Welcome to the Northern Trust Corporation fourth quarter and full year 2009 earnings conference call. At this time I would like to turn the call over to the Director of Investor Relations, Bev Fleming for opening remarks and introductions.

Welcome to Northern Trust Corporation’s fourth quarter 2009 earnings conference call. Joining me on our call this morning are Bill Morrison, Northern Trust’s Chief Financial Officer and Preeti Sullivan from our investor relations team. For those of you who did not receive our fourth quarter earnings press release or financial trends report by email this morning, they are both available on our web site at northerntrust.com. in addition, this January 20 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be available through January 27. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Now for our safe harbor statement; what we say during today’s conference call may include forward-looking statements which are Northern Trust’s current estimates or expectations of future events or future results. Actual results of course could differ materially from those indicated by these statements because the realization of those results is subject to many risks and uncertainties. I urge you to read our 2008 annual report and our periodic reports to the Securities and Exchange Commission for detailed information about factors that could affect actual results. Thank you again for your time today. Let me turn the call over to Bill Morrison.

It’s my pleasure to be speaking with you today on Northern Trust’s fourth quarter 2009 earnings conference call. Earlier this morning Northern Trust reported fourth quarter 2009 net income of $200 million equal to $0.82 a share. These results were achieved in the context of an economic environment that continues to be challenging on several fronts. Although equity markets have improved interest rates and spreads remain very low which impacts several revenue sources, and market volatility is dramatically lower than it was a year ago which impacts our foreign exchange trading income. For the full year 2009, despite these difficult business conditions, we achieved record net income of $864 million. As I’ll discuss in more detail later, we continue to win new clients in both our personal and our institutional businesses. Economic conditions notwithstanding, we think that our highly focused client centric business model underpinned by our strong financial condition positions Northern Trust very well for growth and success in the years ahead. To assist you in understanding our performance this quarter, we’ve organized today’s remarks into the following sections. First, I’ll discuss market conditions that impacted our performance in the fourth quarter. Second, I’ll review our financial performance focusing on those items that most impacted our results, and third, I’ll offer our perspectives on the near term environment and the longer term strategic positioning of Northern Trust. And finally, Bev and I will be happy to answer your questions. The equity market environment continued to show some signs of improvement in the fourth quarter. The S&P 500 was up over 23% in 2009 and improved 5.5% during the fourth quarter. Some of our trust investment and other servicing fees are earned based on lagged market values. Let me review those impacts. Equity market performance calculated on a one quarter…

(Operator Instructions) Your first question comes from Robert Lee – KBW. Robert Lee – KBW: I have a question on Wealth Management. If I look at I guess it’s assets, I can’t understand why the PFS fees have been kind of flat last year in spite of the rebound in the markets, how fees waivers rolled through there that provide some offset but if I look at the related assets under management, it seems like that has been pretty flat there in spite of the improvement in the market. Is that mainly because you’ve had money fund assets roll off? Maybe you could talk a little bit about what may be happening there. Then as a follow up to that, if I look at the Wealth Management in particular it seems like revenues there are really kind of flattened out. Can you talk about that a bit?

I think your observations are on point. Remember that NR Wealth Management group; we’ve historically had a very high percentage of AUM in short duration assets. In fact at the end of the fourth quarter 44% of our AUM in wealth was in cash, so very much underrated in equities 22% during the fourth quarter as compared to a much higher level in the PFS business. So relative to the lower growth rates and investment management fee income I would just point to the low allocation to equities and high risk investments and also to the fact that in some of the investment vehicles in which we manage client’s cash and Wealth Management, we again are not generating enough return to both pay the clients expected return and our fees, so we’re rebating some fees in there. I would say that also during the quarter, Wealth Management did lose about $2 billion in AUM out of the cash portion of their client AUM. Robert Lee – KBW: And just within the PFS more broadly is all the flat revenue attributable to really the cash management component or the fee waivers? I guess I would have expected a little incremental growth particularly given the strong growth in new client relationships you had in 2008 and 2009.

There was a little bit of growth. Of course we would have liked to have had a little bit more but the issue really is you look at the business broadly, clients are not becoming more risk tolerant frankly at the pace that we had anticipated. In fact, the overall commitment to equity through the PFS investment solutions book today is about 35% and you may recall from our prior conversations in the first quarter of ’09 it got down as low as 28% and last quarter it was 34%. So clients really haven’t move up in their risk tolerance curve again as quickly as we had anticipated. Higher levels of cash and of course those are subject to the fee rebates. So we’ve been watching that risk tolerance curve and hoping it would change a little quicker but to this point it has not. Robert Lee – KBW: In looking at the loan side of the balance sheet obviously it has come down a little bit, has a little bit of run off. Can you talk a little bit about the demand side of the equation? My sense is you would like to find some loans you could put out at proper spreads and whatnot but are you seeing most of your corporate clients just really not making anything on the demand side or seeing and change in there, like a little bit of pickup in activity?

Number one, you’re absolutely right. We would love to find some good loans to make and are looking hard in all parts of the business to find them. The terms of demand is different depending on what part of the U.S. or what part of the world you’re in and you of course know that. I would say that within our commercial and industrial loan sector we’ve seen frankly a higher level of payoffs than we would have anticipated from clients going to the debt markets and refinancing what they’ve got out there and at the same time, you might remember that we financed out for a lot of our not for profit clients their auction rate securities and they also have gone back and refinanced those in the fixed income markets. So we have in effect swapped direct outstanding to letter of credit positioning. So also in PFS a number of the markets that we’re in which we have large positions, they’re still pretty weak, Florida, Arizona, Southern California, as an example and loan demand is slow.

One thing that I’ll point out that you’ll see when we issue our annual report at the end of February; we did have one sub component of loans that did show a sequential quarter increase. The personal loans were up almost 5% on a sequential quarter basis. So in that particular category we actually are seeing some demand for the types of loans that fit with Northern Trust’s lending strategy to our clients. But that growth was more than offset by all of the factors that Bill just described with respect to the commercial and industrial portfolio.

Your next question comes from Brian Bedell – ISI Group. Brian Bedell – ISI Group: Could you just repeat the equity and fixed income break outs for CNIS and PFS group? I think I missed part of them.

For assets under management? Brian Bedell – ISI Group: Yes.

For PFS equity assets were 35%. Fixed income was 32%. For CNIS AUM the numbers were 44% equity, 14% fixed income and 42% short duration. Brian Bedell – ISI Group: Just to tack onto Rob’s question a little bit about the asset numbers, I guess as we think about it, obviously you’re winning new business and new clients at a pretty decent clip but there’s a natural sort of loss of assets that come through as certainly your PFS clients spend money on things and take cash out. How should we think about that going forward? It looks like right now the new business trends aren’t strong enough to really move the total asset number up right now. Should we think of this as more of a seasonal impact or are you running at organic growth rates right now that you’d like to see be a lot better.

Actually to the loss business question first or the run off of the PFS business, I would just tell you that the lost business was the lowest its been since I’ve been with the company in 2009. So lost burins experience has been quite good. I would also tell you that PFS new business in 2009 was quite strong. In fact, other than the flight to quality induced, remarkably high new business we had in 2008, 2009 was the best year we’ve had since 2000. So the trends are encouraging I think both from a new business point of view and from a lost business point of view. The issue that surprises me a little bit, I mentioned it a few minutes ago was it is the concentration of existing and new client assets in PFS and very risk adverse. There’s a give up there obviously. Brian Bedell – ISI Group: I think you said in the last quarter and tell me if this has changed at all, but you are seeing some reallocation through equities, encouraging clients to move into equities.

It’s quite small. It’s 1% for the fourth quarter. 34% to 35% using the numbers that Bev just gave. Brian Bedell – ISI Group: Could you talk about fee waivers? Do you think you’re at a normalized rate at $11 million in the quarter? Is there some more pressure in the first quarter coming?

We think we’re getting close as short duration assets in these funds reinvest at lower rates. We think we’re most of the way through that but there may be a little bit left in 2010. Brian Bedell – ISI Group: And the normalized tax rate that we should be thinking about given that we’ve had two quarters of sort of abnormally tax rates here?

Hard to project based on the fact that we don’t know what our revenue flows are going to be from non U.S. sources. Obviously the higher that revenue flow, the lower our taxes but there are some non recurring state tax credits in there and we would encourage you to use the full year 2009 tax rate as you think about future years just for lack of better guidance on that. Brian Bedell – ISI Group: And that was 31%?

More or less, yes. Brian Bedell – ISI Group: On credit, obviously this can be lumpy from quarter to quarter, but certainly signs are very encouraging in the fourth quarter. As you look into 2010, as you look across your client base do you think we’re through the worst part or do you expect to have continued lumpiness there?

First let me say we’re encouraged with non performing loans being down 5% and even with the non performing asset number being up a little bit because we moved a couple of assets into ORE, that’s encouraging too because it facilitates a quicker disposition of those assets and quicker resolution. I don’t think we’re ready to say that we’ve reached a peak on this and that we’re headed down the other side. I’d like to think so but we’ve still got some commercial real estate issues to deal with, with 11% of our portfolio in commercial real estate and while it’s underwritten better than our peers have underwritten, I still there is some risk there. So I’d like to think we’ve peaked, but I’m not sure. We’re not collectively sure. Brian Bedell – ISI Group: And the reserve is, should we be thinking about the reserve as your expectation for the next 12 months of charge offs roughly?

We don’t have an expectation for the next 12 months. We look at it quarter to quarter. We looked at the relative shrinkage in the aggregate portfolio. We looked at the relatively lower number of charge offs and looked at our inherent reserve allocation in our process and thought that was the right number for the fourth quarter. Again, we take it quarter by quarter.

Your next question comes from Kenneth Usdin – BofA/Merrill Lynch. Kenneth Usdin – BofA/Merrill Lynch: To your point about the rate environment continuing to hurt net interest margin, it looks like you continued to stay very conservative with your investments especially with the big growth you had in the money market assets. I’m just wondering are there any opportunities to just reinvest in the securities book or is it just going to be that you just kind of take what the low rate environment gives you until rates actually turns the other way because in terms of assessing when we can hope for that stabilization of the down type pressures of the margin.

Although the temptation is there, we’re going to stick to our conservative positioning in our securities portfolio. As you all know that portfolio has an average duration of about a year and substantially all floating rate. We might do some very, very marginal things around the margin but are we going to change our strategy? No. Kenneth Usdin – BofA/Merrill Lynch: So does that just mean that presuming that then directionally with the reinvestments rolling off at the bias that there’s more pressure downwards before there’s upside until rates turn.

I think if you looked at the components of our investment portfolio, how it’s made up, there might be a little more to go. Kenneth Usdin – BofA/Merrill Lynch: On PFS, just coming back to Rob’s question earlier, with the last couple of years the business has moved more towards more of an asset location model versus individual portfolio managers and I’m just wondering how much of that has an impact on the recovery of PFSC’s meaning is it as much about how equity is recovered because nowadays you’re in more of an asset allocation. You might be just getting paid a percentage per. So I’m just wondering can you differentiate those two different buckets for us in terms of helping us understand how much leverage we can see over time from that allocation change.

Actually I would view the full migration of PFS clients into a centrally run asset allocation driven investment model as a positive to us in a number of ways and I think you may be thinking about it the other way. The reason I would view it as a positive is we would have more consistent movement from less risky to more risky and vice versa investment solutions because they’d be centrally driven. And secondly, the fee in those centralized solutions is managed centrally. So I don’t think that it goes necessarily that the more clients migrate into that type of asset allocation approach, and I would tell you that less than half of our clients are there that our revenue is negatively impacted. I would view it the other way around. Kenneth Usdin – BofA/Merrill Lynch: On capital management allocation, any updates on your desire to change dividend policy and your outlook for potential acquisitions as you just look around the world?

