Note C: Funds Held for Clients and Corporate Investments

Funds held for clients and corporate investments consisted of the following:

		August 31, 2011
						Gross				Gross
		Amortized				unrealized				unrealized				Fair
In millions		cost				gains				losses				value
Type of issue:
Money market securities and other cash equivalents		$	1,396.3			$	—			$	—			$	1,396.3
Available-for-sale securities:
General obligation municipal bonds			1,036.4				41.4				—				1,077.8
Pre-refunded municipal bonds(1)			437.9				13.4				—				451.3
Revenue municipal bonds			384.3				14.9				—				399.2
Variable rate demand notes			366.6				—				—				366.6
Total available-for-sale securities			2,225.2				69.7				—				2,294.9
Other			8.7				0.2				—				8.9
Total funds held for clients and corporate investments		$	3,630.2			$	69.9			$	—			$	3,700.1

		May 31, 2011
						Gross				Gross
		Amortized				unrealized				unrealized				Fair
In millions		cost				gains				losses				value
Type of issue:
Money market securities and other cash equivalents		$	1,372.9			$	—			$	—			$	1,372.9
Available-for-sale securities:
General obligation municipal bonds			1,017.5				33.1				(0.1	)			1,050.5
Pre-refunded municipal bonds(1)			470.5				14.2				—				484.7
Revenue municipal bonds			361.6				12.1				—				373.7
Variable rate demand notes			828.3				—				—				828.3
Total available-for-sale securities			2,677.9				59.4				(0.1	)			2,737.2
Other			8.3				0.6				—				8.9
Total funds held for clients and corporate investments		$	4,059.1			$	60.0			$	(0.1	)		$	4,119.0

Included in money market securities and other cash equivalents as of August 31, 2011 and May 31, 2011 are money market funds, FDIC-insured deposit accounts, and other bank demand deposit accounts. In addition, included in other cash equivalents as of May 31, 2011 were U.S. agency discount notes and a municipal bond with a maturity of less than 90 days when acquired.

Classification of investments on the Consolidated Balance Sheets is as follows:

		August 31,				May 31,
In millions		2011				2011
Funds held for clients		$	3,095.2			$	3,566.7
Corporate investments			372.0				345.0
Long-term corporate investments			232.9				207.3
Total funds held for clients and corporate investments		$	3,700.1			$	4,119.0

The Company is exposed to credit risk in connection with these investments through the possible inability of borrowers to meet the terms of their bonds. In addition, the Company is exposed to interest rate risk, as rate volatility will cause fluctuations in the fair value of held investments and in the earnings potential of future investments. The Company’s investment strategy focuses on optimizing liquidity and protecting principal. The Company invests primarily in high credit quality securities with AAA and AA ratings and short-term securities with A-1/P-1 ratings. It limits the amounts that can be invested in any single issuer, and invests in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. All the investments held as of August 31, 2011 were traded in active markets. The Company has not and does not utilize derivative financial instruments to manage interest rate risk.

The Company’s available-for-sale securities reflected a net unrealized gain of $69.7 million as of August 31, 2011 compared with a net unrealized gain of $59.3 million as of May 31, 2011. Included in the net unrealized gain as of August 31, 2011, there were 10 available-for-sale securities in an unrealized loss position with a total fair value of $25.2 million and minimal unrealized losses. Included in the net unrealized gain as of May 31, 2011, there were 15 available-for-sale securities in an unrealized loss position. All of these securities were in an unrealized loss position for less than twelve months and were categorized as follows:

		May 31, 2011
		Gross
		unrealized				Fair
In millions		loss				value
Type of issue:
General obligation municipal bonds		$	(0.1	)		$	37.3
Revenue municipal bonds			—				14.4
Total		$	(0.1	)		$	51.7

The Company regularly reviews its investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. The Company believes that the investments held as of August 31, 2011, with minimal unrealized losses, were not other-than-temporarily impaired. All of the securities in an unrealized loss position as of August 31, 2011 and May 31, 2011 held an AA rating or better. The Company’s assessment that an investment is not other-than-temporarily impaired could change in the future due to new developments or changes in the Company’s strategies or assumptions related to any particular investment.

Realized gains and losses on the sales of securities are determined by specific identification of the amortized cost basis of each security. On the Consolidated Statements of Income, realized gains and losses from funds held for clients are included in interest on funds held for clients and realized gains and losses from corporate investments are included in investment income, net. For both the three months ended August 31, 2011 and 2010, realized gains were $0.1 million, and there were no realized losses.

The amortized cost and fair value of available-for-sale securities that had stated maturities as of August 31, 2011 are shown below by contractual maturity. Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.

		August 31, 2011
		Amortized				Fair
In millions		cost				value
Maturity date:
Due in one year or less		$	428.8			$	434.4
Due after one year through three years			614.5				641.1
Due after three years through five years			547.9				575.0
Due after five years			634.0				644.4
Total		$	2,225.2			$	2,294.9

Variable rate demand notes (“VRDNs”) are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature.