# Table	of	Contents

# Index	to	Financial	Statements

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

x	ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE SECURITIES	EXCHANGE	ACT	OF	1934

¨	TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE SECURITIES	EXCHANGE	ACT	OF	1934

# GLOBAL	PAYMENTS	INC.

(Exact	name	of	registrant	as	specified	in	charter)

Georgia

(State	or	other	jurisdiction	of incorporation	or	organization)

10	Glenlake	Parkway,	North	Tower,	Atlanta,	Georgia (Address	of	principal	executive	offices)

# Registrant's	telephone	number,	including	area	code:	770-829-8000

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	each	class

Common	Stock,	No	Par	Value

Series	A	Junior	Participating	Preferred	Share	Purchase	Rights

Name	of	each	exchange

				on	which	registered

New	York	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

(Title	of	Class)

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.				Yes		x				No		¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.				Yes		¨				No		x

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past 90	days.				Yes		x				No		¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		¨

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the

definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	one):

Large	accelerated	filer		x

Non-accelerated	filer		¨

Accelerated	filer		¨

Smaller	reporting	company		¨

(Do	not	check	if	a	smaller	reporting	company)

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).				Yes			¨				No		x

The	aggregate	market	value	of	the	voting	stock	held	by	non-affiliates	(assuming	for	these	purposes,	but	not	conceding,	that	all	executive	officers,	directors,	and shareholders	owning	15%	or	more	of	the	outstanding	shares	of	common	stock	as	of	November	30,	2007,	are	"affiliates"	of	the	Registrant)	was	$3,397,984,623	based upon	the	last	reported	sale	price	on	the	New	York	Stock	Exchange	on	November	30,	2007.

The	number	of	shares	of	the	registrant's	common	stock	outstanding	at	July	21,	2008	was	79,656,560	shares.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Specifically	identified	portions	of	the	registrant's	proxy	statement	for	the	2008	annual	meeting	of	shareholders	are	incorporated	by	reference	in	Part	III.

|  | GLOBAL	PAYMENTS	INC.<br>2008	FORM	10-K	ANNUAL	REPORT<br>TABLE	OF	CONTENTS | Page |
| :--- | :--- | :--- |
|  | PART\tI |  |
| ITEM\t1. | BUSINESS | 2 |
| ITEM\t1A. | RISK\tFACTORS | 16 |
| ITEM\t1B. | UNRESOLVED\tSTAFF\tCOMMENTS | 23 |
| ITEM\t2. | PROPERTIES | 23 |
| ITEM\t3. | LEGAL\tPROCEEDINGS | 23 |
| ITEM\t4. | SUBMISSION\tOF\tMATTERS\tTO\tA\tVOTE\tOF\tSECURITY\tHOLDERS | 23 |
|  | PART\tII |  |
| ITEM\t5. | MARKET\tFOR\tREGISTRANT'S\tCOMMON\tEQUITY,\tRELATED\tSTOCKHOLDER\t\tMATTERS\tAND\tISSUER\tPURCHASES\tOF |  |
|  | EQUITY\tSECURITIES | 24 |
| ITEM\t6. | SELECTED\tFINANCIAL\tDATA | 27 |
| ITEM\t7. | MANAGEMENT'S\tDISCUSSION\tAND\tANALYSIS\tOF\tFINANCIAL\tCONDITION\tAND\tRESULTS\tOF\tOPERATIONS | 28 |
| ITEM\t7A. | QUANTITATIVE\tAND\tQUALITATIVE\tDISCLOSURES\tABOUT\tMARKET\tRISK | 49 |
| ITEM\t8. | FINANCIAL\tSTATEMENTS\tAND\tSUPPLEMENTARY\tDATA | 50 |
| ITEM\t9. | CHANGES\tIN\tAND\tDISAGREEMENTS\tWITH\tACCOUNTANTS\tON\tACCOUNTING\tAND\tFINANCIAL\tDISCLOSURE | 86 |
| ITEM\t9A. | CONTROLS\tAND\tPROCEDURES | 86 |
| ITEM\t9B. | OTHER\tINFORMATION | 87 |
|  | PART\tIII |  |
| ITEM\t10. | DIRECTORS,\tEXECUTIVE\tOFFICERS\tAND\tCORPORATE\tGOVERNANCE | 88 |
| ITEM\t11. | EXECUTIVE\tCOMPENSATION | 89 |
| ITEM\t12. | SECURITY\tOWNERSHIP\tOF\tCERTAIN\tBENEFICIAL\tOWNERS\tAND\tMANAGEMENT\tAND\tRELATED\tSTOCKHOLDER\tMATTERS | 89 |
| ITEM\t13. | CERTAIN\tRELATIONSHIPS\tAND\tRELATED\tTRANSACTIONS,\tAND\tDIRECTOR\tINDEPENDENCE | 90 |
| ITEM\t14. | PRINCIPAL\tACCOUNTING\tFEES\tAND\tSERVICES | 90 |
|  | PART\tIV |  |
| ITEM\t15. | EXHIBITS,\tFINANCIAL\tSTATEMENT\tSCHEDULES | 91 |
| SIGNATURES |  | 95 |

# CAUTIONARY	NOTICE	REGARDING

# FORWARD-LOOKING	STATEMENTS

Unless	the	context	requires	otherwise,	references	in	this	report	to	"Global	Payments,"	the	"Company,"	"we,"	"us,"	and	"our"	refer	to	Global	Payments	Inc.	and our	respective	subsidiaries.

We	believe	that	it	is	important	to	communicate	our	plans	and	expectations	about	the	future	to	our	shareholders	and	to	the	public.	Some	of	the	statements	we	use	in this	report,	and	in	some	of	the	documents	we	incorporate	by	reference	in	this	report,	contain	forward-looking	statements	concerning	our	business	operations,	economic performance	and	financial	condition,	including	in	particular:	our	business	strategy	and	means	to	implement	the	strategy;	the	amount	of	future	results	of	operations,	such as	revenue,	certain	expenses,	operating	margins,	income	tax	rates,	shares	outstanding,	capital	expenditures,	operating	metrics,	and	earnings	per	share;	our	success	and our	timing	in	developing	and	introducing	new	products	or	services	and	expanding	our	business;	and	the	successful	integration	of	future	acquisitions.	You	can	sometimes identify	forward	looking-statements	by	our	use	of	the	words	"believes,"	"anticipates,"	"expects,"	"intends,"	"plan,"	"forecast,"	"guidance"	and	similar	expressions.	For these	statements,	we	claim	the	protection	of	the	safe	harbor	for	forward-looking	statements	contained	in	the	Private	Securities	Litigation	Reform	Act	of	1995.

Although	we	believe	that	the	plans	and	expectations	reflected	in	or	suggested	by	our	forward-looking	statements	are	reasonable,	those	statements	are	based	on	a number	of	assumptions	and	estimates	that	are	inherently	subject	to	significant	risks	and	uncertainties,	many	of	which	are	beyond	our	control,	cannot	be	foreseen	and reflect	future	business	decisions	that	are	subject	to	change.	Accordingly,	we	cannot	guarantee	you	that	our	plans	and	expectations	will	be	achieved.	Our	actual	revenues, revenue	growth	rates	and	margins,	other	results	of	operations	and	shareholder	values	could	differ	materially	from	those	anticipated	in	our	forward-looking	statements	as a	result	of	many	known	and	unknown	factors,	many	of	which	are	beyond	our	ability	to	predict	or	control.	These	factors	include,	but	are	not	limited	to,	those	set	forth	in Item	1A—Risk	Factors	of	this	report,	those	set	forth	elsewhere	in	this	report	and	those	set	forth	in	our	press	releases,	reports	and	other	filings	made	with	the	Securities and	Exchange	Commission,	or	SEC.	These	cautionary	statements	qualify	all	of	our	forward-looking	statements,	and	you	are	cautioned	not	to	place	undue	reliance	on these	forward-looking	statements.

Our	forward-looking	statements	speak	only	as	of	the	date	they	are	made	and	should	not	be	relied	upon	as	representing	our	plans	and	expectations	as	of	any subsequent	date.	While	we	may	elect	to	update	or	revise	forward-looking	statements	at	some	time	in	the	future,	we	specifically	disclaim	any	obligation	to	publicly release	the	results	of	any	revisions	to	our	forward-looking	statements.

# PART	I

# ITEM	1—BUSINESS

# General	Developments

# Financial	Highlights

The	consolidated	operating	income	amounts	reflect	restructuring	and	other	charges	of	$1.3	million	and	$3.1	million	in	fiscal	2008	and	fiscal	2007,	respectively. These	charges	primarily	relate	to	employee	termination	benefits,	fixed	asset	abandonment	and	facility	closure	costs	due	to	facility	consolidations	and	the	elimination	of redundant	activities.

Refer	to	"Item	7—Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations"	for	a	detailed	explanation	of	these	results.

# Acquisitions

During	fiscal	2008,	we	acquired	a	portfolio	of	merchants	that	process	Discover	transactions	and	the	rights	to	process	Discover	transactions	for	our	existing	and new	merchants.	As	a	result	of	this	acquisition,	we	will	now	process	Discover	transactions	similarly	to	how	we	currently	process	Visa	and	MasterCard	transactions.	The purpose	of	this	acquisition	was	to	offer	merchants	a	single	point	of	contact	for	Discover,	Visa	and	MasterCard	card	processing.

During	fiscal	2008,	we	acquired	a	majority	of	the	assets	of	Euroenvios	Money	Transfer,	S.A.	and	Euroenvios	Conecta,	S.L.,	which	we	collectively	refer	to	as	LFS Spain.	LFS	Spain	consisted	of	two	privately-held	corporations	engaged	in	money	transmittal	and	ancillary	services	from	Spain	to	settlement	locations	primarily	in	Latin America.	The	purpose	of	the	acquisition	was	to	further	our	strategy	of	expanding	our	customer	base	and	market	share	by	opening	additional	branch	locations.

