Good day, everyone. Welcome to the Northern Trust Corporation First Quarter 2013 Earnings Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to the Director of Investor Relations, Ms. Bev Fleming, for opening remarks and introductions. Please go ahead, ma'am.

Thank you, Allan. And good morning, everyone, and welcome to Northern Trust Corporation's first quarter 2013 earnings conference call. Joining me on our call this morning are Mike O'Grady, Northern Trust's Chief Financial Officer; Rick Kukla, our Controller; and Allison Quaintance from our Investor Relations team. For those of you who did not receive our first quarter earnings press release or financial trends report via e-mail this morning, they are both available on our website at northerntrust.com. In addition, and also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 16 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is a replay that will be available through May 14. 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 and 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 2012 Annual Report and our periodic reports to the Securities and Exchange Commission for detailed information about factors that could affect actual results. [Operator Instructions] Thank you again for joining us today. Let me turn the call over to Mike O'Grady.

Thanks, Bev. Before I start, I wanted to say that our thoughts go out to all of those impacted by the situation yesterday in Boston. As usual, we've organized today's into 3 sections. I'll review our first quarter results, update you on our Driving Performance initiative and comment on our capital. Bev and I would then be pleased to answer your questions. Starting with some overview comments on Slide 2. This morning, we reported first quarter earnings per share of $0.67 and a return on equity of 8.8%. In the first quarter, we were successful in growing the business, adding both Personal and Institutional clients and improving our productivity. New business from Personal clients was very strong, reflecting our position as a trusted advisor to our clients and the impact of improving confidence on client and prospect decision-making. With institutional clients, we're seeing a good pace of activity across global regions, products and client segments. The macro environment was mixed, with both positive and negative implications for our business. Equity markets in the U.S. and Europe were higher, which supplemented our strong new business results. The S&P 500 was up 11% year-over-year and 10% sequentially, and the EAFE Index was up 13% year-over-year and 9% sequentially. Our client asset levels increased, as over 45% of our assets under custody and assets under management are equities. Assets under custody ended the quarter at $5 trillion, up 9%, and assets under management ended at $810 billion, up 13% over last year. On a sequential basis, client asset levels were also up 5% and 7%, respectively. Currency volatility increased in the first quarter for the first time in over a year, positively impacting our foreign exchange trading income. Interest rates, however, declined further. Low short-term rates continue to pressure our net interest margin…

[Operator Instructions] We'll take our first question from Howard Chen with Crédit Suisse. Howard Chen - Crédit Suisse AG, Research Division: Mike, as you look across your C&IS and PFS client base, how would you broadly characterize the level of re-risking and re-engagement that you saw in these set of results and then subsequently since then?

Howard, I would say, particularly focused on the personal side, that we did begin to see activity of re-risking that we've been talking about in previous quarters, in previous calls. I think it's a result of a number of things. But one is certainly that looking at cash and high-quality fixed income is really an insurance policy, but it's becoming a more and more expensive insurance policy, and that for investors to really achieve any type of real return, they understand that they have to take on greater risk. So we did see, I would say, the beginnings of that. I think that's supported by, if you look at some of the asset flows that we had in the quarter and for example, within PFS, the equities category for us was up 13%. So up, up stronger. And if you looked at the flows behind that, you would see that equities, we had positive inflows, and on the money market side, we had outflows. So I think that we're beginning to see it, although I would say it's still in the stage where it's somewhat fragile, in our view. And while we've had a nice run, when you have days like yesterday, it certainly can have an impact on the psyche of the investor. Howard Chen - Crédit Suisse AG, Research Division: Great. And my follow-up, now that the CapiR [ph] process is in the rearview mirror for this year, I was hoping you could just talk about how you arrived at the capital plan of the dividend boost and the $400 million buyback that your regulator had no objection to.

Sure. Well, as we've said before, we're very comfortable with our capital adequacy, and our objective, of course, is always to have sufficient capital and to have the appropriate and robust processes in place so that we can weather through whatever conditions may be in front of us. So with that in mind, as you see from the results of the capital plan, our objective was to increase the amount of capital that we return to shareholders. So doing that both through increasing our dividend somewhat and then also significantly increasing the amount that we could do through share repurchase. So I would say, overall, try to balance all those objectives to get to that position. And I would also just say, Howard, with regard to capital, as I've said before, it's a situation that continues to evolve. The final rules for Basel III are expected to be coming out in the near future here. That's something that certainly we'll have to digest, and you have other aspects of regulation that are still in flux. And so we take all that into account as we look to continue to improve our processes around capital.

