
</TABLE>

- --------------------------------------------------------------------------------

                                       31

<PAGE>

- --------------------------------------------------------------------------------

<TABLE>
<S>       <C>                                                                                             <C>
             (vi)   Northern Trust Corporation Supplemental Employee Stock Ownership Plan as
                    amended and restated as of  July 20, 1999** ...................................             (15)

                    (1)  Amendment dated as of  May 16, 2000 ......................................             (17)

            (vii)   Northern Trust Corporation Supplemental Thrift-Incentive Plan as amended and
                    restated as of  July 20, 1999** ...............................................             (15)

                    (1)  Amendment dated December 31, 1999 ........................................             (16)

                    (2)  Amendment dated as of May 16, 2000 .......................................             (17)

           (viii)   Northern Trust Corporation Supplemental Pension Plan
                    as amended and restated as of July 20, 1999** .................................             (15)

                    (1) Amendment dated as of May 16, 2000 ........................................             (17)

                    (2) Amendment dated as of September 25, 2001 ..................................             (20)

             (ix)   Northern Trust Corporation Deferred Compensation Plan dated as of May 1, 1998**              (9)

                    (1) Amendment dated as of May 16, 2000 ........................................             (17)

              (x)   Rights Agreement, dated as of July 21, 1998, between Northern Trust
                    Corporation and Norwest Bank Minnesota, N.A.  (now known as Wells Fargo
                    Bank Minnesota, N.A.) .........................................................              (8)

                    (1) Amendment No. 1 to Rights Agreement dated as of November 18, 1998 .........             (10)

                    (2) Amendment No. 2 to Rights Agreement dated as of February 16, 1999 .........             (11)

             (xi)   Lease dated as of November 29, 2000 between LaSalle Bank National Association,
                    as successor trustee to American National Bank & Trust Company of Chicago as
                    Trustee under Trust Agreement dated April 5, 1990 and known as Trust No.
                    110513-07 (Landlord) and The Northern Trust Company (Tenant) ..................             (18)

            (xii)   Lease dated December 29, 2000 between Metropolitan Life Insurance Company
                    (Landlord) and The Northern Trust Company (Tenant) ............................             (18)

           (xiii)   Amended 1992 Incentive Stock Plan** ...........................................              (5)

                    (1) Amendment dated January 20, 1998 ..........................................             (14)

                    (2) Amendment dated September 15, 1998 ........................................             (14)

                    (3) Amendment dated May 18, 1999 ..............................................             (14)

                    (4) Amendment dated September 25, 2001.........................................             (20)

            (xiv)   Northern Trust Corporation Management Performance Plan**.......................             (13)

             (xv)   Northern Trust Corporation (2001) Annual Performance Plan** ...................             (19)

            (xvi)   Northern Trust Corporation 1997 Stock Plan for Non-Employee Directors**........             (12)

           (xvii)   Northern Trust Corporation 1997 Deferred Compensation Plan
                    for Non-Employee Directors As Amended**........................................             (12)

          (xviii)   Form of Employment Security Agreement entered into between Northern Trust
                    Corporation and each of 8 executive officers - as amended**....................              (3)

                    (1) Amendment dated as of September 25, 2001...................................             (20)

            (xix)   Form of Employment Security Agreement entered into between Northern
                    Trust Corporation and each of  41 officers**...................................              (3)

                    (1) Amendment dated as of September 25, 2001...................................             (20)

             (xx)   Form of Employment Security Agreement entered into between Northern
                    Trust Corporation and each of  4 officers**....................................              (3)

                    (1) Amendment dated as of September 25, 2001...................................             (20)
</TABLE>

- --------------------------------------------------------------------------------

                                       32

<PAGE>

<TABLE>
<S>        <C>                                                                                           <C>
           (xxi)  Amended and Restated Trust Agreement of NTC Capital I,
                  dated as of January 16, 1997, among Northern Trust Corporation,
                  as Depositor, The First National Bank of Chicago, as Property Trustee,
                  First Chicago Delaware, Inc., as Delaware Trustee, and the
                  Administrative Trustees named therein..........................................              (4)

          (xxii)  Guarantee Agreement, dated as of January 16, 1997,
                  relating to NTC Capital I, by and between Northern
                  Trust Corporation, as Guarantor, and The First National
                  Bank of Chicago, as Guarantee Trustee..........................................              (4)

         (xxiii)  Amended and Restated Trust Agreement of NTC Capital II,
                  dated as of April 25, 1997, among Northern Trust
                  Corporation, as Depositor, The First National Bank of
                  Chicago, as Property Trustee, First Chicago Delaware,
                  Inc., as Delaware Trustee, and the
                  Administrative Trustees named therein..........................................              (5)

          (xxiv)  Guarantee Agreement, dated as of April 25, 1997,
                  relating to NTC Capital II, by and between Northern
                  Trust Corporation, as Guarantor, and The First National
                  Bank of Chicago, as Guarantee Trustee..........................................              (5)

           (xxv)  Agreement between Fiserv Solutions, Inc. and The Northern Trust
                  Company dated as of October 20, 1998...........................................             (12)

          (xxvi)  Agreement for Lease between Heron Quays Properties Limited (Developer)
                  and The Northern Trust Company (Tenant) dated as of November 15, 2000..........             (18)

         (xxvii)  Lease Agreement between Perimeter Summit Parcel 3 Limited Partnership
                  (Landlord) and Northern Trust Retirement Consulting, L.L.C. (Tenant) dated
                  as of November 5, 1999.........................................................             (18)

                  (1)   First Amendment dated as of February 29, 2000                                         (18)

                  (2)   Second Amendment dated as of September 8, 2000                                        (18)

(13)       2001 Annual Report to Shareholders....................................................        Filed Herewith

(21)       Subsidiaries of the Registrant........................................................        Filed Herewith

(23)       Consent of Independent Public Accountants.............................................        Filed Herewith

(24)       Powers of Attorney....................................................................        Filed Herewith

(99)       Additional Exhibits

           (i)      Corporate Governance Guidelines Adopted May 16, 2000 ........................             (17)
</TABLE>

*Prior Filings (File No. 0-5965)
- --------------------------------

(1)  Annual Report on Form 10-K for the year ended December 31, 1988
(2)  Form 8-K dated January 26, 1989
(3)  Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
(4)  Form 8-K dated January 22, 1997
(5)  Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(6)  Annual Report on Form 10-K for the year ended December 31, 1997
(7)  Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
(8)  Form 8-A dated July 24, 1998
(9)  Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(10) Form 8-K dated November 20, 1998
(11) Form 8-K dated February 19, 1999
(12) Annual Report on Form 10-K for the year ended December 31, 1998
(13) Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
(14) Quarterly Report on Form 10-Q for the quarter ended June 30, 1999

- --------------------------------------------------------------------------------

                                       33

<PAGE>

- --------------------------------------------------------------------------------

(15) Quarterly Report on Form 10-Q for the quarter ended September 30, 1999
(16) Annual Report on Form 10-K for the year ended December 31, 1999
(17) Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
(18) Annual Report on Form 10-K for the year ended December 31, 2000
(19) Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
(20) Quarterly Report on Form 10-Q for the quarter ended September 30, 2001

** Denotes management contract or compensatory plan or arrangement
   ---------------------------------------------------------------

     Upon written request to Rose A. Ellis, Secretary, Northern Trust
Corporation, 50 South LaSalle Street, Chicago, Illinois 60675, copies of
exhibits listed above are available to Northern Trust Corporation stockholders
by specifically identifying each exhibit desired in the request.

     Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Corporation hereby
agrees to furnish the SEC, upon request, any instrument defining the rights of
holders of long-term debt of the Corporation not filed as an exhibit herein. No
such instrument authorizes long-term debt securities in excess of 10% of the
total assets of the Corporation and its subsidiaries on a consolidated basis.

- --------------------------------------------------------------------------------

                                       34

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(II)
<SEQUENCE>3
<FILENAME>dex10ii.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
<PAGE>

                                                                  EXHIBIT 10(ii)

Northern Trust
Employee Stock Ownership Plan
(As Amended and Restated Effective January 1, 2002)

<PAGE>

Northern Trust
Employee Stock Ownership Plan
(As Amended and Restated Effective January 1, 2002)

Contents

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Section                                                                    Page
<S>                                                                        <C>
ARTICLE I.    NATURE OF THE PLAN...........................................  1

1.1  Establishment and Amendment of the Plan...............................  1
1.2  Purpose of the Plan...................................................  1
1.3  Legal Qualification...................................................  1
1.4  Applicability of the Plan.............................................  1

ARTICLE II.   DEFINITIONS..................................................  2

2.1  Definitions...........................................................  2

ARTICLE III.  PARTICIPATION AND SERVICE....................................  9

3.1  Participation.........................................................  9
3.2  Duration of Participation.............................................  9
3.3  Transferred or Rehired................................................  9
3.4  Vesting Service....................................................... 10
3.5  Break in Service...................................................... 11
3.6  One-Year Break in Service............................................. 11

ARTICLE IV.   EMPLOYER CONTRIBUTIONS....................................... 13

4.1  Contributions......................................................... 13
4.2  Medium of Payment..................................................... 13
4.3  Allocation of Employer Contributions.................................. 13
4.4  No Participant Contributions.......................................... 13
4.5  Uniformed Services Employment and Reemployment Rights Act............. 13

ARTICLE V.    INVESTMENT OF TRUST ASSETS................................... 14

5.1  Investments........................................................... 14
5.2  Valuation of Company Stock............................................ 14
5.3  Crediting of Stock.................................................... 14
5.4  Sales and Resales of Company Stock.................................... 14

ARTICLE VI.   EXEMPT LOANS................................................. 15

6.1  Requirements.......................................................... 15
6.2  Payments on Loans..................................................... 16
6.3  Crediting of Released Stock........................................... 16
6.4  Payments of Principal and Interest.................................... 16
6.5  Puts, Calls, and Other Options........................................ 16
</TABLE>

                                                                               i

<PAGE>

Northern Trust
Employee Stock Ownership Plan
(As Amended and Restated Effective January 1, 2002)

Contents

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------

Section                                                                    Page
<S>                                                                        <C>
ARTICLE VII.  ALLOCATIONS TO PARTICIPANTS' ACCOUNTS.......................  17

7.1   Participants Entitled to Allocations................................  17
7.2   Allocations to Company Stock Accounts...............................  17
7.3   Allocations to Other Investments Accounts...........................  17
7.4   Allocations of Employer Contributions, Company Stock Acquired
      With a Loan and Forfeitures.........................................  17
7.5   Maximum Allocation..................................................  19
7.6   Vesting.............................................................  21
7.7   Net Income or Loss of the Trust.....................................  22
7.8   Accounting for Allocations..........................................  22
7.9   Diversification of Investments......................................  22

ARTICLE VIII. VOTING AND TENDER OF COMPANY STOCK..........................  24

8.1   Voting Rights; Tender Offers........................................  24

ARTICLE IX.   BENEFITS....................................................  26

9.1   Payments on Retirement..............................................  26
9.2   Payments on Death...................................................  26
9.3   Payments on Disability..............................................  27
9.4   Payments on Termination for Other Reasons...........................  27
9.5   Deemed Cashout......................................................  28
9.6   Property Distributed................................................  28
9.7   Methods of Payment..................................................  28
9.8   Direct Rollover of Eligible Rollover Distributions..................  31
9.9   Payment of Small Amounts............................................  32

ARTICLE X.    RIGHTS AND OPTIONS ON DISTRIBUTED SHARES OF COMPANY
              STOCK.......................................................  33

10.1  Right of First Refusal..............................................  33
10.2  Put Option..........................................................  33

ARTICLE XI.   IN-SERVICE DISTRIBUTIONS AND DIVIDENDS......................  35

11.1  In-Service Distributions............................................  35
11.2  Dividends...........................................................  35
</TABLE>

                                                                              ii

<PAGE>

Northern Trust
Employee Stock Ownership Plan
(As Amended and Restated Effective January 1, 2002)

Contents

<TABLE>
<CAPTION>
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Section                                                                    Page
<S>                                                                        <C>
ARTICLE XII.  PLAN ADMINISTRATION.........................................  36

12.1  Powers..............................................................  36
12.2  Directions to Trustee...............................................  36
12.3  Uniform.............................................................  36
12.4  Reports.............................................................  36
12.5  Members; Compensation...............................................  36
12.6  Claims Procedure....................................................  36
12.7  Indemnity for Liability.............................................  37

ARTICLE XIII. AMENDMENT AND TERMINATION...................................  38

13.1  Amendment...........................................................  38
13.2  Termination.........................................................  38
13.3  Merger and Consolidation............................................  38
13.4  Distribution Upon Termination.......................................  39

ARTICLE XIV.  EXTENSION OF PLAN TO AFFILIATES.............................  40

14.1  Participation in the Plan...........................................  40
14.2  Withdrawal from the Plan............................................  40

ARTICLE XV.   TOP-HEAVY PROVISIONS........................................  41

ARTICLE XVI.  MISCELLANEOUS PROVISIONS....................................  42

16.1  Spendthrift Provisions..............................................  42
16.2  Incompetency........................................................  42
16.3  Unclaimed Funds.....................................................  43
16.4  Rights Against the Company..........................................  43
16.5  Illegality of Particular Provision..................................  43
16.6  Effect of Mistake...................................................  43
16.7  Compliance with Federal and State Securities Laws...................  43
16.8  No Discrimination...................................................  44
16.9  Exclusive Benefit of Members........................................  44
16.10 Governing Law.......................................................  44
16.11 Change in Control...................................................  44
</TABLE>

                                                                             iii

<PAGE>

Northern Trust
Employee Stock Ownership Plan
(As Amended and Restated Effective January 1, 2002)

Contents

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------

Section                                                                    Page
<S>                                                                        <C>
SUPPLEMENT #1 .............................................................  48

SUPPLEMENT #2 .............................................................  51

SUPPLEMENT #3 .............................................................  52

SCHEDULE A ................................................................  53
</TABLE>

                                                                              iv

<PAGE>

Article I.  Nature of the Plan

1.1  Establishment and Amendment of the Plan

Effective January 1, 1989, The Northern Trust Company (the "Company")
established the Northern Trust Employee Stock Ownership Plan (the "Plan"). The
Plan was subsequently amended and restated effective January 1, 1989, in order
to incorporate the requirements of the Tax Reform Act of 1986 and subsequent
legislation. The Plan is hereby amended and restated effective January 1, 2002,
except as otherwise specifically stated herein.

1.2  Purpose of the Plan

The purpose of the Plan is to enable Members and their Beneficiaries to share in
the growth and prosperity of the Company and its Affiliates, to provide Members
with an opportunity to accumulate capital for their future economic security,
and to furnish additional security to Members who become permanently disabled.
The primary purpose of the Plan is to enable Members to acquire ownership
interests in Company Stock. Consequently, the Plan will be invested primarily in
Company Stock.

1.3  Legal Qualification

It is intended that the Plan continue to qualify as an employee stock ownership
plan under section 4975(e)(7) of the Code and section 407(d)(6) of ERISA, and as
a stock bonus plan qualified under section 401(a) of the Code.

1.4  Applicability of the Plan

The provisions of the Plan as set forth herein apply only to Members (or
Beneficiaries of Members) who are eligible to participate in the Plan on or
after January 1, 2002. Except as so provided herein, the rights and benefits, if
any, of Members who ceased accruing Vesting Service prior to January 1, 2002,
shall be determined in accordance with the provisions of the Plan in effect on
the date his or her Vesting Service terminated.

                                                                               1

<PAGE>

Article II.  Definitions

2.1  Definitions

The following capitalized terms shall have the meanings stated below wherever
they appear in the text unless the context otherwise requires.

(a)  "Account" means the separate accounts maintained for each Member (or a
     deceased Member's Beneficiary) which represents his or her total
     proportionate interest in the Trust as of any Valuation Date.

(b)  "Affiliate" means any corporation which is a member of the same controlled
     group of corporations (within the meaning of Code section 414(b)) as the
     Company, or an unincorporated trade or business which is under common
     control with the Company (within the meaning of Code section 414(c)), any
     organization which is a member of an affiliated service group (within the
     meaning of Code section 414(m)) of which the Company is also a member, and
     any other entity required to be aggregated under Code section 414(o). For
     purposes of section 2.1(nn), this section 2.1(b) shall be as modified as
     provided in section 415(h) of the Code.

(c)  "Anniversary Date" means December 31 of each Plan Year.

(d)  "Annual Additions" means the total of: (1) Company or Participating
     Employer contributions allocated to a Participant's Account under this Plan
     and any Related Plan during any Limitation Year; (2) the amount of employee
     contributions (within the meaning of Code section 415(c)(2)) made by the
     Participant under any Related Plan; and (3) Forfeitures allocated to a
     Participant's Account under this Plan and any Related Plan.

(e)  "Beneficiary" means the person or persons designated as such by the Member
     on a form supplied by the Committee, provided that, a married Member may
     designate a Beneficiary other than the Member's Spouse only if the
     requirements of section 9.2 are met. If the Member does not designate a
     Beneficiary, or if the designation is for any reason ineffective, as
     determined by the Committee, the Member's Beneficiary shall be:

     (i)   the Member's Spouse or, if none,

     (ii)  the Member's children (in equal amounts) or, if none,

     (iii) the Member's parents (in equal amounts) or, if none,

     (iv)  the Member's brothers and sisters (in equal amounts) or, if none,

     (v)   the Member's estate.

     Any designation of the Member's Spouse as Beneficiary under the Plan shall
     become null and void on the date a judicial order or decree is entered
     dissolving the marriage of the Member and Spouse, except as otherwise
     provided in a qualified domestic relations order within the meaning of Code
     section 414(p). If a designated Beneficiary shall die before the Member,
     his or her interest shall terminate and, unless otherwise provided in the
     Member's designation, if the

                                                                               2

<PAGE>

     designation included more than one Beneficiary, such interest shall be paid
     in equal shares to those Beneficiaries, if any, who survive the Member.

(f)  "Board of Directors" or "Board" means the Board of Directors of the
     Company.

(g)  "Break in Service" means the event described in section 3.5.

(h)  "Code" means the Internal Revenue Code of 1986, as amended.

(i)  "Committee" means the Employee Benefit Administrative Committee of the
     Company, as constituted from time to time, which has the responsibility for
     administering the Plan and which shall be deemed to be the plan
     administrator and the named fiduciary for the purposes of ERISA.

(j)  "Company" means The Northern Trust Company, an Illinois state bank, and its
     successors and assigns.

(k)  "Company Stock" means any qualifying employer security within the meaning
     of section 4975(e)(8) of the Code and 407(d)(1) of ERISA and regulations
     thereunder.

(l)  "Company Stock Account" means an account of a Member that is credited with
     the Member's allocable shares of Company Stock purchased and paid for by
     the Trust or contributed to the Trust.

(m)  "Compensation" means the base salary paid by the Company or a Participating
     Employer to a Participant, plus any amounts paid as shift differential, but
     exclusive of severance pay or other types of compensation. Base salary
     includes amounts which the Participant elects to have contributed to the
     Participant's before-tax deposit account under The Northern Trust Company
     Thrift-Incentive Plan, any amounts contributed by or on behalf of the
     Participant to a cafeteria plan established by the Company, and, effective
     July 1, 2001, any pre-tax qualified transportation fringe benefit plan
     provided pursuant to Code section 132(f).

     In addition to other applicable limitations set forth in the Plan, and
     notwithstanding any other provision of the Plan to the contrary, the
     Compensation of each Participant taken into account under the Plan shall
     not exceed the annual compensation limit under section 401(a)(17) of the
     Code, as adjusted by the Commissioner of the Internal Revenue Service for
     increases in cost of living in accordance with Code section 401(a)(17). The
     cost-of-living adjustment in effect for a calendar year applies to any
     period, not exceeding 12 months, over which Compensation is determined (the
     "determination period") beginning in that calendar year. If a determination
     period consists of fewer than 12 months, the annual compensation limit will
     be multiplied by a fraction, the numerator of which is the number of months
     in the determination period and the denominator of which is 12.

     For Plan Years prior to January 1, 1997, in determining the Compensation of
     a Participant for purposes of this limitation, the rules of Code section
     414(q)(6) (as in effect immediately prior to January 1, 1997) shall apply,
     except that, in applying such rules, the term "family" shall include only
     the Spouse of the Participant and any lineal descendants of the Participant
     who have not attained age 19 before the close of the Plan Year. If, as a
     result of the application of these rules, the adjusted dollar limitation of
     Code section 401(a)(17) applicable to family members is exceeded, then the
     dollar limitation shall be prorated among the affected individuals in
     proportion

                                                                               3

<PAGE>

     to each such individual's Compensation as determined under this section
     2.1(m) before applying the limitation.

(n)  "Effective Date" means January 1, 2002.

(o)  "Eligible Employee" means any Employee of the Company or a Participating
     Employer, other than:

     (1)  An Employee employed by any office or branch of the Company or a
          Participating Employer located in a foreign country who, as to the
          United States, is a nonresident alien; and

     (2)  An Employee who: (A) as to the United States, is a foreign national,
          (B) is working for the Company or a Participating Employer at a
          location in the United States, and (C) is covered by a retirement plan
          sponsored by a non-U.S. Affiliate in the county in which an Affiliate
          is located.

     Any other provision of the Plan to the contrary notwithstanding, no
     individual will be considered an Eligible Employee nor will such individual
     be otherwise eligible to participate in or receive benefits under the Plan
     during any period in which such individual is providing services to the
     Company or a Participating Employer under a contract, arrangement or
     understanding with either such individual or with an agency or leasing
     organization that treats the individual as either an independent contractor
     or an employee of such agency or leasing organization, even if such
     individual is later determined (by judicial action or otherwise) to have
     been a common law employee of the Company or a Participating Employer
     rather than an independent contractor or an employee of such agency or
     leasing organization.

(p)  "Employee" means an individual employed by the Company or an Affiliate. A
     person who is considered a "leased employee" (as defined below) of the
     Company or an Affiliate shall not be considered an Employee for purposes of
     the Plan. If such a person subsequently becomes an Employee, and thereafter
     participates in the Plan, that person shall receive Vesting Service for
     employment as a leased employee except to the extent that the requirements
     of section 414(n)(5) of the Code were satisfied with respect to such
     Employee while he or she was a leased employee. For purposes of the Plan, a
     leased employee is a person who is not employed by the Company or an
     Affiliate but who performs services for the Company or an Affiliate
     pursuant to an agreement between the Company or Affiliate and a leasing
     organization, other than a person described in Code section 414(n)(5), if
     such person performed the services for a year and, effective as of January
     1, 1997, the services are performed under the primary direction or control
     of the Company or an Affiliate.

(q)  "Employer Contributions" means payments made to the Trust by the Company or
     a Participating Employer.

(r)  "Entry Date" shall mean the first day of each calendar month.

(s)  "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended.

(t)  "Forfeiture" means the Unvested Portion of a Participant's Account that
     becomes forfeited pursuant to section 9.4.

                                                                               4

<PAGE>

(u)  "Former Participant" means a person who has been a Participant, but who has
     incurred a Break in Service.

(v)  "Highly Compensated Participant" means, effective as of January 1, 1997, an
     Eligible Employee who, (1) during the current Plan Year or the preceding
     Plan Year was at any time a five-percent owner of the Company, or (2)
     during the preceding Plan Year received compensation (as defined in section
     7.5(i)) from the Company and its Affiliates in excess of $80,000 (or such
     greater amount as provided by the Secretary of the Treasury pursuant to
     section 414(q) of the Code) and was in the top paid group of Employees for
     such Plan Year. The provisions of section 414(q) of the Code shall apply in
     determining whether an Eligible Employee is a Highly Compensated
     Participant.

(w)  "Hour of Service" means each hour for which an Employee is paid or entitled
     to payment for the performance of duties for the Company or an Affiliate.

(x)  "Inactive Participant" means a person who was a Participant who is
     transferred to and is in a position of employment either--

     (1)  as an Employee where he or she is not an Eligible Employee; or

     (2)  as an Employee of an Affiliate which has not adopted this Plan.

(y)  "Limitation Year" means the 12-consecutive-month period to be used in
     determining the Plan's compliance with section 415 of the Code and the
     regulations thereunder. The Limitation Year shall be the calendar year
     unless the Company elects to use another 12-month period.

(z)  "Loan" means any loan to the Trustee made or guaranteed by a disqualified
     person (within the meaning of section 4975(e)(2) of the Code) including,
     but not limited to, a direct loan of cash, a purchase money transaction, an
     assumption of an obligation of the Trustee, an unsecured guarantee, or the
     use of assets of a disqualified person (within the meaning of section
     4975(e)(2) of the Code) as collateral for a loan.

(aa) "Member" means a Participant, Inactive Participant, or a Former
     Participant.

(bb) "Normal Retirement Date" means the later of (1) the date on which a
     Participant attains 65 years of age, or (2) the fifth anniversary of the
     date the Participant commenced participation in the Plan.

(cc) "One-Year Break in Service" means a period of time described in section
     3.6.

(dd) "Other Investments Account" means an Account of a Member that is credited
     with the Member's share of the net income or loss of the Trust and Employer
     Contributions and Forfeitures in other than Company Stock, and that is
     debited with payments made to pay for Company Stock.

(ee) "Parental Leave" shall mean an absence from employment with the Company or
     an Affiliate because of (1) the Employee's pregnancy, (2) the birth of the
     Employee's child, (3) the placement of a child with the Employee in
     connection with the Employee's adoption of the child,

                                                                               5

<PAGE>

     or (4) caring for such child immediately following such birth or placement,
     provided that, the Employee furnishes to the Company or Affiliate such
     timely information that the Company or Affiliate may reasonably require to
     establish (A) that the absence from work is for one of the reasons
     specified and (B) the number of days for which there was such an absence.

(ff) "Participant" means an Eligible Employee who meets the requirements of
     section 3.1 and who is participating in the Plan.

(gg) "Participating Employer" means any Affiliate, which has adopted the Plan in
     accordance with Article XIV.

(hh) "Pension Plan" means The Northern Trust Company Pension Plan.

(ii) "Permanent Disability" means any physical or mental injury, illness or
     incapacity which, in the sole judgment of the Committee based on the
     medical reports of a physician selected by the Committee and other evidence
     satisfactory to the Committee, currently and permanently prevents an
     Employee from satisfactorily performing the Employee's usual duties for the
     Company or an Affiliate or the duties of such other position or job which
     the Company or an Affiliate makes available to the Employee and for which
     such Employee is qualified by reason of training, education or experience;
     provided, however, to the extent that a disability case manager determines
     whether an Employee is permanently disabled under the Company's short or
     long-term disability plan, such determination shall be binding with respect
     to the question of whether the Employee has incurred a Permanent Disability
     hereunder.

(jj) "Plan" means the Northern Trust Employee Stock Ownership Plan, as amended.

(kk) "Plan Year" means the calendar year.

(ll) "Qualified Election Period" means-

     (1)  prior to the date that section 2.1(mm)(2) becomes operative, the
          period beginning with the Plan Year in which the Member first has
          attained age 55 and is 100 percent vested under section 7.6 and ending
          with the earliest of (A) the fourth succeeding Plan Year thereafter;
          (B) the Plan Year preceding the Plan Year during which the Member
          ceases being an Employee; or (C) the Plan Year preceding the Plan Year
          during which the Member becomes a Qualified Participant under section
          2.1(mm)(2), or

     (2)  on and after January 1, 1999 or such earlier date that any Member
          satisfies the requirements of section 401(a)(28)(B)(iii) of the Code,
          the six-Plan Year period beginning with the Plan Year in which the
          Member first becomes a Qualified Participant under section 2.1(mm)(1)
          or (2), provided, that, the Qualified Election Period of a Member who
          would have been a Qualified Participant in any year prior to 1989
          shall begin January 1, 1989.

(mm) "Qualified Participant" means-

     (1)  prior to the date that paragraph (2) below becomes operative, any
          Participant who is age 55 or older and is 100 percent vested under
          section 7.6; and

                                                                               6

<PAGE>

     (2)  on and after January 1, 1999 or such earlier date that any Member
          satisfies the requirements of section 401(a)(28)(B)(iii) of the Code,
          any Member who has attained age 55 and has been a Participant in the
          Plan for at least ten years, or has otherwise satisfied such
          requirements.

(nn) "Related Plan" means any other defined contribution plan (as defined in
     section 415(k) of the Code) maintained by the Company or an Affiliate.

(oo) "Severance Eligible Participant" means a Participant whose employment has
     terminated in a manner entitling such Participant to severance pay under
     any formal severance plan maintained by The Northern Trust Company
     providing severance benefits to certain employees as a result of job
     elimination or termination of employment due to the acquisition or
     disposition of a business entity.

(pp) "Spouse" means the person to whom a Member is married or, in the case of a
     deceased Member, the person to whom a Member was married on the date of
     such Member's death.

(qq) "Suspense Account" means an account to which securities purchased with any
     Loans are allocated pending their release and allocation to Accounts as the
     Loan is repaid.

(rr) "Trust" means all money, securities, and other property held in trust for
     purposes of the Plan. The Trust forms a part of the Plan and shall be
     evidenced by an agreement between the Company and the Trustee specifying
     the duties of the Trustee.

(ss) "Trust Assets" means the assets held in the Trust for the exclusive benefit
     of Members, Beneficiaries, and Spouses.

(tt) "Trustee" means the entity named by the Company to act as trustee of the
     Trust pursuant to the Trust Agreement.

(uu) "Unvested Portion" means the remaining Account balance after subtracting
     the Vested Portion.

(vv) "Valuation Date" means the last business day of each calendar month.

(ww) "Vested Portion" means that percentage of a Member's Account constituting
     the Member's irrevocable right to such Account, as indicated in the
     following vesting schedule:

     Member's Years
     of Vesting Service
     with the Company                            Vested
     and Affiliates                              Percentage

     Less than 1 year                              0%
     1 year but less than 2                       20%
     2 years but less than 3                      40%
     3 years but less than 4                      60%
     4 years but less than 5                      80%
     5 or more years                             100%

                                                                               7

<PAGE>

          A Member shall always have a fully vested interest in the portion of
          his or her Account attributable to dividends on shares of Company
          Stock allocated to such Account.

     (xx) "Vesting Service" means the period of employment credited under
          section 3.4.

                                                                               8

<PAGE>

Article III.  Participation and Service

3.1  Participation

Each Eligible Employee shall become a Participant in the Plan on the Entry Date
following the date the Eligible Employee completes six (6) months of Vesting
Service; provided, that he or she is an Eligible Employee on such date.

3.2  Duration of Participation

An Eligible Employee who becomes a Participant shall continue to be a
Participant or Inactive Participant until he or she incurs a Break in Service,
and also shall continue to be a Member thereafter for as long as he or she is
entitled to receive any benefits hereunder. After receiving all benefits to
which he or she is entitled hereunder, he or she shall cease to be a Member
unless and until he or she thereafter becomes eligible to again become a
Participant.

3.3  Transferred or Rehired

The following rules shall be applicable to Employees who (a) become Eligible
Employees because of transfer to a status qualifying for coverage under the
Plan, (b) become Inactive Participants, (c) transfer to a status not qualifying
for coverage after meeting the requirements of section 3.1 but before becoming
Participants, or (d) are rehired by the Company or an Affiliate:

(a)  An Employee who shall be transferred into employment where he or she
     becomes an Eligible Employee hereunder shall be credited with Vesting
     Service computed for all his or her employment with the Company and any
     Affiliate, before and after such transfer.

(b)  Any Participant who shall be transferred into employment as an Employee
     where he or she becomes an Inactive Participant shall continue to receive
     credit for Vesting Service under this Plan during the period he or she is
     an Inactive Participant.

(c)  Any Eligible Employee who shall meet the requirements of section 3.1 but is
     transferred into employment as an Employee but not as an Eligible Employee,
     before becoming a Participant, shall no longer be eligible to have
     contributions made on his or her behalf hereunder. Any such Employee shall
     continue to accrue Vesting Service during the period computed for all of
     the Employee's employment with the Company and any Affiliate.

(d)  An Employee who has a Break in Service and is subsequently reemployed by
     the Company or an Affiliate shall be considered a new Employee for purposes
     of section 3.1, unless he or she was credited with at least six months of
     Vesting Service prior to his or her Break in Service. In such case, the
     Employee shall become eligible to participate in the Plan upon
     reemployment, provided he or she is then an Eligible Employee.

     (1)  By written notice to the Committee after his or her reemployment, an
          Employee who has not had five consecutive One-Year Breaks in Service
          may deposit with the Trustee an amount which shall be equal to the
          aggregate value of the distributions from his or her Account at the
          time of his or her previous Break in Service. All deposits must be
          made in cash and in a single lump sum. The deposits must be made
          within five years after the Employee is reemployed. Effective January
          1, 2002, any such deposit shall be reinvested in Company Stock in
          accordance with administrative procedures established by the
          Committee.

                                                                               9

<PAGE>

     (2)  In the case of a reemployed Employee who does not have five
          consecutive One-Year Breaks in Service, the Company shall contribute
          to the Account of such Employee the amount, if any, forfeited at the
          time of the Employee's termination of service, if and only if the
          Employee makes the deposits permitted under paragraph (1) above or the
          Employee did not receive a distribution at or after the time of his or
          her previous termination of service. The Company's contribution shall
          be made concurrently with the Employee's repayment if applicable,
          otherwise as soon as administratively practicable after the date of
          his or her reemployment.

          For each other reemployed Employee, his or her beginning balance in
          his or her Account shall be zero, and his or her previous Forfeiture,
          if any, shall not be restored.

3.4  Vesting Service

An Employee shall receive credit for Vesting Service for the period commencing
with the Employee's date of hire with the Company or an Affiliate and ending on
the date the Employee incurs a Break in Service. Vesting Service shall be
calculated in accordance with reasonable and uniform standards and policies
adopted by the Company from time to time, which standards and policies shall be
consistently observed subject, however, to the following:

(a)  Vesting Service shall be computed on the following bases: (i) prior to July
     1, 1993, an Employee shall receive credit for each calendar quarter during
     which the Employee earned at least one (1) Hour of Service or otherwise
     would receive credit for Vesting Service pursuant to subsection (b) below;
     and (ii) from and after July 1, 1993, an Employee shall receive credit for
     each calendar month during which the Employee earned at least one (1) Hour
     of Service or otherwise would receive credit for Vesting Service pursuant
     to subsection (b) below.

(b)  An Employee shall earn Vesting Service for all periods of active employment
     with the Company or an Affiliate, and for the following periods that are
     not active employment but that immediately precede a Break in Service:

     (1)  an approved absence of up to 12 consecutive months from the Company or
          an Affiliate (e.g. vacation, paid holiday, sick, short term
          disability, long term disability, leave under the Family and Medical
          Leave Act of 1993, unpaid leave of absence) that is granted according
          to uniform and nondiscriminatory standards;

     (2)  a period of up to one (1) year during which an Employee is on Parental
          Leave, and

     (3)  an absence from work with the Company or an Affiliate on account of
          qualified military service (within the meaning of Code section
          414(u)), but only if the Employee reports for work within the period
          required under Code section 414(u).

(c)  If an Employee incurs a Break in Service, but returns to employment with
     the Company or an Affiliate prior to incurring a One-Year Break in Service
     (as defined in section 3.6), the period commencing on the date the Break in
     Service began and ending on the date such Employee is reemployed shall be
     counted as Vesting Service. Notwithstanding the preceding sentence, if the
     Break in Service occurs during a period of absence from active employment,
     the Employee shall not receive Vesting Service under the preceding sentence
     unless such Employee returns to employment before the first (1st)
     anniversary of the first day of such absence. If an Employee

                                                                              10

<PAGE>

     suffers a One-Year Break in Service and the Employee is thereafter
     reemployed by the Company or an Affiliate, such Employee's Vesting Service
     before such One-Year Break in Service shall be added to the Employee's
     Vesting Service after reemployment.

(d)  A Participant's Vesting Service shall not include periods of service with
     an entity that is not an Affiliate, or service prior to the date an entity
     becomes an Affiliate, except as provided in Schedule A hereto.

(e)  A Severance Eligible Participant shall receive credit for one (1) year of
     Vesting Service beyond that earned pursuant to the foregoing.

(f)  All periods of Vesting Service shall be aggregated; provided, however, that
     a Participant shall not receive multiple credit for Vesting Service with
     respect to any single period.

3.5  Break in Service

(a)  A "Break in Service" shall occur on earlier of:

     (1)  the date the Employee separates from service due to a voluntary
          termination of employment, discharge, retirement, or death; or

     (2)  the first anniversary of the date the Employee separates from service
          with the Company or an Affiliate for any reason other than the reasons
          set forth in paragraph (1) above, such as vacation, holiday, sickness,
          disability, leave of absence or layoff.

(b)  Effective December 12, 1994, the fact that an Employee separates from
     service with the Company or an Affiliate on account of qualified military
     service (within the meaning of Code section 414(u)) shall not constitute a
     Break in Service unless the Employee fails to report to work within the
     period required under Code section 414(u), in which case the Break in
     Service shall occur on the earlier of (1) the expiration of the period by
     which such Employee was required by law to report back to work or (2) the
     first anniversary of the date the Employee separated from service.

(c)  A Break in Service shall end on the date on which an Employee again
     performs an Hour of Service for the Company or an Affiliate.

(d)  The fact that an Employee who is a Participant becomes an Inactive
     Participant shall not constitute a Break in Service, but the foregoing
     rules shall continue to apply to such an Employee during the period he or
     she is an Inactive Participant.