I’ll talk about acquisitions first. As all of you know there’s a lot of it out there and there’s a lot for a company that has the supposed excess capital that we have to be out there looking at, and we actually have been looking. We’ve been looking at opportunities in the institutional side of the bank that would enhance our capabilities and add some clients to us as well both domestically and internationally, but we haven’t done anything. On the personal side of the business we are looking for acquisition opportunities which will allow us to acquire principally client relationships and principally in areas where we have relatively low market penetrations and great opportunity; meaning the Northeast and the Mid Atlantic and California and the West Coast broadly. So we have an active initiative going on there and I would suspect we would do something or a series of things there, none of which will be huge in terms of our historical background. Kenneth Usdin – BofA/Merrill Lynch: Are you going to touch on the dividend policy?

As you all know we were one of the two top twenty banks not to cut our dividend the last time around. We’ve got a 2% plus dividend yield and we’re paying out something in the range of 32% to 35% in our dividend and I think in the present environment we’ll stick with what we’re doing. We like most other banks right now are just beginning the second phase of the initiative and we’ve got to get a little further into that before we can get agreement with our principal regulators on what the appropriate level of capital is. I think not just for us but for most like us, that’s going to be a constraining factor until we get clarity.

Your next question comes from Michael May – Calyon Securities. Michael May – Calyon Securities: For the international custody activity and international revenues generally, can you highlight what that did late quarter?

36% year over year and 2% sequentially. Michael May – Calyon Securities: That’s revenues?

No, that’s the increase in global custody assets. Michael May – Calyon Securities: As far as winning new business, you have 20% annualized growth this quarter and CNIS and PFS if you just take those two line items, I guess you’re winning business and I guess the other processing banks are winning business, so who are you winning it from?

One of the things that I would point out is a very consistent story for us over a long period of time is that a little bit more than half of our new business in the institutional side comes from existing clients. So we’ve done a terrific job over the years and that’s been a pretty consistent 50% to 60% a year for as long as I’ve been in this role. So we do garner a lot of new business opportunities and we close on those new business opportunities with our existing clients which is very meaningful. Michael May – Calyon Securities: For awhile there a lot of the clients the way I understood it were kind of frozen. They didn’t want to make any changes on the CNIS side. Has that changed at all? Do you see a defrosting in terms of willingness of clients to do more things with you or to maybe change providers?

I talked to Steve Franken last night a little bit about his pipeline in CNIS and he has a very strong pipeline across all of our different service segments in CNIS both internationally and domestically. So I think the answer to your question is yes. To go back if I could and try to answer your question on the PFS side of the house and who are we winning business from, it’s changed pretty dramatically in the last year because we were winning from a group of banks that were perceived to be troubled then and you all know who they are. And that is no longer the case, so we’re back to a very, very broad spectrum of competitors from whom we’re winning business. But clients on the personal side also seem to be becoming a little more willing to consider new providers. We had a nice uptick in new business towards the end of the fourth quarter on the personal side.

Your next question comes from John Stilmar – Suntrust. John Stilmar – Suntrust: Starting with CNIS, in the custody fee, if we just look at the custody fee as a percentage of the balance, I realize it’s not a perfect way of looking at it, it had gotten as high as just over 2.2 basis points and now it’s started to trend down over the previous quarter. Is that because of the fact the service fees are associated with the custody business are now a smaller portion when you compare them to the asset base?

No. I’m looking at similar statistics and I’m not seeing a meaningful change there. I will say in my notes here I do see we had some prior period adjustments that impacted the fourth quarter a bit, so in terms of the level of detail you’re getting into there, that might have been part of what you’re seeing. But no, I don’t see a meaningful change there. John Stilmar – Suntrust: With regards to the balance sheet as we think forward, how should we be thinking about the securities portfolio and specifically the money market assets? It would seem to have a bit of a growth and then if we look at the liability side there was an increase in short term borrowing, non interest deposits and deposits. How much of that is seasonal versus secular and how should we be thinking about this as a telling indicator for the balance sheet near to intermediate term?

