Welcome to the FactSet Research Systems fourth quarter fiscal 2008 quarterly earnings conference call. (Operator Instructions) Now I will turn the meeting over to Mr. Peter Walsh, Chief Financial Officer.

Welcome to FactSet’s fourth quarter earnings conference call. Joining me today are Phil Hadley, Chairman and CEO, Mike DiChristina, President and Chief Operating Officer, Mike Frankenfield, Director of our US Investment Management business, and Scott Beyer, Head of our non-US business. This conference call is being transcribed in real time by FactSet’s call-free service and is being broadcast live via the Internet at factset.com. A replay of this call will also be available on our website. Our call will contain forward-looking statements reflecting management’s current expectation based on currently available information. Actual results may differ materially. More information about factors that could affect FactSet’s business and financial results are in FactSet’s filings with the SEC. Lastly, FactSet undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events, or otherwise. We’ll divide our time today in three ways. First, we’ll review fourth quarter results. Then I’ll cover guidance for the upcoming first quarter of fiscal 2009, including our current thinking on the AAC [sic] impact from historic changes and consolidation in the financial services industry. Finally, we’ll close with our management team addressing your questions. Before covering results I’d like to take a moment to highlight two items. One, on July 24th FactSet completed its acquisition of a copy of the Thomson Fundamentals database. Our product line is now branded as FactSet Fundamentals and resulted in EPS dilution of one penny per share in Q4. We reported in our earnings release GAAP and non-GAAP financial measures. Operating income, net income, and EPS have been adjusted where appropriate to exclude the acquisition of Thomson Fundamentals and the $1.1 million tax benefit in Q4 last year. Reconciliations between GAAP and non-GAAP financial measures are also included in the earnings press release, which can be found at…

(Operator Instructions) Your first question comes from Peter Appert – Goldman Sachs. Peter Appert – Goldman Sachs: Phil or Peter, as you think about the expectation or the growth prospects for fiscal 2009 how are you thinking about your hovering plans for the year ex the increments for FactSet Fundamentals?

Peter, it’s Phil. Over the years we’ve always kept our head count plan in line with what we think revenue growth is. We have an ability to adjust that kind of on a real-time basis, but at this point you saw in this quarter that we hired quite strongly over the summer and it’s in line with what we believe our ASV growth is. Peter Appert – Goldman Sachs: Okay. And on that, I guess, just help us better understand that degree of flexibility in the costs and the context of any changes in revenue growth.

Peter, it’s Peter Walsh. Thanks for the question. FactSet, when you look at FactSet’s operating costs 65% are compensation related. So our flexibility all relates to compensation and that would include obviously our hiring plans and our compensation to existing employees. Peter Appert – Goldman Sachs: Okay. And then when you, this is just back to the hiring issue then. In terms of the hiring cycle, I guess I had thought that most of your folks were hired right out of school and therefore a substantial commitment sort of a year ahead in terms of hiring. Is that not the way it works?

Certainly the fourth quarter for us is the highest head count come on line, but if you looked at prior history, we’re hiring throughout the year. So we’re picking some people up from industry and not all college grads are what we think of as are fourth fiscal quarter. Peter Appert – Goldman Sachs: Okay. And then on the one point 5% of ASV from the four firms you cited, just so I understand that number, is that meant to be your expectation of the portion of their spending that goes away? That’s not to suggest that those four in total represent 1.5% of ASV, correct?

That is correct. Peter Appert – Goldman Sachs: Okay. And can you give us any insight into the assumptions you’re making in terms of what portion of the business from those firms you think you lose?

I think we went through a rational approach of looking at the firm’s completion of their subscription and our experience with firms that merge and what we think the exposure is, and came up with what we think is our expectation as to what that risks.

The one thing I might add to that is, like Bear Stearns, I think if there is a material change in ASV once we understand that in actual terms we’ll certainly highlight that when we speak at the end of next quarter. Peter Appert – Goldman Sachs: Okay. And so you’re not assuming that the Lehman business goes totally away?

We took an approach were based on the market information we have we could each one of the four clients there, they’re of different sizes, and overlay their businesses with what we think will occur and came up with the $10 million. Peter Appert – Goldman Sachs: Okay. Can you share with us what percent of the ASV those four were in fiscal 2008?

