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Modern Slavery Act Transparency Statement 2017

INTRODUCTION

This statement is made pursuant to section 54(1) of the UK Modern Slavery Act 2015 (the Act) and constitutes the "slavery and human trafficking statement" of The Northern Trust Company (the Bank), Northern Trust Global Services Limited (NTGSL), Northern Trust Management Services Limited (NTMSL) and Northern Trust Global Investments Limited (NTGIL and, together with the Bank, NTGSL and NTMSL, the Reporting Entities) for the financial year ended December 31, 2017. NTGSL, NTMSL and NTGIL are indirect subsidiaries of the Bank, which itself is a subsidiary of Northern Trust Corporation (the Corporation). Except where the context requires otherwise, references to "Northern Trust", "we", "us", "our" or similar terms means the Corporation and its subsidiaries, including but not limited to the Reporting Entities, on a consolidated basis.

Northern Trust firmly believes that all work should be done voluntarily and without slavery, servitude, forced or compulsory labor or the involvement of human trafficking (Modern Slavery). We take the risk of Modern Slavery occurring within our business and in our supply chain seriously and view relationships with vendors as an opportunity to encourage behavior and practices that are consistent with our own ethical practices.


OVERVIEW OF NORTHERN TRUST

Northern Trust Corporation and The Northern Trust Company

The Corporation is a financial holding company that is a leading provider of asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals worldwide. The Corporation conducts business through various U.S. and non-U.S. subsidiaries, including the Bank. At December 31, 2017, the Corporation had consolidated total assets of $138.6 billion and stockholders' equity of $10.2 billion.

The Bank is an Illinois banking corporation headquartered in Chicago and the Corporation's principal subsidiary. Founded in 1889, the Bank conducts its business through its U.S. operations and its various U.S. and non-U.S. branches and subsidiaries. At December 31, 2017, the-Bank had consolidated assets of $138.2 billion and common bank equity capital of $9.2 billion.

Northern Trust’s Business

Northern Trust focuses on managing and servicing client assets through two client-focused segments: Corporate & Institutional Services (C&IS) and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business.

C&IS is a leading global provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors around the globe. Asset servicing and related services encompass a full range of capabilities including, but not limited to: global custody; fund administration; investment operations outsourcing; investment management; investment risk and analytical services; employee benefit services; securities lending; foreign exchange; treasury management; brokerage services; transition management services; banking; and cash management. Client relationships are managed through the Bank and the Bank's and the Corporation's other subsidiaries, including support from locations in North America, Europe, the Middle East, and the Asia-Pacific region. At December 31, 2017, total C&IS assets under custody/administration, assets under custody, and assets under management were $10.07 trillion, $7.44 trillion, and $871.2 billion, respectively.

Wealth Management focuses on high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately-held businesses in its target markets. The business also includes the Global Family Office, which provides customized services to meet the complex financial needs of individuals and family offices in the United States and throughout the world with assets typically exceeding $200 million. In supporting these targeted segments, Wealth Management provides trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking. Wealth Management is one of the largest providers of advisory services in the United States, with assets under custody/administration, assets under custody, and assets under management of$655.8 billion, $645.5 billion, and $289.8 billion at December 31, 2017. Wealth Management services are delivered by multidisciplinary teams through a network of offices in 18 U.S. states and Washington, D.C., as well as offices in London, Guernsey, and Abu Dhabi.

Asset Management, through the Corporation's various subsidiaries, supports the C&IS and Wealth Management segments by providing a broad range of asset management and related services and other products to clients around the world. Investment solutions are delivered through separately managed accounts, bank common and collective funds, registered investment companies, exchange traded funds, non-U.S. collective investment funds, and unregistered private investment funds. Asset Management's capabilities include active, passive and engineered equity; active and passive fixed income; cash management; alternative asset classes (such as private equity and hedge funds of funds); and multi­manager advisory services and products. Asset Management's activities also include overlay services and other risk management services. Asset Management operates internationally through subsidiaries and distribution arrangements and its revenue and expenses are allocated fully to C&IS and Wealth Management. As discussed above, Northern Trust managed $1.16 trillion in assets as of December 31, 2017, including $871.2 billion for C&IS clients and $289.8 billion for Wealth Management clients.

