John M. Morphy-Senior Vice President, Chief Financial Officer, and Secretary Jonathan J. Judge-President and Chief Executive Officer

Rod Bourgeois-Bernstein Research James Kissane-Bear Stearns Kartik Mehta - FTN Midwest Patrick Burton-Citigroup Greg Smith-Merrill Lynch Elizabeth Grausam-Goldman Sachs David Grossman-Thomas Weisel Partners Tien-Tsin Huang-JP Morgan Charlie Murphy-Morgan Stanley Gary Bisbee-Lehman Brothers Glenn Greene - Oppenheimer TC Robillard - Banc of America Securities Mark Marcon - Robert W. Baird Sanil Daptardar - Sentinel Asset Management

Good morning and welcome to Paychex third quarter results conference call. (Operator Instructions) I would now like to turn the call over to Mr. John Morphy, Senior Vice President and Chief Financial Officer.

Thank you for joining us today for our third quarter earnings release. Also with us is Jon Judge, our President and CEO. The call will be comprised of three sections: a review of third quarter financial results including comments; updated guidance for the fiscal 2008; an overview from Jon Judge and lastly a Q&A session. Yesterday afternoon after the market closed we released our financial results for the third quarter ended February 29, 2008 and we have filed our Form 10-Q with the SEC which provides additional discussion and analysis of the results for the quarter. These are available by accessing our investor relations page of www.Paychex.com. In addition this teleconference is being broadcast over the Internet and will be archived and available on our website until April 28, 2008. The third quarter reflected another quarter of very good results and we look forward to achieving our 18th consecutive year of record revenue and earnings for fiscal 2008. We achieved record net income of $142.5 million or $0.39 diluted earnings per share in the third quarter. Total revenue increased 10%, generated by payroll service revenue growth of 8% and human resources services revenue growth of 18%. Service revenue growth of 11% was in line with our expectations. However, we are seeing signs of a weakening economy indicated by a more difficult than normal third quarter selling season and increases in business failures. Jon will be giving a lot more color on that we get to his section. On a positive note, checks per client has not yet shown any significant weakness. In light of volatility in the bond markets I wanted to share some information with you about our portfolio of investments. For many years we have followed a policy of a maximization of liquidity and protection of principal. We have a strong investment group at Paychex and work closely with senior investment managers at McDonald’s and Blackrock to ensure we meet our investment objectives. This conservative investment profile was readily apparent last summer when we became concerned over potential liquidity of option notes and we chose to exit the market. We invest primarily in highly liquid investment grade fixed income securities with AAA and AA ratings and short-term securities with A-1/P-1 ratings. We limit amounts that can be invested in any single issuer and invest in short to intermediate term instruments whose market value is less sensitive to interest rate changes. We do not utilize derivative financial instruments to manage investment grade risk. We currently have no exposure to the following investment types: asset-backed commercial paper or asset-backed securities; auction rate securities; collateralized debt obligations; enhanced cash or cash plus mutual funds; structured investment vehicles; or sub-prime mortgage securities. As mentioned, we exited the auction rate market in the early fall of 2007 and have never experienced a failed auction. Our investments in variable rate demand notes are rated A-1/P-1 and have notes exposure to municipal bond insurers except FSA and I’ll comment on that in a minute, and must carry an irrevocable letter of credit or stand-by purchase agreement issued by highly rated financial institutions. Approximately 40% of our long-term portfolio is insured with an average underlying credit rating of AA. The average rating for the remaining 60% of the portfolio is AA plus. Ignoring the insurance rating and using only the underlying rating of our insured bond holdings gives us a total long-term portfolio rating in excess of AA. Today we continue to be extremely conservative in choosing investments of our funds held for clients and corporate funds. We are not investing in taxable money market since they may still have exposure to sub-prime debt and we’re not investing in any tax exempt money market funds because they may still be exposed to insurance risk. We are buying funds backed by Financial Security Assurance, FSA, since they have no exposure to sub-prime credits. Our investment portfolio is approximately 50% taxable and 50% tax exempt at the present time but they are subject to change due to the rapidly changing environment and we will continue our philosophy of choosing the most liquid and safe investments. Our quarterly earnings release process accompanied by simultaneously filing our Form 10-Q and your early analyst reports always gives us an indication of what you would like us to comment on during this call. In response to your comments we provide the following couple of comments: During the quarter, we recognize $3.3 million of realized gains versus $0.5 million a year ago. These gains are recognized as we sold long-term taxable investments to reinvest in tax exempt instruments. The long-term taxable investments were purchased originally to minimize a corporate A&T tax issue that was removed in connection with our stock repurchase program. So basically the generation of these realized gains was not any attempt to diminish the effect of lowering interest rates, it was related to a better investment strategy that came out of the repurchase program last fall. The $3.3 million of realized gains generated approximately 0.60 of a penny of EPS. HRS service revenue for the quarter was 18% compared to 25% a year ago and 21% for the first nine months compared to 24% for the same period last year. As we’ve mentioned before, HRS service revenue growth is not as consistent or predictable as payroll service revenue. Some of the factors affecting the third quarter include some weakness in our 401 K fees from our fund managers due to decreases in the value of investment portfolios accompanied by lower levels of contributions and increased loans by 401 K participants. We also experienced limited growth at our PDO business due to our choosing to be risk avoidant to taking on new clients; continued reduction to worker’s compensation rates in Florida and weak economic conditions in Florida. Our PDO operations are heavily based in Florida as we normally sell under our non-PDO offering named Paychex Premier when we’re outside the Florida area. On a positive note, insurance experts are predicting that workers compensation rates in Florida will bottom out in calendar 2008. Year-over-year revenue growth has been affected by the timing of the subs, a 401 K provider, and BeneTrac acquisitions. Despite the revenue fluctuations the more important aspect of the HRS growth in the quarter is we met our profit expectations from those revenues. We will now refer to the consolidated income statement. Payroll service revenue increased 8% to $374.2 million and 8% to $1.1 billion for the three and nine months ended February 29, 2008. This growth was again driven primarily by client-based growth, higher check volume and price increases. As of February 29, 2008 nearly all of our clients utilize our payroll tax administration services and 72% of our clients utilized our employee payment services. Human resource service revenue increased 18% to $120.6 million and 21% to $349.4 million for the three and nine months ended February 29. The following factors contributed to the growth in HRS: Retirement Services client base increased 10% to 47,000 clients; Comprehensive Human Resource Outsourcing Services client employees increased 17% to 409,000 client employees; worker’s compensation insurance increased 19% to 70,000 clients; and the asset value of the retirement service employees’ funds was $9.1 billion. In addition, the acquisition of BeneTrac contributed approximately $3 million in both the second and third quarters. For the three months ended February 29, 2008 interest on funds held for clients decreased 1% due primarily to a decrease in the average interest rates earned, partially offset by higher realized gains on sales and available for sales securities and higher average investment balances. For the nine months ended February 29, 2008 interest on funds held for clients increased 3% as a result of higher average investment balances and higher realized gains on sales of available for sale securities offset by lower average interest rates earned. The average interest rates earned on funds held for clients were 3.6% and 3.9% for the three and nine months ended February 29, 2008 as compared to 4.1% and 4% for the same periods last year. Funds held for clients average balances increased 4% for the first nine months of fiscal 2008. Growth in clients’ average balances for the full year fiscal 2008 is expected to be consistent with the growth for the first nine months of fiscal 2008. Excluding the expense charge increase to litigation reserve of $13 million in February 2007, consolidated operating and selling, general and administrative expenses increased 8% for both the three and nine months ended February 29, 2008. This was primarily related to our continued investment in personnel related to selling and retaining clients and promoting new services. As of February 29, 2008, our employees increased 7% from the same time a year ago to 12,300 employees. Operating income net of certain items excludes interest on funds held for clients and the expense charge in February, 2007 for the litigation reserve. Operating income net of certain items increased 17% to $173 million and 16% to $530.1 million for the three and nine months ended February 29. We expect the growth in operating income, net of certain items, will be approximately 15% for the full year fiscal 2008 consistent with our long-term growth objectives. Investment income decreased 66% to $3.6 million and 22% to $23.3 million for the three and nine months ended February 29, 2008. The changes in investment income reflect the funding of the stock repurchase program completed on December 14, 2007. Based upon current interest rate levels, we expect fiscal 2008 corporate investment income will decrease by 35% to 40% compared to 2007. This is primarily due to the 1 billion stock repurchase program which reduced investment income and is expected to yield slightly higher earnings per share results for fiscal 2008 due to fewer common shares outstanding. Our effective income tax rate was 33.4% and 32.6% for the three and nine months ended February 29, 2008 respectively, compared with 31.0% for both the respective prior year periods. The increase in the effective income tax rate for the three months ended February 29, 2008 is due to anticipated lower levels of tax exempt income for the balance of fiscal 2008 from securities held in our investment portfolio. Again as we discussed before, that is flight to safety has caused us to be more in taxable. The increase in the effective income tax rate for the nine months ended February 29, 2008 as compared to the same period last year, is the result of lower levels of tax exempt income derived from securities held in our investment portfolios as well as the adoption of new accounting guidance related to uncertain tax positions. We will now move to the balance sheet. Cash and total corporate investments were 427 million as of February 29, 2008. Our cash flows and operations were again strong at 590 million for the nine months ended February 29, 2008, an increase of 11% over the same period a year ago. Our total available for sale investments, including corporate investments and funds held for clients, reflected a net unrealized gain of 13.6 million as of February 29, 2008, compared with a net unrealized loss of 14.9 million as of May 31, 2007. The three year AAA municipal securities yield decreased to 2.75% at February 29, 2008 from 3.71% it made May 31. 2007. Our net property equipment balance activity during the first nine months of fiscal 2008 reflected capital expenditures of approximately 64 million and depreciation expense of approximately 46 million. Buying fund deposits as of February 29, increased to 4.4 billion from 4 billion as of May 31, buying fund deposits vary widely on a day to day basis and average 3.3 billion during the nine months ended February 29, 2008. Client fund deposit balances continue to grow at a slower rate than historical due to continued wage inflation accompanied by no index changes in the federal deposit rules since 1993, which means more and more clients are required to pay their taxes weekly versus monthly. The fund balances benefit from ready Readychex was not as great as in prior years as the growth of this product is now much closer to that of direct deposit. Readychex is a service whereby we pay our client employees with checks drawn on Paychex’s bank accounts. Total stockholders equity was 1.2 billion as of February 29, 2008, reflecting 334 million in dividends paid in the first nine months of fiscal 2008, a 1 billion in stock repurchases. A return in equity for the past 12 months was an outstanding 34%. Our outlook for the fiscal year ended May 31, 2008 has been revised to reflect the current federal funds rate of 2.25% in current economic conditions. Consistent with our policy regarding guidance, our projections do not anticipate or speculate on future changes to interest rates. As disclosed on our Form 10-Q for the three months ended February 29, 2008, the earnings effect of a 25 point basis change in the federal funds rate, at the present time, is expected to be approximately 4.5 million after taxes for the next 12 month period. Projected revenue, net income growth and other financial results are summarized as follows: Payroll service revenue growth is projected to be in the range of 8 to 9%. Human resource services revenue growth is projected to be in the range of 19 to 22% with total service revenue growth between 10 and 12%. Interest on funds held for clients is expected to be in the range of a decrease of 5% to flat year over year. Total revenue growth is projected to be in the range of 9 to 11. Corporate investment income is projected to decrease by approximately 35 to 40. The effective income tax is expected to approximate 33%, accompanied by net income growth in the range of 11 to 13%. We expect our average outstanding shares for the year to be approximately 370 million and purchases of new property and equipment are estimated to be about 85 million, accompanied by depreciation expense of 65 million. You should be aware that certain written and oral statements made by management constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements should be evaluated in light of certain risk factors which could cause actual results to differ materially from anticipated results. Please review our Safe Harbor statement in the press release for a discussion of our forward –looking statements and related risk, factors. At this time, I’ll turn the meeting over to Jon Judge.