And next we'll go to Gerard Cassidy with RBC.

Can you give us more color on the deposit outflow? You mentioned it was due to the expiration of the TAG program. Was that large corporations or countries? Who were the customers that took the deposits out?

Sure. So our demand deposits were down $4.4 billion on average for the period, and most of that was in our C&IS business. So about 3.5 of the total was from institutional clients, and it's a mix of clients, but it is definitely clients that had placed the deposits with us as a result of the TAG program. And so with that expiring, they looked to move those to other alternatives. What we saw on the Institutional side there is that a decent portion of about $1.5 billion really just flowed into our money market funds. So they decided to switch from having deposit to putting it in, for example, one of our government funds. And then the remainder for the institutional clients really split between either just purchasing government securities outright or, in some cases, just diversifying amongst other larger banks. So we still have what I would consider significant deposits from them, but they've reduced the amount and placed deposits at other banks. On the Personal side, we saw about a $1 billion decline in the demand deposits during the month -- or excuse me, during the quarter, and I would say, that's mostly just a shift into either interest-bearing deposits, and you saw that in the change in the average balances. And then also, as we've talked about, I think some of that also is reflected in the re-risking.

Great. The second question was your return on equity targets of 10% to 15%. In this low interest rate environment -- and obviously, you're working very hard to manage your operating expenses, which showed up again in this quarter, is it -- and your ROE came in less than 10% in the quarter, and the last 2 years, it's been less than 10% as well. Is it possible to get to a 10% -- to 11% ROE if this rate environment remains this way through '15, as the Fed has pointed out that's what they plan?

So as we've said, the 10% to 15% is definitely a long-term financial target. And so it's intended to be across different macro operating -- macro environments. It is clearly difficult to do in this low interest rate environment, as is being demonstrated through our results and, I would say, results overall. What we're focused on is, as we've talked about, trying to grow the parts of the business that we can. You've seen that in the stronger growth in our trust fees, which is the largest component. So we look to grow that, we look to control the expenses. That improves profitability in and of itself to get there. Net interest income was a drag in this period, and I think we have also foreign exchange trading income, which has also been a drag in other time periods. So if both of those remain constant, do I think we could get there? We could, but it's going to be difficult, and it's going to take longer to get there without some improvement in the macro environment. So again, I would just emphasize, it's a longer-term target. We still think it's the right target to have, and even in this environment, were working towards it. It's just a significant challenge if the operating conditions, particularly low interest rates, continue to persist.

And then lastly, on the buyback, with the $400 million being approved last year, you pretty much completed what you expected in terms of your approval from CCAR last year. You completed that buyback. Should we count on all $400 million being done over the next 4 quarters, or what event could happen where you choose not to execute on the buyback completely?

Sure. Well, with the capital plan, what we're looking to do is to provide an outlook for our regulators as to what our expectations would be and what we would like to be able to execute. But to your point, it doesn't necessarily mean that we need to execute on those or have to. There are a number of things that could happen that would change that. Some of them very opportunistic. If there are other opportunities for us to deploy our capital, that certainly is something that we would take into account on whether we end up executing the full authority, I will say. And then also, the operating conditions. I mean, when we put the plan in, it's with our best view on what those operating conditions are. All else equal, then yes, we'd look to move forward with executing on those. But the operating conditions, obviously, can change. And we also -- we do look at the relative alternatives that we have and how we can deploy the capital. And my point being, we do look at the value of the stock and when we think it's the best alternative to repurchase and the best time to do that relative to other things that are going on. So our plan is to move forward with that, as you mentioned, just as we did last year. But certainly, things can come up along the way that could change that.

Next we'll go to Jacob Troutman with KBW. Jacob Troutman - Keefe, Bruyette, & Woods, Inc., Research Division: My first question just goes back to Howard's question on the PFS and the client re-risking. Overall, it sounds like new client activity was very strong, but PFS revenues were only up about 1% linked quarter. I was wondering if you could maybe provide a little color on how much of those revenues are asset based versus how much are client activity based?