During	fiscal	2008,	we	acquired	a	series	of	money	transfer	branch	locations	in	the	United	States.	The	purpose	of	these	acquisitions	was	to	increase	the	market presence	of	our	DolEx-branded	money	transfer	offering.

# Facility	Consolidations	and	Conversions

In	March	2007,	we	decided	to	consolidate	our	technical	support	center	located	in	St.	Louis,	Missouri	into	our	operations	center	in	Owings	Mills,	Maryland.	We believe	this	consolidation	will	improve	our	customer	service	by	allowing	us	to	provide	our	customers	with	a	single	point	of	contact	in	one	physical	location.	This

consolidation	resulted	in	staff	reduction,	fixed	asset	abandonment	and	facility	closure	costs	and	was	completed	during	our	second	quarter	of	fiscal	2008.

During	fiscal	2008,	as	part	of	our	ongoing	strategy	to	integrate	our	acquisitions	into	our	existing	systems,	we	completed	the	conversion	of	our	Hong	Kong	and Macau	merchant	portfolio	away	from	HSBC	Asia	and	onto	our	back-end	operating	platform.

# Share	Repurchase	Program

On	April	5,	2007,	our	Board	of	Directors	approved	a	share	repurchase	program	that	authorized	the	purchase	of	up	to	$100	million	of	Global	Payments'	stock	in the	open	market	or	as	otherwise	may	be	determined	by	us,	subject	to	market	conditions,	business	opportunities,	and	other	factors.	Under	this	authorization,	we repurchased	2.3	million	shares	of	our	common	stock	during	fiscal	2008	at	a	cost	of	$87.0	million,	or	an	average	of	$37.85	per	share,	including	commissions.	As	of May	31,	2008,	we	had	$13.0	million	remaining	under	our	current	share	repurchase	authorization.

# Subsequent	Events

On	June	17,	2008,	we	entered	into	a	purchase	agreement	with	HSBC	Bank	plc,	or	HSBC	UK,	to	obtain	an	interest	in	a	newly	formed	limited	partnership	that	will provide	payment	processing	services	to	merchants	in	the	United	Kingdom	and	Internet	merchants	globally.	The	new	partnership	will	operate	under	the	name	HSBC Merchant	Services.	On	June	30,	2008,	we	completed	the	transaction	and	paid	HSBC	UK	$439	million	in	cash	to	acquire	a	51%	majority	ownership	in	the	partnership. We	will	manage	the	day-to-day	operations	of	the	partnership,	will	control	all	major	decisions	and,	accordingly,	will	consolidate	the	partnership's	financial	results	for accounting	purposes	effective	with	the	closing	date.	HSBC	UK	retained	ownership	of	the	remaining	49%	and	contributed	its	existing	merchant	acquiring	business	in	the United	Kingdom	to	the	partnership.	In	addition,	HSBC	UK	entered	into	a	ten-year	marketing	alliance	with	the	partnership	in	which	HSBC	UK	will	refer	customers	to	the partnership	for	payment	processing	services	in	the	United	Kingdom.	On	June	23,	2008,	we	entered	into	a	new	five	year,	$200	million	term	loan	to	fund	a	portion	of	the acquisition.	We	funded	the	remaining	purchase	price	with	excess	cash	and	our	existing	credit	facilities.

# Business	Description

We	are	a	leading	payment	processing	and	consumer	money	transfer	company.	As	a	high-volume	processor	of	electronic	transactions,	we	enable	merchants, multinational	corporations,	financial	institutions,	consumers,	government	agencies	and	other	profit	and	non-profit	business	enterprises	to	facilitate	payments	to	purchase goods	and	services	or	further	other	economic	goals.	Our	role	is	to	serve	as	an	intermediary	in	the	exchange	of	information	and	funds	that	must	occur	between	parties	so that	a	payment	transaction	or	money	transfer	can	be	completed.	We	were	incorporated	in	Georgia	as	Global	Payments	Inc.	in	September	2000,	and	we	spun-off	from	our former	parent	company	on	January	31,	2001.	Including	our	time	as	part	of	our	former	parent	company,	we	have	provided	transaction	processing	services	since	1967.

We	market	our	products	and	services	throughout	the	United	States,	Canada,	Europe	and	the	Asia-Pacific	region.	We	operate	in	two	business	segments,	merchant services	and	money	transfer,	and	we	offer	various	products	through	these	segments.	Our	merchant	services	segment	targets	customers	in	many	vertical	industries including	financial	institutions,	gaming,	government,	health	care,	professional	services,	restaurants,	retail,	universities	and	utilities.	Our	money	transfer	segment primarily	targets	immigrants	in	the	United	States	and	Europe.	See	Note	11	in	the	notes	to	consolidated	financial	statements	for	additional	segment	information	and	"Item 1A—Risk	Factors"	for	a	discussion	of	risks	involved	with	our	international	operations.

Total	revenues	from	our	merchant	services	and	money	transfer	segments,	by	geography	and	sales	channel,	are	as	follows	(amounts	in	thousands):

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Domestic\tdirect | $687,065 | $558,026 | $481,273 |
| Canada | 267,249 | 224,570 | 208,126 |
| Asia-Pacific | 72,367 | 48,449 | — |
| Central\tand\tEastern\tEurope | 59,778 | 51,224 | 47,114 |
| Domestic\tindirect\tand\tother | 44,150 | 46,873 | 51,987 |
| Merchant\tservices | 1,130,609 | 929,142 | 788,500 |
| Domestic | 119,019 | 115,416 | 109,067 |
| Europe | 24,601 | 16,965 | 10,489 |
| Money\ttransfer | 143,620 | 132,381 | 119,556 |
| Total\trevenues | $1,274,229 | $1,061,523 | $908,056 |

# Merchant	Services	Segment

Our	offerings	in	the	merchant	services	segment	provide	merchants,	independent	sales	organizations,	or	ISOs,	and	financial	institutions	with	credit	and	debit	card transaction	processing,	as	well	as	check-related	services.	We	use	two	basic	business	models	to	market	our	merchant	services	offerings.	One	model,	referred	to	as	"direct" merchant	services,	features	a	salaried	and	commissioned	sales	force,	ISOs	and	independent	sales	representatives,	all	of	whom	sell	our	end-to-end	services	directly	to merchants.	Our	other	model,	referred	to	as	"indirect"	merchant	services,	provides	the	same	basic	products	and	services	as	direct	merchant	services,	primarily	to	financial institutions	and	a	limited	number	of	ISOs	on	an	unbundled	basis,	that	in	turn	resell	our	products	and	services	to	merchants.	We	also	offer	sales,	installation	and	servicing of	ATM	and	point	of	sale,	or	POS,	terminals	and	selected	card	issuing	services,	which	are	components	of	indirect	merchant	services,	through	Global	Payments	Europe, s.r.o.,	formerly	known	as	MUZO,	which	is	our	subsidiary	based	in	the	Czech	Republic.	Our	direct	merchant	services	are	marketed	in	the	United	States,	Canada,	and throughout	the	Asia-Pacific	region,	while	our	indirect	merchant	services	are	marketed	in	the	United	States,	Canada,	and	Europe.

Direct	merchant	services	revenue	is	generated	on	services	primarily	priced	as	a	percentage	of	transaction	value,	whereas	indirect	merchant	services	revenue	is generated	on	services	primarily	priced	on	a	specified	amount	per	transaction.	In	both	merchant	services	models,	we	also	charge	other	processing	fees	unrelated	to	the number	of	transactions	or	the	transaction	value.

# Direct	Merchant	Services

We	market	our	services	through	a	variety	of	sales	channels	that	includes	a	dedicated	sales	force,	ISOs,	an	internal	telesales	group,	trade	associations,	alliance	and agent	bank	relationships,	retail	outlets	and	financial	institutions.	In	addition	to	receiving	referrals	from	approximately	1,600	bank	branch	locations	in	Canada,	we	have affiliations	in	the	United	States	with	hundreds	of	organizations	that	provide	sales	leads,	including	financial	institutions,	alliance	bank	branch	locations,	trade	associations, and	value	added	resellers,	or	VARs.	Additionally,	we	market	directly	to	customers	through	print	advertising	and	direct	mail	efforts.	We	also	participate	in	major	industry tradeshows	and	publicity	events	and	actively	execute	various	public	relations	campaigns.	In	the	Asia-Pacific	region,	we	market	through	a	dedicated	sales	force	and receive	referrals	from	HSBC	bank	branch	locations.	We	pursue	this	strategy	because	we	believe	that	it	utilizes	one	of	the	lowest	cost	delivery	systems	available	to acquire	customers	successfully.

# Credit	and	Debit	Card	Transaction	Processing

Credit	and	debit	card	transaction	processing	includes	the	processing	of	Visa,	MasterCard	and	Discover	credit	cards,	cards	issued	by	other	card	associations	like American	Express,	Diners	Club,	and	JCB,	and	on-line	and	off-line	debit	cards.	Credit	and	debit	card	processing	involves	a	consumer	or	cardholder	acquiring	goods	or services	from	a	merchant	and	using	a	credit	or	debit	card	as	the	form	of	payment.	The	term	"merchant"	generally	refers	to	any	organization	that	accepts	credit	or	debit cards	for	the	payment	of	goods	and	services,	such	as	retail	stores,	including	physical	locations	and	internet	sites,	mail	order	or	telephone	order	outlets,	restaurants, universities	and	government	agencies.	We	are	the	processing	intermediary	between	the	merchant	and	the	card	associations,	debit	networks	and	financial	institutions.

Although	card	transactions	may	appear	to	be	simple,	a	transaction	requires	a	complex	process	involving	various	participants	in	a	series	of	electronic	connections. In	addition	to	electronic	transaction	payment	processors	such	as	Global	Payments,	also	known	as	merchant	acquirers,	participants	in	this	process	include	card	issuers, cardholders,	merchants,	card	associations	and	card	association	members.	Card	issuers	are	financial	institutions	that	issue	credit	and	debit	cards	to	approved	applicants and	are	identifiable	by	their	trade	name	typically	imprinted	on	the	issued	cards.

