Exhibit 99
EDITED VERSION OF REMARKS DELIVERED BY
MR. WILLIAM A. OSBORN AT THE ANNUAL MEETING
OF STOCKHOLDERS OF NORTHERN TRUST
CORPORATION HELD APRIL 18, 2000
Forward-Looking Statements
My remarks today may include some forward-looking statements, such as statements
that relate to our financial goals, expansion plans, business prospects, new
business results and credit quality. Of course, actual results could differ
materially from those indicated by my remarks. I encourage you to read our 1999
Annual Report and our periodic reports to the SEC for additional information
that could affect actual results.
Overview
1999 was the twelfth consecutive year of record earnings. Net income of
$405 million was 14% ahead of 1998. This performance reflects our continued
success in attracting new business in all segments of the Corporation. The
compound annual growth rate of net income in the 90's was a very strong 15%.
We have experienced exceptional growth in trust assets over the past decade
and especially over the past five years. Total trust assets now amount to $1.6
trillion and have grown $304 billion in the last 12 months alone. That is more
than the total amount of assets under administration in 1990. In the decade of
the 90's, trust assets have grown an average of 20% per year. Managed assets
grew 27% in 1999 and now amount to $323 billion. The ten-year compound annual
growth rate is 21%. In the first quarter of 2000, managed assets grew by $24
billion - in just one quarter! The growth of trust assets is key to the
continued success of both Personal Financial Services and Corporate &
Institutional
Services. We offer a full range of products including credit, treasury
management, brokerage, and foreign exchange but our trust and managed asset
growth is really a key driver of our profitability.
New business momentum has been just phenomenal, and 1999 capped it off with
52% growth over 1998. These figures are new trust business sold -- stated in
terms of annualized fees -- less lost business due to distributions and other
reasons. Net new trust business sold in the first quarter of 2000 was 30% higher
than a year ago. So the momentum continues.
Trust fees grew 19% in 1999 to $974 million and were fueled by the
excellent new business results. Trust fees accounted for 54% of total revenues
in 1999. Both our Personal and Corporate & Institutional businesses contributed
to this growth, reporting approximately equal levels of trust fees. In the first
quarter of 2000 we had $286 million in trust fees. That is more than total trust
fees for the entire year in 1990 when we had $271 million in fees.
Personal Financial Services
Our uniquely positioned Personal Financial Services business delivers high-
touch trust, investment management, and banking services to individuals and
families. In PFS we administer $162 billion of trust assets and we have
investment discretion for $97 billion of those assets. PFS trust fees grew 25%
in 1999 and were up 31% in the first quarter of this year.
Our PFS network now has 76 offices in ten states and we currently reach 26%
of the millionaire population which we define as households with $1 million or
more of investable assets.
One of the key reasons that we like this business is the growth rate of our
target market. Over the next five years,
the U.S. population is expected to grow at 1.0% per annum. By contrast, the
affluent segment -- individuals with more than $1 million in investable assets
- -- is expected to grow at 8.5% per annum. That equates to over 800,000
additional affluent households who represent our target market in the next five
years.
We see plenty of growth opportunities in PFS. First, we continue to fill in
our existing states with additional locations. In 1999, we opened five new
offices in these states including Hinsdale and Northwestern Memorial Hospital in
Illinois; Grand Rapids, Michigan; Lakewood Ranch, Florida; and Mill Valley,
California.
Growth opportunities will also come from our continued entry into new
markets. We announced in 1997 that we planned to enter one new state per year,
and to reach 100 offices by 2003. That would put us potentially within reach of
40% of the U.S. millionaires. In the last two years we have entered four new
states. In 1998 we entered Colorado and Michigan, and last year we added our
eighth and ninth states with offices in Cleveland, Ohio and Seattle, Washington.
We recently opened an office in St. Louis, Missouri, our tenth state, and we
plan to open a full-service office in Milwaukee, Wisconsin, our eleventh state,
later this year.
Along with geographic expansion we have sought new distribution channels to
reach additional clients and to allow our clients more convenient access to
products and services. Our unique referral arrangement with Northwestern Mutual
Life allows their agents to refer clients to us for fiduciary and asset
management expertise. We are already seeing success from this arrangement in
Chicago and Milwaukee, and we will be rolling this out throughout the country
later this year.
Since September we have had five of our mutual funds available on Schwab
OneSource, and have brought in over $200 million in fund assets through this
channel. We have
also significantly enhanced Private Passport for our personal clients who want
to deal with us through the Internet. But, most importantly, we find that
referrals from existing clients continue to be a great source of new business
for us. I am proud to say that in recent surveys we found that 96% of PFS
clients were either very satisfied or satisfied with Northern's service and over
70% of clients had recommended Northern Trust to others.