Sure. So in the Personal business, most of those fees are asset based, and we did have the drag of the money market fund fee waivers in the period, which caused the fees to be reduced relative to the prior period. The other thing is, within PFS, it depends not only on the asset mix, so we've talked about how that's shifting around, but the actual products and the pricing on the various products. And within our multi-manager products, we also reduced the fees on a few of those products, which had some impact in the period-over-period comparison. Jacob Troutman - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then maybe just one quick follow-up along that vein. From the increased client activity there, do you expect to maybe see any increased demand for loans going forward?

Well, it's certainly something that we are offering to our clients and trying to be supportive of what their borrowing needs would be. So I would say it's in the forefront of the client service offering that we have. At the same time, it has to be driven by their demand. And that's really been the situation, I would say, both on the personal and, certainly, on the commercial or institutional front as well, which is demand has just not been significant enough and/or sufficient enough, really, to offset the natural roll off of the portfolio. So it's not as though we're not -- first of all, not -- very interested in lending to our clients, and it's not as though we're not originating new loans. It's just that the level of roll-off has been close to or, in some times, exceeding the new origination.

And next we'll go to Cynthia Meyer with Bank of America Merrill Lynch.

Just another question on the PFS. I guess the AUM is up pretty strongly versus 4Q, and you guys mentioned new clients. Is it possible to sort of parse out how much of the growth is due to new clients versus money from existing clients? And just in terms of asset growth or account growth, how do the trends compare to last year? And is there a seasonal aspect to that, people switching advisors in 1Q, and where do you think you're taking share from if you're taking share?

Okay. Cynthia, you were very clever to embed multiple questions in there, so we'll try to address them. But first of all, I would say as far as the seasonality aspect, I'm not sure that it's going to repeat every year per se. But there is no doubt that the momentum that we saw in the fourth quarter of last year continued into the first quarter. So it -- as a result of, I think, the fiscal situation, anticipated changes in taxes, that just began a process with clients to look at their situation and potentially make changes. And we saw a strong end to the fourth quarter last year, and then also, we've seen that carry into this year. So that would be one. Two is, I would say, that we continue to be successful as we move up-market. So the size of the accounts or the relationships that we're adding on average have been larger as we move forward. We have a nice breadth of business. But I would say, as far as particular momentum, we've seen it more on the upper end there. And as far as just the balance between new business and equity markets, it's really been relatively balanced between the 2. And so on that front, it would be great to have the markets continue to support that, but where we're mostly focused is the area that we can have a greater influence on, and that is adding new clients.

Great. Well, I don't know if I'm allowed to ask a second question, but...

Yes, sure.

I guess, if rates and balance sheet levels didn't change from here, what would be the implications for net interest income in 2Q and the balance of the year?

Great. So obviously, difficult to predict where rates are going to go. And so if you do take it the way you asked the question of no change in rates, the way I look at it is by our earning asset categories. So on the loan front, we do continue to originate loans as loans roll off, and the trend has been that they're coming on at lower rates than what's rolling off. And you've seen that with a slow decline in the yield on the loan portfolio, which is now still over 2.5%. So it's the highest-yielding portion of the portfolio. But all the same, we've seen decline there. The securities portfolio, there, likewise, as securities roll off, the reinvestment rates are lower. Now we've moved our duration out as we've gone over time and did so again in the quarter here. So it moved from basically an index ratio of a year to about 1 year and 1 month. So just slightly moving it out, because there's obviously trade-offs in doing that, that's enabled us to at least slow the decline in the yield on the securities portfolio. And then deposits with banks, it's very much dependent on the shortest end of the curve, if you will, the overnight rates, and it depends on the currency. And so as long as it's U.S. dollar, the overnight rates have been relatively stable, and I think it's largely because the Fed has 25 basis points. But if you look over in Europe, we have seen a steady decline in overnight rates for the euro, but now they're at 3, 4 basis points. So it's -- we'd like to think less room to decline. In sterling, the short-term rates are closer to 50 basis points, and the Bank of England has not been as aggressive in their easing. If they were to change that, that's what would cause an impact. And then finally, as I mentioned in the comments, the Australian dollar, which yields a much higher rate but has been declining over the last several quarters. So those are some headwinds to the yield. We've been able to offset some of that with lower borrowing costs, essentially, in the rates that we pay on our deposits. But again there, there's just less room as we're closer to what appears to be the floor. And I guess I look at it, and if you just go back over the 4 quarters here, we've seen the NIM decline a couple of basis points on average over those quarters. Not knowing where rates are going to go, we think that we'll continue to pressure on our NIM.