An	approved	applicant	for	a	credit	or	debit	card	from	a	card	issuer	is	referred	to	as	a	cardholder,	and	may	be	any	entity	for	which	an	issuer	wishes	to	extend	a	line of	credit,	such	as	a	consumer,	corporation	or	government	agency.	The	cardholder	may	use	the	card	at	any	merchant	location	that	meets	the	qualification	standards	of	the relevant	card	association,	such	as	MasterCard,	Visa,	Discover,	other	cards	such	as	American	Express	and	Diners	Club,	or	debit	networks	such	as	NYCE,	PULSE	and STAR	in	the	United	States,	Interac	in	Canada	and	the	various	debit	networks	in	the	Asia-Pacific	region.

The	card	associations	and	debit	networks	consist	of	members,	generally	financial	institutions,	who	establish	uniform	regulations	that	govern	much	of	the	industry. During	a	typical	card	transaction,	the	merchant	and	the	card	issuer	do	not	interface	directly	with	each	other,	but	instead	rely	on	merchant	acquirers.	A	merchant	acquirer can	be	an	independent	processor	that	acts	with	a	member	sponsor,	such	as	Global	Payments,	or	the	merchant	acquirer	can	be	a	bank	itself.	We	perform	a	series	of services	including	authorization,	electronic	draft	capture,	file	transfers	to	facilitate	the	funds	settlement	and	certain	exception-based,	back	office	support	services	such	as chargeback	and	retrieval	resolution.	The	following	is	a	more	detailed	description	of	credit	and	debit	card	transactions:

A	card	transaction	begins	when	a	cardholder	presents	a	card	for	payment	at	a	merchant	location	and	the	merchant	swipes	the	card's	magnetic	strip	through	a	POS terminal	card	reader,	which	may	be	provided	by	Global	Payments.	Alternatively,	card	and	transaction	information	may	be	captured	and	transmitted	to	our	network through	a	POS	device	by	one	of	a	number	of	products	that	we	offer	directly	or	through	a	VAR.	For	a	credit	card	transaction,	authorization	services	generally	refer	to	the process	in	which	the	card	issuer	indicates	whether	a	particular	credit	card	is	authentic	and	whether	the	impending	transaction	value	will	cause	the	cardholder	to	exceed defined	credit	limits.	The	terminal	electronically	records	sales	draft	information,	such	as	the	credit	card	identification	number,	transaction	date	and	value	of	the	goods	or services	purchased.	Debit	card	payments	differ	slightly	from	traditional	credit	card	transactions	in	that	the	cardholder	is	required	to	have	sufficient	funds	available	in	a deposit	account	at	the	time	of	the	transaction,	or	the	debit	card	transaction	will	not	be	authorized.	PIN-based	or	on-line	debit	transactions	are	sent	through	a	debit network,	while	signature-based,	off-line	debit,	or	check	card	transactions	are	sent	through	card	associations	and	require	a	signature	at	the	time	of	purchase.	Also,	PIN- based	or	on-line	debit	transactions	typically	deduct	the	purchase	amount	from	the	cardholder's	deposit	account	within	a	day	of	the	purchase,	depending	on	the	time	of	the purchase.	Signature-based,	off-line	debit	or	check	card	transactions	typically	debit	the	cardholder's	deposit	account	two	to	three	days	after	the	purchase,	although	the funds	are	"held"	with	a	memo	posted	to	the	cardholder's	bank	account.	A	credit	card	transaction	posts	to	a	cardholder's	account,	reducing	the	available	credit	limit	in	a similar	manner.

After	the	card	and	transaction	information	is	captured	by	the	POS	device,	the	terminal	automatically	either	dials	a	pre-programmed	phone	number	or	otherwise connects	to	our	network,	such	as	through	the	internet	or	a

leased	line,	in	order	to	receive	authorization	of	the	transaction.	We	route	the	request	to	the	applicable	card	association	or	debit	network.	The	card	association	or	debit network	forwards	the	authorization	request	to	the	card	issuer,	who	determines	a	response	based	on	the	status	of	the	cardholder's	account.	The	response	is	returned	to	the merchant's	terminal	via	the	same	communication	network.	This	entire	authorization	and	response	process	occurs	within	seconds	from	the	time	the	merchant	swipes	the cardholder's	card	through	the	POS	terminal	card	reader.

Electronic	draft	capture	is	the	process	of	transferring	sales	draft	data	into	an	electronic	format	so	that	it	may	be	sent	through	networks	for	clearing	and	settlement. The	card	associations	use	a	system	known	as	interchange,	in	the	case	of	credit	and	off-line	debit	cards,	and	financial	institutions	use	the	debit	networks,	in	the	case	of on-line	debit	cards,	to	transfer	the	information	and	funds	between	the	card	issuers	and	us	to	complete	the	link	between	merchants	and	card	issuers.

In	order	to	provide	credit	card	transaction	processing	services,	we	must	be	designated	as	a	certified	processor	by	MasterCard	and	Visa,	in	addition	to	a	Merchant Service	Provider	by	MasterCard	and	an	Independent	Sales	Organization	by	Visa.	These	designations	are	dependent	upon	member	clearing	banks	of	either	organization sponsoring	us	and	our	adherence	to	the	standards	of	the	Visa	and	MasterCard	associations.	A	financial	institution	that	is	a	member	of	the	Visa	and/or	MasterCard	card associations	(the	"Member")	must	sponsor	an	electronic	transaction	payment	processor	such	as	Global	Payments.	We	have	four	primary	financial	institution	sponsors	in the	United	States,	Canada,	and	the	Asia-Pacific	region	with	whom	we	have	sponsorship	or	depository	and	processing	agreements.	These	agreements	allow	us	to	route transactions	under	the	member	banks'	control	and	identification	numbers	to	clear	credit	card	transactions	through	Visa	and	MasterCard.	The	member	financial institutions	of	Visa	and	MasterCard,	some	of	which	are	our	competitors,	set	the	standards	with	which	we	must	comply.

We	also	provide	credit	card	transaction	processing	for	Discover	Financial	Services	or	Discover	Card	("Discover")	and	are	designated	as	an	acquirer	by	Discover. This	designation	provides	us	with	a	direct	relationship	between	us	and	Discover,	and	therefore	a	Member	sponsorship	is	not	required.	Our	agreement	with	Discover allows	us	to	route	and	clear	transactions	directly	through	Discover's	network.	Otherwise,	we	process	Discover	transactions	similarly	to	how	we	process	MasterCard	and Visa	transactions.	Discover	publishes	acquirer	operating	regulations,	with	which	we	must	comply.	We	use	our	Members	to	assist	in	funding	merchants	for	Discover transactions.

Funds	settlement	refers	to	the	process	of	transferring	funds	for	sales	and	credits	between	cardholders	and	merchants.	Depending	on	the	type	of	transaction,	either the	credit	card	interchange	system	or	the	debit	network	is	used	to	transfer	the	information	and	funds	between	the	Member	and	card	issuer	to	complete	the	link	between merchants	and	card	issuers.

For	transactions	processed	on	our	systems,	we	use	our	network	telecommunication	infrastructure	to	deliver	funding	files	to	the	Member,	which	creates	a	file	to fund	the	merchants	using	country-specific	payment	networks	such	as	the	Federal	Reserve's	Automated	Clearing	House	system	in	the	United	States	or	the	Automated Clearing	Settlement	System	or	the	Large	Value	Transfer	System	in	Canada.	In	our	United	States	portfolio	and	in	most	of	our	Canadian	portfolio,	merchant	funding primarily	occurs	after	the	Member	receives	the	funds	from	the	card	issuer	through	the	card	associations.	For	certain	of	our	Canadian	and	Asia-Pacific	merchant accounts,	the	Member	funds	the	merchants	before	the	Member	receives	the	net	settlement	funds	from	the	card	associations,	creating	a	net	settlement	asset	at	the Member.	In	certain	Asia-Pacific	countries,	the	Member	provides	the	payment	processing	operations	and	related	support	services	on	our	behalf	under	a	transition	services agreement.	The	Member	will	continue	to	provide	these	services	until	we	fully	integrate	the	Asia-Pacific	operations	into	our	own	operations,	which	we	expect	will	be completed	in	phases	through	2010.	After	our	integration,	the	Member	will	continue	to	provide	funds	settlement	services	similar	to	the	functions	performed	by	our Members	in	the	United	States	and	Canada.

Timing	differences,	interchange	expenses,	merchant	reserves	and	exception	items	cause	differences	between	the	amount	the	Member	receives	from	the	card associations	and	the	amount	funded	to	the	merchants.	The

standards	of	the	card	associations	restrict	us	from	performing	funds	settlement	or	accessing	merchant	settlement	funds,	and,	instead,	require	that	these	funds	be	in	the possession	of	the	Member	until	the	merchant	is	funded.	However,	in	practice	and	in	accordance	with	the	terms	of	our	sponsorship	agreements	with	our	Members,	we follow	a	net	settlement	process	whereby,	if	the	incoming	amount	from	the	card	associations	precedes	the	Member's	funding	obligation	to	the	merchant,	we	temporarily hold	the	surplus	on	behalf	of	the	Member,	in	a	joint	deposit	account	or	in	an	account	at	the	Member	bank,	and	record	a	corresponding	liability.	Conversely,	if	the Member's	funding	obligation	to	the	merchant	precedes	the	incoming	amount	from	the	card	associations,	the	amount	of	the	Member's	net	receivable	position	is	either subsequently	advanced	to	the	Member	by	us	or	the	Member	satisfies	this	obligation	with	its	own	funds.	If	the	Member	uses	its	own	funds,	the	Member	assesses	a funding	cost,	which	is	included	in	interest	and	other	expense	on	the	accompanying	consolidated	statements	of	income.	Each	participant	in	the	transaction	process receives	compensation	for	its	services.