Thanks John, good morning everyone and thank you for joining us today. I will just add a few comments to John’s and then open it up for your questions. As you can see from our earnings release we had a very solid quarter. Particularly so given all the headlines and concerns about the economy. Our quarter was another record breaking quarter and virtually assured us of our 18 consecutive record breaking year of revenue and profit. Total revenue growth hit 10% for the quarter and 11% year to date. Total service revenue was 11% for the quarter at nine months. Payroll service revenue growth of 8 % was solid and our HRS revenue growth of 18% on the quarter, while slightly lower than last quarter, still positions us very well at 21% for the nine months. Expense management and focus on margins also produced excellent results as evidenced by a very strong profit performance. Operating income growth exploded 17%, which translates to $0.39 a share or 18% EPS growth for our shareholders. When you add on top of that, a cash dividend of $0.30 a share of 43% above this quarter last year and 55% above the same nine months of last year, you can see why we were pleased with our overall third quarter financial results. The third quarter was also a very important quarter for our operations team. It’s our client’s year end close and our operations team performed extremely well. We continued to achieve record level results and client retention and client satisfaction. We processed over 12 million W-2s without a glitch and got them to our customers well ahead of deadlines and in general had a very smooth year end closing for our clients. Let me now move to what we’re seeing in the macroeconomic environment as John mentioned earlier. For the last several earnings calls there has been significant interest in what we were seeing relative to the economy and with over 570,000 clients, we have a pretty good window on at least the small and medium business sector of the economy. For the most part, as we’ve said in the past, we saw very little relative impact on our business. That’s still the case, with two minor exceptions, that we pointed out in our earnings release. In the third quarter we started to see more business failures than normal, not a huge number by any stretch of the imagination, but still the same noticeable and very clustered geographically and by industry: that is Florida, Southern California, very heavily in the construction, mortgage and the real estate businesses and our sales people tell us that the third quarter selling environment was more difficult than they’ve noticed in past years; they still got through it ok, but it was clearly more difficult than we experienced in past years. Other than those two areas, our business is holding up very well and clearly does not match some of the most gloomy headlines that we’ve all seen relative to the economy. Based on our past experience with economic down turn, our relative resiliency is consistent to what we’ve seen in the past. So to sum it up, we had a very solid quarter, we feel very confident in our ability to hit our guidance and to achieve our 18 consecutive record-breaking year. With that, I’ll open it up to your questions and John and I would be happy to comment on any areas that you all would like to take us to.