(e)  Effective August 5, 1993, the fact that an Employee is absent from work
     under the Family and Medical Leave Act of 1993 shall not constitute a Break
     in Service if the Employee returns to work with the Company or an Affiliate
     after such period of absence.

3.6  One-Year Break in Service

(a)  The term "One-Year Break in Service" means each 12-consecutive-month period
     beginning on the date an Employee incurs a Break in Service under section
     3.5 and ending on each anniversary of such date, provided that such
     Employee does not perform an Hour of Service for the Company or any
     Affiliate during such period.

                                                                              11

<PAGE>

(b)  Solely for purposes of determining whether a One-Year Break in Service has
     occurred, but not for purposes of determining Vesting Service, in the case
     of an Employee who is on Parental Leave, the Employee's Break In Service
     shall be deemed to occur on the second (2nd) anniversary of the first day
     of such absence, provided the Employee does not perform an Hour of Service
     for the Company or any Affiliate during such period of absence. The period
     of time between the first (1st) and second (2nd) anniversaries of a
     Parental Leave shall not be counted as a Break in Service or Vesting
     Service.

                                                                              12

<PAGE>

Article IV. Employer Contributions

4.1  Contributions

Subject to section 4.2, for each Plan Year, Employer Contributions under the
Plan will be paid to the Trust in an amount equal to 2% of each Participant's
Compensation for such Plan Year. Additional Employer Contributions under the
Plan may be paid in an amount up to 3% of each Participant's Compensation for
such Plan Year if certain corporate performance goals established by the Board,
with respect to this Plan, are met. The Board has the sole discretion to
establish and change such performance goals on an annual basis and to determine
whether such goals have been met. Notwithstanding any provision in the Plan or
any law to the contrary, the Company and Participating Employers shall also make
Employer Contributions to the extent necessary to satisfy the provisions of
section 4.5. Effective January 1, 2002, Forfeitures under the Plan shall be
applied to offset the Company's and Participating Employers' Employer
Contribution obligation for the next succeeding year or years.

Employer Contributions for a Plan Year may be paid during or at the end of the
Plan Year and must be paid no later than the due date for filing the Company's
federal income tax return for that year, including any extensions of the due
date. Employer Contributions for any Plan Year shall not be paid to the Trust in
amounts that would exceed the limitations of section 404 of the Code.
Notwithstanding the provisions of this section, no Employer Contributions in any
Limitation Year shall be in an amount that would cause the Annual Additions to
the Accounts of any Participant to exceed the Maximum Permissible Amount (as
defined in section 7.5) for such Participant for that Limitation Year.

4.2  Medium of Payment

Employer Contributions may be paid to the Trust in cash or in shares of Company
Stock, as determined by the Board. Employer Contributions, however, shall be
paid in cash in such amounts (subject to the limitations described in section
7.5), and at such times as needed to provide the Trust with funds sufficient to
pay in full when due any principal and interest payments required by a Loan
incurred, pursuant to Committee direction, by the Trustee to finance
acquisitions of Company Stock, except to the extent such principal and interest
payments have been satisfied by the Trustee from cash dividends paid to it with
respect to Company Stock.

4.3  Allocation of Employer Contributions

All Employer Contributions for a Plan Year shall be allocated to Participants'
Accounts as provided in Article VII.

4.4  No Participant Contributions

No Participant shall be required or permitted to make contributions to the Plan
or Trust.

4.5  Uniformed Services Employment and Reemployment Rights Act

Effective December 12, 1994, the Plan shall be administered consistent with the
provisions of Uniformed Services Employment and Reemployment Rights Act of 1994,
P.L. 103-353 ("USERRA"). As such, the Company and any Participating Employer
shall make special Employer Contributions as necessary to comply with USERRA and
other applicable laws.

                                                                              13

<PAGE>

Article V. Investment of Trust Assets

5.1  Investments

Trust Assets under the Plan will be invested primarily in Company Stock.
Employer Contributions and other Trust assets may be used to acquire shares of
Company Stock from the stockholders (including Former Participants) or the
issuer thereof. The Trustee also may hold Trust assets in cash or invest them in
savings accounts, certificates of deposit, high grade short-term securities, any
kind of investment fund (open-end or otherwise), a common trust fund for the
investment of qualified employee benefit trusts, including any such fund
maintained by the Trustee, or in other investments desirable for the Trust.

5.2  Valuation of Company Stock

All purchases of Company Stock will be made at a price, or at prices, that do
not exceed the fair market value of such Company Stock. Except as otherwise
determined by the Trustee in accordance with ERISA, the fair market value of
Company Stock as of a given date shall be the closing price as of such date on
the NASDAQ Stock Market; provided, however, that before January 1, 1995, the
fair market value as of a given date shall be the median of the high and low
sale prices of Company Stock on the preceding trading day. If Company Stock is
not readily tradable on an established securities market, the determination of
the fair market value of Company Stock for all purposes of the Plan shall in all
cases be made by an independent appraiser appointed by the Committee. Any
independent appraiser appointed pursuant to this section shall meet the
requirements of section 401(a)(28)(C) of the Code.

5.3  Crediting of Stock

Company Stock purchased with the proceeds of a Loan shall be held in the
Suspense Account pending release and allocation to the Accounts of Participants
as the Loan is paid pursuant to section 7.4. Company Stock purchased with
amounts allocated to Participants' Other Investments Accounts shall immediately
upon purchase be credited pro rata to the corresponding Company Stock Accounts.
Company Stock contributed to the Plan pursuant to Article IV shall be allocated
to the Company Stock Accounts of Participants pursuant to section 7.4.

5.4  Sales and Resales of Company Stock

The Committee may direct the Trustee to sell or resell shares of Company Stock
to any person. All such sales to any disqualified person (within the meaning of
section 4975(e)(2) of the Code) must be made at no less than the fair market
value and no commission may be charged. Such sales shall comply with section
408(e) of ERISA. All sales of Company Stock (except Company Stock held in a
Suspense Account) by the Trustee will be charged pro rata to the Company Stock
Accounts of Participants. Sales of Company Stock pursuant to this section 5.4
may only be made to the extent not inconsistent with section 1.3 of the Plan.

                                                                              14

<PAGE>

Article VI. Exempt Loans

6.1  Requirements

(a)  The Committee may direct the Trustee to obtain Loans. Any such Loan will
     meet all requirements necessary to constitute an exempt loan within the
     meaning of section 4975(d)(3) of the Code and Treasury regulation section
     54.4975-7(b)(1)(iii) and shall be used primarily for the benefit of
     Participants, Beneficiaries, and Spouses. The proceeds of any such Loan
     shall be used, within a reasonable time after the Loan is obtained, only to
     purchase Company Stock, repay the Loan, or repay any prior Loan. Any such
     Loan shall provide for no more than a reasonable rate of interest (as
     determined under Treasury regulation section 54.4975-7(b)(7)) and must be
     without recourse against the Plan. The number of years to maturity under
     the Loan must be definitely ascertainable at all times. The only assets of
     the Plan that may be given as collateral on a Loan are shares of Company
     Stock acquired with the proceeds of the Loan and shares of Company Stock
     that were used as collateral on a prior Loan repaid with the proceeds of
     the current Loan. No person entitled to payment under a Loan shall have
     recourse against Trust Assets other than such collateral, Employer
     Contributions (other than contributions of Company Stock) that are
     available under the Plan to meet obligations under the Loan, and earnings
     attributable to such collateral and the investment of such Employer
     Contributions.

(b)  All Employer Contributions paid during the Plan Year in which a Loan is
     made (whether before or after the date the proceeds of the Loan are
     received), all Employer Contributions paid thereafter until the Loan has
     been repaid in full, and all earnings from investment of such Employer
     Contributions, shall be used to meet obligations under the Loan as such
     obligations accrue, or before such obligations accrue, unless otherwise
     designated by the Committee at the time any such Employer Contribution is
     made.

(c)  Any Company Stock acquired with the proceeds of a Loan shall be placed in a
     Suspense Account. The Company Stock in the Suspense Account must be
     released from the Suspense Account upon the payment of any portion of the
     Loan. The number of shares to be released from the Suspense Account for
     each Plan Year during the duration of the Loan shall equal the number of
     shares of Company Stock which serve as collateral for such Loan held
     immediately before release for the current Plan Year multiplied by a
     fraction. The numerator of the fraction is the sum of principal and
     interest paid in such Plan Year. The denominator of the fraction is the sum
     of the numerator and the principal and interest to be paid for all future
     years. Such years will be determined without taking into account any
     possible extension of renewal periods.

(d)  If the collateral in the Suspense Account includes more than one class of
     Company Stock, the number of shares of each class to be released from the
     Suspense Account for a Plan Year must be determined by applying the same
     fraction to each class. If interest on any Loan is variable, the interest
     to be paid in future years under the Loan shall be computed by using the
     interest rate applicable as of the end of the current Plan Year.

(e)  In the event of a default under the Loan, the value of Plan assets
     transferred in satisfaction of the Loan shall not exceed the amount of the
     default. If the lender is a disqualified person (as defined in section
     4975(e) of the Code) or a party in interest to the Plan (as defined in
     section 3(14) of ERISA), the Loan shall provide for the transfer of Plan
     assets upon default only upon and to the extent of the failure of the Plan
     to meet the payment schedule of the Loan.

                                                                              15

<PAGE>

6.2  Payments on Loans

Payments of principal and interest on any Loan during a Plan Year shall be made
by the Trustee (as directed by the Committee) only from (a) Employer
Contributions to the Trust made to meet the Plan's obligation under a Loan and
from any earnings (including dividends) attributable to such Employer
Contributions or to Company Stock held as collateral for a Loan (received either
during or prior to the Plan Year), less payment from such contributions and
earnings in prior Years; (b) the proceeds of a subsequent Loan made to repay a
prior Loan; and (c) the proceeds of the sale of any Company Stock held as
collateral for a Loan. Such Employer Contributions and earnings must be
accounted for separately by the Plan until the Loan is repaid.

6.3  Crediting of Released Stock

Company Stock released by reason of the payment of principal or interest on a
Loan from Employer Contributions shall, on the Anniversary Date, be allocated to
Participants as set forth in section 7.4.

6.4  Payments of Principal and Interest

(a)  The Company shall contribute to the Trust sufficient amounts to enable the
     Trust to pay principal and interest on any Loans as they are due. If the
     limitations of section 7.5 would result in Employer Contributions in an
     amount insufficient to enable the Trust to pay principal and interest on
     such Loan as it is due, then the Company may-

     (1)  make a Loan to the Trust (as described in Treasury regulation section
          54.4975-7(b)(4)(iii)), in sufficient amounts to meet such principal
          and interest payments. A new Loan must also meet all requirements of
          an exempt loan within the meaning of Treasury regulation section
          54.4975-7(b)(1)(iii) and shall be subordinated to the prior Loan.
          Company Stock released from the pledge of the prior Loan shall be
          pledged as collateral to secure the new Loan. Such Company Stock will
          be released from this new pledge and allocated to the Accounts of the
          Participants in accordance with applicable provisions of the Plan;

     (2)  purchase any Company Stock pledged as collateral in an amount
          necessary to provide the Trustee with sufficient funds to meet the
          principal and interest repayments. Any such sale by the Plan shall
          meet the requirements of section 408(e) of ERISA; or

     (3)  any combination of paragraphs (1) and (2).

(b)  Neither the Company nor any Affiliate, pursuant to this section, shall do,
     fail to do, or cause to be done any act that would result in a
     disqualification of the Plan as an employee stock ownership plan under the
     Code or ERISA.

6.5  Puts, Calls, and Other Options

Except as provided in Article X and notwithstanding any amendment to or
termination of the Plan that causes it to cease to qualify as an employee stock
ownership plan within the meaning of section 4975(e)(7) of the Code, no shares
of Company Stock acquired with the proceeds of a Loan obtained by the Trust to
purchase Company Stock may be subject to a put, call, or other option, or
buy-sell or similar arrangement while such shares are held by and when
distributed from the Plan.

                                                                              16

<PAGE>

Article VII.  Allocations to Participants' Accounts

7.1  Participants Entitled to Allocations

As of each Anniversary Date, a Participant is entitled to the allocations
provided in this Article VII. A Participant must be an active Eligible Employee
on the Anniversary Date in order to share in the allocations relating to that
Anniversary Date; provided, however, that each Participant who is on an
authorized leave of absence, whose employment terminates by reason of death or
early or normal retirement under the terms of the Pension Plan, who becomes
entitled to a disability distribution under section 9.3, or whose employment
terminates in circumstances under which he or she is a Severance Eligible
Participant, shall be entitled to share in the allocation of Employer
Contributions which have not been used to make payments on a Loan or Company
Stock released from the Suspense Account according to section 6.1(c), for any
Anniversary Date occurring with respect to the Plan Year in which the leave of
absence begins or employment terminates. If a Participant becomes an Inactive
Participant during a Plan Year, then such Inactive Participant shall be entitled
to an allocation of Employer Contributions for such Plan Year, provided he or
she is an Employee on the Anniversary Date for that Plan Year.

7.2  Allocations to Company Stock Accounts

A separate Company Stock Account will be established for each Participant. The
Company Stock Account will be credited with (a) a Participant's allocable share
(determined under section 7.4) of Company Stock (including fractional shares)
purchased and paid for by the Trust or contributed in kind to the Trust, (b) any
stock dividends on Company Stock allocated to a Member's or Beneficiary's
Company Stock Account as of the record date therefor and (c) Company Stock
acquired with cash dividends that a Member or Beneficiary elects to reinvest in
Company Stock in accordance with Section 11.2. Company Stock acquired by the
Trust with the proceeds of a Loan obtained pursuant to Article VI shall be
allocated to the Company Stock Accounts of Participants according to the method
set forth in section 7.4 at the time the Company Stock is released from Suspense
Accounts as provided in section 6.1(c).

7.3  Allocations to Other Investments Accounts

A separate Other Investments Account will be established for each Participant.
The Other Investments Account will be credited or debited with (a) each Member's
or Beneficiary's allocable share (as determined under section 7.7) of the net
income or loss of the Trust, (b) for Participants entitled to allocations under
section 7.1, Employer Contributions that have not been used to make principal
and interest payments on a Loan or to purchase Company Stock, and (c) prior to
January 1, 2002, for Participants entitled to allocations under section 7.1,
Forfeitures in other than Company Stock. Each Other Investments Account will be
debited for its share of any cash payments for the acquisition of Company Stock
for the benefit of Company Stock Accounts.

7.4  Allocations of Employer Contributions, Company Stock Acquired With a Loan
and Forfeitures

Subject to subsection (d) of this section and to sections 4.5 and 7.5, (i)
Employer Contributions which have not been used to make payments on a Loan, (ii)
Company Stock released from the Suspense Account according to section 6.1(c),
and (iii) prior to January 1, 2002, Forfeitures incurred since the prior
Anniversary Date, shall be allocated among Participants entitled to allocations
under section 7.1 as follows:

(a)  For the Anniversary Date on January 31, 1989, with respect to Employer
     Contributions which have been made pursuant to a loan described in section
     133(b)(1)(B) of the Code (as in effect on

                                                                              17

<PAGE>

     such date), in the proportion that each such Participant's Compensation for
     January 1989 bears to the total of such Compensation for all such
     Participants (considering in both cases, with respect to each Participant,
     only Compensation not in excess of $16,666.66);

(b)  For the Anniversary Date on December 31, 1989, with respect to Employer
     Contributions which have not been made to make payments on a Loan, Company
     Stock released from the Suspense Account according to section 6.1(c), and
     Forfeitures incurred on or before December 31, 1989, in accordance with the
     following procedure:

     (1)  the number of shares released from the Suspense Account for the Plan
          Year shall be added to the number of shares allocated on the January
          31, 1989 Anniversary Date; and

     (2)  to preliminarily determine the number of shares to be allocated to
          each Participant entitled to share in allocation under section 7.1,
          the number determined under paragraph (1) above shall be multiplied by
          a fraction, the numerator of which is the Participant's Compensation
          for the 1989 Plan Year, and the denominator of which is the aggregate
          Compensation for the 1989 Plan Year of all Participants entitled to
          share in the allocation.

     The product so determined for each such Participant shall be decreased by
     the number of shares of Company Stock allocated to the Participant on the
     January 31, 1989 Anniversary Date; provided that, for any Participant with
     respect to whom the product of subsection (b)(2) is less than the number of
     shares allocated on the January 31, 1989 Anniversary Date, no shares
     allocated on such Anniversary Date shall be subtracted from the
     Participant's Account. To accomplish the foregoing, (A) the Participants
     described in the foregoing proviso (the "Deficit Participants") will
     receive no allocation for the December 31, 1989 Anniversary Date and (B)
     for all other Participants entitled to share in such allocation, the
     preliminary determination described in subsection (b)(2) shall be adjusted
     by subtracting from the shares otherwise allocable to them a number of
     shares equal to the shares that would have been subtracted from the
     Accounts of the Deficit Participants if the foregoing proviso had not
     applied. Such adjustment shall be accomplished pro rata based on the
     relative Compensation of affected Participants as described in subsection
     (b)(2), except that, if such adjustment would result in the subtraction of
     shares allocated to any Participant on the January 31, 1989 Anniversary
     Date, then to the extent such subtraction would occur, the adjustment will
     not be made to such Participant's allocation and any additional adjustment
     shall be made pro rata (on the same basis) among the other affected
     Participants; and

(c)  For each Anniversary Date after December 31, 1989, with respect to Employer
     Contributions which have not been made to make payments on a Loan, Company
     Stock released from the Suspense Account according to section 6.1(c), and,
     prior to January 1, 2002, Forfeitures incurred since the prior Anniversary
     Date, in the proportion that such Participant's Compensation for the Plan
     Year (considering for this purpose only Compensation paid while a
     Participant is in the Plan) bears to the total Compensation of all such
     Participants; provided, however, that a special allocation may be made
     pursuant to section 4.5.

(d)  Notwithstanding subsections (b) and (c), if for any Limitation Year more
     than one-third of the Employer Contributions that are deductible as
     principal or interest payments on a Loan pursuant to the provisions of
     section 404(a)(9) of the Code would, but for the provisions of this
     subsection (e), be allocated to Highly Compensated Participants, then such
     Employer Contributions

                                                                              18

<PAGE>

     otherwise allocable to such Participants shall be reduced. The reduction
     shall be made among all Highly Compensated Participants in the same
     proportion as the amounts of such Employer Contributions otherwise
     allocable to them and shall be made only to the minimum extent necessary so
     that no further reduction would be required to satisfy the conditions of
     section 415(c)(6) of the Code.

(e)  Effective January 1, 2002, all Forfeitures under the Plan shall be used to
     reduce future Employer Contributions by the Company and Participating
     Employers under section 4.1 of the Plan.