As	an	illustration,	on	a	$100.00	credit	card	transaction,	the	card	association	may	fund	the	Member	$98.50	after	retaining	a	hypothetical	$1.50	referred	to	as	an interchange	fee	or	interchange	expense.	The	card	associations	have	published	hundreds	of	different	interchange	expense	rate	arrangements.	The	card	issuer	seeks reimbursement	of	$100.00	from	the	cardholder	in	the	cardholder's	monthly	credit	card	statement.	The	Member	would,	in	turn,	pay	the	merchant	$100.00.	The	net settlement	after	this	transaction	would	require	us	to	advance	to	the	Member	$1.50.	After	the	end	of	the	month,	we	would	bill	the	merchant	a	percentage	of	the transaction,	or	discount,	to	cover	the	full	amount	of	the	interchange	fee	and	our	net	revenue	from	the	transaction.	If	our	net	revenue	from	the	merchant	in	the	above example	was	0.5%	of	the	credit	card	transaction	value,	we	would	bill	the	merchant	$2.00	at	the	end	of	the	month	for	the	transaction,	reimburse	ourselves	for approximately	$1.50	in	interchange	fees	advanced	to	the	Member	and	retain	$0.50	as	our	net	revenue	for	the	transaction.	Our	gross	profit	on	the	transaction	reflects	the net	revenue	less	operating	expenses,	including	the	network	and	systems	cost	to	process	the	transaction	and	commissions	paid	to	our	sales	force	or	ISOs.

If	it	is	determined	that	the	merchant	in	the	above	transaction	is	to	be	placed	on	reserve	or	delay,	then	collateral	is	held	to	minimize	contingent	liabilities	to	us associated	with	charges	properly	reversed	by	cardholders,	otherwise	known	as	chargebacks.	This	contingent	liability	arises	from	our	performance	guarantee	to	the Member	sponsor.	The	merchant	funds	are	held	as	a	cash	deposit	to	minimize	this	risk	of	loss	associated	with	the	transactions	processed.	On	behalf	of	the	Member,	we hold	all	or	a	portion	of	the	deposit	for	the	convenience	of	the	Member.	In	this	situation,	the	Member	would	net	fund	us	$98.50,	the	same	amount	the	Member	received from	the	card	association.	This	amount	is	comprised	of	the	$100.00	that	would	have	been	funded	by	the	Member	to	the	merchant,	less	the	same	$1.50	for	the	interchange expense.

If	a	transaction	we	had	processed	previously	through	the	Member	is	charged	back	by	the	cardholder	through	the	card	issuer,	the	Member	is	notified	of	the shortfall	in	the	anticipated	wire	transfer.	If	the	amount	of	the	chargeback	is	$5.00,	the	Member	would	receive	$93.50,	net	from	the	card	association	and	be	required	to fund	the	merchant	the	same	$100.00.	Therefore,	we	would	be	required	to	advance	$6.50	to	the	Member.	This	amount	is	comprised	of	$5.00	for	the	chargeback,	plus	the same	$1.50	for	the	interchange	expense.

In	addition	to	the	card	processing	services	described	above,	we	also	process	retrieval	requests	on	behalf	of	merchants	for	issuing	banks	and	provide	chargeback resolution	services,	both	of	which	relate	to	cardholders	disputing	an	amount	that	has	been	charged	to	their	card.	We	review	the	dispute	and	handle	the	related	exchange of	information	and	funds	between	the	merchant	and	the	card	issuer	if	a	charge	is	to	be	reversed.	As	a	result	of	our	financial	institution	sponsorship	and	the	terms	of	our standard	merchants'	agreement,	our	direct	merchant	services	customers	are	liable	for	any	charges	properly	reversed	by	the	cardholder.	In	the	event,	however,	that	we	are not	able	to	collect	such	amount	from	the	merchants,	due	to	merchant	fraud,	insolvency,	bankruptcy	or	any	other	reason,	we	may	be	liable	for	any	such	reversed	charges. We	utilize	a	number	of	systems	and	procedures	to	manage	merchant	risk.	Our	risk	management	services	include	credit	underwriting,	credit	scoring,	fraud	control, account	processing	and	collections.	In	addition,	we	may	require	cash	deposits,	guarantees,	letters	of	credit	and	other	types	of	collateral	by	certain	merchants	to	minimize any	such	contingent	liability.	Notwithstanding	our	risk	management	activities,	we	have	historically	experienced	losses	due	to	merchant	defaults.

# Check	Services

Our	check	products	offer	merchant	customers	risk	management	alternatives,	in	the	case	of	our	verification	and	recovery	offerings,	or	risk	elimination,	in	the	case of	our	guarantee	offerings,	by	leveraging	our	internal	and	external	databases	of	checkwriters	to	help	decide	whether	the	merchant	should	accept	a	check	as	the	form	of payment	from	a	particular	checkwriter.	Our	check	services	products	are	part	of	our	domestic	direct	service	offering.

Check	guarantee	services	include	comprehensive	check	verification	and	guarantee	services	designed	for	a	merchant's	specific	needs	and	risk	adversity.	This service	offering	guarantees	payment	of	all	checks	that	are	electronically	verified,	primarily	using	POS	check	readers	and	our	extensive	databases,	which	allows merchants	to	expand	their	revenue	base	by	applying	less	stringent	requirements	when	accepting	checks	from	consumers.	If	a	verified	check	is	dishonored,	our	check guarantee	service	generally	provides	the	merchant	with	reimbursement	of	the	check's	face	value,	and	then	we	pursue	collection	of	the	check	through	our	internal collection	services.	While	we	have	the	right	to	collect	the	full	amount	of	the	check	from	the	checkwriter,	we	have	historically	recovered	less	than	100%	of	the guaranteed	checks.	To	protect	against	this	risk,	we	use	verification	databases	that	contain	information	on	historical	delinquent	check	writing	activity.	We	derive	revenue for	these	services	primarily	by	charging	the	merchant	a	percentage	of	the	face	value	of	each	guaranteed	check.

Check	verification	and	recovery	services	are	similar	to	those	provided	in	the	check	guarantee	service,	except	that	these	services	do	not	guarantee	payment	of	the verified	checks.	Check	verification	services	provide	a	low-cost	loss-reduction	solution	for	merchants	wishing	to	measure	a	customer's	check	worthiness	quickly	at	the point	of	sale	without	incurring	the	additional	expense	of	check	guarantee	services.	We	provide	check	recovery	services	for	these	customers	upon	their	request.	We	derive revenues	for	these	services	primarily	from	the	service	fees	collected	from	delinquent	check	writers,	fees	charged	to	merchants	based	on	a	transaction	rate	per	verified check,	and	fees	charged	to	merchants	for	specialized	services,	such	as	electronic	re-deposits	of	dishonored	checks.

In	the	specialized	vertical	market	of	gaming,	our	VIP	LightSpeed	proprietary	software	and	VIP	Preferred	Advantage	product	provide	the	gaming	industry	with	the tools	necessary	to	establish	revolving	check	cashing	limits	for	the	casinos'	customers.	VIP	Preferred	offers	both	traditional	and	electronic	check	cashing	options	which eliminates	the	need	for	paper	checks	as	part	of	the	VIP	LightSpeed	suite	of	products.	Further,	our	ATM	Cash	Advantage	product	allows	the	casinos'	customers	to cash	electronic	checks	at	certain	ATMs	using	a	VIP	Preferred	Card	to	initiate	the	transaction.	Lastly,	our	PlayerCash	Advantage	product,	formerly	referred	to	as	Cash and	Win,	allows	the	casinos'	customers	to	complete	credit	and	debit	card	cash	advances	by	utilizing	specialized	kiosks	to	initiate	the	advances	and	then	completing	the transaction	at	the	casino	cage.	Our	gaming	products	allow	fast	access	to	cash	with	high	limits	so	that	gaming	establishments	can	increase	the	flow	of	money	to	their gaming	floors	and	reduce	risk.	We	derive	revenue	from	our	gaming	products	primarily	based	on	a	percentage	of	the	transaction	value.

# Indirect	Merchant	Services

Through	our	indirect	merchant	services	business	model,	we	market	unbundled	products	and	services	primarily	to	financial	institutions	and	a	limited	number	of ISOs	that	in	turn	resell	our	products	and	services	to	merchants.	The	primary	service	offering	in	this	business	model	is	credit	and	debit	card	transaction	processing.	These products	and	services	are	identical	with	those	offered	under	our	direct	merchant	services	business	model.	We	primarily	perform	authorization,	electronic	draft	capture and	file	transfer	services	for	our	indirect	merchant	services	customers.	In	addition,	we	may	perform	merchant	accounting	and	other	back	office	services.	The	primary differences	between	indirect	merchant	services	credit	and	debit	card	transaction	processing	and	direct	merchant	services	relate	to	funds	settlement	and	financial institution	sponsorship.	Our	indirect	merchant	services	customers	perform	their	own	funds	settlement	and	either	have	separate	financial	institution	sponsorship	or	their own	identification	numbers,	referred	to	as	Bank	Identification	Number,	or	BIN,	for	Visa

transactions	and	Interbank	Card	Association	number,	or	ICA,	for	MasterCard	transactions,	to	clear	credit	card	transactions	through	Visa	and	MasterCard.	Since	we	are not	party	to	the	financial	institution	sponsorship,	we	are	not	potentially	liable	for	any	charges	properly	reversed	by	the	cardholder.

Our	merchant	accounting	services	provide	information	primarily	for	our	indirect	merchant	services	customers	to	monitor	portfolio	performance,	control	expenses, disseminate	information	and	track	profitability	through	the	production	and	distribution	of	detailed	statements	summarizing	electronic	transaction	payment	processing activity.	Our	risk	management	services	allow	financial	institutions	to	monitor	credit	and	transaction	risk,	thereby	enhancing	the	profitability	of	their	merchant	portfolios. Our	risk	management	services	include	credit	underwriting,	credit	scoring,	fraud	control,	account	processing	and	collections.

In	Europe,	we	provide	these	indirect	merchant	services	through	our	Global	Payments	Europe	subsidiary.	Consistent	with	the	European	payments	processing environment,	Global	Payments	Europe's	offerings	also	include	terminal	management	services	for	ATM	and	POS	terminals,	as	well	as	card	issuing	services.	Our	card issuing	services	in	Europe	include	card	database	management	and	card	personalization.	We	also	provide	credit	scoring	services	to	financial	institutions	in	the	Czech Republic,	Slovakia	and	Russia.

Our	domestic	indirect	and	other	service	offering	also	provides	financial	and	operational	data	to	financial	institutions,	corporations	and	government	agencies	and allows	these	organizations	to	exchange	this	information	with	financial	institutions	and	other	service	providers.	We	also	provide	EDI	tax	filing	and	internet	tax	payment services	that	allow	financial	institutions	and	government	agencies	to	offer	corporate	taxpayers	a	secure	and	convenient	method	of	paying	taxes	electronically.	These services	are	primarily	priced	based	on	a	rate	per	transaction	processed.

# Money	Transfer	Segment

Our	money	transfer	segment	provides	consumer	money	transfer	services.	A	majority	of	the	revenue	derived	from	our	money	transfer	offering	consists	of	our electronic	money	transfer	services	marketed	under	our	DolEx	brand	to	first	and	second	generation	Latin	Americans	living	in	the	United	States.	This	segment	regularly transfers	money	to	family	and	friends	living	in	Latin	America.	Following	the	Europhil	acquisition	in	December	2004,	we	expanded	our	money	transfer	origination locations	to	Europe	and	our	settlement	locations	to	Morocco,	the	Philippines,	Romania,	Poland	and	other	new	destinations.

As	of	May	31,	2008,	we	operated	793	originating	retail	branch	locations	in	the	United	States	and	90	in	Europe,	and	have	settlement	arrangements	with	more	than 12,000	bank,	exchange	house,	and	retail	locations	worldwide.	The	money	transfer	service	offering	is	primarily	driven	by	transaction	levels	and	unit	pricing.	Our	business strategy	is	to	competitively	price	our	services,	provide	a	timely	and	quality	service,	diversify	our	services	through	new	product	offerings	and	increase	our	physical presence	through	branch	acquisitions	and,	to	a	lesser	extent,	new	branch	openings,	and	expand	our	settlement	network.	We	believe	this	strategy	will	further	expand	our customer	base	and	increase	our	market	share.

In	a	typical	money	transfer	transaction,	a	customer	visits	one	of	our	originating	branch	locations	and	pays	a	fee	based	on	the	nature	and	amount	of	the	transaction performed	on	the	customer's	behalf.	Where	applicable,	the	customer	is	quoted	a	retail	exchange	rate	when	the	money	transfer	transaction	is	requested.	The	customer	will receive	a	receipt	that	includes	the	amount	the	beneficiary	will	receive,	the	retail	exchange	rate,	money	transfer	fee,	settlement	location	and	total	amount	that	was remitted	to	us.	We	earn	additional	revenue	based	on	the	difference	between	the	retail	exchange	rate	that	is	quoted	and	the	wholesale	exchange	rate	when	the	currency	is purchased,	which	is	in	much	larger	denominations	than	the	individual	customer's	transaction.	On	each	business	day,	we	estimate	the	amount	of	currency	needed	by	our settlement	locations,	bid	the	wholesale	exchange	rates	based	on	the	amount	needed	and	purchase	currency	at	the	best	available	rates.

# Employees

As	of	May	31,	2008,	we	had	4,899	employees.	Many	of	our	employees	are	highly	skilled	in	technical	areas	specific	to	electronic	transaction	payment	processing and	money	transfer.	We	believe	that	our	current	and	future	operations	depend	substantially	on	retaining	our	key	technical	employees.

# Competition

Our	primary	competitors	in	the	electronic	transaction	payment	processing	industry	include	other	merchant	acquirers,	as	well	as	major	national	and	regional financial	institution	processors	and	ISOs,	some	of	which	are	our	customers.	Certain	of	these	companies	are	privately	held,	and	the	majority	of	those	that	are	publicly	held do	not	release	the	information	necessary	to	quantify	our	relative	competitive	position	precisely.	As	an	independent	merchant	acquirer,	our	principal	affiliation	with financial	institutions	relates	to	the	sponsorship	that	enables	our	access	to	the	card	associations	and	debit	networks.	We	believe	an	independent	merchant	acquirer,	such	as Global	Payments,	will	tend	to	be	more	of	an	advocate	for	the	merchant	customer,	as	there	is	no	other	relationship	with	a	card	issuing	business	or	cardholder	customer service,	which	is	typical	of	a	financial	institution	processor.	Also,	a	financial	institution	processor's	sales	channel	is	primarily	based	on	customer	referrals	within	the institution	while	an	independent	processor	or	ISO	will	tend	to	be	focused	on	sales	from	all	channels,	including	internally	generated	leads.	Finally,	a	financial	institution processor	may	not	have	the	same	executive	focus	on	a	merchant	acquiring	business,	as	the	business	is	generally	not	core	to	the	total	revenues	of	the	financial	institution. We	primarily	differ	from	ISOs	in	that	we	have	our	own	processing	platform	and	financial	institution	sponsorship	agreements.

Based	on	industry	publications	such	as	The	Nilson	Report,	dated	March	2008,	we	are	a	leading	mid-market	and	small-market	merchant	acquirer	in	the	United States.	According	to	that	report,	one	of	our	competitors,	First	Data	Corporation	and	its	affiliates,	which	include	Chase	Paymentech	Solutions,	is	the	largest	electronic transaction	payment	processor	in	the	United	States.

Our	primary	competitor	in	Canada	is	Moneris	Solutions,	which	we	believe	has	a	larger	share	of	the	Canadian	merchant	acquiring	market	based	on	volume processed.	Moneris	Solutions	is	a	joint	venture	between	the	Royal	Bank	of	Canada	and	the	Bank	of	Montreal.	We	also	consider	Chase	Paymentech	Solutions	and	TD Merchant	Services	to	be	major	competitors	in	the	Canadian	market.

In	the	Asia-Pacific	region,	our	primary	competition	is	from	financial	institutions	that	offer	merchant	acquiring	services.	In	Europe,	our	primary	competition	is from	financial	institutions,	other	third	party	processors	and	from	software	providers	that	offer	financial	institutions	the	ability	to	process	transactions	in-house.

We	service	a	variety	of	industry	segments	and	specialize	in	direct	merchant	services,	primarily	the	mid-market	and	small-market	segments	in	the	United	States, large	and	mid-market	segments	in	Canada	and	large	and	mid-market	segments	in	the	Asia-Pacific	region.	We	define	mid-market	as	a	merchant	with	an	average	of $150,000	to	$300,000	in	annual	card	volume.	Card	volume	represents	the	dollar	value	of	transactions	processed	by	the	merchant	for	credit	and	debit	card	transactions. Many	of	our	ISO	relationships	provide	merchant	referrals	in	the	small-market	segment,	with	average	annual	card	volumes	below	$150,000.	National	accounts	or	large- market	merchants	that	we	serve	typically	range	between	$3	million	to	$10	million	in	annual	card	volume,	although	we	serve	a	limited	number	of	merchants	with	more than	$100	million	in	such	volume	and	a	select	few	merchants	with	more	than	$1	billion	in	such	volume.

Our	primary	strategy	to	distinguish	ourselves	from	our	competitors	focuses	on	offering	a	variety	of	electronic	transaction	payment	processing	solutions	to	our customers.	These	enhanced	services	involve	vertical	market	functionality	and	sophisticated	reporting	features	that	add	value	to	the	information	obtained	from	our electronic	transaction	payment	processing	databases.	We	believe	that	our	knowledge	of	these	specific	markets,

the	size	and	effectiveness	of	our	dedicated	sales	force,	affiliations	with	trade	associations,	agent	banks,	original	equipment	manufacturers	or	OEMs	and	value	added resellers	or	VARs,	our	ability	to	offer	specific,	integrated	solutions	to	our	customers,	including	hardware,	software,	processing,	and	network	facilities,	and	our	flexibility in	packaging	these	products	are	positive	factors	that	enhance	our	competitive	position.

Our	primary	competitors	in	the	money	transfer	industry	are	Western	Union	and	MoneyGram,	who	are	more	diversified	with	a	broader	international	reach	than	us. In	addition,	we	face	competition	from	a	number	of	smaller	money	transfer	operators	who	focus	on	money	transfers	from	the	United	States	to	Latin	America.	Many	of our	competitors	use	agency	agreements	with	third	parties	at	the	point	of	sale	to	collect	funds	and	input	transaction	data.	We	generally	use	a	fixed-cost,	branch-owned model	at	the	point	of	sale	rather	than	a	variable-cost,	agent-based	model.	We	believe	this	model	enhances	our	growth	strategy,	as	higher	transaction	levels	may	provide significant	future	leverage.

The	most	significant	competitive	factors	relating	to	our	money	transfer	offering	include	price,	reliability,	customer	service,	functionality,	the	breadth	and effectiveness	of	our	distribution	channel	and	value-added	features.	These	competitive	factors	will	continue	to	change	as	new	distribution	channels	and	alternative payment	solutions	are	developed	by	our	competitors	and	us.	Many	money	transfer	operators,	including	us,	are	developing	ancillary	products	and	services	such	as	stored value	cards,	check	cashing	and	bill	payments.	Increasingly,	card-based	solutions	are	being	introduced	at	the	origination	and	settlement	points,	replacing	the	current	cash- based	solution.	Our	ability	to	effectively	compete	in	the	marketplace	depends	on	our	ability	to	adapt	to	these	technological	and	competitive	advancements.	We	believe our	knowledge	of	the	industry,	our	relative	size	and	our	branch-owned	model	give	us	an	advantage	over	our	competitors	when	adapting	to	these	changes.