Northern Trust’s Employee Base

As of December 31, 2017, Northern Trust has approximately 18,100 full-time equivalent employees globally.


MEASURES TAKEN TO PREVENT MODERN SLAVERY IN OUR BUSINESSES

Northern Trust Policies in relation to Slavery and Human Trafficking

Northern Trust's three guiding principles are "Integrity", "Service" and "Expertise"; how we do business is as important as what we do.

Our Code of Business Conduct and Ethics and our Standards of Conduct Policy reflect our commitment to acting ethically and with integrity in all our business relationships and to the adoption of sound business practices. Northern Trust's culture supports open communication and reporting of concerns at all levels.

All employees, as well as third parties, have access to an Employee Hotline where they can raise any concerns in relation to ethical business practices {and other issues) in confidence and without fear of recrimination.

In addition, we have a range of policies, procedures and training that pertain to human rights issues that, amongst other things, may help identify customers whose financial activity may show involvement in human trafficking such as Anti-Money Laundering and Anti-Bribery and Corruption Policies.

Northern Trust as an Employer

As a global financial services firm, we have a broad base of employees who work across various business lines, regions and functions to deliver products and services to our clients, as well as employees who provide expertise in risk, technology, legal, policy and regulation, finance, accounting, controls, human resources and many more areas. Northern Trust is committed to respecting the human rights of our employees through our internal employment policies and practices which reference our conformance with public policies including the International Labor Organization's standards and the Organization for Economic Co-Operation and Development Guidelines.

Fostering diversity and inclusion is a cornerstone of our corporate culture, and we strive to ensure that employees are able to work in a safe, professional work environment. In addition, compensation and benefits play a critical role in our ability to attract, retain and motivate our workforce. We are committed to providing competitive and equitable compensation for our employees, and benefits that support our employees' needs, such as health and retirement benefits and other programs to support work-life balance.

Northern Trust employees are made aware of their employment rights through a variety of channels including written employment contracts and employee handbooks.

In every jurisdiction in which Northern Trust has offices, the organization complies with Right to Work laws. One such law obligates that employees (and other workers, e.g., contractors) must meet the age requirement of the applicable jurisdictional Right to Work laws. Except for a very small number of paid school interns, Northern Trust does not hire individuals under the age of 18 in any of its offices across the organization. This practice insulates Northern Trust against adverse risk associated with child labor.

Training

Annually employees receive specific training on the Standards of Conduct Policy which addresses both human rights and ethical issues as well as training on related matters such as diversity, anti-money laundering and anti-bribery and corruption.

Northern Trust and Its Supply Chain

We rely on a large number of vendors to execute our business activities. Our vendors include both third-party service providers and Northern Trust's own entities. The supply chain is comprised primarily with vendors of information technology and communications equipment, software, catering, cleaning, security services and office equipment. It also includes vendors of professional services such as business and strategy consulting, recruitment agencies, legal counsel, training and insurance providers. Finally there are those vendors that support Northern Trust's client servicing requirements, including sub­ custodians, brokers and distributors.1

Northern Trust's Procurement Policy requires that Procurement be involved at the initiation of a project and/or identification of the need to engage a third-party vendor of a product or service for all but the lowest-risk and lowest-spend purchases. The Procurement team's level of ongoing involvement varies according to the engagement complexity. The following gives an overview of our supply chain management of third-party vendors.

Prior to entering into a new third-party vendor relationship, Procurement will initiate due diligence on the potential vendor, which includes a review of the vendor's compliance with various applicable laws and regulations, including those that impose ethical standards on vendors. A subsequent risk assessment of the vendor determines the appropriate level of ongoing monitoring.