Thank you. (Operator Instructions) Our first question is from Rod Bourgeois from Bernstein. Rod Bourgeois - Bernstein Research: Hey guys, I wanted to follow up on the comments, particularly about the weak selling season that you’ve had over the last couple of months. Can you give us any way to dimension how weak the sales were and any way to gauge to what extent that could impact your revenue growth going forward. And I guess a specific question on that front would be, can you tell us how much of your next 12 months revenues are contingent upon the selling that has taken place over the last three months, just to give us a way to dimension your commentary about the weak selling season.

Yes, well first of all I said difficult, I didn’t say weak. I don’t know, I didn’t catch whether Jon said weak; but to put it in perspective, what it is that I do is, I look at where we were this year versus last year, which will help you. What you’re trying to do is to project out if we had some issues in the quarter, I was out to project out to the next several years. When I look at this year versus last year and how we did relative to the plan last year versus this year, what we’re talking about from a difficulty standpoint is a matter of a couple of percentage points, so you’re not talking about an enormous number by any stretch of the imagination. You’re really just talking about a more difficult season this year than last. In general, when you think about what impact sales has on any given calendar year, the normal rule of thumb that we use is that, the sales in a current environment or a current year normally will rarely have an impact of more than 10 or 15% of our revenue. Rod Bourgeois - Bernstein Research: Okay. And so, when you say it was difficult, I mean is there any way to quantify what your sales were in the last three months maybe versus a year ago period, just to give us a baseline for that?

Well, I did. When I told you that you’re talking about, we don’t talk about what the actual sales performance was, we always give you penile performance which is the actual revenue, not the selling revenue. But, what I told you was, to give you an option to kind of understand the difference; I said it was a couple of percentage points one way or the other. Rod Bourgeois - Bernstein Research: Okay. So, over the next few quarters, is it reasonable to assume your services revenue growth could decelerate a couple of points over the next few quarters, based on the experience you had in the last three months, if that doesn’t rectify itself soon?

A couple points are too much. Rod Bourgeois - Bernstein Research: Okay.

I think what you have to recognize, we look and we know you’re looking very hard at what we see with all these clients, how the economy gets affected. So, basically we spend a lot of time looking at this again and when you look at what happened and kind of the early stages for us is selling gets a little harder, so don’t interpret it, I think people have reacted stronger than what we said, but that’s ok. We saw the beginning of it being affected. We still haven’t seen much check difference and the other thing we do see with clients is, if you’re not near the sub prime construction, kind of the areas of California or Florida, we still things as being ok, not expanding but we don’t see any significant weakness yet. But when you go to sell, you just see a little more caution on people. It doesn’t affect it significantly, but some and the caution is they’re just going to wait and see a little bit. Again, it’s early stages and we said to you before we would tell you exactly what we are seeing and that’s what we’ve been seeing. Rod Bourgeois - Bernstein Research: That’s very helpful. Jon, can you clarify the difficulty in selling, is it difficulty mostly by region and industry or is it difficulty in selling particular services? In otherwards, is the difficulty across all services or is it relegated to things like 401K services? Can you dimension where the difficulty is primarily showing up in this….

When you talk about industry, because of the nature of the products that we sell, you know this business is really one that goes across the entire spectrum of the industry, so it’s not like every one reverses the other. When I talk about difficulty, what I talk about is, you know we look at pretty detailed metrics on our sales teams and on our sales activities, relative to the number of calls that they’re making on CPAs, what the closing rates are by territory and so on. The difficulty to me, the comments that I get from our sales force is just the sledding was a little bit harder, they were working a lot more hours, they were pushing it a lot harder and as I said earlier, they got through it, but it was harder for them to get the sales than it had been in prior years. So, from a geographic standpoint, that tends to show up more on the loss side of it than it does on the sales side of it and the loss being by the failed businesses that we talked about. Again, that number, to calibrate it, is measured in hundreds or very low thousands versus hundreds of thousands of clients that we have; but those definitely tend to cluster in the Florida and the Southern California markets, to a lesser extent in Arizona. Rod Bourgeois - Bernstein Research: Beautiful. Thanks guys.

A pleasure.

Thank you. Our next question is from James Kissane from Bear Stearns. James Kissane - Bear Stearns: Thanks. Good job, guys. Not to pin you down Jon, but do you think you’ll still do better than 3.5% net new client growth for fiscal ’08?

No. James Kissane - Bear Stearns: No, okay. And just given the pick up in bankruptcies, where do you see your retention tracking right now? Maybe you can put some historical perspective around that?

Okay. One thing about retention is, controllable retention is clearly at its best ever again. Okay? So retention is changed and it‘s not a lot, I mean when you start talking about the number of bankruptcies there are and how much it’s changed by, again it’s just a little bit of an up tick and I think this original up tick is almost directly related to sub prime construction and people are just simply struggling, we don’t see something that’s widespread. So, we’ve seen a little bit of a tick up, but you know it’s greater than normal, but not unbelievable.

The other thing to remember in our business, versus when you’re dealing with large clients; what typically happens in ours, when a company fails, the owner often will start a new business the next week or go join one of his buddy’s businesses, so the impact to us is not as one to one as it might be if we were dealing with larger clients where those employees would be out of work for a long period of time. James Kissane - Bear Stearns: Okay and one last question; are you seeing any change in the competitive environment? It does seem like Intuit has stepped up their marketing of their parallel offering just in the past several months.

Well it depends, you know in the Intuit world, you remember that Intuit got out of a large part of the business that we’re in, not 12 months ago; so Intuits focus, from what we can see, has remained pretty much where it was. We tend to be exclusively in the fully outsource, they tend to be in the assisted and do it yourself world and so we don’t see them that much and where we would see them, it would be in the one to four, one to ten sale.

But on the general comment about competition, there’s nothing that’s involved with any of what we’re talking about, with just it being a harder sledding to get the sales, that has to do with competition; we don’t see anything different on that landscape, ADPs not ticked up higher on us, in fact I think we might be doing a little bit better against them, but it’s a pretty small number. You know we almost never see Ceridian. So that landscape hasn’t really changed that much for us; and quite frankly, on the economy, part of what we’re doing is we told you that if we ever saw anything change, we’d tell you that we saw it change, but the changes that we’ve seen are no where near what the focus has been so fare on this call, it’s much smaller than that. James Kissane - Bear Stearns: Great, thank you very much.

Pleasure.

Thank you. Our next question is from Kartik Mehta from FTN Midwest Kartik Mehta - FTN Midwest: Hi, good morning, John. Listening to your comments and talking about only 10% of the revenue really impacts your next year, is it safe to say that if we stay in this environment, assuming the economy doesn’t change from this point, at least downward, that you could at least sustain 8% service revenue growth, at least the bottom end of the long-term guidance?

Well, we’ll talk to you about guidance in three months.

I don’t know that I want to go in and say what I think the bottom could be or not be. I mean you’ve watched this change in cycles and so I wouldn’t overreact to think that the change can be dramatic, because I don’t believe that’s the case. When you talk about revenue growth, what basically happens and I want to make sure, because we didn’t quite say that, I want to make sure you understand it; in the year we’re in, only in payroll, only 10% of the revenue comes from what we sell in that year, so it isn’t like you’re at risk for 10%. You’re at risk for a fraction of 10% because the sales force isn’t going to sell zero. Now obviously, what they sell this year probably has a bigger impact again the following year, but again, they’re not selling zero. Now that’s 10% on payroll. I would say in human resource, it’s probably in the 15 to 20% ranges simply because there are sign up fees on the front end. So, when we talk about things weakening, I think you’ll see in similar economic cycles, we can get some weakness in revenue, but it’s not like it goes all to hell and then changes dramatically. Kartik Mehta - FTN Midwest: And John, is there any impact in pricing, if you looked at what happened last recession or is your ability to sustain a normal pricing in that 3 to 4% range stays?