The allocations made pursuant to subsections (b), (c) and (d) shall be
consistent with the provisions of sections 9.1, 9.2, 9.3, and 9.4.
Notwithstanding the preceding provisions of this section, and subject to
sections 4.5 and 7.4(d), no allocation shall be made to the Account of any
Participant in any Limitation Year that would cause (A) the Annual Additions of
the Participant to exceed the Maximum Permissible Amount (as defined under
section 7.5) for that year (except as permitted in section 7.5) or (B) for
Limitation Years beginning prior to January 1, 2000, the sum of the "defined
benefit plan fraction" and the "defined contribution plan fraction" (each as
defined in Code section 415(e) as in effect on December 31, 1999) to exceed one
for that Participant for that Limitation Year.

7.5  Maximum Allocation

(a)  Notwithstanding anything to the contrary contained elsewhere in the Plan,
     but subject to sections 4.5 and 7.4(d), for each Limitation Year, the
     allocations to the Account of any Participant shall be limited so that the
     Participant's Annual Additions for such Year do not exceed the Maximum
     Permissible Amount (as defined in subsection (i)(1) below).

(b)  If the foregoing limitation on allocations would be exceeded in any
     Limitation Year for any Participant as a result of the allocation of
     Forfeitures, reasonable error in estimating a Participant's Compensation,
     or under such other limited facts and circumstances as the Commissioner of
     Internal Revenue, pursuant to Treasury regulation section 1.415-6(b)(6),
     finds justify the availability of this subsection (b), the excess amount
     shall be placed, unallocated to any Participant, in a Limitation Account
     (as defined in subsection (i)(3) below). If a Limitation Account is in
     existence at any time during a particular Limitation Year, other than the
     Limitation Year described in the preceding sentence, all amounts in the
     Limitation Account must be allocated to Participants' Accounts (subject to
     the limits of this section 7.5) before any contributions that would
     constitute Annual Additions may be made to the Plan for that Limitation
     Year. The excess amounts allocated pursuant to this subsection (b) shall be
     used to reduce Employer Contributions for the next Limitation Year (and
     succeeding Limitation Years, as necessary) for all of the Participants in
     the Plan. Excess amounts held in a Limitation Account pursuant to this
     section 7.5 may not be distributed to Participants or former Participants.
     The Limitation Account will not share in the valuation of Participants'
     Accounts or in the allocation of earnings set forth in section 7.7 of the
     Plan, and the change in fair market value and allocation of earnings
     attributable to the Limitation Account shall be allocated to the remaining
     accounts hereunder as set forth in this section 7.5.

(c)  Upon termination of the Plan, any amounts in a Limitation Account at the
     time of such termination shall revert to the Company or Participating
     Employer that employs the Employees to whom such amounts are attributable.

(d)  For Limitation Years beginning prior to January 1, 2000, if any Participant
     under the Plan is also a Participant in a defined benefit plan (as defined
     in section 415(k) of the Code) maintained by

                                                                              19

<PAGE>

     the Company or an Affiliate, the sum of the "defined benefit plan fraction"
     and the "defined contribution plan fraction" (each as defined in Code
     section 415(e) as in effect on December 31, 1999) for any Limitation Year
     with respect to such Participant shall not exceed one. If a Participant is
     otherwise entitled to receive an allocation under this Plan and accrue a
     benefit under a defined benefit plan maintained by the Company or an
     Affiliate, and the combination thereof would cause the limitations of this
     section to be exceeded, the allocation under this Plan will only be reduced
     if the accrual under such defined benefit plan is not decreased as
     necessary to cause such limitations not to be exceeded. For any Limitation
     Year prior to January 1, 2000 in which the Plan is a top-heavy plan, the
     determination of the defined benefit fraction and the defined contribution
     fraction under this subsection (d) will be adjusted in accordance with the
     provisions of section 416(h) of the Code (as in effect on December 31,
     1999).

(e)  If a Participant is entitled to receive an allocation under this Plan and
     any Related Plan and, in the absence of the limitations contained in this
     section, the Company or a Participating Employer would contribute or
     allocate to the Account of that Participant an amount for a Limitation Year
     that would cause the Annual Additions to the Account of the Participant to
     exceed the annual Maximum Permissible Amount for such Limitation Year, then
     the contributions and allocations made with respect to the Participant
     under this Plan will only be reduced if the contributions or allocations to
     the Participant's accounts under the Related Plan are not decreased to the
     extent necessary so that the Participant's Annual Additions do not exceed
     the Maximum Permissible Amount.

(f)  In applying the limitations under this section 7.5, all Affiliates shall,
     together with the Company, be considered as a single employer. In addition,
     in applying these limitations, all defined contribution plans (whether or
     not terminated) of the Company and all Affiliates shall be treated as one
     defined contribution plan, and all defined benefit plans (whether or not
     terminated) of the Company and all Affiliates shall be treated as one
     defined benefit plan.

(g)  Any reduction in the contributions and allocations under this Plan made
     with respect to a Participant's Account required pursuant to this section
     and section 415 of the Code shall be effected, to the minimum extent
     necessary, by reducing the Employer Contributions that would have been made
     by the Company or a Participating Employer for the applicable Plan Year
     with respect to such Participant.

(h)  The provisions of this section shall be interpreted by the Committee, in
     the administration of the Plan, to reduce contributions and allocations (as
     required by this section) only to the minimum extent necessary to reflect
     the requirements of section 415 of the Code, as amended and in force from
     time to time, and Treasury regulations promulgated pursuant to that
     section, which are incorporated by reference herein.

(i)  For purposes of this section 7.5-

     (1)  "Maximum Permissible Amount" shall mean:

          (A)  the lesser of-

               (i)  $40,000 (as adjusted for increases in the cost-of-living
                    under section 415(d) of the Code); or

                                                                              20

<PAGE>

               (ii)  100 percent of a Participant's compensation (as defined in
                     paragraph (2) hereof), for the Limitation Year.

          (B)  If no more than one-third of the Employer Contributions for a
               Limitation Year that are deductible as principal or interest
               payments on a Loan pursuant to the provisions of section
               404(a)(9) of the Code are allocated to Highly Compensated
               Participants, then the limitations imposed by paragraph (A),
               shall not apply to-

               (i)   Forfeitures of Company Stock if the Company Stock was
                     acquired with the proceeds of a Loan; or

               (ii)  Employer Contributions that are deductible as interest
                     payments on a Loan under section 404(a)(9)(B) of the Code
                     and charged against a Participant's Account.

     (2)  For purposes of this section, section 2.1(v) and Article XV,
          "compensation" shall mean wages, salaries, fees for professional
          services, and other amounts received for personal services actually
          rendered in the course of employment with the Company or an Affiliate
          (including, but not limited to, commissions paid salesmen,
          compensation for services on the basis of a percentage of profits,
          tips, and bonuses); shall include all compensation actually paid or
          made available to a Participant for an entire Limitation Year;
          effective as of January 1, 1998, shall include amounts which are not
          includible in the Participant's gross income by reason of sections
          125, 402(g)(3) and, effective July 1, 2001, 132(f)(4) of the Code; and
          shall not include any other items or amounts paid to or for the
          benefit of a Participant.

     (3)  "Limitation Account" shall mean a suspense account established in
          accordance with Treasury regulation section 1.415-6(b)(6) to hold
          excess Annual Additions with respect to one or more Participants prior
          to allocation of such excess Annual Additions to Participants'
          Accounts.

(j)  To the extent permitted, the limitations set forth in this section 7.5
     shall be adjusted in connection with contributions made pursuant to section
     7.4(d).

7.6  Vesting

(a)  Each Member shall have a vested interest in the adjusted balance of his or
     her Company Stock and Other Investments Accounts in accordance with the
     vesting schedule set forth in section 2.1(ww).

(b)  On reaching the Normal Retirement Date, a Member shall be 100 percent
     vested in the adjusted balance of his or her Company Stock and Other
     Investments Accounts if such Member is an Employee on his or her Normal
     Retirement Date.

(c)  In the event a Member dies or becomes entitled to a disability distribution
     under section 9.3, the Member shall be 100 percent vested in the adjusted
     balance of his or her Company Stock and Other Investments Accounts if such
     Member is an Employee on the date he or she dies or becomes entitled to
     such distribution.

                                                                              21

<PAGE>

7.7  Net Income or Loss of the Trust

(a)  Dividends on Company Stock. Any stock dividends received in respect of
     --------------------------
     Company Stock allocated to a Member's or Beneficiary's Company Stock
     Account as of the record date therefor shall be credited to the Member's or
     Beneficiary's Company Stock Account on the Valuation Date coincident with
     or succeeding the Trustee's receipt of such dividends. Any stock dividends
     received in respect of Company Stock held in the Suspense Account as of the
     record date shall be allocated to such Suspense Account and released
     pursuant to section 6.1(c). Any cash dividends received on Company Stock
     held in the Suspense Account pursuant to section 6.1(c), or any cash or
     stock dividends received on Company Stock that has been forfeited pursuant
     to section 9.4(b), but not yet used to offset Employer Contributions
     pursuant to section 4.1 or reallocated pursuant to section 7.4(c), as of
     the record date, may be used to meet obligations under the Loan, the
     proceeds of which were used to acquire such Company Stock.

(b)  Other Income or Loss. The net income or loss of the Trust shall be
     --------------------
     determined as of each Valuation Date. Each Member's and Beneficiary's share
     of the net income or loss will be allocated to the Member's or
     Beneficiary's Other Investments Accounts in the ratio that the balance of
     all his or her Account on the last Valuation Date, based on the fair market
     value thereof (reduced by the amount of any distribution from such Account,
     including a distribution or transfer pursuant to section 7.9, other than a
     distribution made in the calendar quarter that the Member ceases being an
     Employee), bears to the sum of such balances for all Members and
     Beneficiaries as of that date. The net income or loss of the Trust includes
     the increase or decrease in the fair market value of Trust Assets (other
     than Company Stock), interest income, dividends, and other income or loss
     attributable to Trust Assets (other than Company Stock, except as provided
     in subsection (a) above) since the last Valuation Date. Net income or loss
     shall not include Employer Contributions or Forfeitures. Any proceeds of
     sales of unallocated Company Stock shall, to the extent such amounts are
     not used to pay principal or interest on a Loan, be considered net income
     for the Trust. Net income or loss attributable to any Limitation Account
     established under section 7.5 shall be allocated to the Other Investments
     Accounts of Members and Beneficiaries in accordance with the ratio
     described in the second sentence of this subsection (b), and the Limitation
     Account shall not share in the allocation of net income or loss of the
     Trust under this section.

7.8  Accounting for Allocations

The Committee shall adopt accounting procedures for the purpose of making the
allocations, valuations, and adjustments to Members' and Beneficiaries' Accounts
provided for in this section. Except as provided in Treasury regulation section
54.4975-11, Company Stock acquired by the Plan shall be accounted for as
provided under Treasury regulation section 1.402(a)-l(b)(2)(ii); allocations of
Company Stock shall be made separately for each class of stock; and the
Committee shall maintain adequate records of the cost basis of all shares of
Company Stock allocated to each Member's and Beneficiary's Company Stock
Account. From time to time, the Committee may modify the accounting procedures
for the purpose of achieving equitable and nondiscriminatory allocations among
the Accounts of Members and Beneficiaries in accordance with the general
concepts of the Plan and the provisions of this section. Annual valuations of
Trust Assets shall be made at fair market value.

7.9  Diversification of Investments

(a)  Except as provided below, a Qualified Participant (pursuant to either
     section 2.1(mm)(1) or (2)) may elect, within 90 days after the close of
     each Plan Year in the Qualified Election Period described in 2.1(ll)(1) or
     (2), as applicable, one of the following:

                                                                              22

<PAGE>

     (1)  to have the Trustee dispose of a specified whole number of shares of
          Company Stock not in excess of the Qualified Participant's "Applicable
          Amount"(defined below) and transfer the proceeds thereof to The
          Northern Trust Company Thrift-Incentive Plan, or

     (2)  to receive a distribution of the Applicable Amount (calculated in the
          manner described below but considering only elections, if any, made
          during the Qualified Election Period described in Section 2.1(mm)(2)).
          Such a distribution shall not be subject to the requirements of
          section 10.2 of the Plan.

     A Qualified Participant's Applicable Amount for a Plan Year in the
     Qualified Election Period shall equal 25 percent of (1) the total number of
     shares of Company Stock ever acquired by or contributed to the Plan and
     allocated to the Qualified Participant's Account in the Plan as of the end
     of such Plan Year less (2) the number of shares to which a prior election
     under this subsection applied; provided that, if with respect to a
     Qualified Participant, such difference is not a whole number of shares of
     Company Stock, it shall be rounded to the nearest whole number of shares.
     In the case of the last year of a Qualified Election Period, the preceding
     sentence shall be applied by substituting "50 percent" for "25 percent."
     Qualified Participant elections under this subsection (a) shall be in such
     written, electronic, or other form as the Committee shall determine.

(b)  The provisions of this section shall apply notwithstanding any other
     provisions of the Plan.

(c)  If the Committee receives a Qualified Participant's election pursuant to
     subsection (a), it shall direct the Trustee (1) to sell the required number
     of shares of Company Stock (and, if the Committee desires, the manner in
     which such sale should be accomplished) as of the March 31 next succeeding
     the end of the Plan Year with respect to which the election is made and (2)
     to transfer to The Northern Trust Company Thrift-Incentive Plan or
     distribute to the Qualified Participant, as the case may be, an amount of
     cash equal to the proceeds of the sale of the subject shares. Any such
     transfer shall be made as of the next succeeding April 1, and any such
     distribution shall be made within 90 days after the last day of the period
     during which the election can be made. Notwithstanding any provision of the
     Plan to the contrary, if the Trustee is unable to sell the required shares
     as aforesaid in a timely manner, the Company shall buy such shares. If such
     shares are sold to the Company or an Affiliate, the price paid therefor
     shall be the greater of the fair market value of such shares as of March 31
     or the fair market value of such shares on the date the sale actually
     occurs; provided that, any amount the Plan receives in excess of the fair
     market value as of March 31 shall be considered earnings of the Plan and
     shall be allocated as provided in section 7.7(b).

(d)  Notwithstanding the foregoing, a Qualified Participant shall not be
     entitled to make an election hereunder for a Plan Year within a Qualified
     Election Period if the fair market value of the total number of shares of
     Company Stock ever acquired by or contributed to the Plan and allocated to
     the Qualified Participant's Account in the Plan as of the last day of such
     Plan Year is less than $500.

(e)  Notwithstanding the foregoing, a Qualified Participant who is not an
     Employee of the Company or an Affiliate at the time an election is made
     under this section 7.9, shall not be permitted to transfer amounts to The
     Northern Trust Thrift-Incentive Plan pursuant to subsection (a)(1) above,
     and shall only be entitled to the distribution right described in
     subsection (a)(2) above.

                                                                              23

<PAGE>

Article VIII. Voting and Tender of Company Stock

8.1  Voting Rights; Tender Offers

(a)  Each Member and Beneficiary shall have the right to direct the manner in
     which the Trustee shall vote shares of Company Stock allocated to such
     Member's or Beneficiary's Account.

(b)  In the event of a Tender Offer for Company Stock, each Member and
     Beneficiary shall have the right to direct whether the Trustee will (1)
     tender the Company Stock allocated to such Member's or Beneficiary's
     Account and (2) withdraw such Company Stock from the depository into which
     it is tendered pursuant to such direction.

(c)  Subject to sections 16.8 and 16.9 of the Plan and Part 4 of Title I of
     ERISA, the Trustee shall vote, tender, or withdraw from the depository into
     which tendered, Company Stock allocated to Members' and Beneficiaries'
     Accounts in accordance with directions received from such Members and
     Beneficiaries within the time periods set forth below and the Trustee shall
     have no discretion in such matter. Subject to subsection (e) below, the
     Trustee shall vote allocated shares for which it has not received timely
     directions from Members and Beneficiaries and unallocated shares of Company
     Stock in the same proportion as directed shares are voted and shall have no
     discretion in such matter except as otherwise provided in accordance with
     ERISA.

(d)  As soon as possible prior to each stockholders meeting of Northern Trust
     Corporation, the Trustee shall provide each Member and Beneficiary entitled
     under this section to direct the voting of Company Stock with notice of
     such meeting and of those matters which at the time of the mailing of such
     notice are expected to be presented at such meeting for action by holders
     of Company Stock. Such notice shall be accompanied by an appropriate form
     with which the Member or Beneficiary may direct the manner of voting on
     such matters, or instructions regarding electronic or telephonic voting of
     the Common Stock. If directions on such matters are received by the Trustee
     from any such Member or Beneficiary at least two days prior to such
     meeting, the Trustee shall vote the shares allocated to such Member's or
     Beneficiary's Account in accordance with the directions received from such
     Member or Beneficiary.

(e)  If any person makes a Tender Offer for shares of Company Stock which
     includes shares of Company Stock allocated to Members' and Beneficiaries'
     Accounts under the Plan, the Trustee shall promptly notify each such Member
     and Beneficiary: (1) that a Tender Offer for shares of Company Stock has
     been commenced, (2) of the identity of the tender offeror, (3) of such
     other information as the Trustee deems appropriate to enable the Member or
     Beneficiary to make an independent decision with respect to the tendering
     of such Company Stock, (4) that the Member or Beneficiary has the right to
     direct whether the shares of Company Stock allocated to his or her Account
     will be tendered, (5) that Company Stock allocated to the Member's or
     Beneficiary's Account will be tendered or not tendered in accordance with
     directions received by the Trustee from such Member or Beneficiary no later
     than the date two days before the deadline for tenders under such Tender
     Offer, and (6) that the Trustee shall not tender Company Stock allocated to
     Members' and Beneficiaries' Accounts for which timely directions are not
     received or Company Stock held by the Trustee that is not allocated to
     Accounts except as otherwise provided in accordance with ERISA. Such notice
     will be accompanied by an appropriate form with which the Member or
     Beneficiary may direct the Trustee whether to tender the shares allocated
     to his or her Account, or instructions regarding electronic or telephonic
     direction with respect to the tender of such shares. If such written,
     electronic or telephonic direction is received by the

                                                                              24

<PAGE>

     Trustee prior to such date, the Trustee shall tender, or not tender, the
     shares allocated to such Member's or Beneficiary's Account in accordance
     with such directions. The instructions received by the Trustee from Members
     and Beneficiaries shall be held by the Trustee in confidence and shall not
     be divulged or released to any person, including officers or employees of
     the Company or any Affiliate. A Member's or Beneficiary's direction to
     tender or not tender may be revoked by a subsequent direction received by
     the Trustee from such Member or Beneficiary on or before the date two days
     before the deadline for such tenders, but all directions shall become
     irrevocable on such date. After shares of Company Stock have been tendered
     pursuant to this subsection, the Trustee shall credit each Account for
     which a timely tender direction was received with the proceeds of the sale
     of Company Stock from such Account pursuant to the Tender Offer.