# Industry	Overview	and	Target	Markets

# Industry	Overview

Payment	processing	service	providers	offer	high-volume	electronic	transaction	payment	processing	and	support	services	directly	to	financial	institutions, merchants,	multinational	corporations,	government	agencies	and	ISOs.	Generally,	the	payment	processing	market	in	the	United	States	and	Canada	continues	to	transition from	traditional	financial	institution	providers	to	independent	merchant	acquirers,	such	as	Global	Payments.	We	believe	merchants	seek	more	efficient	distribution channels,	as	well	as	increased	technological	capabilities	required	for	the	rapid	and	efficient	creation,	processing,	handling,	storage,	and	retrieval	of	information.

In	the	European	and	Asia-Pacific	regions,	financial	institutions	remain	the	dominant	provider	of	payment	processing	services	to	merchants,	although	the outsourcing	of	back-end	processing	services	to	third	party	service	providers	is	becoming	more	prevalent.	Throughout	all	markets,	processing	services	have	become increasingly	complex,	requiring	significant	capital	commitments	to	develop,	maintain	and	update	the	systems	necessary	to	provide	these	advanced	services	at	a competitive	price.

We	also	provide	electronic	money	transfer	services	to	consumers	in	the	United	States	and	Europe	who	send	money	to	Latin	America,	Morocco,	the	Philippines, Romania,	Poland	and	other	destinations.	Unlike	our	major	competitors	in	the	Latin	American	corridor	that	operate	an	agent-based	network,	we	generally	utilize	a branch-owned	network	strategy	at	the	point	of	sale.	We	believe	that	this	differentiation	allows	us	to	be	more	flexible	and	competitive	when	setting	our	prices	and introducing	new	products	and	services.

As	a	result	of	continued	growth	in	our	industry,	several	large	merchant	acquirers,	including	us,	have	expanded	operations	both	domestically	and	internationally. This	expansion	has	come	in	the	form	of	acquisitions	and	the	creation	of	alliances	and	joint	ventures.	We	believe	that	the	electronic	payment	transaction	processing	and money	transfer	industries	will	continue	to	consolidate	as	banks	and	independent	processors	that	do	not	have	the	necessary	infrastructure	to	participate	in	a	highly competitive	environment	look	to	exit	the	business.

In	the	Canadian	market,	Visa,	MasterCard	and	Interac	are	planning	to	migrate	to	cards	containing	chip	technology	over	the	coming	years.	Chip	technology provides	the	ability	to	process	payment	transactions	securely	by	protecting	the	cardholder	information	in	an	encrypted	and	confidential	manner.	The	chip	is	difficult	to copy	and	has	the	additional	capacity	to	be	personalized	by	a	card	issuer,	including	the	ability	to	be	programmed	with	spending	and	usage	limits,	making	it	possible	to authorize	some	transactions	off-line.	Chip	technology	can	also	help	enable	a	variety	of	additional	card	features	including	applications	such	as	loyalty,	access	control, rewards	and	public	transit	passes.	We	expect	that	it	will	take	multiple	years	for	all	participants	to	implement	the	computer	equipment	and	merchant	terminals	necessary to	accept	and	process	the	chip	card	compliant	transactions	in	the	Canadian	marketplace.	We	have	developed	a	long-term	plan	to	ensure	our	merchants	will	benefit	from the	migration	to	chip	technology	in	the	Canadian	market.	In	addition,	we	have	begun	to	deploy	chip	card-capable	terminals	in	the	Canadian	market.	Chip	card technology	is	already	prevalent	in	the	European	and	Asia-Pacific	markets.

We	believe	the	number	of	electronic	transactions	will	continue	to	grow	in	the	future	and	that	an	increasing	percentage	of	these	transactions	will	be	processed through	emerging	technologies.	To	help	our	customers	reduce	their	transaction	costs	and	speed	up	the	transaction	approval	process,	we	have	integrated	new	technologies into	our	service	offerings	such	as	internet	protocol	communications	and	check	truncation	or	conversion	at	the	point	of	sale.	If	new	technologies	like	radio	frequency identification	or	contactless	payment	cards	continue	to	evolve	and	are	desired	by	merchants	and	consumers,	we	plan	to	continue	developing	new	products	and	services that	will	exploit	the	benefits	that	these	new	technologies	can	offer	our	customers.	We	also	believe	that	new	emerging	markets	will	continue	to	develop	in	areas	that	have been	previously	dominated	by	paper-based	transactions.	Industries	such	as	quick	service	restaurants,	government,	recurring	payments,	and	business-to-business	should continue	to	see	transaction	volumes	migrate	to	more	electronic-based	settlement	solutions.	We	believe	that	the	continued	development	of	new	products	and	services	and the	emergence	of	new	vertical	markets	will	be	a	factor	in	the	growth	of	our	business	for	the	foreseeable	future.

# Target	Markets

We	believe	that	significant	global	opportunities	exist	for	continued	growth	in	the	application	of	electronic	transaction	payment	processing	and	money	transfer services.	Although	the	United	States	accounts	for	the	largest	payment	processing	volume	in	the	world,	global	expansion	by	financial	institutions	into	new	geographies and	the	increased	recognition	by	governments	of	the	ability	of	payment	cards	to	facilitate	economic	growth	are	rapidly	transforming	the	electronic	commerce	market	into a	global	payments	opportunity.	Additionally,	increased	migration	trends	led	by	the	rapid	globalization	of	the	economy	are	also	leading	the	way	for	increased	electronic money	transfer	opportunities.

The	growth	of	retail	credit	card	transactions,	as	well	as	the	rapid	growth	in	the	utilization	of	debit	cards,	directly	correlates	with	the	historic	growth	of	our business.	According	to	The	Nilson	Report	dated	May	2008,	worldwide	annual	general	purpose	card	purchase	volume	increased	13.8%	to	$6.1	trillion	in	2007.	General purpose	cards	include	the	major	card	association	brands	such	as	American	Express,	Discover,	Diners	Club,	JCB,	MasterCard	and	Visa.	In	Canada,	general	purpose	cards also	include	Interac	debit	cards.

The	Nilson	Report	dated	May	2008	estimates	that	more	than	$2.7	trillion	of	annual	consumer	spending	was	charged	in	2007	using	general	purpose	cards	in	the United	States,	an	11%	increase	from	2006.	Based	on	figures	reported	in	The	Nilson	Report	dated	February	2008,	$400	billion	(U.S.)	of	annual	Canadian	consumer spending	uses	general	purpose	cards	as	the	form	of	payment,	representing	an	increase	of	10%	over	2006.	The	Nilson	Report	dated	June	2008	estimates	that	$1.7	trillion of	annual	consumer	spending	was	charged	in	2007	using	general	purpose	cards	in	Europe,	a	13%	increase	from	2006.

We	process	in	ten	countries	and	territories	in	the	Asia-Pacific	region.	This	market	includes	almost	40%	of	the	world's	population	and	70%	of	the	total	Asia-Pacific population	according	to	the	CIA	World	Factbook.	The	gross	domestic	product	of	the	countries	and	territories	in	this	market	as	a	whole	grew	15%	per	year	on	average between	2002	and	2006	according	to	the	World	Bank's	World	Development	Indicators	database.	We	believe	there	are	significant,	long-term	growth	opportunities	for payment	processing	in	this	market.

According	to	the	World	Bank's	Migration	and	Remittances	Factbook	2008	edition,	nearly	191	million	people,	or	approximately	3%	of	the	world's	population,	are international	immigrants.	The	World	Bank	estimates	that	over	$318	billion	was	remitted	internationally	worldwide	in	2007	with	a	significant	portion	of	the	volume originating	in	the	United	States.	According	to	the	Inter-American	Development	Bank,	the	expected	value	of	electronic	money	transfer	remittances	to	the	Latin	American market	in	2007	was	estimated	to	be	almost	$66.5	billion,	of	which	$46	billion	is	estimated	to	be	from	the	United	States.	The	growth	rate	of	remittances	from	the	United States	to	Latin	America	has	decreased	over	the	past	year,	primarily	due	to	a	slowing	United	States	economy,	a	downturn	in	the	United	States	housing	and	construction markets,	and	increased	enforcement	of	immigration	policies.

# Strategy

In	pursuing	our	business	strategy,	we	seek	to	increase	our	penetration	in	existing	markets,	expand	into	new	geographic	regions,	as	represented	by	our	acquisitions in	the	Asia-Pacific	and	European	regions,	and	expand	into	new	payment	areas,	as	represented	by	our	acquisitions	in	the	electronic	money	transfer	industry.	We	believe that	this	strategy	provides	us	with	the	greatest	opportunity	to	expand	our	existing	business,	leverage	our	existing	infrastructure,	and	maintain	a	consistent	base	of recurring	revenues,	thereby	maximizing	shareholder	equity	and	acquisition	returns	on	investment.	We	intend	to	accomplish	this	overall	strategy	as	follows:

# Existing	offerings

In	pursuing	this	business	strategy,	we	intend	to	increase	our	penetration	of	existing	markets	and	to	further	leverage	our	infrastructure.	Our	objectives	to	execute this	strategy	include	the	following:

•expand	our	direct	merchant	services	distribution	channels,	primarily	our	existing	sales	force,	ISOs,	OEMs,	VARs	and	other	referral	relationships;

•	 provide	the	best	possible	customer	service	at	levels	that	exceed	our	competitors	by	investing	in	technology,	training	and	product	enhancements;

•	 grow	our	direct	merchant	services	market	share	in	the	United	States,	Canada,	United	Kingdom,	and	Asia-Pacific	region	by	concentrating	on	the	small	and mid-market	merchant	segments;

•	 grow	our	indirect	merchant	services	market	share	in	Europe	by	concentrating	on	financial	institutions	with	an	existing	or	an	emerging	focus	on	merchant acquiring,	card	issuing,	and	credit	scoring;

•	 grow	our	money	transfer	customer	base	and	market	share	by	expanding	our	branch	and	settlement	locations	and	offering	competitive	pricing;

•	 provide	the	latest,	secure	and	enhanced	products	and	services	by	developing	value-added	applications,	enhancing	existing	products	and	developing	new systems	and	services	to	blend	technology	with	our	customer	needs;	and

•focus	on	potential	domestic	and	international	acquisitions	or	investments	and	alliances	with	companies	that	have	high	growth	potential	and	operate	in profitable	sectors	of	payments-related	industries	through	compatible	products	and	services,	and	development	and	distribution	capabilities.