We take our next question from Alex Blostein with Goldman Sachs.

Just want to tackle the organic growth question for both, I guess, C&IS and PFS. When we look at some of the businesses you guys are growing more rapidly, and whether it be hedge fund outsourcing or middle office solutions, that stuff that doesn't really show up in assets under custody -- in addition to that, obviously, you have the market impact, you have the FX impact, you have the money market fee waiver impact. So when you guys kind of try to x all that out, and when you think about the core growth in the business, how should we think about that organic growth rate for you?

So Alex, you're right. There are a number of factors that ultimately impact what the fee growth is there, some of them less in our control than others. And so where we're focused is on that organic growth rate. And I think as you -- over time, as you sort out all these other factors, what we've achieved for that organic growth rate is kind of mid-single digits for both businesses. Now we get there in both -- in different ways historically. And what I mean by that is in the Personal business, just the size of the accounts on a relative basis is just smaller to the overall base. There's less client concentration, if you will. And so it tends to be a less volatile organic growth rate as long as we're executing on our strategies. Whereas on the Institutional side, as you know, we can have some moderate clients, smaller-size clients, but then we can also have some very significant clients that can tend to move the organic growth rates more in particular periods. So it is a little bit more volatile. But over time, the average growth rate in that business has been very similar to what we've seen in the Personal business. So that's kind of how we think about it. And as you've mentioned, it's also, particularly on the institutional side, a very diversified set of clients. So whether that's sovereign wealth funds, whether it's hedge funds, whether it's defined benefit plans in the U.S. or superannuation funds in Australia, it's diversified by client type, geography, et cetera, and there are just different dynamics with each of those markets.

Got it. That's very helpful. And then my follow-up is on the expenses, and I guess maybe to clarify some of the questions that we got over the course of this quarter from last quarter's call. But with that kind of mid-single-digit organic growth rate in mind, is it fair to think that your core expense growth, again, over time, should be somewhere below that, given your comments earlier? I mean, and I guess looking more in the near term, first quarter tends to be seasonally high. So should we expect a similar quarterly pattern this year as we've seen in the past of kind of lower second quarter, lower third quarter, and then maybe high in the fourth quarter?

Yes. So to the first part of the question, I would say the way you state it, Alex, is the way that we think about it, which is the expenses and the growth in our expenses needs to be below our organic growth rate on revenues. And so to the extent we can grow faster, then yes, our expense growth rate can be faster, but then -- and vice versa, of course. But that is the relationship, is focused on the organic growth versus the growth in the expenses. That does mean that over time, total expenses are going to fluctuate and revenues are going to fluctuate because of external factors that may cause positive or negative operating leverage outside of that. As far as your second question on the pattern, I think -- and I've said the expenses fluctuate from period to period. And as much as there are certain expenses that we do experience, so for example, the Northern Trust Open in the first quarter, and are more predictable, there are other aspects that are not necessarily predictable by quarter. So I definitely would not hold to a set pattern where, just because last year, our expenses went down from first quarter to second quarter, does not necessarily mean they're going to go down this year from first quarter to second quarter. That -- many other factors which we've talked about as far as the growth in the business, the level of business activity, any number of things that can cause fluctuation from period to period.

And next, we'll go to Luke Montgomery with Sanford Bernstein. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: So I'd like to ask you how seriously the firm is taking its competitor's cloud technology initiative and its claim that it's going to become the low-cost producer in the industry. And given that your clients share a common technology platform, would a similar transformation actually help Northern? Or would it be superfluous? And then, are you contemplating a competitive response there?

Sure. As much as some of our competitors may talk about their cloud computing strategy more than we do does not mean that we are not utilizing and executing a cloud computing strategy ourselves. I mean, in fact, without being able to quote various numbers, it is something that we look at as to the number of applications that we've moved to the cloud, to our cloud. So it's a technology that we're very much using. It's just from a way that we characterize or position our technology strategy to the outside world, it's not centered around just cloud computing. It's much broader than that. You did mention our single operating platform, which is more about how we think about technology. And so I would say that, as far as how we present ourselves to our clients and, more importantly, reacting to strategic moves by our clients, there's no doubt that technology is one of the key competitive criteria. And needless to say, in both parts of our business, meaning both Personal and the Institutional side of the business, it's critical that we continue to invest in technology and be at the front edge of that. We've demonstrated that both by the dollars that we've invested, we've demonstrated that by some of the acquisitions we've done where we've acquired what we believe to be leading-edge technology. And with Driving Performance, one of the things we've talked a lot about, both internally and externally, is what we're doing there really is trying to create the capacity to be able to continue to invest in technology. So recognizing the fact that it's an area that will require investment and, as a result, have a higher growth rate than maybe some of our other expense categories. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: That's really helpful. Following on Alex's question a bit, some of our channel checks are saying that the pipeline for large mandates have been driving up -- drying up a little bit, particularly in middle office outsourcing. You have a very credible offering in that business. So I'm wondering if you would agree with that view and if you might comment on where we are in the replacement cycle for middle office and whether you're seeing continued growth in demand from new large customers who want that service.

Sure. I'm not going to be able to specifically give you a view on what the pipeline is, broadly speaking, in the industry and just the opportunities that's out there. I will say that, given that the nature of those types of transactions, it can be more sporadic, right? So it's not just a constant stream at a certain level. And so I think it's -- you need to be cautious when you think about either the pipeline really building up or coming down. We definitely are continuing to see opportunities of all sizes, so including very large opportunities in that business. But I will tell you it is sporadic in the sense that at times, there can be multiple large opportunities that we're pursuing and are competing with others to win. To your point, we think we have a compelling offering in that marketplace. We think there is a what I call market dynamic that's out there that is very positive longer term. So even if there are periods where it may slow down as to companies deciding to go that direction, we're still a believer that over time, more asset managers will pursue that strategy.

Okay. And next, we'll go to Andrew Marquardt with Evercore Partners.

I want to ask about the balance sheet size again and going back to deposits and excess deposits, potentially. It was helpful, the tag color. But can you go back and give us some reminders in terms of excess deposits from flight to safety, how much of that may be left? Should we continue to expect, if indeed kind of re-risking holds here, more broadly that we could see that reversal continue?

Sure. So Andrew, you saw in the quarter that the size of our balance sheet or average earning assets was about the same as it was in the fourth quarter, but the mix did change, as I talked about, with demand deposits going down. I think that what we have seen is a period of time where the "excess deposits" in the system did increase. And now we've seen, for the most part, that, that has dispersed out more broadly, as I talked about, both to funds, both to securities and to other asset categories. And as much as our balance sheet is liability driven, so to the extent that our clients move back into a position that they want to place more deposits on the balance sheet, we'll be there, and you'll see the effect of that. But I think that, at least in the current period here, we've seen a little bit of a stabilization of the balance sheet closer to what I would consider normal levels as opposed to times before we've talked about really being in a higher level of deposit situation.

Got it. And related, should we then expect from here that there actually could be growth in the overall balance sheet this year?

I wouldn't necessarily say that. I think, again, combination of -- on the one side, Andrew, where we are seeing this re-risking, some of that comes off of the balance sheet. And so we have, on the Personal side, for example, for a while anticipated that with some of our clients that have significant balances, that they will essentially invest that either in funds or other investment products or businesses, et cetera. So that trend could continue, which is not a negative thing, by the way, but that would be a decrease in the balance sheet. At the same time, I would say, as we grow our business overall, that tends to and has grown our balance sheet overall. So I look at the confluence of those 2 factors as having us in a range here, really, more than necessarily saying it's going to go up or it's necessarily going to go down.

Got it, that's helpful. And then just lastly, back to expenses. It looks like on Slide 8 of your slide deck you're Driving Performance initiatives on a pretax basis. You're largely through your initial target in terms of an annual impact already this quarter, 85%, 90% through, if you will. How much more room is there to go in terms of that target $250 million above and beyond when we get through this year to -- I assume you're targeting kind of positive operating leverage this year and going forward.