(f)  If shares of Company Stock have been tendered in a Tender Offer by the
     Trustee pursuant to the direction of a Member or Beneficiary, and if
     withdrawal rights arise pursuant to (1) the terms of such Tender Offer, (2)
     any statute or regulation promulgated thereunder, or (3) a court order, the
     Trustee shall promptly notify any Member or Beneficiary who made such a
     direction that he or she has the right to direct the withdrawal of the
     shares of Company Stock tendered pursuant to his or her direction from the
     depository into which such shares have been tendered. The Trustee will
     provide such Member or Beneficiary with an appropriate form with which he
     or she may direct the Trustee to withdraw such shares, or instructions
     regarding electronic or telephonic direction with respect to the withdrawal
     of such shares. In the event the Trustee receives any such written,
     electronic or telephonic direction within sufficient time to act, it shall
     withdraw such shares of Company Stock.

(g)  For purposes of this section 8.1, a "Tender Offer" is a tender offer for,
     or a request for or invitation for tenders of, stock within the meaning of
     section 14(d) of the Securities Exchange Act of 1934 and applicable rules,
     regulations, and case law thereunder.

                                                                              25

<PAGE>

Article IX.  Benefits

9.1      Payments on Retirement

A Member who attains his or her Normal Retirement Date or early retirement date
and continues to be an Employee shall continue to share in the allocation of
Employer Contributions and Forfeitures in other than Company Stock under the
Plan. Upon the retirement of a Member on or after his or her Normal Retirement
Date or early retirement date, the Committee shall notify the Trustee in writing
of the Member's retirement and shall direct the Trustee to make payment of the
adjusted balance of the Member's Accounts as of the Valuation Date coinciding
with or immediately preceding the date a distribution is made to the Member,
unless the Member agrees to a later date in a method provided in the Plan.
Notwithstanding the foregoing, if a Member retires on or after his or her Normal
Retirement Date or early retirement date and before the Anniversary Date next
following his or her retirement, he or she shall be entitled to share in the
allocation of Employer Contributions which have not been used to make payments
on a Loan, Company Stock released from the Suspense Account according to section
6.1(c), and Forfeitures in other than Company Stock, occurring on such
Anniversary Date. For purposes of this Article IX, a Member's "early retirement
date" means the date the Member could terminate employment with entitlement to
early retirement benefits under the Pension Plan.

9.2      Payments on Death

(a)      Upon the death of a Member, the Committee shall promptly notify the
         Trustee in writing of the Member's death and the name of the Member's
         Beneficiary (or Spouse if subsection (c) is applicable) and shall
         direct the Trustee to make payment of the adjusted balances of the
         Member's Account (or the Vested Portion thereof if section 7.6(c) is
         not applicable) as of the Valuation Date coinciding with or immediately
         preceding the date a distribution is made to the Member's Beneficiary,
         in a method provided in the Plan. Notwithstanding the foregoing, if
         such Member dies and the distribution of the Accounts of such Member is
         made before the Anniversary Date next following his or her death, his
         or her Beneficiary or Spouse, as the case may be, shall be entitled to
         share in the allocation of Employer Contributions which have not been
         used to make payments on a Loan, Company Stock released from the
         Suspense Account according to section 6.1(c), and Forfeitures in other
         than Company Stock, occurring on such Anniversary Date.

(b)      Each unmarried Member and each married Member whose surviving Spouse
         has consented to an alternate Beneficiary or an alternate method of
         payment as provided in subsection (c) shall have the right to
         designate, by giving a written designation to the Committee, a person
         or entity as Beneficiary to receive the death benefit provided under
         this section. Successive designations may be made, and the last
         designation received by the Committee prior to the death of the Member
         shall be effective and shall revoke all prior designations.

(c)      The Beneficiary of each Member who is married shall be the surviving
         Spouse of such Member and the death benefits of any Member who is
         married shall be paid in full to his or her surviving Spouse in a
         single payment. Notwithstanding the preceding sentence, the death
         benefits provided pursuant to subsection (a) shall be distributed to
         any other Beneficiary designated by a married Member as provided in
         subsection (b) of this section if the Member's surviving Spouse
         consented to such designation, prior to the date of the Member's death,
         in writing. Such a consent must acknowledge the effect of the election
         and designation and the identity of any nonsurviving Spouse
         Beneficiary, including any class of Beneficiaries or contingent
         Beneficiaries, and must be witnessed by a representative of the Plan or
         a notary public. Consent

                                                                              26

<PAGE>

         of a Member's surviving Spouse shall not be required if the Member
         establishes to the satisfaction of the Committee that consent may not
         be obtained because there is no surviving Spouse or the surviving
         Spouse cannot be located, or because of such other circumstances as the
         Secretary of the Treasury may prescribe by regulations. The Member may
         not subsequently change the designation of the Beneficiary unless his
         or her surviving Spouse consents to the new designation in accordance
         with the requirements set forth in the preceding sentence. Any such
         consent shall only be effective with respect to the specific Spouse. A
         surviving Spouse's consent shall be irrevocable. If a married Member
         dies, and there is a Beneficiary designation as to which the Member's
         surviving Spouse has not consented as provided above, then the
         distribution under this section 9.2 shall be made to the Member's
         surviving Spouse in a lump sum.

         Notwithstanding the foregoing, the consent of a Member's surviving
         Spouse shall not be required if the Member establishes to the
         satisfaction of the Committee that consent may not be obtained because
         there is no surviving Spouse, the surviving Spouse cannot be located,
         or because of such other circumstances as the Secretary of the Treasury
         may prescribe by regulations.

9.3      Payments on Disability

In the case of a Member who is absent from employment by reason of disability,
the Committee shall direct the Trustee to make payment of the adjusted balances
of the Member's Accounts upon the earliest to occur of the following:

(a)      The absence continues without interruption for a period of 12 months;

(b)      The Member is entitled to receive a benefit payable prior to death (a
         "living benefit") under the terms of the Company's Non-Contributory
         Life Insurance Plan (or would be entitled to a living benefit, as
         determined by the Committee, if the Member participated in such Life
         Insurance Plan); or

(c)      The Member has a Permanent Disability, provided that some portion of
         the Member's Account is attributable to participation in the Plan on or
         before August 1, 1998.

Such distribution shall be made as of the Valuation Date coinciding with or
immediately preceding the date a distribution is made to the Member. A Member
who receives a distribution under this section shall be entitled to share in the
allocation of Employer Contributions which have not been used to make payments
on a Loan, Company Stock released from the Suspense Account according to section
6.1(c), and Forfeitures in other than Company Stock for the Anniversary Date
occurring with respect to any Plan Year in which the Member continued to receive
Compensation, including the Plan Year in which such Member's employment
terminates.

9.4      Payments on Termination for Other Reasons

(a)      General. Upon the termination of a Member's employment with the Company
         -------
         and all Affiliates for any reason other than retirement under Section
         9.1, death, or, disability which entitles the Member to a distribution
         under section 9.3, the Committee shall notify the Trustee in writing of
         the termination and shall direct the Trustee to make payment of the
         Vested Portion of the adjusted balances of the Member's Accounts as of
         the Valuation Date coinciding with or next preceding the date a
         distribution is made to the Member. The Vested Portion of a Member's
         Accounts shall be determined in accordance with section 7.6 of the
         Plan.

                                                                              27

<PAGE>

(b)      Forfeiture. The Unvested Portion of the adjusted balance of the Account
         ----------
         of a Member who terminates employment with the Company and all
         Affiliates under this section shall be forfeited as of the first
         Valuation Date following the date the Member terminates employment with
         the Company and all Affiliates. The amount forfeited shall be the
         entire Unvested Portion. If a Member's Company Stock Account includes
         more than one class of Company Stock, the Forfeiture will consist of
         the same proportion of each class of stock.

(c)      Reinstatement.  If a Member is reemployed by the Company or an
         -------------
         Affiliate after incurring a Forfeiture, the Member shall be entitled to
         make repayment to the Plan of the aggregate amount distributed to him
         or her, at any time before the earlier of (1) five years after the
         Member is reemployed and (2) the end of five consecutive One-Year
         Breaks in Service incurred by the Member. Upon making repayment in a
         single cash sum of the fair market value (at the time of distribution)
         of the aggregate amount distributed to him or her, the amount repaid
         shall be credited to the Member's Account and invested by the Trustee
         in a cash equivalent short term investment fund. Notwithstanding the
         foregoing, effective January 1, 2002, the repayment will be reinvested
         in Company Stock in accordance with administrative procedures
         established by the Committee. Any amount which was forfeited (also
         based on the fair market value at the time of distribution) upon the
         Member's prior employment termination shall be reinstated to the
         Member's Account. The amount required to restore such Member's Account
         shall be made up from Forfeitures and, to the extent necessary,
         Employer Contributions prior to their allocation pursuant to section
         7.4.

9.5      Deemed Cashout

If a Member has no vested interest in his Account balance when his or her
employment with the Company and all Affiliates terminates, such Member will be
treated as having received a Deemed Cashout of the Member's Account balance as
of the last day of the Plan Year in which the Member's employment terminated and
the Member's Account balance will be treated as a Forfeiture on such date.
"Deemed Cashout" means a distribution of zero dollars representing the Member's
entire Account balance. If the Member is reemployed with the Company or any
Affiliate before such Member has incurred five (5) consecutive One-Year Breaks
in Service, the amount forfeited will be restored as the Member's Account
balance.

9.6      Property Distributed

Any distribution pursuant to section 9.1, 9.2, 9.3, or 9.4, from a Member's or
Beneficiary's Company Stock Account, shall be made in whole shares of Company
Stock, and the value of partial shares of Company Stock shall be paid in cash.
Distribution from a Member's or Beneficiary's Other Investments Account shall be
made in cash unless the Member or Beneficiary requests a distribution in stock
of the whole shares purchasable with such balance and the balance attributable
to fractional shares in the Member's or Beneficiary's Company Stock Account, in
which case the Trustee shall acquire the necessary shares for distribution. If
cash is to be distributed in connection with fractional shares, the Trustee
shall sell such shares as of the Valuation Date with respect to which the
distribution is being made and distribute the proceeds of sale to the affected
Member or Beneficiary. Any such sale shall be subject to the last two sentences
of section 7.9(c).

9.7      Methods of Payment

(a)      Whenever the Committee shall direct the Trustee to make payment to a
         Member upon termination of a Member's employment on or after the
         Member's Normal Retirement Date, the Committee shall direct the Trustee
         to pay the adjusted balances of the Member's Account to or

<PAGE>

         for the benefit of the Member in a single sum distribution. Whenever
         the Committee shall direct the Trustee to make payment to a Member, the
         Member's Spouse, or other Beneficiary upon or following termination of
         a Member's employment for any other reason, the Committee shall direct
         the Trustee to pay the Vested Portion of the adjusted balances of the
         Member's Accounts, if any, to or for the benefit of the Member, the
         Member's Spouse, or the Member's Beneficiary, in a single sum
         distribution.

(b)      Payment under this section shall be made as soon as reasonably
         practicable (and under ordinary circumstances no more than 60 days)
         after the Valuation Date coincident with or following the date the
         Member ceases being an Employee provided that (1) any Member or
         Beneficiary or Spouse described in section 9.1, 9.2, or 9.3 may elect
         to defer distribution to such Anniversary Date and (2) effective
         January 1, 1998, if the Vested Portion of a Member's Account exceeds
         $5,000, distribution shall not be made to the Member at any time prior
         to the earlier of the Member's Normal Retirement Date or death without
         the Member's written consent. A Member described in paragraph (2) may
         elect to receive distribution of the Member's Accounts as of any
         Valuation Date following the Valuation Date next succeeding the
         Member's termination by filing prescribed materials with the Trustee on
         or before such reasonable deadline as established by the Trustee.

         Distribution may commence less than thirty (30) days after the notice
         required under section 1.411(a)-11(c) of the Treasury regulations is
         given, provided that:

         (1)     the Committee clearly informs the Member that the Member has a
                 right to a period of at least thirty (30) days after receiving
                 the notice to consider the decision of whether to elect a
                 distribution, and

         (2)     the Member, after receiving the notice, affirmatively elects a
                 distribution.

(c)      Notwithstanding the provisions of subsection (b) above, distribution of
         each Member's Account must commence not later than 60 days after the
         last day of the Plan Year in which the last of the following events
         occurs:

         (1)     the Member reaches his or her Normal Retirement Date;

         (2)     the tenth anniversary of the date on which the Member commenced
                 participation in the Plan; or

         (3)     the Member's employment with the Company and all Affiliates
                 terminates.

(d)      Notwithstanding anything to the contrary contained elsewhere in the
         Plan--

         (1)      A Member's benefits under the Plan will-

                 (A) be distributed to him or her not later than the Required
                     Distribution Date (as defined in paragraph (3)), or

                 (B) be distributed commencing not later than the Required
                     Distribution Date in accordance with regulations prescribed
                     by the Secretary of the Treasury over a

                                                                              29

<PAGE>

                           period not extending beyond the life expectancy of
                           the Member or the life expectancy of the Member and
                           the Member's Beneficiary.

         (2)      Payments on death-

                  (A)      If the Member dies after distribution has commenced
                           pursuant to paragraph (1)(B) but before the Member's
                           entire interest in the Plan has been distributed to
                           him or her, then the remaining portion of that
                           interest will be distributed at least as rapidly as
                           under the method of distribution being used under
                           paragraph (1)(B) at the date of the Member's death.

                  (B)      If the Member dies before distribution has commenced
                           pursuant to paragraph (1)(B), then, except as
                           provided in paragraphs (2)(C) and (2)(D), the
                           Member's entire interest in the Plan will be
                           distributed within five years after the Member's
                           death.

                  (C)      Notwithstanding the provisions of paragraph (2)(B),
                           if the Member dies before distribution has commenced
                           pursuant to paragraph (1)(B) and if any portion of
                           the Member's interest in the Plan is payable (i) to
                           or for the benefit of a Beneficiary, (ii) in
                           accordance with regulations prescribed by the
                           Secretary of the Treasury over a period not extending
                           beyond the life expectancy of the Beneficiary, and
                           (iii) beginning not later than one year after the
                           date of the Member's death or such later date as the
                           Secretary of the Treasury may prescribe by
                           regulations, then the portion referred to in this
                           paragraph (2)(C) shall be treated as distributed on
                           the date on which such distribution begins.

                  (D)      Notwithstanding the provisions of paragraphs (2)(B)
                           and (2)(C), if the Beneficiary referred to in
                           paragraph (2)(C) is the Spouse of the Member, then-

                           (i)      the date on which the distributions are
                                    required to begin under paragraph
                                    (2)(C)(iii) of this section shall not be
                                    earlier than the date on which the Member
                                    would have attained age 70-1/2, and

                           (ii)     if the Spouse dies before the distributions
                                    to that Spouse begin, then this paragraph
                                    (2)(D) shall be applied as if the surviving
                                    Spouse were the Member.

         (3)      For purposes of subsection (d)(1), the Required Distribution
                  Date means April 1 of the calendar year in which occurs the
                  later of (A) the Member's attainment of age seventy and
                  one-half (70-1/2), or (B) the Member's retirement (within the
                  meaning of Code section 401(a)(9)), unless the Member is a
                  Five Percent Owner (as defined in section 416(i) of the Code)
                  with respect to the Plan Year during which the Member attains
                  age 70-1/2, in which case clause (B) shall not apply. Any
                  Member who attained age 70-1/2 on or before December 31, 1998
                  shall continue to receive distributions under the terms of the
                  Plan as in effect on December 30, 1998.

         (4)      For purposes of subsection (d), once distribution has
                  commenced hereunder, the life expectancy of a Member and the
                  Member's Spouse may not be redetermined.

                                                                              30

<PAGE>

     (5)  A Member may not elect a form of distribution pursuant to paragraph
          (1) providing payments to a Beneficiary who is other than the Member's
          Spouse unless the actuarial value of the payments expected to be paid
          to the Member is more than 50 percent of the actuarial value of the
          total payments expected to be paid under such form of distribution.

9.8  Direct Rollover of Eligible Rollover Distributions

(a)  Notwithstanding any provision of the Plan to the contrary that would
     otherwise limit a distributee's election under this section, a distributee
     may elect, at the time and in the manner prescribed by the Committee, to
     have any portion of an eligible rollover distribution paid directly to an
     eligible retirement plan specified by the distributee in a direct rollover.
     Any portion of an eligible rollover distribution that is not paid directly
     to an eligible retirement plan in a direct rollover may be subject to 20%
     Federal income tax withholding.

(b)  Definitions.

     (1)  Eligible Rollover Distribution. An eligible rollover distribution is
          ------------------------------
          any distribution of all or any portion of the balance to the credit of
          the distributee, except that an eligible rollover distribution does
          not include: any distribution that is one of a series of substantially
          equal periodic payments (not less frequently than annually) made for
          the life (or life expectancy) of the distributee or the joint lives
          (or joint life expectancies) of the distributee and the distributee's
          designated Beneficiary, or for a specified period of ten years or
          more; any distribution to the extent such distribution is required
          under section 401(a)(9) of the Code; effective as of January 1, 1999,
          any hardship distribution described in section 401(k)(2)(B)(i)(IV) of
          the Code; and any other distribution excluded under Code section
          402(c)(4). A distribution shall not fail to be an eligible rollover
          distribution merely because a portion of it consists of after tax
          deposits; provided such portion may be rolled over only to an
          individual retirement account or annuity described in section 408(a)
          or (b) of the Code, or to a qualified defined contribution plan
          described in section 401(a) or 403(a) of the Code that agrees to
          separately account for the amounts so transferred, including
          separately accounting for the portion of such distribution that is
          includible in gross income and the portion which is not so includible.

     (2)  Eligible Retirement Plan. An eligible retirement plan means (i) an
          ------------------------
          individual retirement account described in section 408(a) of the Code,
          (ii) an individual retirement annuity described in section 408(b) of
          the Code, (iii) a qualified trust described in section 401(a) of the
          Code, (iv) an annuity plan described in section 403(a) of the Code,
          (v) an eligible deferred compensation plan described in section 457(b)
          of the Code which is maintained by an eligible employer described in
          section 457(e)(1)(A) of the Code and that agrees to separately account
          for amounts transferred into such plan from this Plan, or (vi) an
          annuity contract described in section 403(b) of the Code, that accepts
          the distributee's rollover distribution. The definition of eligible
          retirement plan shall also apply in the case of a distribution to a
          surviving Spouse, or to a Spouse or former Spouse who is an alternate
          payee under a qualified domestic relation order, as defined in section
          414(p) of the Code.

     (3)  Distributee. A Member, the Member's surviving Spouse and the Member's
          -----------
          Spouse or former Spouse who is the alternate payee under a qualified
          domestic relations order, as defined in section 414(p) of the Code,
          are distributees with regard to the respective interest of such
          Member, Spouse or former Spouse.

                                                                              31

<PAGE>

     (4)  Direct Rollover.  A direct rollover is a payment by the Plan to the
          ---------------
          eligible retirement plan specified by the distributee.

