Wendy's 2008 Annual Report Download - page 47

Executives”) evidencing the termination of their employment agreements and providing for their resignation as
executive officers as of June 29, 2007 (the “Separation Date”). In addition, we sold properties and other assets
at our former New York headquarters in 2007 to an affiliate of the Former Executives and we incurred charges
for the transition severance arrangements of other New York headquarters’ executives and employees who
continued to provide services as employees through the 2008 first quarter. The Corporate Restructuring
included the transfer of substantially all of our senior executive responsibilities to the executive team of Arby’s
Restaurant Group, Inc. (“ARG”), a wholly-owned subsidiary of ours, in Atlanta, Georgia.
We also maintain an investment portfolio principally from the investment of our excess cash with the
objective of generating investment income, including an account (the “Equities Account”) which is managed
by a management company (the “Management Company”) formed by the Former Executives and a director,
who was also our former Vice Chairman (collectively, the “Principals”). The Equities Account is invested
principally in equity securities, including derivative instruments, of a limited number of publicly-traded
companies. In addition, the Equities Account sells securities short and invests in market put options in order
to lessen the impact of significant market downturns. Investment income (loss) from this account includes
realized investment gains (losses) from marketable security transactions, realized and unrealized gains (losses)
on derivative instruments and securities sold with an obligation to purchase, other than temporary losses,
interest and dividends. The Equities Account, including restricted cash equivalents and equity derivatives, had
a fair value of $37.7 million as of December 28, 2008. The cost of available-for-sale securities within the
Equities Account has been reduced by $12.7 million included in “Other than temporary losses on
investments.” The fair value of the Equities Account at December 28, 2008 excludes $47.0 million of
restricted cash released from the Equities Account to Wendy’s/Arby’s in 2008. We obtained permission from
the Management Company to release this amount from the Equities Account and we are obligated to return
this amount to the Equities Account by January 29, 2010. As of February 27, 2009, as a result of continuing
weakness in the economy during the first quarter of 2009 and its effect on the equity markets, there has been a
decrease of approximately $3.6 million in the fair value of the available for sale securities held in the Equities
Account as compared to their value on December 28, 2008.
We also had invested in several funds managed by Deerfield, including Deerfield Opportunities Fund,
LLC (“the Opportunities Fund”), and DM Fund LLC (“the DM Fund”). Prior to 2006, we invested $100.0
million in the Opportunities Fund and transferred $4.8 million of that amount to the DM Fund. We redeemed
our investments in the Opportunities Fund and the DM Fund effective September 29, 2006 and December 31,
2006, respectively. The Opportunities Fund through September 29, 2006 and the DM Fund through
December 31, 2006 were accounted for as consolidated subsidiaries of ours, with minority interests to the
extent of participation by investors other than us. The Opportunities Fund was a multi-strategy hedge fund
that principally invested in various fixed income securities and their derivatives and employed substantial
leverage in its trading activities which significantly impacted our consolidated financial position, results of
operations and cash flows. When we refer to Deerfield, we mean only Deerfield & Company, LLC and not the
Opportunities Fund or the DM Fund.
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