According to a news release, Northern Trust expects to incur a pre-tax charge of approximately $150 million ($94 million after-tax or $0.42 per share) in the third quarter in connection with the securities lending action. The exact nature of the securities lending program was not detailed.
Along with the cost of two other measures revealed at the same time, Northern Trust said it expects to be hit with a total pre-tax charge of approximately $525 million ($328 million after-tax or $1.46 per share) in the third quarter.
The other measures included a move by Northern Trust to increase the support provided for certain cash investment funds previously covered through capital support agreements (as announced February 22, 2008, and amended July 15, 2008) and adding one additional fund to this coverage. The capital support levels provided by Northern Trust will increase a total of $321 million, to a maximum capital contribution of $550 million.
The announcement said these measures will enable the funds to continue to maintain a stable net asset value of $1.00. Northern Trust expects to incur a pre-tax charge of approximately $290 million ($181 million after-tax or $.80 per share) in the third quarter in connection with the cash investment fund action.
Cash investment funds impacted by this enhanced support include:
- Northern Institutional Funds Diversified Assets Portfolio, Prime Obligations Portfolio and Liquid Assets Portfolio, as well as Northern Funds Money Market Fund, all of which are registered money market funds;
- The Sterling Fund and the US Dollar Fund of Northern Trust Global Funds plc, both of which are pooled cash funds organized as Undertakings for the Collective Investment of Transferable Securities (UCITS); and
- The NTGI Collective Short Term Investment Fund and
The Northern Trust Company Common Short Term Investment
Fund, both of which are commingled cash funds.
Finally, Northern Trust kicked off a program to purchase certain illiquid auction rate securities that were purchased through Northern Trust for Personal Financial Services (PFS) clients under investment discretion or that were acquired by PFS clients from Northern Trust’s affiliated broker/dealer.