# International	markets

We	intend	to	focus	on	further	diversification	in	international	markets	with	high	payments	industry	growth,	such	as	Latin	America,	Europe	and	the	Asia-Pacific region.	We	may	expand	our	direct	merchant	services,	indirect	merchant	services	and	money	transfer	offerings	into	these	markets,	either	organically	or	through acquisitions.	We	are	evaluating	these	markets	due	to	the	following	attractive	characteristics:

•currently	low	but	growing	credit	and	debit	card	utilization;

•	 high	level	of	immigrants	who	desire	to	send	money	using	a	non-bank	provider;

•the	absence	of	a	dominant	merchant	acquirer	or	processor;	and

•	 potential	to	satisfy	our	acquisition	strategy.

# Infrastructure

Our	focus	on	the	existing	infrastructure	will	center	on	attracting,	developing	and	retaining	talent	to	execute	our	strategy	and	migrate	our	systems	to	leading	edge technology.	We	intend	to	continue	systems	integrations,	primarily	the	consolidation	of	operating	platforms.

We	continue	to	make	progress	on	our	next	generation	technology	processing	platform.	This	platform	is	planned	to	be	a	new	front-end	operating	environment	for our	merchant	processing	in	the	United	States,	Asia-Pacific,	the	United	Kingdom,	and	Canada,	and	is	intended	to	replace	several	legacy	platforms	that	have	higher	cost structures.	Aside	from	cost	advantages,	there	are	many	other	benefits	to	this	new	platform,	such	as	increased	speed	to	market	of	new	products,	ease	of	scalability, enhanced	reporting	options,	hardware	environment	flexibility,	and	compliance	with	EMV	and	PCI	standards.	In	addition,	the	platform	is	being	designed	as	a	potential integration	platform	for	future	acquisitions,	which	may	help	us	achieve	higher	acquisition	synergies	in	the	future.

# Maximize	corporate	returns

Finally,	we	believe	we	will	maximize	corporate	returns	by	leveraging	our	core	technology	and	operational	capabilities	and	continue	cost	reduction	initiatives	to maximize	shareholder	equity	and	acquisition	returns	on	investment.	Currently,	we	have	the	following	multi-year	initiatives,	among	others,	underway	that	we	expect	will facilitate	this	goal:

•	 developing	a	new	technology	platform	that	will	enable	us	to	consolidate	our	front-end	platforms	in	the	United	States	and	Canada;

•	 migrating	the	Asia-Pacific	and	United	Kingdom	back-end	and	front-end	platforms	away	from	HSBC	and	onto	our	own	platforms;

•	 pursuing	price	reductions	from	our	vendor	relationships;	and

•streamlining	of	management	positions	and	operating	functions.

# Compliance

# Money	Transfer	Licensing	and	Regulations

We	are	subject	to	various	United	States	federal,	state	and	foreign	laws	and	regulations	governing	money	transmission	and	the	sale	of	payment	instruments,	such as	official	checks	and	money	orders.

In	the	United	States,	most	states	license	consumer	money	transfer	service	providers	and	issuers	of	money	orders	such	as	DolEx.	The	applicable	state	statutes	and regulations	typically	require	DolEx	to	obtain	and	maintain	certain	required	licenses	as	a	condition	to	performing	these	activities.	These	statutes	and	regulations	vary,	but generally	require	DolEx	to	do	the	following:	(a)	satisfy	minimum	net	worth	and	other	financial	covenant	requirements;	(b)	periodically	submit	information	regarding financial	results,	changes	in	corporate	documentation	or	ownership,	insurance,	and	other	relevant	information;	(c)	procure	and	maintain	a	surety	bond	with	minimum statutory	levels	of	coverage;	(d)	demonstrate	the	character	and	fitness	of	the	officers	and	directors	of	DolEx;	and	(e)	be	subject	to	periodic	financial	and	operational audits.	The	state	licenses	have	varying	renewal	periods.	Certain	licenses	have	a	specific	term	of	one	or	more	years	and	require	renewals	at	the	end	of	such	term,	while others	remain	in	effect	unless	revoked.

The	money	transfer	service	offering	also	is	subject	to	regulation	by	various	agencies	of	the	federal	government	that	are	charged	with	implementing	and	enforcing anti-money	laundering	laws	and	regulations,	including	the	Bank	Secrecy	Act,	as	amended	by	the	USA	PATRIOT	Act	of	2001,	collectively	referred	to	as	the	BSA.	The BSA,	among	other	things,	requires	money	transfer	companies	to	develop	and	implement	risk-based	anti-money	laundering	programs,	report	large	cash	transactions	and suspicious	activity,	and	maintain	transaction	records.	In	addition,	certain	economic	and	trade	sanctions	programs	that	are	administered	by	the	Treasury

Department's	Office	of	Foreign	Assets	Control,	or	OFAC,	prohibit	or	restrict	transactions	to	or	from	or	dealings	with	specified	countries,	their	governments,	and	in certain	circumstances,	their	nationals,	and	with	individuals	and	entities	that	are	specially-designated	nationals	of	those	countries,	narcotics	traffickers,	and	terrorists	or terrorist	organizations.

Global	Payments'	European	money	transfer	companies,	created	through	Europhil,	our	acquisition	in	December	2004,	are	regulated	by	various	governmental agencies	in	Spain,	Belgium,	and	the	United	Kingdom	in	their	money	transfer	activities.	Prior	to	its	acquisition	by	Global	Payments,	Europhil	received	approval	from these	governmental	agencies	to	act	as	a	money	transfer	service	provider.	The	requirements	of	these	governmental	agencies	vary,	but	generally	require	Europhil	to	do	the following:	(a)	satisfy	minimum	share	capital	requirements;	(b)	periodically	submit	information	regarding	financial	results,	changes	in	corporate	documentation	or ownership,	insurance,	and	other	relevant	information;	(c)	register	and	maintain	transaction	information;	(d)	maintain	adequate	insurance	coverage;	(e)	ensure	the transparency	of	the	conditions	of	the	transactions	to	its	customers;	(f)	implement	safeguards	and	restrictions	to	prevent	money	laundering;	and	(g)	subject	itself	to periodic	audits.

In	addition,	the	money	transfer	service	offerings	are	subject	to	regulation	in	the	settlement	countries	in	which	DolEx	and	Europhil	offer	their	services.	These regulations	may	include	limitations	on	what	types	of	entities	may	offer	money	transfer	services,	limitations	on	the	amount	of	principal	that	can	be	moved	into	or	out	of	a country,	limitations	on	the	number	of	money	transfers	that	may	be	received	by	a	customer,	limitations	on	the	exchange	rates	between	foreign	currencies,	and	regulations intended	to	help	detect	and	prevent	money	laundering.

DolEx	and	Europhil	have	developed	compliance	programs	to	monitor	regulatory	requirements	and	developments	and	to	implement	policies	and	procedures	to help	satisfy	these	requirements	in	each	origination	and	settlement	jurisdiction.	In	addition,	our	use	of	a	United	States	and	European	branch	network	for	the	origination	of electronic	money	transfers,	rather	than	an	agent	model	typically	utilized	by	our	larger	competitors,	allows	greater	control	over	our	regulatory	compliance.

# Where	to	Find	More	Information

We	file	annual	and	quarterly	reports,	proxy	statements	and	other	information	with	the	SEC.	You	may	read	and	print	materials	that	we	have	filed	with	the	SEC from	its	website	at	www.sec.gov.	In	addition,	certain	of	our	SEC	filings,	including	our	annual	report	on	Form	10-K,	our	quarterly	reports	on	Form	10-Q,	our	current reports	on	Form	8-K	and	amendments	thereto	can	be	viewed	and	printed	from	the	investor	information	section	of	our	website	at	www.globalpaymentsinc.com	free	of charge.	Certain	materials	relating	to	our	corporate	governance,	including	our	senior	financial	officers'	code	of	ethics,	are	also	available	in	the	investor	information section	of	our	website.	Copies	of	our	filings,	specified	exhibits	and	corporate	governance	materials	are	also	available,	free	of	charge,	by	writing	us	using	the	address	on the	cover	of	this	Form	10-K.	You	may	also	telephone	our	investor	relations	office	directly	at	(770)	829-8234.	We	are	not	including	the	information	on	our	website	as	a part	of,	or	incorporating	it	by	reference	into,	this	report.

Our	SEC	filings	may	also	be	viewed	and	copied	at	the	following	SEC	public	reference	room,	and	at	the	offices	of	the	New	York	Stock	Exchange,	where	our common	stock	is	quoted	under	the	symbol	"GPN."

SEC	Public	Reference	Room

(You	may	call	the	SEC	at	1-800-SEC-0330	for	further	information	on	the	public	reference	room.)

NYSE	Euronext 20	Broad	Street

# ITEM	1A—RISK	FACTORS

Our	revenues	from	the	sale	of	services	to	merchants	that	accept	Visa	cards	and	MasterCard	cards	are	dependent	upon	our	continued	Visa	and	MasterCard	certification and	financial	institution	sponsorship.

In	order	to	provide	our	transaction	processing	services,	we	must	be	designated	a	certified	processor	by,	and	be	a	merchant	service	provider	of,	MasterCard	and	an independent	sales	organization	of	Visa.	These	designations	are	dependent	upon	our	being	sponsored	by	member	clearing	banks	of	both	organizations	and	our	continuing adherence	to	the	standards	of	the	Visa	and	MasterCard	associations.	There	are	a	limited	number	of	member	clearing	banks	worldwide	that	are	willing	to	sponsor certified	processors,	such	as	us,	and	attaining	new	sponsorship	agreements	is	highly	difficult.	The	member	financial	institutions	of	Visa	and	MasterCard,	some	of	which are	our	competitors,	set	the	standards	with	which	we	must	comply.	If	we	fail	to	comply	with	these	standards,	our	designation	as	a	certified	processor,	a	merchant	service provider	or	as	an	independent	sales	organization	could	be	suspended	or	terminated.	The	termination	of	any	of	these	designations,	the	loss	of	any	of	our	four	primary sponsor	banks,	or	any	changes	in	the	Visa	and	MasterCard	rules	that	prevent	our	registration	or	otherwise	limit	our	ability	to	provide	transaction	processing	and marketing	services	for	the	Visa	or	MasterCard	organizations	would	likely	result	in	the	loss	of	merchant	customers	and	lead	to	a	material	reduction	in	our	revenues	and earnings.