Pricing for us, it’s hard to believe, has never been based on the economy. Again, the price increases are modest and their small to an employee, you know 6 or $7 a month to the average client and the employer and it just doesn’t seem to be a problem as long as we maximize the service levels, which right now we believe we’re providing the best service we ever have. We’re actually, believe it or not, right now discounting is a little less than it’s been and client losses due to price are less than they’ve been. So, here we are in a tough environment and I think our pricing power will continue. Kartik Mehta - FTN Midwest: And last question; I was wondering if you could give us an update on the healthcare initiatives, the number of sales people you have now and successes or failures you’ve witnessed and any changes you might need to make to that particular program for it to grow.

It’s growing great. I mean the healthcare investment, if you will, has been going very well. I won’t get into too much detail with you on it. I’ve mentioned in the past sales that were up, just over a hundred sales people I think at this point and we’ll continue to expand that as quick as we can, stay under control. From the standpoint of the plans that we’ve set for ourselves, you can imagine, given the fact that it’s our number one investment right now that we’ve put fairly aggressive plans in place relative to growth and we’re exceeding those plans from a sales standpoint year to date. So, we’re pretty happy with where we are: We’re happy with the number of providers that or carriers that we’re signed up with. We’re happy with the deployment of the sales teams in the field. .We’re happy with the receptivity of the prices. As I’ve talked several times on these calls, this appears to me to be a completely natural market for us and we’re investing appropriately and we’re getting the results that we had hoped we would get. So, I feel very, very bullish about the whole health benefits world. Kartik Mehta - FTN Midwest: Thank you very much.

Thank you. Our next question is from Pat Burton - Citi. Patrick Burton - Citigroup: Hi and congratulations on the quarter. My question has to do with the investment portfolio in the lower rate environment. A couple things, would you guys consider increasing duration, number one and number two would you consider perhaps leveraging against the portfolio like your competitor does, issuing liabilities to earn a spread on the assets? And then I have a follow up. Thanks.

Basically, Pat, we’re looking at all these strategies. We probably will, we did move the duration out some when we chose to take the big one out of the short-term investments and put it in the long term, because to be able to do that we’re going to have to borrow, I’m going to say maybe 10 to 15 days a year. Now, for us to go to the velocity of ADP heads, we have to then look hard at getting totally out of tax exempts, because generally you can’t borrow money to invest in tax exempt securities; but, we’re looking at all those things, what can we do to minimize this? But the biggest thing we want to make sure, as we go through these cycles, is we really do protect the principle and we don’t have any liquidity issues that are going to cause us problems. So, obviously these are very changing times and we’re, I think, right on top of them. We did some great things with the auction notes we ran, looked at the insurance on the variable rate demand notes and we’ll continue to be aggressive and we’ll continue to look at this area for better ways to do this. Patrick Burton - Citigroup: Okay, thanks. And the follow up is, if the float continues to get pressure, lets say the fed goes arguably to 1%, would you guys consider cutting costs to offset that impact to shareholders, or would you just view it as the cyclical nature of rates and wait for it to recover?

In the past, we’ve looked at that as the cyclical rates, because while it’s lower revenues, none of the work goes away because the rates went down. So if we look at our business kind of outside the rates, we’d react to them as best we can, but that’s some of the vagaries. You know sometimes you get the benefit of higher rates. I don’t think they’re permanently going to be at one and it will come back, but I think we just would have to kind of weather the storm there. But obviously we would remove all costs we could, but the same token, I know one thing about this business is crucial: you can’t do anything that harms client service. Patrick Burton - Citigroup: Okay, thanks. And thanks for your conservatism in terms of how you run the portfolio.

Our next question today is from Greg Smith from Merrill Lynch. Greg Smith - Merrill Lynch: Yes, hi, good morning. Obviously we know the net unrealized gains as of the end of the quarter, but any chance you can give us where that sits maybe yesterday? Do you have a real time number there?

I think it might be in the 10-Q. I think it’s in the 10-Q. I believe it’s in the 10-Q in the investment section of what it is as of a recent date, if it’s not, we’ll put it somewhere that you can’t miss it on the website. Greg Smith - Merrill Lynch: Okay, great. And then, what is your philosophy, obviously you guys had some gains this quarter, you explained why that happened, but what it the philosophy; again in the scenario we go rates come quite a bit lower, the gains go up, what’s the philosophy on realized…

The old gains, in the last cycle of the interest rates, we chose to take gains and cycles, we’ve taken losses to allow us to try and maximize or minimize some of the distortion. I’ve come to the conclusion that in the end you just change where it is, you don’t really change it. The accounting rules have also come out and they’re a little bit different, but if you take losses as a norm, you can’t be considered to be holding to market; therefore you have to book the fluctuating rate environment, every day, I mean it’d be every quarter. We’re not going to get into that environment. The SEC has relaxed that rule a little bit in the current environment, saying that these investment portfolios, these are unusual times, so some people have been able to take losses, we would too, but basically you don’t have to change your accounting. So right now I would say we’re not looking to take gains and losses. The 3 million that we took related to a very unusual tax issue on an AMT, that when we bought the stock back and I know it’s very complicated, the issue went away, so we no longer needed the taxables and that’s why we sold them; it had nothing to do with trying to generate any gains. Greg Smith-Merrill Lynch: Yep, okay thank you.

Thank you. Our next question is from Elizabeth Grausam, from Goldman Sachs Elizabeth Grausam - Goldman Sachs: Great, thanks. Obviously the margin was very strong this quarter. I wanted to get any sense from you if sales commissions were a little bit lower than you’d expected, given the selling environment. And also, how you think about sales force hiring going forward, if we’re in a little bit more of a choppy sales environment, give us some perspective on how you manage hiring in these types of environments?

Tell me exactly what you’re looking for in the first part of your question? Elizabeth Grausam - Goldman Sachs: Just whether or not sales commissions, are the SG&A expenses a little bit lighter than you’d expected given where the selling season came in.

Assuming with the margin part, but the selling expenses we’re a little bit lighter, but from commissions it was very small. As I tried to mention earlier, the difference on a year to year basis of sales through this past quarter and the sales through the same quarter last year were very minor. I mean, if you called one 100%, you’d call the other 98; it was that kind of a thing. So it wasn’t quite as big as I think some people were concluding. So margin in general, you know we are very focused on margins, not to the point that, you know we’re constraining expenses required to run our business or to grow our business, but as part of our culture, we’re very focused on expense and cost containment and on margin expansion, so that will always happen. So relative to the sales people going forward, if we see that we need to increase our sales people, we will definitely make that expense. In the fourth quarter this year, remember that we’ve gone, I don’t know it’s been, every year I think since I’ve been here and probably many years before I got here, we’ve done pre hires in the fourth quarter to get ready for the first quarter. We’re very focused on where our coverage is relative to the territories and making sure that we have a full slate of sales people in it, so we’ll make those expenses as are needed to run the business. Elizabeth Grausam - Goldman Sachs: Great thanks. And then, mechanics, John Morphy, on the tax rate going forward, given where the investment portfolio is now, should we see it kind of staying around 33% or would you expect that to move up more as you go into ’09 as well?