Corporate & Institutional Services
Northern's Corporate & Institutional business employs innovative technology
and a strong emphasis on relationships to deliver custody, banking, investment,
and advisory services to corporations and institutions worldwide. We continue to
hold a leadership position in the master trust and custody business. C&IS has
$1.4 trillion in assets under administration of which $226 billion are under
management. Trust fees in C&IS grew 14% in 1999 and were up 24% in the first
quarter of 2000.
We currently have clients in 35 countries and have trade settlement
capabilities in 80 countries through our ever-expanding subcustodian network.
Northern is one of only six major global custodians. And others cannot enter
into this business. Technology is just too large of a barrier to entry.
Current industry trends have a positive impact on our ability to attract
new business. Among those trends are the privatization of pension funds
worldwide, continued consolidation of custody providers, globalization of
investments, and growth of defined contribution plans. We are really in an
excellent position to continue to capitalize on the opportunities created by
these trends.
Northern Trust Global Investments
Superior investment capabilities and performance are essential to the
growth of both the Personal and Corporate & Institutional businesses. Assets
under management total $323 billion and are growing at a compound annual growth
rate of 30%. Our overall investment performance has been terrific. Our two
mutual fund families, Northern Funds and Northern Institutional Funds, have
grown to $36 billion. As of March 31, 2000, 18 of our funds received an "A" or
"B" ranking in The Wall Street Journal Quarterly Fund Review and 13 funds
received ratings of "4 stars" or "5 stars" from Morningstar.
We continue to take steps to broaden our product line. In 1999, we launched
new investment capabilities including high yield fixed income, small cap growth
equity, hedge funds and a variety of new index products. In addition, we
recently announced the pending acquisition of Carl Domino Associates in Palm
Beach, Florida. This acquisition will provide us with a value equity style of
investment management to complement our current quality growth style. Building
on asset management is really one of the key strategic focuses of the
Corporation.
Technology
Northern Trust has spent $600 million over the last three years on
technology, and we plan to spend over $870 million during the next three years.
The Internet is rapidly changing the ways of conducting global commerce.
Northern Trust has been working with clients via the Internet since 1994. So we
are no strangers to the business. We view web-based capabilities as an
opportunity to increase our collaboration with clients as well as offering
greater access and efficiency.
Our technology gets very high marks from our clients. This is evidenced by
the fact that we have won the two largest corporate pension funds to come to
market in the past two years. And in PFS we've had an overwhelming response by
our personal clients to the new capabilities offered via Private Passport, which
brings together all of an individual's relationships across trust, asset
management, brokerage, banking and our mutual funds, and represents a new level
of electronic delivery of information to individual clients.
There are also some major industry initiatives that we, as a leading
custody provider, are actively participating in and which require major
technology investments. These include moving to a T+1 securities settlement
environment and global straight through processing.
Just last Friday, we published a new version of our web site to provide
easier navigation and to more closely align the online look with the Northern
Trust brand. This is just the beginning. I have designated a corporate e-
commerce director who reports to me. We have created an e-commerce leadership
team comprised of senior representatives from each of our business units and
empowered this team to guide our online strategy. The team is currently focused
on creating the next generation of Passport suites.
Our online approach is integral to our overall business strategy and is
centered on using the Internet to expand capabilities for existing clients while
leveraging opportunities to deliver existing capabilities to emerging clients in
the new economy. Through an innovative combination of new technology with our
longstanding tradition of personal service we will continue to be a financial
services leader in an increasingly online world.
First Quarter Results
Now let me review the first quarter results that we released yesterday,
which were outstanding. Trust fees grew an exceptional 27% and represented 56%
of total revenue in the first quarter. Total revenue was up 22% -- the highest
quarterly increase in the history of this Corporation. With net income of $113
million, up 19%, and EPS growth of 20%, the momentum from 1999 has carried
forward into 2000. All areas of the company are contributing to this exceptional
performance. We are very optimistic that 2000 will be another record year.
Our strong financial performance coupled with the robust stock market --
although it wasn't as robust last week -- has resulted in extraordinary
performance of our stock price, which rose 21.4% in 1999 and was the third
highest performing institution of the 25 largest banks in the United States. In
the last ten years, our stock price has grown 12 times and had a compound annual
growth rate of 26%. This is well ahead of the performance of the S&P 500 index
and the Keefe Bruyette and Woods index of the 50 largest banks. I really like
that slide and I hope that all of you do too!
Finally, I want to thank all of our employees worldwide for their hard work
and dedication which has led to this record performance. We want to thank our
clients for their confidence and trust in placing their business with Northern
Trust, and our Board of Directors whose advice, counsel and support has been
invaluable in leading to these results. We continue to be very optimistic about
the future of your company.