Right. So there definitely is more room just with the initiatives that we're executing on right now. As I've said before, some of these initiatives are more challenging. These are the end-to-end initiatives where we look at major processes within the institution and essentially reengineer them, which results in really better outcomes for the clients, for the partners and also from a cost efficiency standpoint. So those are the areas that we're executing. And I would say that the gains come, but they come spread out over time. So we definitely expect to see that Driving Performance benefit increase each quarter throughout the rest of the year. The level, difficult to put a pin in exactly what the level is going to be, but we do expect the trajectory to continue. And then longer term, we look to add additional initiatives, particularly in the area of this process optimization. We went after the areas that we thought had the most opportunity in the near term, not just from an expense standpoint but from a process improvement standpoint. But there are additional processes which we've begun to execute on, but then we can also begin to execute on later in the year and into next year.

Got it. And the split on that, where we are today in terms of the run rate in terms of expenses-revenue, it had been 60-40 last year when you were kind of 60-plus percent. And now you're closer to 85%, 90%. Is it still 60-40?

Yes, it's still pretty close to 60-40. It may drift a little bit to the expense side just because some of these process optimization initiatives are more -- definitely more expense oriented than revenue oriented.

And next, we'll go to Vivek Juneja with JPMorgan. Vivek Juneja - JP Morgan Chase & Co, Research Division: Mike, a couple of questions, I guess, now that we have the CCAR results. Your capital ratios keep growing. You've always been industry leading, and you just keep widening out the gap. So how much capital is too much, if [indiscernible] ?

Well, I -- as I -- as you know, we do feel good about our capital position. But as I mentioned, the situation continues to evolve. And frankly, a lot of these things, in fact, are out of our control. So as much as we feel very comfortable with our capital positions, the final rules as to what's required have not been determined. And with regard to the CapR [ph] and then the CCAR process, there's a process we have to go through with our regulators in order to return capital to our shareholders. So needless to say, we feel very good about the level of capital we have for our business. We feel very good about the level of capital we have relative to our competitors. This year, we'll look to return more capital than we did in the previous year, and we'll look to improve our processes around our capital plan and capital adequacy so that, regardless of how the rules may change and how ratios may get affected by changes in those rules, that we're well positioned to continue to be able to do that. But it's too difficult to be able to quantify exactly what that's going to be when you have so many uncertainties. Vivek Juneja - JP Morgan Chase & Co, Research Division: Is there any particular issue or item in what's not been clarified that you're particularly concerned about?

I would say that there's no particular ruling that we're concerned about per se. There are always various either parts of the business or parts of the balance sheet that can be more favorably or less favorably impacted by what the requirements may be and various things that, with the regulators, you spend more time on. And so there's constantly things that are a part of our dialogue, but there's no one factor or rule, I should say, that at this point we're concerned about the outcome of a particular rule. Vivek Juneja - JP Morgan Chase & Co, Research Division: Okay. And one request. This will sync with a question that was asked earlier. If you can start doing something that a lot of your peers do, which is break down inflows versus market impact when you give us details on things like assets under management, that'd be very helpful.

Okay, we'll take that into account.

Okay. Next, we'll go to John Moran with Macquarie Capital.

I just wanted to sort of revisit the money market fund issue. I guess news out today that one of the big players here is sort of resigned to floating NAV as an eventuality, and I think we've got some expected action coming later this year. So just wondering if we could kind of get your updated thoughts on how you guys are positioned for what may be coming from a regulatory perspective there.