I believe the 33 is a good number now, but I think we’ll have to give better guidance when we get to June, only because this environment is changing. I mean, three or four weeks ago we were in tax exempt taxables to the tune of almost 80 to 90%, we’re back down to 50, it’s going to keep bouncing around, I think if the liquidity crisis goes away, you’ll see us getting back to the old way, but I don’t know. Now, it isn’t as big an issue as what you think, because if you stay with what you’ve got and what we’ve given you on the disclosure, if I’m in taxables I’m going to have a little more tax exempt income, which would probably be above your estimate and you missed the tax rate by a little bit, but you won’t be very far off on net income. Elizabeth Grausam - Goldman Sachs: Great, thank you.

Thank you. Our next question is from Adam Frisch from UBS. Adam Frisch - UBS: Thanks, good morning guys. Just judging from the conversations that we’ve had with investors and the questions that I’m hearing on the call today, forgive me for a second if I’m going back to like, kind of Paychex 101 and ask you guys to revisit the secular trends versus the cyclical trends right? Like if we look at the cyclical stuff it’s Armageddon on employment, interest rates, small business lending, all that kind of stuff that we read about,; but we look at your model and we mapped out your service revenue growth since ’98 up until the present, it’s been fairly consistent after the last recession despite employment trends going up and then coming back down. So, do you feel like people are kind of missing the story a little bit? You know we’re arguing if sales in the third quarter were weak, you said it was weaker, not weak, were they really that much weaker? I mean, given where you’re multiple is, from what you described Jon Judge, doesn’t really seem like a whole big difference at all to make anything out of. But, do you feel like people are kind of missing the secular story here versus outsourcing payroll growth, versus what we’re hearing about?

I think it’s possible. The analysis that you did is why I’ve said in the past that, you know while nobody would ever, I think, be crazy enough to say that they’re completely resistant to any economic down turns, we tend to not be affected anywhere near the way the rest of the economy is affected, so, there is a variety of reasons for that. But, we don’t, when the economy went down the last time in the early 2001, 2001 stand point, we kind of went right through it. It’s not to say that we weren’t affected, that we didn’t have some minor issues, but relative to what happened in the economy in general, we kind of kept going, we went right through it. And my feeling has been and I’ve been somewhat vocal on this, is that I suspect that that’ll happen in this current environment as well. It’s not that we won’t be affected, but we won’t be affected anywhere near the way other companies are, or the way the headlines on the economy are. So, I think the analysis that you did, the long-term analysis, in looking to different past periods, when there have been down turns, what you came out with was right. So, on the focus on the… Adam Frisch - UBS: Is that because, John, the secular trends that outsource payroll, that it still is a relatively unsaturated market...

It is very much a saturated market, in anything typically what happens is when you get into, you know down turns like this, most companies try to figure out ways to get other people to do, you know what they would consider to be non essential and non strategic things, so that they can get focused on their business. And so, typically when you get into down turns you might see more outsourcing rather than less. But, where we stand, it’s what we’ve said from the beginning, if you look at what the penetration rates are in the existing US market, there is plenty of room for us to move without a single dollar of growth in the environment, just because it’s still a relatively under penetrated market and, quite frankly, with the type of businesses that we serve, the products and services that we offer, relative to what their business issues are, are perfect. I mean if you think about it, to be able to have somebody take care of all of your payroll processing, all of your tax filing, you know and so on, then for an average client of ours, for 23 or $2,400.00 a year, in most of our businesses, their greatest single problem is resource shortages; it frees up what little people they have in their company to get focused on the things they need to focus on, which is growing revenue and staying alive. Adam Frisch - UBS: Okay. So again, sorry to retreat, go back there, but I thought it was kind of necessary. Two questions that I did have, one are the ancillary services getting a little bit harder to sell, just because companies tightening up a little bit on expenses and what they want to pay via benefits and all that kind of stuff, is that any, kind of difference, that what you’ve seen in the past?

Nothing, you know I don’t have any data in front of me that would tell me the answer to that is yes. The theory on it though, in some cases you should say yes, in some cases you should say now. But where you’d say no is and it’s very evident in what we’ve seen so far, the immediate ancillaries, tax pay, employee pay, those continue to defy gravity, they continue to sell at very strong rates and they were, from a tax they were virtually at 100%. When you get into some of the others, if you think about things like Safe Harbor 401-Ks, which in small businesses which require contributions by the owner to the employees piece, the theory would say that as the economy gets tougher and tougher that those might be affected, but so far we haven’t really seen anything that would tell us that our ancillaries are under stress. Adam Frisch - UBS: Okay and then last question on, I think Kartik asked this before, but I just wanted to follow up on it, you guys have always run a real tight ship, obviously that shows up on your operating margin line. But, are you guys in any kind of more aggressive mode here to take a harder look at SG&A or operating costs right now than you would be otherwise?

No more so than any normal period. I mean we have said that we are, you know we tend to be a very disciplined financial organization, starting with Tom from day one and it’s been ingrained in our culture from the beginning. We don’t have a lot of perks in the business and we sort of run a relatively tight ship and we tend to be very focused on delivering profits. So, when we book our plans for the year, we’re not constraining the way that we spend money relative to growing our business, we clearly constrain how we spend money relative to wastage. But, there’s nothing going on right now that says we’re going to start dragging expense out of the business that could potentially hurt us, to sort of survive the next period. We’re just managing our business prudently and I think you can see that in our results. Adam Frisch - UBS: Yep, absolutely. Okay guys, thanks a lot.

Thank you. Our next question is from David Grossman from Thomas Weisel Partners David Grossman - Thomas Weisel Partners: Hi, thanks very much. Just to go back to some earlier questions, You know it sounds like you’re comfortable with the client base this year, you’re pretty comfortable with the pricing environment and retention has been good, so with all that bundled in is there any reason to think, you know the five to eight, six to eight kind of gross in the core payroll business is a realistic look at fiscal ’09, just from where we sit today? You know, again, I’m really not asking for specific guidance here but just trying to put the various pieces together.

Basically, you know we’re not going to guidance today, David, and as we’re still in the middle of the process of developing all this, you know obviously right now we said we haven’t seen any significant check weakness, except related to when people go out of business. You’re talking about what’s happened in the past. I don’t think we’re talking about anything that’s dramatic here and we’ll continue to watch it closely. But, for me to say what’s the bottom line, it really comes down to, I don’t know what kind of an economy or what it’s going to be. I mean, the paper would have you believe that we’re in the midst of a huge recession, which we don’t certainly see and you’ve just got to wait and see how it works out and each ones got it a little bit different. So, I think for me to guess at that now would just be a guess. But, I don’t think that we’re looking at numbers bottoming out at extremely low levels, unless something changes we’re not aware of. On unrealized gains, they just gave me the number, at March 20; the unrealized gains were 37 million, so. It’s what happens when the portfolio goes down, but we’re not looking to take those gains. David Grossman - Thomas Weisel Partners: Thanks. And just one other thing, I know this comes up every quarter, but are you considering, at least give us your updated thoughts on a more systematic share repurchase program.