9.9  Payment of Small Amounts

Effective January 1, 1998, if the value of a Member's vested Account is $5,000
or less, the Committee shall direct that such amount be paid to the Member or
his or her Beneficiary as soon as administratively feasible following the
Member's Break in Service.

                                                                              32

<PAGE>

Article X.   Rights and Options on Distributed Shares of Company Stock

10.1     Right of First Refusal

(a)      Shares of Company Stock distributed by the Trustee may be subject to a
         right of first refusal. Such a right shall provide that prior to any
         subsequent transfer, the shares must first be offered in writing to the
         Trust and then, if refused by the Trust, to the Company at a price
         equal to the greater of (1) the then fair market value of such shares
         of Company Stock as determined in good faith by the Committee, in
         accordance with Treasury regulation section 54.4975-11(d)(5) or (2) the
         purchase price offered by a buyer, other than the Company or Trustee,
         making an offer in good faith (as determined by the Committee) to
         purchase such shares of Company Stock.

(b)      The Trust or the Company, as the case may be, may accept the offer as
         to part or all of the Company Stock at any time during a period not
         exceeding 14 days after the Trust receives the offer, on terms and
         conditions no less favorable to the Trust than those offered by the
         independent third-party buyer. Any installment purchase shall be made
         pursuant to a note secured by the shares purchased and shall bear a
         reasonable rate of interest as determined by the Committee.

(c)      If the offer is not accepted by the Trust, the Company, or both, then
         the proposed transfer may be completed within a reasonable period
         following the end of the 14-day period but only upon terms and
         conditions no less favorable to the shareholder than the terms and
         conditions of the third-party buyer's prior offer.

(d)      Shares of Company Stock that are publicly traded within the meaning of
         Treasury regulation section 54.4975-7(b)(1)(iv) at the time such right
         may otherwise be exercised shall not be subject to this right of first
         refusal.

10.2     Put Option

(a)      Shares of Company Stock acquired by the Trust shall be subject to a put
         option at the time of distribution if at such time the shares are not
         readily tradable on an established market within the meaning of section
         409(h)(1)(B) of the Code. The put option shall be exercisable by the
         Member, Beneficiary, Spouse, their donees, or by a person (including an
         estate or its distributee) to whom the Company Stock passes by reason
         of the death of the Member, Beneficiary, or Spouse. The put option
         shall provide that for a period of at least 60 days following the date
         of distribution of the Company Stock, the holder of the option shall
         have the right to cause the Company, by notifying it in writing, to
         purchase such shares at their fair market value, as determined pursuant
         to section 5.2. If the put option is not exercised within such 60-day
         period, the option shall be exercisable for an additional period of 60
         days in the following Plan Year. The Committee may give the Trustee the
         option to assume the rights and obligations of the Company at the time
         the put option is exercised, insofar as the repurchase of Company Stock
         is concerned.

(b)      If the entire adjusted balance of the Account of a Member, Spouse,
         Beneficiary, or other person described in subsection 10.2(a) is
         distributed to such Member, Spouse, Beneficiary or other person within
         one taxable year, payment of the price of the Company Stock purchased
         pursuant to an exercised put option shall be made in no more than five
         substantially equal annual payments, and the first installment shall be
         paid not later than 30 days after such Member, Spouse, Beneficiary, or
         other person exercises the put option. The Plan shall provide adequate

                                                                              33

<PAGE>

         security and pay a reasonable rate of interest on amounts not paid
         after 30 days. If the entire adjusted balance of the Account of a
         Member, Spouse, Beneficiary or other person described in subsection
         10.2(a) is not distributed to him or her within one taxable year,
         payment of the price of the Company Stock purchased pursuant to an
         exercised put option shall be made in a single sum not later than 30
         days after such Member, Spouse, Beneficiary or other person exercises
         the put option.

                                                                              34

<PAGE>

Article XI.  In-Service Distributions and Dividends

11.1     In-Service Distributions

Except as provided in sections 7.9, 9.7(d) and 11.2, a Member is not entitled to
any payment, withdrawal, or distribution under the Plan while he or she is a
Participant or Inactive Participant.

11.2     Dividends

Effective January 1, 2002, in accordance with an election made by the Member,
Beneficiary or Spouse, any cash dividend received by the Trustee on Company
Stock allocated to the Account of such Member, Beneficiary, or Spouse as of the
record date shall be either paid to such Member, Beneficiary or Spouse in cash
or re-invested in Company Stock in accordance with Section 7.2. Such election
shall be in such written, electronic or other form, as the Committee shall
establish. Once a Member, Beneficiary or Spouse has made the election either to
receive a cash payment of the dividends or to have the dividends re-invested in
Company Stock, the election will remain in effect until it is subsequently
changed by the Member, Beneficiary or Spouse. A Member, Beneficiary or Spouse
may change the election at any time, and the election that is in effect on the
record date of the dividends will determine whether such dividends are paid in
cash to the Member, Beneficiary or Spouse or re-invested in Company Stock. If a
Member first becomes a Participant in the Plan on or after January 1, 2002 and
the Member or such Member's Beneficiary or Spouse does not make an election
pursuant to this Section 11.2, the dividends will automatically be reinvested in
Company Stock. If a Member first became a Participant in the Plan before January
1, 2002 and the Member or such Member's Beneficiary or Spouse does not make an
election pursuant to this Section 11.2, the dividends will automatically be paid
in cash to such Member, Beneficiary or Spouse.

If a Member, Beneficiary or Spouse has elected to receive a cash payment of the
dividends received by the Trustee on Company Stock allocated to his or her
Account, such payment must be made no later than 90 days after the end of the
Plan Year in which the dividend is received by the Trustee. Any such payment of
cash dividends on shares of Company Stock shall be accounted for as if the
Member, Beneficiary, or Spouse receiving such dividends were the direct owner of
such shares of Company Stock and such payment shall not be treated as a
distribution for purposes of Article X. Any dividends to be paid in cash that
are allocated to a Member's Account on the date of his or her death shall be
paid to the Member's Beneficiary.

If a Member, Beneficiary or Spouse has elected to have the dividends received by
the Trustee on Company Stock allocated to his or her Account re-invested in
Company Stock, such re-investment shall occur within a reasonable period after
the end of the calendar quarter in which such dividends were received by the
Trustee.

                                                                              35

<PAGE>

Article XII.  Plan Administration

12.1     Powers

The Committee shall have all powers necessary to discharge its duties in
administering the Plan including, but not by way of limitation, discretionary
authority with respect to the following powers:

(a)      to construe and interpret the Plan;

(b)      to determine all questions regarding the status and rights of Members
         and Beneficiaries, including questions relating to age, Vesting
         Service, eligibility, or Compensation;

(c)      to make and enforce such rules and regulations as it shall deem
         necessary or proper for efficient administration of the Plan; and

(d)      to retain counsel, employ agents, and actuaries and provide for such
         clerical, medical, accounting, auditing, and other services as it may
         require in carrying out the provisions of the Plan;

provided, however, that no member of the Committee shall participate in any
action on any matter involving solely his or her own rights or benefits or those
of his or her Spouse or other Beneficiaries, and such matters shall be
determined by the other members of the Committee. The Committee may delegate any
or all of its powers under this Article XII.

12.2     Directions to Trustee

The Committee shall direct the Trustee concerning all payments which shall be
made out of the Trust pursuant to the provisions of the Plan. Any direction to
the Trustee, shall be in writing, signed by the Secretary of the Committee or
its delegate, or given by electronic or telephonic media if acceptable to the
Committee or its delegate and the Trustee. The Trustee shall act in a manner
consistent with any such direction that is proper, made in accordance with the
Plan, and not contrary to ERISA.

12.3     Uniform

All rules adopted and all actions taken by the Committee shall be uniform in
nature as applied to all persons similarly situated and shall not discriminate
in favor of Employees who are officers, shareholders, or Highly Compensated
Participants.

12.4     Reports

The Committee shall keep on file, in such form as it shall deem convenient and
proper, such reports of the Trust received from the Trustee that relate to its
duties hereunder.

12.5     Members; Compensation

The Members of the Committee shall be appointed by the Chief Executive Officer
of the Company. Members of the Committee shall not receive compensation for
their services in connection with the Plan, but the Company shall reimburse them
for all necessary expenses incurred in the discharge of their duties.

12.6     Claims Procedure

(a)      Claims for benefits under the Plan shall be made in writing to the
         Committee or its duly authorized delegate. If the Committee or such
         delegate wholly or partially denies a claim for benefits, the Committee
         or, if applicable, its delegate shall, within a reasonable period of
         time, but no later than ninety (90) days after receipt of the claim,
         notify the claimant in writing or

                                                                              36

<PAGE>

         electronically of the adverse benefit determination. Notice of an
         adverse benefit determination shall be written in a manner calculated
         to be understood by the claimant and shall contain (1) the specific
         reason or reasons for the adverse benefit determination, (2) a specific
         reference to the pertinent Plan provisions upon which the adverse
         benefit determination is based, (3) a description of any additional
         material or information necessary for the claimant to perfect the
         claim, together with an explanation of why such material or information
         is necessary, and (4) an explanation of the Plan's review procedure and
         the time limits applicable to such procedure including a statement of
         the claimant's right to bring a civil action under section 502(a) of
         ERISA following an adverse benefit determination. If the Committee or
         its delegate determines that an extension of time is necessary for
         processing the claim, the Committee or its delegate shall notify the
         claimant in writing of such extension, the special circumstances
         requiring the extension and the date by which the Committee expects to
         render the benefit determination. In no event shall the extension
         exceed a period of ninety (90) days from the end of the initial ninety
         (90) day period. If notice of the denial of a claim is not furnished in
         accordance with this subsection (a) within ninety (90) days after the
         Committee or its duly authorized delegate receives it (or within one
         hundred and eighty (180) days after such receipt if the Committee or
         its delegate determines an extension is necessary), the claim shall be
         deemed denied and the claimant shall be permitted to proceed to the
         review stage described in subsection (b) below.

(b)      Within sixty (60) days after the claimant receives the written or
         electronic notice of an adverse benefit determination, or the date the
         claim is deemed denied pursuant to subsection (a) above, or such later
         time as shall be deemed reasonable in the sole discretion of the
         Committee taking into account the nature of the benefit subject to the
         claim and other attendant circumstances, the claimant may file a
         written request with the Committee that it conduct a full and fair
         review of the adverse benefit determination, including the holding of a
         hearing, if deemed necessary by the Committee. In connection with the
         claimant's appeal of the adverse benefit determination, the claimant
         may review pertinent documents and may submit issues and comments in
         writing. The Committee shall render a decision on the appeal promptly,
         but not later than sixty (60) days after the receipt of the claimant's
         request for review, unless special circumstances (such as the need to
         hold a hearing, if necessary) require an extension of time for
         processing, in which case the sixty (60) day period may be extended to
         one hundred and twenty (120) days. The Committee shall notify the
         claimant in writing of any such extension, the special circumstances
         requiring the extension, and the date by which the Committee expects to
         render the determination on review. The claimant shall be notified of
         the Committee's decision in writing or electronically. In the case of
         an adverse determination, such notice shall (1) include specific
         reasons for the adverse determination, (2) be written in a manner
         calculated to be understood by the claimant, (3) contain specific
         references to the pertinent Plan provisions upon which the benefit
         determination is based, (4) contain a statement that the claimant is
         entitled to receive upon request and free of charge, reasonable access
         to, and copies of, all documents, records, and other information
         relevant to the claimant's claim for benefits, and (5) contain a
         statement of the claimant's right to bring an action under section
         502(a) of ERISA.

12.7     Indemnity for Liability

The Company shall indemnify the Committee and each other fiduciary who is an
Employee of the Company or an Affiliate, against any and all claims, losses,
damages, expenses, including counsel fees, incurred by said fiduciaries, and any
liability, including any amounts paid in settlement with such a fiduciary's
approval, arising from the fiduciary's action or failure to act, except when the
same is judicially determined to be attributable to the gross negligence or
willful misconduct of such fiduciary.

                                                                              37

<PAGE>

Article XIII.  Amendment and Termination

13.1     Amendment

The Company reserves the right at any time and from time to time to amend the
Plan in whole or in part either retroactively or prospectively by action of the
Board of Directors or action of the Compensation and Benefits Committee of the
Board of Directors, but no such amendment shall authorize or permit any part of
the corpus or income of the Trust to be used for or diverted to purposes other
than for the exclusive benefit of Members or their Beneficiaries, or to deprive
any of them of any funds then held for his or her Account.

13.2     Termination

It is the intention of the Company to continue the Plan and to make
contributions thereto, but the Company reserves the right to terminate the Plan
in whole or in part as of any Valuation Date by action of the Board of Directors
or action of the Compensation and Benefits Committee of the Board of Directors
and for any reason satisfactory to the Board of Directors. The Company, however,
shall not terminate the Plan while any Loan remains outstanding and unpaid in
whole or in part, without the prior written consent to any such termination by
all holders and guarantors, if any, of the Plan's obligations under such Loan.
Where any holder or guarantor has a representative on the Compensation and
Benefits Committee, prior written consent will not be required if such
representative approves the amendment. Upon partial or full termination, all
affected Members shall become fully vested, and upon permanent discontinuance of
contributions by the Company and Participating Employers, all Members who are
then Employees or who have not previously forfeited their Unvested Portion shall
become fully vested.

13.3     Merger and Consolidation

In the event of any merger or consolidation of the Plan with, or transfer in
whole or in part of the assets and liabilities of the Trust to another trust
fund held under any other plan of deferred compensation maintained or to be
established for the benefit of all or some of the Members, the Plan shall be so
merged or consolidated, or the assets of the Trust applicable to such Members
shall be so transferred, only if--

(a)      each Member would (if either the Plan or the other plan then
         terminated) receive a benefit immediately after the merger,
         consolidation, or transfer which is equal to or greater than the
         benefit he or she would have been entitled to receive immediately
         before the merger, consolidation, or transfer (if the Plan had then
         terminated);

(b)      resolutions of the Board of Directors or of any new or successor
         employer of the affected Members, shall authorize such transfer of
         assets; and, in the case of the new or successor employer of the
         affected Members, its resolutions shall include an assumption of
         liabilities with respect to such Members' inclusion in the new
         employer's plan; and

(c)      such other plan and trust are qualified under section 401(a) and exempt
         under section 501(a) of the Code.

In the event a portion of the business of the Company or any Affiliate is sold
or discontinued, the Board of Directors in its discretion may direct that all
Members who are employed by the new owner of that portion of the business shall
become fully vested.

                                                                              38

<PAGE>

13.4     Distribution Upon Termination

In the event of the termination of the Plan, there shall be distributed to each
Member, or to his or her Beneficiary in the case of a deceased Member, a benefit
equal to the sum of the value of the Member's Account as of the Valuation Date
on which termination occurs. If such benefits shall not exhaust the assets of
the Trust, any remaining assets shall be allocated to the Accounts of the
Members as though they were additional Employer Contributions, and in no event
shall any such assets revert to the Company or any Affiliate.

                                                                              39

<PAGE>

Article XIV.  Extension of Plan to Affiliates

14.1     Participation in the Plan

Any Affiliate which desires to become a Participating Employer under the Plan
may elect, with the consent of the Board of Directors, to become a party to the
Plan and the related Trust by adopting the Plan for the benefit of its eligible
Employees, effective as of the date specified in such adoption. The adoption
resolution or decision may contain such specific changes and variations in Plan
or Trust Agreement terms and provisions applicable to such Participating
Employer and its Employees as may be acceptable to the Board and the Trustee.
However, the sole, exclusive right of any other amendment of whatever kind or
extent to the Plan is reserved to the Board of Directors. The Board of Directors
may amend specific changes and variations in the Plan or Trust terms and
provisions as adopted by the Participating Employer in its adoption resolution
without the consent of such Participating Employer. The adoption resolution or
decision shall become, as to such adopting organization and its employees, a
part of this Plan as then amended or thereafter amended and the related Trust.
It shall not be necessary for the adopting organization to sign or execute the
original or then amended Plan and Trust. The coverage date of the Plan for any
such adopting organization shall be that stated in the resolution or decision of
adoption, and from and after such effective date, such adopting organization
shall assume all the rights, obligations, and liabilities of an individual
employer entity hereunder and under the Trust. The administrative powers and
control of the Company, as provided in the Plan and Trust Agreement shall not be
diminished by reason of the participation of any such adopting organization in
the Plan and Trust Agreement.

14.2     Withdrawal from the Plan

Any Participating Employer may withdraw from the Plan and Trust after giving
notice to the Board of Directors, provided the Board of Directors consents to
such withdrawal. In the event of such withdrawal, the Committee shall cause a
valuation of the Trust to be made to ascertain the value of assets which are
attributable to Members who are Employees of the terminating Participating
Employer or their Beneficiaries in the case of deceased Members and shall direct
the Trustee to segregate assets which are deemed to be so attributable to such
Members from the Trust, and to make distribution to the Members or their
Beneficiaries as if the Plan had terminated with respect to the Members or their
Beneficiaries of such Participating Employer.

In the event such withdrawal constitutes a partial termination of this Plan,
only the affected Participants in that part of the Plan which is terminated
shall have fully vested and nonforfeitable rights in their benefits (unless they
were already fully vested prior to the partial termination). Distribution may be
implemented through continuation of the Trust, or transfer to another trust fund
exempt from tax under section 501 of the Code, or to a group annuity contract
qualified under Code section 401, or distribution may be made as an immediate
cash payment; provided, however, that no such action shall divert any part of
such fund to any purpose other than the exclusive benefit of the Participants of
such Participating Employer.

                                                                              40

<PAGE>

Article XV.  Top-Heavy Provisions

The following provisions shall become effective in any Plan Year in which the
Plan is determined to be a top-heavy plan.

(a)  Determination of Top-Heavy. The Plan will be considered a top-heavy
     --------------------------
     plan for the Plan Year if as of the last day of the preceding Plan Year (1)
     the account balances of Participants who are key employees (as defined in
     section 416(i) of the Code) exceed 60 percent of the account balances of
     all Participants (the "60 Percent Test") or (2) the Plan is part of a
     required aggregation group and the required aggregation group is top-heavy.
     However, and notwithstanding the results of the 60 Percent Test, the Plan
     shall not be considered a top-heavy plan for any Plan Year in which the
     Plan is a part of a required or permissive aggregation group which is not
     top-heavy. The top-heavy ratio shall be computed pursuant to section 416(g)
     of the Code and the regulations issued thereunder. A "required aggregation
     group" is each plan of the Company in which a key employee is a participant
     and each other plan of the Company, if any, which enables such plan to meet
     the requirements of Code section 401(a)(4) or 410. The Company may treat
     any plan not required to be included in an aggregation group as being part
     of a "permissive aggregation group" if such group would continue to meet
     the requirements of Code sections 401(a)(4) and 410 with such plan being
     taken into account.