At this point in time I think the best way to describe the complexion of our client base is our largest client is less than 3% of our total ASV and our top ten are less than 15% of total ASV. And I also would characterize that none of those four were the largest client. Peter Appert – Goldman Sachs: Okay. And the last thing, I’ll let someone else speak. The repurchase activity, how do you see that playing out in fiscal 2009?

Thanks, Peter. You know, as we think about how we allocate capital, the repurchase activity has been a part of our capital allocation process. The primary reason is that we have a very high-quality problem. We have $150 million of cash and we generate $116 million of free cash flow over the last 12 months. If you look at the repurchase activity historically over the last eight quarters, it’s bounced around quite a bit. You know, we’ve had a low of $5 million and a high of $46 million. Over the last 12 months it’s been $77 million. I think we’ll continue to evaluate the data in front of us and it’s difficult to project what it will be in 2009, but that historical perspective hopefully gives you some understanding of how it’s moved around. Peter Appert – Goldman Sachs: Oh, I understand how it’s moved around, but I guess I don’t understand the decision-making process. Is it specifically that you’re trying to be opportunistic in the context of share price movement?

Our decision-making process is really looking at a few factors. One is, we’re really analyzing how much cash we need to run the business, that not only includes operating expenses, but what has been our historical track record of making small tuck-in acquisitions. Then we’re simply analyzing what our return on, or drag on return on capital would be as to holding on to our existing cash. That drag is only increasing as interest rates decline. So, as you’ve seen in our capital allocation process, not only have we been stepping up our buy-backs in 2007 and 2008 versus 2006 and 2005, but we’ve also been stepping up our dividend. So if you add the buy-back and the dividend together in 2008 it almost matched up to our free cash flow. We’ll continue to be aggressive doing that, especially if our acquisition activity isn’t high. But what I’m really signalling is that the amount that we’ll buy each quarter is always dependent on the facts that are in front of us at that time. Peter Appert – Goldman Sachs: Got it. And in the costs, this will really be the last question, in the context of having to integrate FactSet Fundamentals would it be fair to assume that you would perhaps be less inclined to be acquisition focused in fiscal 2009?

Peter, it’s Phil. We’ve always been opportunistic when it comes to acquisitions and certainly look for businesses that fit into what we believe our objective is, and that is to serve as a financial professional. So it really depends on what’s presented to us and whether we believe it’s something that’s going to be accretive to the FactSet revenue in the long term. Peter Appert – Goldman Sachs: Okay. Thank you.

Your next question comes from Kevin Doherty – Banc of America Securities. Kevin Doherty – Banc of America Securities: Thanks, guys. I just had a couple questions on the 1Q revenue guidance. I guess first of all, can you just quantify the drag from those four customers that you’re expecting in that period. I guess the second one is just specifically if you look at Merrill, would you expect that to be a little more of a 2Q event just when they’re talking about when that deal might close? And then a third, just what sort of assumptions are you making for FactSet Fundamentals revenue coming through in 1Q?

Thanks, Kevin. This is Peter. How are you? Kevin Doherty – Banc of America Securities: Good. How are you?

Good, thanks. As far as the Q1 guidance on revenue, we didn’t assume that all of the $10 million ASV would fall off on September 1st. Like you cited, you know, the Merrill transaction is hard to tell when it closed, but it certainly isn’t on September 1st. As it relates to FactSet Fundamentals, what we’ll be doing going forward is exactly what we did in the fourth quarter. We’ll be highlighting what the impact on FactSet Fundamentals was on our revenue growth rate. We’ll tell you the impact on operating income, as well as EPS. So in Q1 we’ll do exactly that and we laid out the guidance at an EPS level. Kevin Doherty – Banc of America Securities: Okay. And then just a follow up on that business. If you’re starting out from a base of about $2 million in revenue, how aggressively do you think that can ramp up? Then maybe with the, you know, what’s been the reaction of your customers and really what’s the incentive for them to make that switch at this point in time? Obviously there’s an opportunity for new customers, but maybe just talk about your existing base?