Basically, we’re in the same place we were. I mean we have a board meeting in the next 30 days and I’m sure the subject will come up. We’ll talk about it and we’ll think about it and I think it depends on where the stock price is and you can say well at this point you need to be an aggressive buyer, but in the same token, we’re living in a world with liquidity. So it isn’t like I don’t mind having the 400 million be flexible to do something with. We’ve been very good at being disciplined and not take this money and buy something that we lost a lot of money in; I mean we’re not going to do that. So I think, the issue you’re having, you can keep looking at this, but the more you take the cash down, or you go into debt, you do start to minimize some of your flexibility. Now when I had 1 billion 4, it was pretty hard to say I was minimizing anything. I go back to 2002 and 3, the opportunity came up to buy Advantage and Interpay on very little notice, and one reason we got those deals done so fast, we didn’t have to go to anybody, except the Hart-Scott-Rodino for approval, we just paid the cash and we were done. So, we’ll keep looking at it, but we haven’t made a decision what we’re going to do yet.

Two things, David, and I’ve talked about this publicly, we did talk about this at the last board meeting and one thing that our board reminded us of and we reminded ourselves of, is we had just completed a billion dollar share repurchase. So we were sort of taking our breath and seeing how things were playing out. You know, obviously it’s something that’s under consideration. I would be curious in what your position or your opinion is. David Grossman - Thomas Weisel Partners: Well I guess it’s, you know, really deferring to you in terms of how you want to manage the business and manage your earnings growth. It just looks like, even after the dividends, you generate considerable free cash flow and you certainly have the flexibility to, institute a more systematic repurchase.

I would say this, if we put one in, it would be not exactly like the last one where we had an objective to reduce the cash and it would be strictly an opportunistic program where we would announce something, but whether we would be active, we’d only tell you after the fact, which is what the requirement is. So, it would be, if we did one, it would be different from what we have done, on the same token we would announce if we planned to do something ahead of time. David Grossman-Thomas Weisel Partners: Very good. Thank you.

Thank you. Our next question is from Tien-Tsin Huang-JP Morgan Tien-Tsin Huang - JP Morgan: Thanks. I had a couple questions on the 401-K side. How much of your retirement share is revenue actually derived from any kind of fees that you might get from the value of the assets under management? And secondly, John Morphy, I think you mentioned some fee pressure on the 401-K side, I think that’s similar to past quarters? I just wanted to verify.

Fee pressure, it’s basically we get about 30 basis points on the money, so we disclose how much money we have, so you can figure out how much that is. We never give the exact number. If we get approximately 30 basis points, those basis points are under a little bit of diminishment due to the fact that when we go to guided choice and some of the other fund offerings, we’re not going to get as many basis points, but as we’ve talked on prior calls, we have a number one position in 401-K and we believe these more sophisticated investment choices, while they don’t quite earn the same basis points on them, they provide us to be able to maintain our number one position and we believe that’s critical to evolving as a player in this market and right now we believe we have some of the best product offerings in 401`-K marketplace of anybody. So, we feel good about it, but at the same time, we know there’s going to be a little bit of pressure on the fees or what do you, call the basis points back. Tien-Tsin Huang - JP Morgan: Okay, so about 30 bits on the 9 billion or so?

Yes. Tien-Tsin Huang-JP Morgan: How we should model it.

Yes. Tien-Tsin Huang - JP Morgan: Okay got it. And then on the client fund balance side, should we assume mid single digit growth there over the next say, two to three quarters? Is that a safe assumption?

Yes, I wouldn’t make it any higher than that. Tien-Tsin Huang - JP Morgan: Okay, so mid single digits there and then lastly on the, I just wanted to clarify, geographically I think you had mentioned Southern Cal and Florida being a little bit tougher. Were those the primary regions or were there other regions that were difficult as well?

It wasn’t being tougher; it was where we were seeing some of the bankruptcies, which is a relatively small piece of the equation, almost a miniscule piece of the equation. Tien-Tsin Huang - JP Morgan: Okay, so nothing else worth calling out then geographically?

No. Tien-Tsin Huang - JP Morgan: Very good, thank you.

Thank you. Our next question is from Charlie Murphy from Morgan Stanley. Charlie Murphy - Morgan Stanley: Thanks. The other expense line within operating expenses and SG&A has grown only around 1% year to date, which is oppressive, but the stuff like delivery and T&E and forms and supplies, how have you been able to keep that line so flat year over year and what could cause that, if anything, to suddenly shoot up?

Well we just, we were very affective. We had a great year end and we watched the stuff and we get better and better. We keep watching, but you know you can get a quarterly aberration that, you know something happened, but we have a lot of people pushing on telecommunication expenses. We have lots of people that walk in here and say “well we can do this better” and they have a tough time. But we just keep watching the expenses, I don’t know of anything in particular and maybe this quarter is a little less than normal, but we’re going to still keep a watch on those and we’re going to keep leveraging. Charlie Murphy - Morgan Stanley: Okay, a quick follow up. Is it management’s intention to stay invested in those VRDNs going forward?

Only if we feel they’re very safe. So, we’re talking to our investment cohorts every day and the ones we’re in are where the banks are making liquidity. And I think if it gets to the point where those aren’t safe, because the banks have no liquidity, I don’t want to think about that. Charlie Murphy - Morgan Stanley: Okay, thanks.

Thank you. Our next question is from Gary Bisbee from Lehman Brothers. Gary Bisbee - Lehman Brothers: Hi, good morning. You know, we can all look at the last recession and see that the core payroll business was a pretty resilient business through out that. Do you have any sense, any broader sense about how the HR services offerings fair and do you expect it to be the same? I know you mentioned a minute ago, the 401-K you could make the case that that might do a little worse, but is there any other that seem like they would be wildly different one way or the other?

I don’t think they’d be wildly different, but you know, I think all of us know, when you look at the process and John talked about it earlier, payroll by itself is a necessity; you’ve got to pay people, you’ve got to do it. When you get to some of the HRS stuff, some of it’s going to be a little more optional than other stuff and you know that last time we went through this, HRS wasn’t as big an entity as it is today. But now you’ve got other products where you know, the world never goes to completely stops. So, while there are some businesses that say, well I don’t want to put a 401-K in, there will be other businesses that do well. And you know when you talk about recessions and how you measure one, it’s still a modest amount of percent change. So, I think they’ll be affected some, how much is hard to say and some of that on pen you know we’ve got to keep pushing our sales upwards and enough good stuff, but it may be a little bit more difficult than payroll, but until we see proof or evidence, I think we really don’t know. Gary Bisbee - Lehman Brothers: Okay. In terms of the M&A landscape, is it too early to see potential acquisitions where they are struggling a bit and are more willing to sell at a reasonable price and you know you mentioned you’ve done that in the past with payroll businesses. How would you think about what you’d like to do, are there other small or mid size payroll, would there be something that would get you a slightly bigger client or would it mostly be HRS, any sense…

Our strategy on M&A is not a bargain hunting strategy, alright? It’s a strategy that’s based on filling out the product portfolio that we have that fits into our offering strategy. And so yes, when you get into an environment like this, you may be able to buy things at a better price than you would buy them normally, but we’re not out bargain hunting. You know, the one exception might be just buying pure payroll businesses, you know for sure we’re interested in that, they may become more available in the tough times than they are in the easier times and that you know obviously would be something that would be a great benefit to us. We buy quite a few of those every year, we’re always in the market for them and we don’t pay ridiculous prices for it. But, whenever we find a scenario where the price is within our model and particularly if it’s just a payroll operation, we’ll snap them up immediately. So that part won’t change and on the other side of it, it’s really more strategy driven than it is bargain hunting driven. Gary Bisbee - Lehman Brothers: Okay and then just lastly and you’ve obviously done a great job over the years on the cost front. How comfortable are you that if revenue growth were to slow, you know 1 or 2 percentage points, that you’d be able to slow the cost growth to continue to, you know, put up the mid teens?