(b)  Minimum Benefit. The Company's (or Participating Employer's) Employer
     ---------------
     Contribution to a Participant's Account under section 4.1 shall be
     increased as necessary so that it equals at least 3 percent of the
     Participant's compensation (as defined in section 7.5(i)(2)), except that
     this subsection (b) shall not apply if--

     (1)  the Participant is also a participant in the Pension Plan,

     (2)  the Pension Plan is a top-heavy plan, and

     (3)  the Participant receives from the Pension Plan the minimum defined
          benefit accrual required under section 416(c)(1) of the Code.

                                                                              41

<PAGE>

Article XVI.  Miscellaneous Provisions

16.1 Spendthrift Provisions

The interests of Members and their Beneficiaries in the Plan and the Trust shall
not be subject to the claims of any creditor, any Spouse for alimony or support,
or others, or to legal process, and may not be voluntarily or involuntarily
assigned, alienated or encumbered.

Notwithstanding the foregoing, the Plan shall make all payments required by a
qualified domestic relations order within the meaning of Code section 414(p).
The Committee shall establish a procedure to determine the qualified status of a
domestic relations order and to administer distributions under a qualified
order. If the qualified domestic relations order so provides, the Plan may make
a distribution to an alternate payee prior to the date that a Member attains
"earliest retirement age." For purposes of a qualified domestic relations order,
"earliest retirement age" means the earlier of--

(a)  the date the Member is entitled to a distribution under this Plan, or

(b)  the later of (i) the date the Member attains age 50, or (ii) the earliest
     date on which the Member could begin receiving benefits under this Plan if
     the Member separated from service.

An alternate payee under a qualified domestic relations order shall have the
right with respect to his or her interest under the Plan to (i) make dividend
elections under section 11.2, (ii) subject to section 9.5, to defer distribution
of such interest in accordance with section 9.7(b), and (iii) to designate a
Beneficiary with respect to such interest. A Member's alternate payee shall also
have the right to make an election under section 7.9(a)(2) with respect to such
alternate payee's interest under the Plan at the same time, if any, that such
Member has a right to make an election with respect to the Member's Account
under the Plan. For this purpose, the alternate payee's Applicable Amount shall
be calculated as if such alternate payee were a Qualified Participant.

Effective with respect to judgments, orders, decrees and settlement agreements
entered into on or after August 5, 1997, the first sentence of this Section 16.1
shall not apply with respect to any offset to a Member's benefits expressly
provided for in a judgment, order, decree or settlement agreement described in
Code section 401(a)(13)(C).

16.2 Incompetency

Every person receiving or claiming benefits under the Plan shall be presumed to
be mentally competent and of age until the Committee receives a written notice,
in a form and manner acceptable to it, that such person is incompetent or a
minor, and that a guardian, conservator, or other person legally vested with the
care of his estate has been appointed. In the event that the Committee finds
that any person to whom a benefit is payable under the Plan is unable to
properly care for his or her affairs, or is a minor, then any payment due
(unless a prior claim therefor shall have been made by a duly appointed legal
representative) may be paid to the Spouse, a child, a parent, or a brother or
sister, or to any person deemed by the Committee to be authorized to care for
such person otherwise entitled to payment.

In the event a guardian, executor, administrator, or conservator of the estate
of any person receiving or claiming benefits under the Plan shall be appointed
by a court of competent jurisdiction, payments shall be made to such guardian,
executor, administrator, or conservator provided that proper proof of
appointment is furnished in a form and manner suitable to the Committee. Any
payment made under the provisions of this section 16.2 shall be a complete
discharge of any liability therefor under the Plan.

                                                                              42

<PAGE>

16.3   Unclaimed Funds

Each Member shall keep the Committee informed of the Member's current address
and the current address of the Member's Spouse and Beneficiaries. Neither the
Company or any Affiliate, the Committee, nor the Trustee shall be obligated to
search for the whereabouts of any such person. If the then current location of a
Member is not made known to the Committee within three years after the date on
which the Committee directs the distribution to the Member of the Member's
Account, distribution may be made as though the Member had died at the end of
the three-year period. If, within one additional year after such three-year
period has elapsed, or within three years after the actual death of a Member,
the Committee is unable to locate any individual who would receive a
distribution upon the death of the Member pursuant to Article IX, the Member's
Account shall be deemed a Forfeiture; provided, however, that if the Member,
Beneficiary, or Spouse makes a claim for any amount that has been so forfeited,
the forfeited benefits shall be reinstated. The amount required to restore such
benefits shall be made up from Forfeitures and, to the extent necessary, from
Employer Contributions prior to their allocation pursuant to section 7.4 or from
a special Company or Participating Employer contribution.

16.4   Rights Against the Company

Neither the establishment of the Plan, nor of the Trust, nor any modification
thereof, nor any distributions hereunder shall be construed as giving to any
person whomsoever any legal or equitable rights against the Committee, the
Company or any Affiliate, or the officers, directors, or shareholders as such of
the Company or any Affiliate, or as giving any Employee or Member the right to
be retained in the employ of the Company. All benefits payable under the Plan
shall be paid or provided for solely from the Trust, and the Company and
Affiliates shall have no liability or responsibility for benefit distributions
other than to make contributions to the Trust as herein provided.

16.5   Illegality of Particular Provision

The illegality of any particular provision of this Plan shall not affect the
other provisions thereof, but the Plan shall be construed in all respects as if
such invalid provision were omitted.

16.6   Effect of Mistake

In the event of a mistake or misstatement as to the age, eligibility,
compensation, service or participation of a Member or Beneficiary or the amount
of distributions made or to be made to a Member or Beneficiary or other person,
the Committee shall, to the extent it deems possible, cause to be withheld or
accelerated, or otherwise make adjustment of, such amounts or distribution to
which he or she is properly entitled under the Plan. In the event of any
overpayment by the Plan, a Member or Beneficiary shall be obligated to repay
amounts on demand to the extent of such overpayment.

16.7   Compliance with Federal and State Securities Laws

(a)    With respect to Company Stock held in or distributed from the Trust, the
       Company will take all necessary steps to comply with any applicable
       registration or other requirements of federal or state securities laws
       from which no exemption is available.

(b)    Stock certificates distributed to Members, Beneficiaries, or Spouses may
       bear such legends concerning restrictions imposed by federal or state
       securities laws, and concerning other restrictions and rights under the
       Plan, as the Committee in its discretion may determine.

                                                                              43

<PAGE>

16.8   No Discrimination

Whenever in the administration of the Plan action by the Committee is required
with respect to eligibility or classification of Employees, contributions, or
benefits, such action shall be uniform in nature as applied to all persons
similarly situated, and no such action shall discriminate in favor of Employees
who are Highly Compensated Participants.

16.9   Exclusive Benefit of Members

(a)    All Employer Contributions made pursuant to the Plan shall be held by the
       Trustee in accordance with the terms of the Trust for the exclusive
       benefit of those Employees who are Members under the Plan, such Members'
       Beneficiaries and Spouses, and shall be applied to provide benefits under
       the Plan and to pay expenses of administration of the Plan and the Trust
       to the extent that such expenses are not otherwise paid. At no time prior
       to the satisfaction of all liabilities with respect to such Members,
       Beneficiaries and Spouses shall any part of the Trust (other than such
       part as may be required to pay administration expenses) be used for, or
       diverted to, purposes other than the exclusive benefit of such Members,
       Beneficiaries and Spouses.

(b)    Notwithstanding section 16.9(a)-

       (1)  if an Employer Contribution by the Company or a Participating
            Employer is conditioned upon the deductibility of such contribution
            under section 404 of the Code, then, to the extent the deduction is
            disallowed, the Trustee shall, upon written request of the Company
            or Participating Employer making the contribution, return the
            contribution to the extent disallowed to the Company or
            Participating Employer within one year after the date the deduction
            is disallowed;

       (2)  if an Employer Contribution or any portion thereof is made by the
            Company or a Participating Employer by a mistake of fact, the
            Trustee shall, upon written request of the Company or Participating
            Employer, return the contribution or the portion to the Company or
            Participating Employer within one year after the date of payment to
            the Trustee; and

       (3)  earnings attributable to amounts to be returned to the Company or
            Participating Employer pursuant to paragraph (1) or (2) shall not be
            returned to the Company or Participating Employer, and losses
            attributable to amounts to be returned pursuant to paragraph (1) or
            (2) shall reduce the amounts to be so returned.

16.10  Governing Law

The provisions of the Plan shall be construed, administered, and enforced in
accordance with the laws of Illinois, to the extent such laws are not superseded
by laws of the United States. All Employer Contributions by the Company and
Participating Employers to the Trust shall be deemed to be made in Illinois.

16.11  Change in Control

Notwithstanding any provision of the Plan to the contrary, if a Change in
Control (as defined below) occurs--

                                                                              44

<PAGE>

(a)  each Participant or Inactive Participant who is an Employee on the date the
     Change in Control occurs shall be 100 percent vested in the adjusted
     balance of the Participant's or Inactive Participant's Company Stock and
     Other Investments Accounts;

(b)  no merger, transfer of assets, or other similar transactions involving the
     Plan shall be permitted until all Loans outstanding at the time of the
     Change in Control have been repaid and all shares of Company Stock held in
     a Suspense Account in respect thereof have been released and allocated to
     the Company Stock Accounts of Participants employed by the Company or a
     Participating Employer as of the Change in Control date;

(c)  no other action may be taken pursuant to Article XIII that would have the
     effect of diverting shares of Company Stock held in a Suspense Account to
     the Company Stock Accounts of Participants who are not employees of the
     Company or a Participating Employer as of the Change in Control date;

(d)  if, in connection with the Change in Control, Company Stock held by the
     Plan has been sold for consideration other than securities constituting
     Company Stock, then the date that the Change in Control occurs shall be a
     special Valuation Date and each Member with an Account under the Plan as of
     the date the Change in Control occurs shall be entitled to share in the
     proceeds of such sale in the manner described in section 7.7(b); and

(e)  for the calendar year in which the Change in Control occurs, the Company
     shall make an Employer Contribution to the Account of each Participant who
     is eligible to receive an Employer Contribution pursuant to the terms of
     Section 7.1 (or who would be eligible to receive an Employer Contribution
     under Section 7.1 if the date of the Change in Control were substituted for
     the Anniversary Date under that section); provided, however, that (i) such
     Employer Contribution shall be equal to 2% of the Participant's
     Compensation paid prior to the date of the Change in Control, and (ii) the
     amount of an Employer Contribution to which the Participant becomes
     entitled pursuant to the provisions of Articles 4 and 7 for the calendar
     year in which the Change in Control occurs (without giving effect to this
     section 16.11(e)) shall be reduced by the amount of any Employer
     Contribution made pursuant to this section 16.11(e).

     For purposes of this section, a "Change in Control" shall be deemed to have
     occurred if the event set forth in any one of the following paragraphs
     shall have occurred:

     (1)  any Person is or becomes the Beneficial Owner, directly or indirectly,
          of securities of Northern Trust Corporation (the "Corporation") (not
          including in the securities beneficially owned by such Person any
          securities acquired directly from the Corporation or its affiliates)
          representing 20% or more of the combined voting power of the
          Corporation's then outstanding securities, excluding any Person who
          becomes such a Beneficial Owner in connection with a transaction
          described in clause (i) of paragraph (3) below; or

     (2)  The election to the Board of Directors of the Corporation, without the
          recommendation or approval of two thirds of the incumbent Board of
          Directors of the Corporation, of the lesser of: (A) three directors;
          or (B) directors constituting a majority of the number of directors of
          the Corporation then in office, provided, however, that directors
                                          --------  -------
          whose initial assumption of office is in connection with an actual or
          threatened election contest, including but not limited to a consent
          solicitation, relating to the election of directors of

                                                                              45

<PAGE>

     the Corporation will not be considered as incumbent members of the Board of
     Directors of the Corporation for purposes of this section; or

(3)  there is consummated a merger or consolidation of the Corporation or any
     direct or indirect subsidiary of the Corporation with any other company,
     other than (i) a merger or consolidation which would result in the voting
     securities of the Corporation outstanding immediately prior to such merger
     or consolidation continuing to represent (either by remaining outstanding
     or by being converted into voting securities of the surviving entity or any
     parent thereof), at least 60% of the combined voting power of the
     securities of the Corporation or such surviving entity or any parent
     thereof outstanding immediately after such merger or consolidation, or (ii)
     a merger or consolidation effected to implement a recapitalization of the
     Corporation (or similar transaction) in which no Person is or becomes the
     Beneficial Owner, directly or indirectly, of securities of the Corporation
     (not including in the securities Beneficially Owned by such Person any
     securities acquired directly from the Corporation or its Affiliates)
     representing 20% or more of the combined voting power of the Corporation's
     then outstanding securities; or

(4)  the stockholders of the Corporation approve a plan of complete liquidation
     or dissolution of the Corporation or there is consummated an agreement for
     the sale or disposition by the Corporation of all or substantially all of
     the Corporation's assets, other than a sale or disposition by the
     Corporation of all or substantially all of the Corporation's assets to an
     entity, at least 60% of the combined voting power of the voting securities
     of which are owned by stockholders of the Corporation in substantially the
     same proportions as their ownership of the Corporation immediately prior to
     such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Corporation immediately prior to such transaction or series
of transactions continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of the
Corporation immediately following such transaction or series of transactions.

For purposes of the foregoing the following definitions shall apply:

     "Affiliate" shall have the meaning set forth in Rule 12b-2 under Section 12
     of the Exchange Act; "Beneficial Owner" shall have the meaning set forth in
     Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed
     to be the Beneficial Owner of any securities with respect to which such
     Person has properly filed a Form 13-G; "Exchange Act" shall mean the
     Securities Exchange Act of 1934, as amended from time to time; and "Person"
     shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
     modified and used in Sections 13(d) and 14(d) thereof, except that such
     term shall not include (i) the Corporation or any of its Affiliates, (ii) a
     trustee or other fiduciary holding securities under an employee benefits
     plan of the Corporation or any of its subsidiaries, (iii) an underwriter
     temporarily holding securities pursuant to an offering of such securities
     or (iv) a corporation owned, directly or indirectly, by the stockholders of
     the Corporation in substantially the same proportions as their ownership of
     stock of the Corporation.

                                                                              46

<PAGE>

In Witness Whereof, the Company has caused the Northern Trust Employee Stock
Ownership Plan to be executed on its behalf by its duly authorized officer this
21st day of December, 2001.

                                         The Northern Trust Company


                                         By   /s/ Martin J. Joyce, Jr.
                                              ------------------------
                                                 Martin J. Joyce, Jr.
                                                 Senior Vice President

                                                                              47

<PAGE>

                                  Supplement #1

                       Extension of Plan to U.K. Employees

This Supplement #1 to the Plan is made a part of the Plan and supersedes any
provisions thereof to the extent that they are not consistent with this
Supplement. Unless the context clearly implies or indicates to the contrary, a
word, term or phrase used or defined in the Plan is similarly used or defined
for purposes of this Supplement #1.

1.   Purpose and Effect. Effective as of January 1, 1999 (the "U.K. Effective
     ------------------
     Date"), Employees of the Company or a Participating Employer who are
     residents of the United Kingdom ("U.K.") or who are employed under U.K.
     permanent contracts of employment shall be eligible to participate in the
     Plan, subject to the terms of the Plan as modified by this Supplement. Such
     employees are referred to herein as "U.K. Employees," and each U.K.
     Employee who becomes a Participant in the Plan pursuant to this Supplement
     is referred to herein as a "U.K. Participant." Effective for the Plan Year
     beginning January 1, 2002 and Plan Years thereafter, no new U.K. Employees
     shall become eligible to participate in the Plan.

2.   Service, Participation, and Compensation for U.K. Employees. U.K.
     -----------------------------------------------------------
     Employees' service with the Company or an Affiliate prior to the U.K.
     Effective Date shall be credited as Vesting Service pursuant to the
     provisions of section 3.4. U.K. Employees who had completed one year of
     Vesting Service as of the U.K. Effective Date shall become U.K.
     Participants in the Plan retroactive to the U.K. Effective Date (and
     Compensation (as defined below) paid to such U.K. Participants during 1999
     shall be recognized for purposes of making the allocations required under
     section 7.4(c)). For a U.K. Participant, "Compensation" shall mean the base
     salary, statutory sick pay, statutory maternity pay (higher and lower rate)
     and shift allowance paid to a U.K. Participant.

3.   Allocation in Year of Retirement. In addition to the circumstances
     --------------------------------
     described in section 7.1 of the Plan, a U.K. Participant whose employment
     terminates after attainment of age 50 with at least two years of Vesting
     Service and who is entitled to a benefit from one of the Company's U.K.
     tax-approved retirement schemes will share in the allocations described in
     section 7.1 for the Anniversary Date occurring with respect to the Plan
     Year in which employment terminates. Effective for the Plan Year beginning
     January 1, 2002 and Plan Years thereafter, U.K. Participants shall no
     longer be eligible to receive an allocation of Employer Contributions under
     the Plan.

4.   Code Limitations. The following special rules shall apply for U.K.
     ----------------
     Participants:


     (a)  U.K. Participants' compensation (as defined in paragraph (c) below)
          shall be recognized for purposes of section 4.1 of the Plan regarding
          the limit on the maximum deductible contribution under section 404 of
          the Code.

     (b)  U.K. Participants shall be included with all other Participants when
          determining the limit on allocations pursuant to section 7.4(e) of the
          Plan. If reductions in the allocations to Highly Compensated
          Participants are necessary to comply with such limit, then the
          allocations to U.K. Participants who are Highly Compensated
          Participants shall be reduced in the same manner as all other Highly
          Compensated Participants.

     (c)  Pursuant to Treasury regulation section 1.415-2(d)(11)(ii), wages and
          all other payments

                                                                              48

<PAGE>

          of compensation (within the meaning of section 3401(a) of the Code,
          but determined without regard to the location of the employment)
          received by U.K. Participants shall be recognized for all purposes of
          section 7.5(i)(2) of the Plan (i.e., sections 414(q), 415, and 416 of
          the Code).

5.   Cash Dividends Payable to U.K. Participants. Notwithstanding section 11.2
     -------------------------------------------
     of the Plan, cash dividends payable on the Company Stock allocated to a
     U.K. Participant's Company Stock Account initially shall be credited to his
     or her Other Investments Account. Thereafter, the amounts allocated to a
     U.K. Participant's Other Investments Account shall be used to purchase
     Company Stock pursuant to section 5.3 of the Plan.

6.   Diversification of Investments. Sections 2.1(ll)(1) and 2.1(mm)(1) shall
     ------------------------------
     not apply to U.K. Participants. As a result, any diversification elections
     for U.K. Participants shall be effected pursuant to section 7.9(a)(2) and
     no elections may be made pursuant to section 7.9(a)(1), regardless of the
     effective dates in such sections.