Once a contract with a third-party supplier is in place, Northern Trust dedicates an internal manager for the supplier relationship (Vendor Manager). The responsibilities of the Vendor Manager include:

  • Monitoring the vendor against the terms of the contract and service level agreements; and
  • Documenting, maintaining and reporting legal and other issues or incidents.

The level of oversight imposed on the Vendor Manager varies according to the vendor's risk assessment.

Northern Trust is committed to holding ourselves and our vendor community to high standards of business conduct and integrity. Our Supplier Code of Conduct sets out expectations for vendors on a range of issues and includes the need to promote and respect human rights by working to prevent child and or forced labor and human trafficking in their operations and supply chains. The Supplier Code of Conduct includes a specific reference to the UK Modern Slavery Act.

Under the Supplier Code of Conduct a third-party vendor shall meet the following minimum requirements:

  • Adopt sound labor practices and treat its workers fairly in accordance with local laws and regulations;
  • Refrain from using forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise;
  • Refrain from engaging in any acts of Modern Slavery;
  • Take commercially reasonable steps to prevent its own subcontractors and vendors from engaging in any acts of Modern Slavery; and
  • Notify Northern Trust if such vendor identifies any instance of Modern Slavery on its part or on the part of any of its subcontractors.

The Supplier Code of Conduct may be found at: https://www.northerntrust.com/about-us/procurement.

If a vendor is found to be in breach of its contract, including in breach of the terms of the Supplier Code of Conduct, Northern Trust will engage with the vendor to remediate the situation. If the situation is not remediated, Northern Trust may terminate the relationship with the vendor and disqualify the vendor from participating in any future bidding processes for Northern Trust's mandates.

During the course of 2016 and 2017 we completed a high-level risk assessment of our critical and key vendors. Drawing on guidance published by the UK Chartered Institute of Purchasing and Supply, we assessed the vendors against four drivers of risk:

  • Location of Product or Service which included the consideration of the right of freedom of association; health and safety procedures; occurrence of discrimination and average living conditions.
  • Industry Sector which included the consideration of recruitment practices and the termination of employment; employment profile (reliance on low-skilled and / or migrant workers); living wage; and existence of grievance mechanisms.
  • Vendor Relationship which included the consideration of the duration of the relationship; the level of oversight; and the value of the contract.
  • Existing Information included the consideration of the existence of an Ethics / Whistleblower Policy; existence of a Business Code of Conduct; non-compliances concerning the above or other factors that are indicators of Modern Slavery; and media or non-governmental organization reports indicating possible problems with labor standards.

Following on from the 2016/2017 risk assessment, we sent our critical and key vendors a due diligence questionnaire to assess their awareness of compliance with the UK Modern Slavery Act. We will continue to engage appropriately with our vendors in accordance with our Vendor Management Program to make them aware of our approach to Modern Slavery and encourage them to adopt their own measures to minimize the risks of slavery and trafficking occurring within their own organizations and supply chain.

Evolving Process

Northern Trust recognizes that Modern Slavery issues are both complex and fluid in nature, and we strive to maintain practices and policies that fulfill our commitment to promoting respect for human rights. We know that this must be a continuing effort, with ongoing work to reassess our practices and our approach in light of changing global circumstances and an evolving global policy environment. We are also committed to engaging with a range of stakeholders on these important topics.

This statement has been approved by the respective Board of Directors of each of the Reporting Entities.



Michael G. O'Grady
President, Chief Executive Officer and Director 
The Northern Trust Company




Approved by the Boards of Directors of the Reporting Entities as follows:

The Northern Trust Company: 20th February 2018.

Northern Trust Global Services Limited: 22nd March 2018.

Northern Trust Management Services Limited: 21st March 2018.

Northern Trust Global Investments Limited: 21st March 2018.





1Please note that the discussion of Northern Trusts' supply chain management contained herein focuses primarily on third-party vendors other than those providing sub-custody services, which are managed through a separate engagement and oversight program. In addition, outsourcing to other Northern Trust affiliates is managed through our Business Process Transition Program. Both of these programs provide controls akin to those described herein.

 
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