There are things I worry about but that isn’t one of them. I believe the costs come out – we have one huge advantage over most companies. First off, we are continuing to grow so it’s not like you got a reduce anything; it’s pretty much you just don’t add. The second thing is we have half our jobs are in two job classifications: sales people and payroll specialists. Payroll specialists automatically -- and we have some turnover in both of those jobs -- is adjusted ongoing to the client base. That’s not done any harm to any people. Basically you have a number of payroll specialists and it goes up and down based upon what we have, but it isn’t a matter of you’ve got to go tell somebody they don’t have a job. The only people I know that we’ve really reduced here is totally performance-based. The same thing on the salesforce we add territories, we generally add them at the beginning of the year but both of those classifications, which means 6,000 people between the two of them is monitored closely. So we’ve got some built-in things that most people don’t have. We’re not in the major contracts. We don’t have major events where all of a sudden you’re missing $4 million or $5 million and what are you going to do? So the biggest thing that affects us, and somebody talked earlier, as float goes down unfortunately work doesn’t go down when float goes down so we’ll continue to manage this business. But I think we have a culture of margin expansion and it’s going to continue.

Our next question is from Glenn Greene - Oppenheimer. Glenn Greene – Oppenheimer: Just to go back to how it related to the more difficult than normal selling season, I just wanted to make sure this was specifically macro related and nothing to do with sales force execution in any way or is it a combination in any means?

: Well again to reiterate it, I guess I didn’t think hard enough about putting this in because I think you guys are reacting way more than what we intend it to be. But with that said, the pieces that we’re referring to were clearly macro related. There’s always opportunities to improve your sales execution and we have sort of an ongoing program in that area like we do with all of our jobs. But the difficult selling season, we watch the call volume that comes out. We are a very activity-based sales organization and we watch the call volumes that go out and the sales activities that go on and all of that was fine. So it was clearly a macro case. Glenn Greene - Oppenheimer: So there’s nothing unusually that you’re doing in terms of going forward in terms of managing the sales force as we go into ‘09?

: Not anything -- how do I answer that? Not anything significantly different, but obviously part of our business model is continuous improvement. We are essentially an organic growing business and the only way that you get that to happen is you’re on a continuous improvement project. So we’re always evaluating what we’re doing, what we think we’re doing well, where we think we have areas to improve and we’re pretty aggressive on going after the areas that we think we can improve in. So you shouldn’t think we’re static in terms of the sales side; we’re not. But in terms of anything, a brand new project or brand new thing that were doing, there’s nothing like that going on. Glenn Greene - Oppenheimer: And then for John Morphy, another question related to the expense growth. Obviously you’ve sort of held the line pretty tightly there. Have you held back on any investments you would have liked to have made this year? Just trying to get a sense for how you’re balancing investments for achieving that 15% operating income growth target going forward.

: -- we’ll do a little harder but I don’t know of anything that we felt we needed to do that we didn’t do.

Let me add something to that. We are a company that is a very healthy company and we’re in the midst of a very protracted long period of growth. So the reality is that every year when we walk into the budget process, our teams can dream up way more than we can afford to spend. So I can’t imagine in my lifetime I’ll ever be in a scenario where we don’t have people making proposals to do things or spend money that would be great to do or nice to do. But the realities are that the way that we manage this business is that the revenue that we believe we can pull out of the marketplace by and large will dictate the expense that’s allotted to run the business. From that point on it’s a prioritization and that will continue. Now if we saw something where we believed that there was a market in front of us that was a natural market for us to go after, we would spend whatever we had to spend. If you look at our balance sheet, you can tell from a financial stability standpoint, we have enormous resources if we choose to put them after a particular target. So if we saw a target that we felt was going to materially change our business, we have no issue with spending it. I think in lots of cases it’s just bad form to spend without having consideration for what the relationship is between expense and revenue.

Our next question is from TC Robillard - Banc of America Securities. TC Robillard - Banc of America Securities: John, I don’t want to harp on the difficult selling season that you guys commented on, but if you can help put that in historical perspective. Is that one of the canaries in the coal mine that if you look back in past cycles tends to be something that pre-dates a more challenging, checks per client type of environment or some of the other key metrics that you guys are not seeing any issues of right now but tend to look at? I’m just trying to look at that historically.

: It really wasn’t meant to be anything other than what it was. It wasn’t really all that complicated. I’m trying to think about the canary in the coal mine. I don’t think it matches that analogy; I’m not even sure what that means. I presume it means that you’re starting to lose oxygen and the canary dies and then two, three or four day later everybody else dies. Is that right? TC Robillard - Banc of America Securities: I guess another analogy, is this the tip of the iceberg? Is this one of the early indicators that as your sales people come back to you and start to say that the selling environment is getting tougher, there is a lot more effort going into it and it is getting more challenging, is that the first crack that you start to see then? A quarter, couple quarters later you start to see higher bankruptcies and then a couple of quarters later you start to see the checks per clients start to slow? If you look back historically and each time where your revenue decelerated on the payroll side into a recession, is this one of the early indicators that has popped up? Or is this something that’s never really popped up before?

: No. What I would say is the reason that we chose to say what we said was because we’ve had multiple conversations with you all in the last several quarters, many of them focused on the economy and we basically said that we look at all of our macro indicators, if you will, and as we look at those, regardless of what we’re seeing in the headlines and what was being said about the economy, we weren’t seeing anything relative to our business. But we said as soon as we saw something we would tell you. That’s really more the spirit of why we said what we said. I don’t see it at all as the first stage of a three-act tragedy. What I see it as is what we said. We saw that it was getting a little bit harder, it appeared to be linked to the economy, we felt like we told you that if we saw something we’d tell that you that we saw something so that’s what we did. Same thing on the business failures. The business failures, as I mentioned earlier, you’re talking about high hundreds low thousands difference attributable to the economy, not 100,000 clients fell out. So it was really more a point to say to you that we are starting to see some impact out of the economy. It’s very minor at this point. There’s nothing I know relative to history that would say it’s an early indicator of something bad to come in the future. I’m not sure we’re smart enough to know that. But John can comment, he’s been around longer than I have. I’ve been here 3.5, four years now. But it was really not meant to nothing more than to say we have seen some indications for the first time whereas in the past we saw almost nothing or very, very, very modest stuff and we felt like we were obligated to tell you about it because we told you we would tell you if we saw something. I don’t see it all as, I’m in a very different place than where a lot of the questions are. I’m not in a place that says I think the year is in trouble, I clearly believe the year’s not in trouble because we told you we would hit guidance. I don’t see anything that tells me that I’m overly concerned about next year. We’re going to have going buckle down and work harder and if it’s a little bit harder to get sales well then we’re going to have to work a little bit harder. That’s just the way it is.

Our next question is from Mark Marcon - Robert W. Baird. Mark Marcon - Robert W. Baird: Can you tell us what sort of effective yield you’re achieving on the funds that you’re now investing?

It’s in the 10-Q. Mark Marcon - Robert W. Baird: What is that exactly John?

Look at the rates.

