Paychex 2011 Annual Report Download - page 66

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In millions
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
May 31, 2010
Type of issue:
Money market securities and other cash
equivalents ............................. $1,754.5 $ — $ — $1,754.5
Available-for-sale securities:
General obligation municipal bonds ........... 951.1 33.7 (0.3) 984.5
Pre-refunded municipal bonds
(1)
.............. 539.8 19.5 — 559.3
Revenue municipal bonds................... 368.0 13.8 (0.1) 381.7
Variable rate demand notes ................. 226.3 — — 226.3
Total available-for-sale securities ............. 2,085.2 67.0 (0.4) 2,151.8
Other ................................... 7.5 — (0.2) 7.3
Total funds held for clients and corporate
investments............................. $3,847.2 $67.0 $(0.6) $3,913.6
(1) Pre-refunded municipal bonds are secured by an escrow fund of U.S. government obligations.
Included in money market securities and other cash equivalents as of May 31, 2011 and May 31, 2010 are
U.S. agency discount notes, government money market funds, and bank demand deposit accounts. In addition,
included in other cash equivalents as of May 31, 2011 was a municipal bond with a maturity of less than 90 days
when acquired.
Classification of investments on the Consolidated Balance Sheets is as follows:
In millions 2011 2010
May 31,
Funds held for clients .......................................... $3,566.7 $3,541.0
Corporate investments .......................................... 345.0 82.5
Long-term corporate investments .................................. 207.3 290.1
Total funds held for clients and corporate investments ................ $4,119.0 $3,913.6
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 May 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 $59.3 million as of May 31,
2011 compared with a net unrealized gain of $66.6 million as of May 31, 2010. Included in the net unrealized gain
50
PAYCHEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)