It’s Phil. Like all FactSet products, we won’t give specific guidance on the revenue effect that’s on the (inaudible) as we go forward because in all of our products they become deeply entwined with our product line and to determine whether the value is actually the application or the content itself it becomes very grey internally. We do believe that there’s a $100 million opportunity for us within our client base as we cited when we made the acquisition and that’s really the basis of what we know our clients currently spend on fundamental data. As to the reaction of our clients, I think the initial reaction is very positive and very pleasing for them because they know there will be more competition in the marketplace for them, they know that we understand what their needs are in the fundamental area and are certainly confident that we’ll be able to meet those needs as time travels. We’re actively selling FactSet Fundamentals, so it’s a $2 million in ASV that Peter highlighted is the ASV that we purchased from Thomson, but since that time we’ve been actively selling FactSet Fundamentals and its contributing to our ASV growth as we speak. Kevin Doherty – Banc of America Securities: And do you think that ramp up is going to come more from new users or existing users?

It’ll be a combination of both. It’ll be some of our clients choosing to switch from whatever product they currently have today to FactSet Fundamentals and it will certainly be a portion of our new client revenue growth. As you saw in the quarter, even in a tough environment we’re organically growing our user base, as well as our client base, and that exists on both the buy and the sell side, believe it or not, even in this tough time. Kevin Doherty – Banc of America Securities: Okay. And just one last separate question to wrap up. We get questioned pretty often about your exposure to hedge funds. I know that’s not your primary buy-side customer, but could you just provide a little more detail there just about what your exposure is and you’re continuing to add kind of net new clients. Is that primarily a hedge fund type clients or where is that incremental growth coming from.

If I were to characterize our whole business, it seems kind of interesting as you’re looking at this in cycle you can look at both the buy and the sell side and say where’s our exposure. On the sell side our exposure really is in the equity research department and the corporate finance. Those are our core user bases. Not that we don’t serve other departments inside of those firms, but that’s where the majority of our users come from. The crisis that’s incurring, clearly the firms are impacted as a whole, but those particular areas of the firm aren’t the part of the firm that’s broken at this point in time. Not that they don’t have [inaudible] in that area, but it’s not the part of the firm where all the leverage occurred and all the layoffs are occurring. We’re actually underweighted on the credit side of the business and the parts of the business that aren’t doing well. If you come back to the buy side the same is true in that our core client base on the buy side is the large traditional managers and coming down that food chain. We do have hedge funds with clients, but it’s not the core of our client base. The hedge funds we do have with clients tend to be the larger hedge funds where they ultimately have a strategy that fits into this style of FactSet as opposed to trading energy or things that are not the core of what FactSet service provides. Kevin Doherty – Banc of America Securities: And then how would you quantify who those new customers would be then? What buckets would they fall into?

I think they would certainly fall in the mix. We’re not, given that we only have 2,200 clients in the marketplace and that there is an opportunity for 6,000, there are all kinds of clients we get. Believe it or not, there are clients that manage $100 billion in the United States that are not FactSet clients. Not very many, but they exist. So it’s a complete spectrum of what the potential client base could be. Kevin Doherty – Banc of America Securities: Okay. Thanks, Phil. Thanks, Peter.

Your next question comes from Randy Hugen – Piper Jaffray. Randy Hugen – Piper Jaffray: Thanks. Are you seeing any changes in purchasing behaviour from the investment management clients? Is there any evidence that they could be consolidating tools or less likely to increase services? Or I guess conversely, are you finding maybe improving sales on some of your products used to replace operational employees?

In the fourth quarter we actually had an outstanding fourth quarter on the buy side. The US Investment Management group did very, very well, and I think it plays into the theme that it really is core impacted. That is that we have a very strong news and quotes product, which is new to the industry on a relative basis, and with consolidation of content and the broadened service that we can provide we can actually provide cost savings with increased functionality to our clients. Whether that’s selling them FactSet Fundamentals or FactSet Estimates on the contents side or any of the other contents that we have for the broad products we have starting with Marquee all the way through PA on the application side has been certainly a drive in our business. That’s true both US and non-US. So I would say the characteristics through my history in the industry is the buy side is much less volatile than the sell side in both hiring and slowing hiring, I guess would be the way I would describe it. And that their purchase patterns are far more consistent. They are affected by the marketplace, but that tends to be a quarterly thing, not something I would characterize over years. Randy Hugen – Piper Jaffray: So there weren’t any, I guess, significant trends at the sales side saying that they’re seeing in Q4 versus previous quarters?

Certainly Q4 was very strong for us, so we were able to get a lot done in the quarter. As with anything, when you have a diverse client base you have some clients that are affected negatively and some that are affected positively. There are always winners and losers in this process. So you tend to get a mix in the marketplace. I think the other thing that I would relate that is certainly pleasing from my perspective is when I’m looking at the data that comes back from the sales force is competitively we’re very strong. Which means I’m looking for gaining share in the marketplace and how we’re doing on that front. The market, the macro-market will take care of itself and we’ll be able to participate at a higher rate than other players in our space. Randy Hugen – Piper Jaffray: Okay. And then also back to the hedge fund issues. There have been some headlines about an increase in funds closing, consolidating, and slow down in new funds. Is that something that at all impacts your short-term client growth or are those new funds generally so small that it’s not even something that impacts your short-term sales?

Well, certainly on the margin we’d love to have everybody healthy in all components of the industry and have new fund formation, but if you look at the core of where our ASV comes from, even though we participate on the tail with the smaller firms, the core of our growth still comes from the large traditional managers. Randy Hugen – Piper Jaffray: Okay. And then digging in the margins a little bit, so we’re clear that 31.5% to 33% odd margin excludes the impact of the database, correct?

Of FactSet Fundamentals, yes. Randy Hugen – Piper Jaffray: Yeah. And then in addition there’s $1.6 million in costs for the TSA, as well as increased amortization costs?

That’s all included in FactSet Fundamentals. When I define FactSet Fundamentals I’m describing the whole end business, including our operating costs, our amortization of the TSA costs, and our amortization of the deal costs. Randy Hugen – Piper Jaffray: Okay. And then what kind of a sequential increase in amortization costs should we expect in Q1 versus Q4?

Related to what? Randy Hugen – Piper Jaffray: The stuff you just mentioned.

FactSet Fundamentals, I mean, is, I would look at it as totally separately from the ongoing business the way we’ve parsed it out. I think I indicated in our last call that the TSA is approximately an annual expense of $5.5 million in a complete fiscal year. The amortization of our other deal costs is not going to change materially. If you go into our Q, we have a run out of our amortization costs for the next five fiscal years that’s disclosed every quarter. Randy Hugen – Piper Jaffray: Okay. Thanks a lot.

Your next question comes from John Neff – William Blair & Company. John Neff – William Blair & Company: Hey, guys. A few questions here. The $615 million in quarter-end annual subscription value, does that include Lehman, Merrill, AIG, Washington Mutual? And if so, would that be in full or in part in terms of how you’re thinking about it going forward?

That includes the info and it includes the ASV as it was on August 31st from all those firms. John Neff – William Blair & Company: Okay. Okay. Good. And then you talked in the press release about first quarter 2009 revenue growth guidance being reduced. I just wanted to confirm, I mean, you had never had any estimate out there, so do you simply mean reduced from what it would have otherwise been?

Yes. John Neff – William Blair & Company: Okay. Coming at the Fundamentals question a little again here, but the $2 million in transferred Fundamentals revenue, can we get a read on what total annual subscription value associated with fundamentals was at the end of the quarter?

It’s not a material change because obviously we completed the transaction on July 24th. So it gave us 30-plus days to sell our own product. So it didn’t change materially between then and August 31. John Neff – William Blair & Company: Okay. The $58.7 million paid for Fundamentals, is that less than you had been expecting or does that just not include the TSA agreement?

Yes, that’s exactly what we were expecting and the number you just quoted includes the TSA. John Neff – William Blair & Company: Okay. Because I thought that previously you were expecting a final purchase price of $68 million to $73 million.

That final purchase price included the cost of purchase revenues, which when you include it is $67 million. John Neff – William Blair & Company: Okay. So the $58.7 million was before the price for the transfer.

Right. John Neff – William Blair & Company: Okay. The decline in year over year and cash from operations, I assume that’s just due to the fundamentals acquisition and the resulting impact on year-end working capital items?