: It was in the press release too. Mark Marcon - Robert W. Baird: I’m just talking about right now?

Looking at right now? Mark Marcon - Robert W. Baird: Yes.

That I don’t know. Mark Marcon - Robert W. Baird: That’s the question. What I’m trying to do is I’m trying to ascertain if rates don’t change relative to where they are today, what sort of effective yield we could potentially look at for next year?

I can’t disclose that yet because I’m not even sure I know exactly what that is. This market’s changing so rapidly, we gave you disclosure. You know what has happened and you can measure the 4.5 million. You know how much has happened since December. I think you can work it out and that would be the safer way to go at it than just trying to figure out what the yield’s going to be. Because remember the yield doesn’t peel off. I’ve got a duration, I’ve got short-term, I’ve got a lot of things moving around and lots of balls moving. Mark Marcon - Robert W. Baird: So can you help us think about some of those balls just in terms of if things --

Out to $4.5 million I said for the next 12 months. So you can look and see what the float income was in the quarter and say okay, maybe go back to last second quarter and say how much did it drop? I’m not sure if I just give you the reinvestment yield number, I’m not sure that’s going to tell you anything more than what you’ve got now. Mark Marcon - Robert W. Baird: What percentage of the portfolio would come up under reinvestment over the next year?

Well you’ve got a duration of 2.6 so it’s got to be half, 40%. Mark Marcon - Robert W. Baird: So we’ve got 40% that’s being reinvested.

Yes. Mark Marcon - Robert W. Baird: All right. That’s helpful. Although it sounds like --

It’s almost as much of a mystery to me as it is to you. We’re looking at it all the time and we’ve got some estimates and we’ll give you guidance when we get to June, but I think you can get close enough. Mark Marcon - Robert W. Baird: Yes, I was just trying to narrow it down a little bit because it’s obviously one of the areas that people are looking at and your competitor gave a lot of disclosure on that and it was quite helpful.

: They know what is going to happen in the liquidity markets in the future? Mark Marcon - Robert W. Baird: They obviously don’t but they can give some sensitivities in terms of if rates do X then based on the amount that comes off the portfolio we could do X.

Well, I just gave you. 25 basis points, I restated again and we stated it more exactly. We gave the net income in fact, not the pre-tax on that. Mark Marcon - Robert W. Baird: All right.

You know it’s peeled off so I think you can get close. I don’t whether you can get to the nearest million, I’m not sure I can get to the nearest million. Mark Marcon - Robert W. Baird: Do you think the float balance should continue to grow at a small rate?

The float balance will grow somewhere between 3% and 5%, subject to what the world does. Mark Marcon - Robert W. Baird: In terms of the PEO growth, that’s just because of Florida, your ASO continues to grow at rapid rate, does it not?

: Our ASO, the ASO absolutely does, our ASO is bigger than the next three combined. The competitor I assume you’re talking about we’re probably 12 to 15 times their size. It is growing well. The PEO what we’ve always said is our PEO is not a growth engine for us. We grow that PEO when we find clients that match our risk profile and when clients don’t match our risk profile we let other people have it, we don’t want them. It’s aggravating the PEO growth, which is why it’s not really indicative. It used to be we only sold the PEO in Florida, today we don’t do that. We sell both. Some of the growth in Florida is just going into PEO. Mark Marcon - Robert W. Baird: Health insurance, 12 months from now we’ll have had that out for about three years, at what point does it start becoming noticeable in terms of having an impact?

Noticeable? Define noticeable. Mark Marcon - Robert W. Baird: Where its starts moving the numbers a little bit.

I think we’re 18 months away from that. That’s what we said in the beginning. Healthcare is a good one when you guys talk about investments and all that, in this business unfortunately or fortunately spending more doesn’t always get you more. Everything’s kind of got a pace attached to it and you can’t make it go faster than it wants to go. That’s just the way it is.

: Remember the model in the health benefits, Mark, is a lot different than the model in other things because of the recurring revenue. So if you happen to be a company like us, who does a very good job at retaining clients, all your costs in healthcare are in the first year and as the client gets to the second year, third year, fourth year, all of the benefit that comes from the commissions go almost completely to the bottom line. So you end up with the model can almost be a geometric growth model. As you get into the out years, it gets extremely attractive. Mark Marcon - Robert W. Baird: We’ve modeled it out and we’re just wondering when we get to the critical mass where we start really seeing that, because incremental margins look like they’re huge in that area.

Before we get off I’ll get you reinvestment rate. Mark Marcon - Robert W. Baird: I appreciate that. Thanks, John. In terms of the turnover that you were mentioning or the client attrition, that high hundreds, low thousands that would be relative to what you would normally see in a given year, correct?

What I was talking about was the incremental values to what we would normally see. Mark Marcon - Robert W. Baird: Okay and I’ve got that number. Since there were so many questions on the selling season, just can you just say what specifically your sales people said made it more difficult? Was it that they called clients or potential clients and they didn’t get called back? Was it that they called them and they started going down the sales process and just on the margin a few said you know I’d like to do it but I can’t afford to do it? What specifically was the feedback from the sales force that indicated that it was more difficult?

I’m not sure that what I told you would be anything other than purely anecdotal. Mark Marcon - Robert W. Baird: Yes, no I understand that.

: Just the general feeling was that it was just a lot harder to get to their numbers. That it was a lot more work, there was a lot more calling on CPAs. A lot more farming references, a lot more customer presentations to get to these results. Mark Marcon - Robert W. Baird: And this was in those specific areas that you mentioned?

: No, the geographic areas that I was talking about had nothing to do with sales; it had to do with business failures. Mark Marcon - Robert W. Baird: Okay, so that’s widespread in terms of your sales people were saying they had to work harder in order to get to quota across the board?

: Right. Mark Marcon - Robert W. Baird: And that would be because they had to approach more clients in order to net the same amount?

: That would be one part of it. Again, I’m not sure it’s worth -- this is anecdotal, that it’s worth going into a lot of detail. It’s just it was a tough season. It was tougher for them to get to their numbers.

The reinvestment rate is 2.5%.

Our final question is from Sanil Daptardar - Sentinel Asset Management. Sanil Daptardar - Sentinel Asset Management: Just a question on the guidance that you gave for the human resources services revenue of 19% to 22% growth, when the second quarter numbers were released that guidance was 22%, 23% growth. Is there something basically more than what you talked about in terms of some weakness in the 401 K fees, limited growth in the business, weak economy in Florida? Can you just give more color on that?

No, I think we were simply, we went into the year a little too optimistic, probably challenged the sales growth to the sales people plan a little too high and we’ve gone the year, we’ve gotten a little more realistic and we feel very comfortable and pleased with what we’re doing. Sanil Daptardar - Sentinel Asset Management: If you look at the total revenue growth to the guidance, 11% to 13%, and all other factors have been the same so would those numbers not change with the human resources service revenue guidance being pulled down?

The change isn’t enough to change those numbers. Obviously we look at the guidance and every one of those, you move human resources a couple points, payroll revenue is 75% of the revenue so it doesn’t change total revenue very much.

That is all the time we have for questions today. I’ll turn the callback over the speakers for closing remarks.

Thank you very much for participating. As usual it’s been a spirited call which is good and again we are trying to meet your needs both as a company and how we’re investing and how we are doing. We also hope to give you a little perspective on what we are seeing in the economy and I hope all of you have a great spring. Take care. Bye.