7.   Payment of Benefits. Pursuant to section 9.6 of the Plan, all payments of
     -------------------
     benefits under the Plan to or for the benefit of a U.K. Participant shall
     be made in shares of Company Stock, and the value of any partial shares
     shall be made in pounds sterling.

8.   Rollovers. Notwithstanding section 9.8 of the Plan:
     ---------


     (a)  U.K. Participants (and their Beneficiaries) who performed all of their
          service outside of the U.S. will not be eligible to make a direct
          rollover to an eligible retirement plan.

     (b)  U.K. Participants (and their Beneficiaries) who performed some service
          in the U.S. will be eligible to make a direct rollover to an eligible
          retirement plan of only that portion of a distribution which would be
          included in the U.K. Participant's U.S. gross income.

9.   Satisfaction of U.K. Income and Employment Tax Liabilities. If a U.K.
     ----------------------------------------------------------
     Participant receives a distribution from the Plan that, pursuant to U.K.
     law, subjects the Company to an obligation to account for tax under the
     U.K. Pay As You Earn ("PAYE") system, or to withhold or account for similar
     income, employment or other taxes or fees relating to the distribution, the
     Committee shall direct the Trustee to withhold from such distribution an
     amount sufficient to comply with such obligations. If a U.K. Participant
     receives his or her distribution in the form of both cash and Company Stock
     and the amount of cash distributed is not sufficient to allow the Trustee
     to withhold the amount sufficient to comply with such withholding
     obligations, the Trustee shall liquidate all or a portion of the Company
     Stock to be distributed as is necessary to satisfy such withholding
     obligations. To the extent the Committee deems it necessary or appropriate
     under U.K. law, it may require a U.K. Participant to consent to such
     withholding or liquidation of Company Stock prior to receiving a
     distribution, provided that it does so on a uniform and consistent basis.

10.  Conversion U.S. Dollars into U.K. Pounds Sterling. From time to time, it
     -------------------------------------------------
     will be necessary to convert U.S. dollars into U.K. pounds sterling or
     vice-versa to make allocations to U.K. Participants' Accounts, to make
     distributions from such Accounts, to apply certain Code limitations and to
     implement various other Plan provisions with respect to U.K. Participants.
     Such conversions shall take place at the time specified in the Plan for the
     relevant purpose, using the conversion rate specified for such date in the
     Wall Street Journal.

                                                                              49

<PAGE>

11.  No Mandatory Cash Out. Notwithstanding subsection 9.7(b) of the Plan, a
     ---------------------
     U.K. Participant shall not have any amount of the Vested Portion of his or
     her Account distributed to him or her at any time prior to the U.K.
     Participant's Normal Retirement Date or death without the U.K.
     Participant's written consent.

                                                                              50

<PAGE>

                                  Supplement #2

                        Special Rules for Fiserv Members

This Supplement #2 to the Plan is made a part of the Plan and supersedes any
provisions thereof to the extent that they are not consistent with this
Supplement. Unless the context clearly implies or indicates to the contrary, a
word, term or phrase used or defined in the Plan is similarly used or defined
for purposes of this Supplement #2.

1.   Effective Date. December 31, 1998.
     --------------

2.   Application.  This Supplement #2 shall apply to any Member identified in
     -----------
     Exhibits 16.1 and 16.2 of the Payment System Services Agreement dated
     October 20, 1998, between the Company and Fiserv Solutions, Inc. who is
     employed by the Company on December 31, 1998 (each a "Fiserv Member").

3.   Vesting. Each Fiserv Member shall become fully vested in his or her Account
     -------
     as of December 31, 1998.

                                                                              51

<PAGE>

                                  Supplement #3

       Special Rules for Fiserv Members Associated with 2001 Joint Venture

This Supplement #3 to the Plan is made a part of the Plan and supersedes any
provisions thereof to the extent that they are not consistent with this
Supplement. Unless the context clearly implies or indicates to the contrary, a
word, term or phrase used or defined in the Plan is similarly used or defined
for purposes of this Supplement #3.

1.   Effective Date.  July 31, 2001.
     --------------

2.   Application. This Supplement #3 shall apply to any Member identified in
     -----------
     Exhibit 2.02 of the Employee Agreement between the Company and Fiserv
     Solutions, Inc. ("Fiserv") dated June 15, 2001 who is a Participant in the
     Plan on July 31, 2001 and who has a termination date from the Company of
     July 31, 2001 (or who would have had a termination date of July 31, 2001
     had the Member not been on a disability leave on such date) (each a "Fiserv
     Member").

3.   Special Provisions.  The following special provisions shall apply to
     ------------------
     Fiserv Members:

     (a)   Vesting:  Each Fiserv Member shall become fully vested in his or her
           -------
           Account as of July 31, 2001.

     (b)   Employer Contributions: If a Fiserv Member is employed by the Company
           ----------------------
           on July 31, 2001 and remains continuously employed by Fiserv after
           that date through December 31, 2001, then the Fiserv Member shall be
           eligible to receive a prorated Employer Contribution for the 2001
           Plan Year.

                                                                              52

<PAGE>

                                   Schedule A

<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------
     Affiliate Name & Acq. Code                    ESOP Earliest Vesting Date
- --------------------------------------------------------------------------------------------------------
<S>                                                <C>
O'Hare                                       OH    N/A
Acquired: 05/17/82
Joined Benefits and Payroll: 01/01/88
Pension Merger: 01/01/86
- --------------------------------------------------------------------------------------------------------
Woodfield                                    JB    N/A
Acquired: 07/26/82
Joined Benefits and Payroll: 01/01/88
Adopted NT Pension: 01/01/86
- --------------------------------------------------------------------------------------------------------
Naperville                                   NP    N/A
Acquired: 10/01/82
Joined Benefits and Payroll: 01/01/88
Adopted NT Pension: 01/01/86
- --------------------------------------------------------------------------------------------------------
Oak Brook                                    OB    N/A
Acquired: 06/01/83
Joined Benefits and Payroll: 01/01/88
Adopted NT Pension: 01/01/86
- --------------------------------------------------------------------------------------------------------
Hickey/NT Brokerage                          TB    N/A
Acquired: 04/09/84
Joined Benefits and Payroll: 01/07/87
Adopted NT Pension: 01/01/86
- --------------------------------------------------------------------------------------------------------
Phoenix National                             AR    N/A
Acquired: 06/06/86
Joined Benefits and Payroll: 01/01/87
- --------------------------------------------------------------------------------------------------------
LakeForest                                   EB    N/A
Acquired: 12/31/86
Joined Benefits and Payroll: 01/01/88
Adopted NT Pension: 01/01/88
- --------------------------------------------------------------------------------------------------------
Concorde Bank                                AQ    Later of:
Acquired: 06/18/89                                 06/18/89 or DOH
- --------------------------------------------------------------------------------------------------------
Berry, Hartell, Evers & Osborne, Inc. (BHE)  AF    Later of:
Acquired: 11/30/89                                 11/30/89 or DOH
- --------------------------------------------------------------------------------------------------------
Heritage Trust                               HT    As of 10/01/91:
Acquired: 09/28/90                                 DOH w/Heritage [before or after acquisition (Plan
                                                   Merger 10/01/91)]
- --------------------------------------------------------------------------------------------------------
Tri Valley National Bank                     TV    Later of:
(CA) charter                                       06/27/91 or DOH
Acquired: 06/27/91
- --------------------------------------------------------------------------------------------------------
Trust Services of America                    TS    Later of:
Acquired: 01/31/92                                 01/31/92 or DOH
Joined Benefits and Payroll: 02/1/92
- --------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              53

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------

       Affiliate Name & Acq. Code                             ESOP Earliest Vesting Date

- --------------------------------------------------------------------------------------------------------
<S>                                                  <C>
Hazlehurst & Assoc.                          HA      DOH w/Hazlehurst (before or after acquisition)
Acquired: 04/15/94
Joined Benefits and Payroll: 01/01/96
- --------------------------------------------------------------------------------------------------------
Vero Beach                                   VB      Later of:
Acquired: 03/31/95                                   03/31/95 or DOH
Joined Benefits and Payroll: 01/01/96
Pension Merger: 01/01/96
- --------------------------------------------------------------------------------------------------------
Tanglewood Bank                              TW      DOH w/Tanglewood (before or after acquisition)
Acquired: 07/31/95
Joined Benefits and Payroll: 01/01/96
- --------------------------------------------------------------------------------------------------------
Bent Tree National Bank                      BT      DOH w/Bent Tree (before or after acquisition)
Acquired: 11/15/96
Joined Benefits and Payroll: 01/01/97
- --------------------------------------------------------------------------------------------------------
Trust Bank of Colorado                       DN      Later of:
Acquired: 5/15/98                                    5/15/98 or DOH
Joined Benefits and Payroll: 7/01/98
- --------------------------------------------------------------------------------------------------------
Northern Trust Company of Connecticut/       RC      DOH w/NTCC
Northern Trust Global Advisors, Inc.                 (before or after acquisition)
Acquired:  10/31/95
Joined Benefits and Payroll:  04/01/00
- --------------------------------------------------------------------------------------------------------
Carl Domino Associates L.P.                  CD      DOH w/Domino
Assets Acquired:  05/01/2000
Joined Benefits and Payroll:  07/01/2000
- --------------------------------------------------------------------------------------------------------
Purchase of Master Trust Services            MT
Unit of FNBC:  01/04/85                              N/A
- --------------------------------------------------------------------------------------------------------
FCNBD Agreement Dated 10/03/96:              FC      Service Date w/FCNBD
Applicable to FCNBD hires to Northern from
9/30/96 through 9/30/97
- --------------------------------------------------------------------------------------------------------
ANB IMC                                      AI      First Chicago NBD Service Date
Acquired:  12/31/97                                  (before or after acquisition)
Joined Benefits and Payroll:  01/01/98
- --------------------------------------------------------------------------------------------------------
</TABLE>

DOH = Date of Hire

                                                                              54

</TEXT>
</DOCUMENT>
<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

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                     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

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<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.

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                     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


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                     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.

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                                       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.

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                                       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.

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                                       55

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                     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-

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                                       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

                                       95

<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

                                       99

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>dex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>

                                                             EXHIBIT NUMBER (21)
                                                             TO 2001 FORM 10-K

                     NORTHERN TRUST CORPORATION SUBSIDIARIES
                               AS OF MARCH 1, 2002

<TABLE>
<CAPTION>
                                                                      Percent         Jurisdiction of
                                                                       Owned          Incorporation
                                                                       -----          -------------
<S>                                                                   <C>             <C>
The Northern Trust Company                                              100%          Illinois
   Norlease, Inc.                                                       100%          Delaware
      TNT-NL Leasing I, Inc.                                            100%          Delaware
   MFC Company, Inc.                                                    100%          Delaware
   The Northern Trust Company, Canada                                   100%          Ontario, Canada
   Nortrust Nominees Ltd.                                               100%          England
   The Northern Trust Company U.K. Pension Plan Limited                 100%          England
   The Northern Trust International Banking Corporation                 100%          Edge Act
      The Northern Trust Company of Hong Kong Limited                 99.99%          Hong Kong
      Northern Trust Trade Services Limited                              99%          Hong Kong
      Northern Trust Fund Managers (Ireland) Limited                    100%          Ireland
      Northern Trust Global Investments (Europe) Limited                100%          England
         Helaba Northern Trust GmbH                                      50%          Germany
      Northern Trust (Ireland) Limited                                  100%          Ireland
         Northern Trust Investor Services (Ireland) Limited             100%          Ireland
         Northern Trust Custodial Services (Ireland) Limited            100%          Ireland
         Northern Trust Fund Services (Ireland) Limited                 100%          Ireland
         Northern Nominees (Ireland) Limited                            100%          Ireland
         Northern Trust Property Services (Ireland) Limited             100%          Ireland
   NTG Services LLC                                                     100%          Delaware LLC
      NT Mortgage Holdings LLC                                         99.6%          Delaware LLC
   Northern Trust Investments, Inc.                                     100%          Illinois
   RemitStream Solutions, LLC                                            20%          Delaware

Northern Trust of Florida Corporation                                   100%          Florida
   Northern Trust Cayman International, Ltd.                            100%          Cayman Islands,
                                                                                      BWI
   Northern Trust Bank of Florida N.A                                   100%          National Bank
      Realnor Properties, Inc.                                          100%          Florida
      Realnor Special Properties, Inc.                                  100%          Florida
      Realnor 1177, Inc.                                                100%          Florida
      Realnor Hallandale, Inc.                                          100%          Florida
      Northern Annuity Sales, Inc.                                      100%          Florida

Nortrust Holding Corporation*                                           100%          Arizona
   Northern Trust Bank,  N.A*                                           100%          National Bank

Northern Trust of California Corporation                                100%          Delaware
   Northern Trust Bank of California N.A                                100%          National Bank
</TABLE>

<PAGE>

                     NORTHERN TRUST CORPORATION SUBSIDIARIES
                               AS OF MARCH 1, 2002
                                   (continued)

                                                       Percent  State of
                                                       Owned    Incorporation
                                                       -----    -------------
Metroplex Bancshares, Inc.                              100%    Texas
   Metroplex Delaware Financial Corporation             100%    Delaware
      Northern Trust Bank of Texas N.A                 16.2%    National Bank

Fiduciary Services Inc.                                 100%    Texas
                                                                (INACTIVE)

Northern Trust of Texas Corporation                     100%    Texas
  Northern Trust Bank of Texas N.A                     83.8%    National Bank

Northern Trust Bank, FSB                                100%    Federal Savings
                                                                Bank

Northern Trust Holdings L.L.C.                          100%    Delaware

Northern Investment Corporation                         100%    Delaware

Northern Investment Management Company                  100%    Delaware
                                                                (INACTIVE)

Northern Trust Securities, Inc.                         100%    Delaware

Northern Trust Services, Inc.                           100%    Illinois

Nortrust Realty Management, Inc.                        100%    Illinois

The Northern Trust Company of New York                  100%    New York

Northern Trust Retirement Consulting, L.L.C.            100%    Delaware

Northern Trust Global Advisors, Inc.                    100%    Delaware
   NT Global Advisors, Inc.                             100%    Ontario, Canada
   Northern Trust Global Advisors, Limited              100%    England
   The Northern Trust Company of Connecticut            100%    Connecticut
   NT Fund Advisors of Quebec, Inc.                     100%    Quebec, Canada

NTC Capital I                                           100%    Delaware

NTC Capital II                                          100%    Delaware

*Effective February 18, 2002, the Corporation's Arizona banking subsidiary
changed its name from Northern Trust Bank Arizona N.A. to Northern Trust Bank,
N.A. At the same time, Northern Trust Bank of Colorado was merged into Northern
Trust Bank, N.A. Effective February 19, 2002, Nortrust of Arizona Holding
Corporation changed its name to Nortrust Holding Corporation. At the same time,
Northern Trust of Colorado Corporation was merged into Nortrust Holding
Corporation.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>6
<FILENAME>dex23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>
<PAGE>

                               EXHIBIT NUMBER (23)
                                                               TO 2001 FORM 10-K

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

   As independent public accountants, we hereby consent to the incorporation of
our report dated January 14, 2002, incorporated by reference in the Northern
Trust Corporation's Annual Report on Form 10-K for the year end December 31,
2001, into the Corporation's previously filed Form S-8 Registration Statements
File Nos. 33-47597, 33-63843, 333-25135, 333-25283, 333-52623, 333-58784,
333-84085; and the Corporation's previously filed Form S-3 No. 333-45203.

                                                     /s/ ARTHUR ANDERSEN LLP
                                                     -----------------------
                                                         ARTHUR ANDERSEN LLP

Chicago, Illinois
March 11, 2002

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>7
<FILENAME>dex24.txt
<DESCRIPTION>POWERS OF ATTORNEY
<TEXT>
<PAGE>
                                                             EXHIBIT NUMBER (24)
                                                             TO 2001 FORM 10-K


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

     That the undersigned officers and directors of Northern Trust Corporation
hereby severally constitute and appoint William A. Osborn, Perry R. Pero and
Kelly R. Welsh, and each of them singly, our true and lawful attorneys and
agents with full power to them and each of them singly, to sign for us in our
names, in the capacities indicated below, Form 10-K, annual report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year
ended December 31, 2001, and to file such Form, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises, and generally to do all
such things in our name and behalf in our capacities as officers and directors
to enable Northern Trust Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, and all regulations of the
Securities and Exchange Commission thereunder, hereby ratifying and confirming
our signatures as they may be signed by our attorneys, or any one of them, to
such Form, and all that our attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.

     IN WITNESS WHEREOF, the undersigned have hereunto executed this Power of
Attorney this 19th day of February, 2002.


/s/ William A. Osborn                       /s/ Barry G. Hastings
- ------------------------------------        -----------------------------------
    William A. Osborn                           Barry G. Hastings
    Chairman of the Board, Chief                President, Chief Operating
    Executive Officer and Director              Officer and Director



/s/ Perry R. Pero                           /s/ Harry W. Short
- ------------------------------------        -----------------------------------
    Perry R. Pero                               Harry W. Short
    Vice Chairman                               Executive Vice President
    and Chief Financial Officer                 and Controller (Chief Accounting
                                                (Officer)



/s/ Duane L. Burnham                        /s/ Dolores E. Cross
- ------------------------------------        -----------------------------------
    Duane L. Burnham                            Dolores E. Cross
    Director                                    Director



/s/ Susan Crown                             /s/ Robert S. Hamada
- -------------------------------------       -----------------------------------
    Susan Crown                                 Robert S. Hamada
    Director                                    Director



                                       1



<PAGE>



/s/ Robert A. Helman                        /s/ Arthur L. Kelly
- ------------------------------------        -----------------------------------
    Robert A. Helman                            Arthur L. Kelly
    Director                                    Director



/s/ Frederick A. Krehbiel                   /s/ Robert C. McCormack
- ------------------------------------        -----------------------------------
    Frederick A. Krehbiel                       Robert C. McCormack
    Director                                    Director



/s/ Edward J. Mooney                        /s/ Harold B. Smith
- ------------------------------------        -----------------------------------
    Edward J. Mooney                            Harold B. Smith
    Director                                    Director



/s/ William D. Smithburg                    /s/ Bide L. Thomas
- ------------------------------------        -----------------------------------
    William D. Smithburg                        Bide L. Thomas
    Director                                    Director


STATE OF ILLINOIS          )
                           )   SS
COUNTY OF COOK             )


     I, Victoria Antoni, a Notary Public, DO HEREBY CERTIFY that the above
named directors and officers of Northern Trust Corporation, personally known to
me to be the same persons whose names are subscribed to the foregoing
instrument, appeared before me this day in person, and severally acknowledged
that they signed and delivered the instrument as their free and voluntary act,
for the uses and purposes therein set forth.

     GIVEN under my hand and notarial seal this 19th day of February, 2002.


                                              /s/ Victoria Antoni
                                              ---------------------------------
                                                  Victoria Antoni
                                                  Notary Public

My Commission Expires:

           7/25/03
- ------------------------------------


                                       2

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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