We’ve always said that our balance sheet is there for our clients and most of what’s on the liability side of our balance sheet is client deposits. You will see that during the full year our PFS, our personal clients which are on the balance sheet I think is savings deposits were up almost 50%. So we continue to see a lot of client flow, surprisingly to me I might say from the personal side of the bank. The institutional side of the bank from a deposit flow point of view has been down for much of the year but on average during the fourth quarter compared to the third, was actually up. So we’re starting to see I hope, a little bit more deposit business in our call book on the institutional side as well. That’s principally responsible for the growth in money market assets and in our securities portfolio. There is a little bit of incremental borrowing on the balance sheet as well as you go through the last couple of quarters, and that is short term borrowings and the proceeds of those borrowings overnight are being deposited with the Fed. John Stilmar – Suntrust: To put a final point on the PFS segment, are there any particular markets, I look at the fees themselves with Illinois and Florida. If I just compare the fees relative to where they were in call it pre crisis period, we haven’t quite gotten back to where we have reached on a revenue basis, but fees in the other segment continue to outpace where we were sort of pre credit cycle issue. And the question I have is what focus are you having or emphasis on growth in that segment and how should we be thinking about the other segment considering that seems to be the real engine of growth. Can you tell me a little bit of the trends that might be driving that fee dynamic underneath the surface?

I’d like to restate your question so I make sure that we understand what you’re talking about. When you’re referring to other, what we disclose is the Illinois fees, Florida fees and Wealth Management. And you’re referring to the remainder? John Stilmar – Suntrust: That’s correct.

The other would be all of the other states. You only listed two states here and we’re in 18 so it would be the 16 other states.

That would include the Northeastern United States which would include our offices from Boston down to Delaware which are relatively new and which are growing at a very, very fast rate. In fact our AUM growth in that sector while not material aggregately is growing extremely quickly. So that gets back to my comment earlier about seeking client acquisition opportunities in the Northeast, in the Mid Atlantic to try to add scale to that very, very successful part of our business over the last five years and take advantage of the opportunities there, and the same for the West Coast in California.

Your next question comes from Thomas McCrohan – Janney Montgomery Scott. Thomas McCrohan – Janney Montgomery Scott: What should we use as a share count for 2010?

We haven’t provided any forward look on the share count. I’d use what you can see for the fourth quarter.

Your next question comes from Nancy Bush – NAB Research LLC. Nancy Bush – NAB Research LLC.: Could you discuss which segment of PFS excluding Wealth Management where most of the business is coming from right now. Is it the lower end in terms of the type of relationship, the type of new relationship that’s coming to you. Could you discuss that please?

We’re trying to and have been for the last three or four years move up market in PFS and as you know we’ve got three principal segments. But I would say that leaving the Wealth Management of the office business out for a second, we are targeting families and businesses that can produce relationships that have AUM of more than $10 million. And we’ve organized that way. We’ve put teams in our locations all around the country that are specifically focused on the $10 million to $200 million AUM opportunity and they’re doing extremely well. I can’t give you the metrics around that but that organization or that reorganization or client segmentation that we put into place three years ago is having the desired outcome. So significantly more new business in that larger space, larger than we previously were in and a good chunk of that in the Northeast region but also in Illinois and also in California and also in Florida and every place we do business. So if you saw the stats they would show gradual migration in terms of new business into the larger client relationships versus history. Nancy Bush – NAB Research LLC.: If I could get straight in my head the mark to market issue. I think you said you were down now to a $95 million negative impact from the marks. Is that correct?

That is correct. Nancy Bush – NAB Research LLC: So that means we can only get $95 million more, right?

That’s right. Nancy Bush – NAB Research LLC.: I know it’s very much of a moving target but is it your expectation that after we get out of 2010 that issue will effectively be behind us?