Sure. Well, overall, we think we're well positioned in the sense that, regardless of the direction of any type of money market reform, we should be in a position to be able to serve our clients' needs. So whether that's -- if they decide to continue in money market funds, we obviously offer them a number of alternatives. If those no longer become attractive, we can offer them other products, certainly balance-sheet-oriented deposit products that can meet with their needs, and we're constantly trying to think of innovative new ways to meet those needs. So there may be types of funds that can -- that right now are not structured, but we can structure them in a way that will meet with needs if the others get changed. So that's the first part. The second part, as far as the specific proposals that are out there, we think that all of them, in one way or another, either have flaws or would require further work in order to be something that would be workable overall. So as much as a floating-rate NAV has some applicability, in our view, maybe to certain funds, so more of the prime funds, for example, there are various tax and accounting requirements that need to be worked through before a floating-rate NAV would work for the prime funds. We think some of the other proposals, like holdbacks, are more difficult, not from our perspective but from our client's perspective. As we talk to our clients on both the Institutional and the Personal side, that's not how they utilize the money market funds for the most part. They like to think that they have complete access to those funds. So we think that's a commercial issue overall for everybody. And then certainly, from a capital standpoint, as Vivek mentioned in the previous question, things that are changing or what are things that are out there, certainly money market reform is an area that we watch. We're a very large provider in that marketplace. And to the extent that capital is required specifically for funds or in some form, that's certainly a way that our capital would have to be utilized. So we think we're prepared for the various directions it could head, and we think that you're correct in that something is likely to come out here in the near term, and we'll certainly be a part of that.

Got you, that's helpful. And then just kind of a, I guess, a nitty-gritty one here. On the fee waiver part of that business, I think in the past, you guys have said we start to abate or get a little bit of relief with not a whole lot of movement on the short end, and then we would kind of be done waiving fees at 75 to 100 basis points. Is that still the case?

Yes. Basically, it is. I mean, we're down now where repo rates, I think, are 12, 13 basis points depending on which securities you're repo-ing. But very low levels. That's caused the money market fund fee waivers to go up this past quarter. But to the extent that the short end were to move up, as you mentioned, kind of 50, 75 basis points, without knowing all of the other dynamics around that, that would have a very material effect in us trying to get out of the money market fee waivers.

Okay. Next we'll go to Brian Bedell with ISI Group.

Most of my questions have been asked. Just a couple of quick follow-ups. On the -- the expense control, obviously, was very good in the first quarter. And Mike, I appreciate your comment that they can be volatile quarter-to-quarter. But it seems like we do have some higher seasonal expenses in the first quarter. Just curious to get your take on whether they were business conversion expenses in terms of the large main office asset servicing image [ph] such as Bridgewater and how that might influence your expense pattern during the year.

Sure. So we did, as you pointed out, Brian, in the fourth quarter talk a lot about having a very active quarter for onboarding, and that often happens at the end of the year, where we're trying to get things completed for clients. And we did see some relief on some of those expenses in the fourth quarter that I mentioned, things like consulting expenses, where we're hiring third parties to help us onboard in order to get it done more quickly; some of the legal expenses that we talked about in that time period as well because of setting up new trusts for clients and things like that. Those expenses were lower in the first quarter, and yet they can increase as the business activity increases. But at this point, there's nothing in particular that we're expecting to change the trajectory of what they would normally be. The larger onboardings, we have a number of those. Bridgewater is one of them. The expenses from that will proceed once -- will proceed when we begin to recognize the revenue. So we'll have some impact. But it doesn't really fully flow in, in that impact until more into 2014.

In 2014?

Yes, there will really be a greater impact from those onboarding expenses.

Right. So the revenue expense calibration is certainly positive by the time we get to, say, the end of this year or into 2014 on that?

I'm sorry. Ask that part again?

The revenue expense sort of calibration on the large main office deals such as Bridgewater are -- become positive sort of by the end of this year or into 2014?

Yes. It's difficult to ask that -- answer that specifically just as to what exactly you mean by calibration. But, I mean, what I would say is we always have onboardings that are happening, and we always have, as a result of that, expenses that come in advance of it. And it's the fact that we have a portfolio of these that allows us to, frankly, be able to take on new clients with expenses in advance. And there is a negative drag maybe on a per client basis. But overall, if you're referring to kind of overall profitability of that, we definitely have that.

Great, great, that's helpful. And then just lastly, the $13 billion of reclassification of PFS company assets, does that have any revenue impact? Or is that just optical?

It has no revenue impact.

And that's all the time we have for questions and answers today. So at this point, I'd like to turn it back over to our speakers for any additional or closing remarks.

No, we're done here. So I just want to thank everybody for dialing in or on the Web for today's call and look forward to talking a quarter from now.

Thanks. And that does conclude today's call. We thank everyone again for their participation.