Yeah, it’s, if you look, you know, through the entire full year we had a negative working capital change of $12 million. It’s almost just the opposite of the previous year, which turned around and we had a positive change of $16 million in previous years. John Neff – William Blair & Company: Do you have any kind of, I mean, if we were to just exclude the Fundamentals acquisition, any sense of what cash from operations growth would have been year over year excluding that item or normalize it for us?

Yeah, the TSA that we paid in advance was $8.25 million, so I would add back $8.25 million to get to the normalized ex Fundamentals. John Neff – William Blair & Company: Right. Kind of a big picture question, maybe for Phil. The long-term impact on FactSet, if on the growth or the encroaching market share of passive management at the expense of active management, what if any impact longer term would you anticipate on FactSet from that trend?

I guess my experience would tell me that’s been a portion of the business for decades at this point. I guess the other thing that probably works in our favour there is there’s passive and then there’s passive plus a tilt. The second you say passive plus a tilt, which seems to be the thing that’s in vogue today, then our products come right back into play because sometimes basically someone who’s quantitative needs all of our quantitative suite in a pretty significant way with all of the content we have could be a real player in that space. John Neff – William Blair & Company: You don’t view that as a threat?

No. John Neff – William Blair & Company: Okay. All right. That’s good. And then fixed income, your applications and offerings there, is all the turmoil here creating opportunities on the terms of your ability to sell that product or interest in it and is that, at this point is that growing in line with your expectations?

Yes, so, as I’ve articulated before, there are different components to that product. There’s the derivatives solutions product we have to purchase, there’s our own fixed-income explorer that we have on our system, and then there’s fixed-income in PA. And all three of those really combine to become what we think of as our fixed-income product. They’re doing quite well in the marketplace. The strategy really there is the playoff of fixed-income PA, which is doing quite well. And it’s also a very, very large, complex problem for our clients. It’s not, it doesn’t really have competition as much as it has just getting clients to understand what they could look at when they want to break down their attribution on the fixed-income [inaudible]. John Neff – William Blair & Company: Would you care to give any kind of range in terms of percentage of ASV represented by fixed-income suites?

No, not at this time. John Neff – William Blair & Company: Okay. Thanks very much. Congrats on a very good quarter.

Thanks.

Your next question comes from John Maietta – Needham & Company. Jonathan Maietta – Needham & Company: Thanks very much. Phil, I was wondering if you could just kind of talk qualitatively about what you see in the pipeline. Obviously the last couple weeks a lot of negative news out there, but things seem to have calmed down. Have you seen more activity in terms of customer conversations and being able to schedule demos and things like that?

I think our business is one that we don’t depend on large sales. So our quarter isn’t made because we close giant sales each quarter that changes our ASV, and even if we did each month you only get a 12th of the value. So there isn’t a huge incentive for a big pipeline piece that you’re staring at where big deals get deferred. With that said, if you take all of our products, of which you can slice our products up by content, by clients, by seats, and by applications, and all those dimensions what really happens is there’s lots of little transactions that make up our ASV each quarter. So I’m sure in the last couple of weeks people spent a lot of time staring at their screen and I’m sure also at the same time something like Portfolio Analytics becomes much more valuable in a time of volatility because you really need to understand what’s happening in your portfolio on a real-time basis and we’re the best product to do that. So I think it certainly plays into our hand and our strength to have a product that tells you how you’re performing and why you’re performing and gives you a bench mark and gives them trading ideas and trading opportunity. So it kind of goes both ways, but I think net-net we’ll do quite well in the marketplace. Jonathan Maietta – Needham & Company: Got it. Okay. And then, Peter, with regard to the expected four-cent-solution for next quarter, how much of that should we think about being a continuing cost for the business? Head count, for example, versus noise.

I think if you were going to exclude things that will go away you would have to look at the cost of the TSA. TSA will expense over an 18-month period and when that 18-month period hits we’re going to lose approximately $5.5 million in annual costs. The remainder of it will be ongoing. Jonathan Maietta – Needham & Company: Okay. Thanks very much.

Your next question comes from Dave Lewis – J. P. Morgan. David Lewis – J. P. Morgan: Hi, guys. I was wondering if you could elaborate on a couple trends. The first is, Marquee clearly has been very robust on both sides of the business. Can you elaborate on how that’s opening doors for you on the buy side?