One of the things that I would point out, and if anybody wants to get all of these statistics from me, please call afterward, but the weighted average maturity of that fund is north of two years. So I don’t think that we would want to sit here today and predict that in 2010 we will completely extricate ourselves from the remaining $95 million. It’s a pretty significant weighted average maturity that we’re holding for that fund.

I would add that the size of that fund has gradually decreased as we’ve allowed clients to exit on a staged withdrawal basis and so I think below $4 billion. So it’s nowhere near as material as it once was to Northern Trust. Nancy Bush – NAB Research LLC: Looking at the whole crisis environment that we started into in 2007, at this point is really the biggest impact that’s still on you just this risk aversion that you’re seeing in the client base, this reluctance to go back into equities? Are we getting to something that looks like the new normal I guess is the basis of my question?

We took on a ton of business both in the bank and in our investment business in PFS and in CNIS. You’re right in that a ton of that new business particularly in PFS came in in cash and stays in cash. But that’s not the problem. The problem is rates. If we had a somewhat normalized rate environment; that begs the question what normalized means, but certainly higher than we have today, we could make a pretty good chunk of money on that cash even if the clients left it in investment solutions that didn’t have risk in it. But it’s the combination of clients coming into cash and staying into cash and rates being so low that we’re having difficulty covering our fees is the problem. But I said this earlier, but I was not surprised by the amount of flow that Northern Trust got in 2008 from individuals and companies for looking for safe haven. I have been surprised by the pace of the continuing flow, but again, it’s largely in these very safe SF buckets where they’re yielding in today’s environment a very, very low return to the client and to Northern Trust. That’s the take away.

Your next question comes from Howard Chen – Credit Suisse. Howard Chen – Credit Suisse: A point of clarification from back earlier in the call, the $2 billion loss that you noted within Wealth Management, I know small on the grand scheme of things but I’m just curious did that stay in house and if not, thoughts on where it went and why.

Remember that the cash, the assets that we manage within our Wealth Management group, a large portion of it is cash and as those families and family offices, as they take on more risk it would be a very normal occurrence for cash to come down and for them to invest those assets whether it be in hedge funds, private equity, equity strategies, etc. As you know, we only manage I think it’s about between 15% and 20% of the Wealth Management family assets that we custody. So in terms as our clients choose to take on more risk in their family offices, it would not be usual for some of those that have previously been cash to invest it elsewhere.

I think that’s true but I also think that from time to time we either lose a piece of business, a relationship or a client finds a higher yielding short duration alternative that he or she likes, and when they move, they move in big chunks. It’s not unusual for us to see a client pull $500 million or $600 million out of cash, maintain a relationship with our Wealth Management team, but move that cash to another provider either short term or intermediate term. So I think it’s a combination of both. Your question around do we have significant loss business issues in Wealth Management, the answer to that is emphatically no. Howard Chen – Credit Suisse: I heard you mention the number and I just wanted to follow up on that. I know it’s very early, but thoughts on the Administration’s proposed U.S. banks tax proposal, fee proposal and what if any longer term, intermediate changes you perceive to the business.

Without getting into how we feel about it, I’d just say that it’s awfully early. We’re going to wait and see if it becomes law and in what shape it becomes law or what form it becomes law. I would leave you with the thought that we have a very, very flexible balance sheet and we can act perhaps more quickly than some other banks in terms of changing the way to do business if we need to. The big impact for us is in our call book, in our foreign deposits as it is for the rest of the trust banks and that’s the big issue. The rest of it for us is really not that big an issue. We’ve modeled what the tax might be. If it was at 15 basis points if calculated on our September 30 balance sheet and we come up with the same number that a lot of you do and that’s plus or minus $70 million. I think all of us in this segment feel the same about it. It puts us at a competitive disadvantage in our international banking business to non U.S. banks and obviously anything that puts you as companies in a competitive disadvantage, we’re going to be not very happy about and that’s where I would say we are. Okay, thank you for being with us today. We look forward to talking with you again at the end of the first quarter. That session is scheduled for Tuesday, April 20. We look forward to seeing many of you before then. Thanks so much.