I think what has changed for FactSet over the last 10 years is that we were very much not even an on-line product. We were a dial-up product at one point. As technology moved in our favour we became a real-time product and then introduced Marquee it’s changed our product complexion from being a research analyst’s product to being a portfolio manager’s product to even being a trader’s product. And the net effect of that is it allows us to sell a percent of the financial professionals in a firm versus historically, I would say we were limited to particular areas of interest that met our core product base. So the positive for us is really you see in key growth and the positive for the client is a consolidated solution that’s cost-effective and very powerful and functional for their business needs. David Lewis – J. P. Morgan: Great. Thanks. The second question I wanted to ask is the consolidation strategy, clearly that’s been a strategy of yours for a long time in providing cost savings to clients. Is that accelerating or is that picking up from prior years? I know you guys have launched a series of new products since the fall of 2007, but what’s changing there, if anything?

Well, I think the consolidation theme for us is one that we’ve been pushing for several years. Obviously clients come to the point where they find it interesting at various points in time based on what they think the market pressures are. I think the market probably is moving in our favour in the perspective. The financial turmoil is a little more than a year old at this point and people tend to have a desire to look at their cost structure at a time when a business is potentially at risk. So I think it’s definitely been a player in our organic ASV growth this year and I think it will certainly be a player as we look forward as well. David Lewis – J. P. Morgan: Okay. Great. Can you touch on just briefly the pricing environment on the sell side at the investment banks?

Can you be more specific? David Lewis – J. P. Morgan: Yeah, sure. I mean, are you seeing increasing pricing pressure? I mean, clearly you guys are taking a share and doing very well, but I was just curious, it seems in the numbers there’s been some pricing pressure. I’m just curious if you see that stabilizing or what you think the outlook could be going forward.

I haven’t really seen pricing pressure on the sell side. I think we’ve taken the strategy where we continue to increase the value for our client, and obviously value is a soft term, and what we include in the product. At the same time, since we continue to expand our [inaudible] balance on the margin, whether it’s the buy or the sell side, the marginal cost of the [inaudible] is always a little less than the average revenue per [inaudible] just by definition. So if you’re getting there that way it’s really just because we’re selling [inaudible] on the market. David Lewis – J. P. Morgan: Okay. And last question for me is, do you guys care to ballpark the number of clients that fall into that 21% sell-side bucket?

Thanks, David. At this time we haven’t broken out our client base between buy and sell side. David Lewis – J. P. Morgan: Okay. Thanks, guys.

I just wanted to add that, as you know, the number of sell-side firms is not significant relative the number of buy-side firms.

Your next question comes from Bill Ferdinand – US Trust. William Ferdinand – US Trust: This is for Phil. Phil, you had mentioned earlier that some of the largest clients out there are not FactSet users. It sort of begs the question as to why are they not FactSet users? And two, who do you view as your, I’d say, strongest competitor at this point in time?

Bill, I’d love to be all things to everybody. That would be a wonderful thing. We’d have 100% market share and I guess we’d be done. But the world of business is always very challenging and we continue to try and evolve our product to meet the needs of a particular client. Some of it is just inefficiencies in the marketplace. I believe they will become clients, they just haven’t yet. A couple fall every year. But it does present an opportunity for us, which I guess is a good thing. As far as competition, I don’t think FactSet has a direct competitor that can come into the market and say I can replace FactSet in your firm, for example, because we do something very different from everybody else in the marketplace. But if you break anybody’s product down in this industry there are different pieces of functionality that are available in multiple places. In our particular case, Portfolio Analytics is one of our most powerful product lines and on a feature-by-feature basis there is no competition in the marketplace. That’s not to say that you couldn’t try to recreate something in a spreadsheet that would get you 2% of the value and call it a competitor. When you get to news and quotes there are lots of players in the space that can deliver real-time news and quotes, but we like to believe that we do it differently and more integrated than other players in the space. So it’s kind of one of those things where everybody’s a competitor and nobody’s a competitor, depending on how you look at it.

You have no further questions.

Okay. Thank you very much.

Thank you very much.