# Loss	of	key	Independent	Sales	Organizations	could	reduce	our	revenue	growth.

Our	ISO	sales	channel,	which	purchases	and	resells	our	end-to-end	services	to	its	own	portfolio	of	merchant	customers,	is	a	strong	contributor	to	our	revenue growth.	If	an	ISO	switches	to	another	transaction	processor,	we	will	no	longer	receive	new	merchant	referrals	from	the	ISO.	In	addition,	we	risk	losing	existing merchants	that	were	originally	enrolled	by	the	ISO.	Consequently,	if	a	key	ISO	switches	to	another	transaction	processor,	our	revenues	and	earnings	could	be	negatively affected.

Risks	associated	with	operations	outside	the	United	States	could	adversely	affect	our	business,	financial	position	and	results	of	operations.

We	are	exposed	to	foreign	currency	risks	resulting	from	changes	in	currency	exchange	rates	because	of	our	significant	international	operations,	as	well	as	our significant	electronic	money	transfer	operations	in	the	United	States	and	Europe.	Our	international	revenues	and	profits	will	increase	or	decrease	compared	to	prior periods	as	a	result	of	changes	in	foreign	currency	exchange	rates.	We	do	not	use	forward	contracts	or	other	derivative	instruments	to	mitigate	the	risks	associated	with our	foreign	operations.

We	have	significant	operations	in	subsidiaries	in	Canada,	the	Czech	Republic,	and	throughout	the	Asia-Pacific	region	whose	functional	currency	is	their	local currency.	We	will	have	a	similar	risk	in	the	United	Kingdom	as	a	result	of	our	acquisition	of	HSBC	Merchant	Services.	We	are	subject	to	the	risk	that	currency	exchange rates	between	these	regions	and	the	United	States	will	fluctuate,	potentially	resulting	in	a	loss	of	some	of	our	revenue	and	earnings	when	such	amounts	are	exchanged into	United	States	dollars.

We	also	have	significant	money	transfer	operations	in	the	United	States	and	Europe	which	subject	us	to	foreign	currency	exchange	risks	as	our	customers	deposit funds	in	the	local	currencies	of	the	originating	countries	where	our	branches	are	located,	and	we	typically	deliver	funds	denominated	in	the	home	country	currencies	to each	of	our	settlement	locations.

In	addition,	in	certain	of	the	jurisdictions	in	which	we	operate,	we	may	become	subject	to	exchange	control	regulations	that	might	restrict	or	prohibit	the conversion	of	our	foreign	currency	into	United	States	dollars	or	limit	our	ability	to	freely	move	currency	in	or	out	of	particular	jurisdictions.

Some	of	our	competitors	are	larger	and	have	greater	financial	and	operational	resources	than	we	do,	which	may	give	them	an	advantage	in	our	market	with	respect	to the	pricing	of	our	products	and	services	offered	to	our	customers,	our	ability	to	develop	new	technologies,	and	our	ability	to	complete	acquisitions.

We	operate	in	the	electronic	payments	and	money	transfer	markets.	Our	primary	competitors	in	these	markets	include	other	independent	processors	and	electronic money	transmitters,	as	well	as	certain	major	national	and	regional	banks,	financial	institutions	and	independent	sales	organizations.	Companies	who	are	larger	than	we are	have	greater	financial	and	operational	resources	than	we	have.	This	may	allow	them	to	offer	better	pricing	terms	to	customers,	which	could	result	in	a	loss	of	our potential	or	current	customers	or	could	force	us	to	lower	our	prices	as	well.	Either	of	these	actions	could	have	a	significant	effect	on	our	revenues	and	earnings.	In addition,	our	competitors	may	have	the	ability	to	devote	more	financial	and	operational	resources	than	we	can	to	the	development	of	new	technologies,	including	internet payment	processing	services	that	provide	improved	operating	functionality	and	features	to	their	product	and	service	offerings.	If	successful,	their	development	efforts could	render	our	product	and	services	offerings	less	desirable	to	customers,	again	resulting	in	the	loss	of	customers	or	a	reduction	in	the	price	we	could	demand	for	our offerings.	Lastly,	our	competitors	may	be	willing	or	able	to	pay	more	than	us	for	acquisitions,	which	may	cause	us	to	lose	certain	acquisitions	that	we	would	otherwise desire	to	complete.

# Our	money	transfer	service	offerings	are	dependent	on	financial	institutions	to	provide	such	offerings.

Our	money	transfer	service	offerings	involve	transferring	funds	internationally	and	are	dependent	upon	foreign	and	domestic	financial	institutions,	including	our competitors,	to	execute	funds	transfers	and	foreign	currency	transactions.	Changes	to	existing	regulations	of	financial	institution	operations,	such	as	those	designed	to combat	terrorism	or	money	laundering,	could	require	us	to	change	our	operational	procedures	in	such	a	way	that	might	increase	our	costs	of	doing	business	or	could require	us	to	terminate	certain	product	offerings.	In	addition,	as	a	result	of	existing	regulations	and/or	changes	to	such	regulations,	financial	institutions	could	decide	to cease	providing	the	services	on	which	we	depend	entirely,	requiring	us	to	terminate	certain	product	offerings	in	specifically	impacted	markets.	In	fact,	several	significant financial	institutions	have	ceased	providing	such	services	as	a	result	of	existing	regulations,	which,	in	a	particular	instance,	required	us	to	rapidly	switch	to	different financial	institution	providers	of	these	services.	In	the	future,	the	inability	to	purchase	these	services	from	significant	regional	or	national	financial	institutions	would likely	result	in	a	material	reduction	to	our	money	transfer	revenue	and	earnings.

We	are	subject	to	the	business	cycles	and	credit	risk	of	our	merchant	customers	and,	to	a	lesser	extent,	consumer	checkwriters.

A	recessionary	economic	environment	could	affect	our	merchants	through	a	higher	rate	of	bankruptcy	filings,	resulting	in	lower	revenues	and	earnings	for	us.	Our merchants	are	liable	for	any	charges	properly	reversed	by	the	card	issuer	on	behalf	of	the	cardholder.	In	the	event,	however,	that	we	are	not	able	to	collect	such	amounts from	the	merchants,	due	to	merchant	fraud,	insolvency,	bankruptcy	or	any	other	reason,	we	may	be	liable	for	any	such	charges.	Any	risks	associated	with	an	unexpected recessionary	economy	that	we	could	not	mitigate	may	result	in	lower	revenues	and	earnings	for	us.	Although	we	believe	our	historical	loss	rates	are	within	or	below industry	averages,	we	process	billions	of	dollars	in	annual	volume	that	are	subject	to	these	risks.

A	recessionary	economic	environment	could	also	cause	checkwriters	to	dishonor	a	greater	number	of	checks	issued	to	our	merchant	customers.	If	we	are	unable	to collect	the	face	value	of	these	checks,	we	may	incur	higher	losses	and	lower	earnings.

In	order	to	remain	competitive	and	to	continue	to	increase	our	revenues	and	earnings,	we	must	continually	update	our	products	and	services,	a	process	which	could result	in	increased	research	and	development	costs	in	excess	of	historical	levels	and	the	loss	of	revenues,	earnings	and	customers	if	the	new	products	and	services	do	not perform	as	intended	or	are	not	accepted	in	the	marketplace.

The	electronic	payments	and	money	transfer	markets	in	which	we	compete	include	a	wide	range	of	products	and	services	including	electronic	transaction	payment processing,	money	transfer,	transaction	reporting	and	other

customer	support	services.	These	markets	are	characterized	by	technological	change,	new	product	introductions,	evolving	industry	standards	and	changing	customer needs.	In	order	to	remain	competitive,	we	are	continually	involved	in	a	number	of	research	and	development	projects	including	the	development	of	a	new	front-end platform	for	electronic	payments	processing.	These	projects	carry	the	risks	associated	with	any	research	and	development	effort,	including	cost	overruns,	delays	in delivery	and	performance	problems.	In	the	electronic	payments	and	money	transfer	markets	these	risks	are	even	more	acute.	Our	markets	are	constantly	experiencing rapid	technological	change.	Any	delay	in	the	delivery	of	new	products	or	services	could	render	them	less	desirable	to	our	customers,	or	possibly	even	obsolete.	In addition,	the	products	and	services	we	deliver	to	the	electronic	payments	and	money	transfer	markets	are	designed	to	process	very	complex	transactions	and	deliver reports	and	other	information	on	those	transactions,	all	at	very	high	volumes	and	processing	speeds.	Any	performance	issue	that	arises	with	a	new	product	or	service could	result	in	significant	processing	or	reporting	errors.	As	a	result	of	these	factors,	our	research	and	development	efforts	could	result	in	increased	costs	that	could reduce	our	earnings,	in	addition	to	a	loss	of	revenue	and	earnings	if	promised	new	products	are	not	timely	delivered	to	our	customers	or	do	not	perform	as	anticipated.

# Security	breaches	or	system	failures	could	harm	our	reputation	and	adversely	affect	future	earnings.

We	handle	personal	consumer	data,	such	as	names,	credit	and	debit	account	numbers,	checking	account	numbers	and	payment	history	records.	We	process	that data	and	deliver	our	products	and	services	by	utilizing	computer	systems	and	telecommunications	networks	operated	both	by	us	and	by	third	party	service	providers. Although	plans	and	procedures	are	in	place	to	protect	this	sensitive	data	and	to	prevent	failure	of,	and	to	provide	backup	for,	our	systems,	we	cannot	be	certain	that	our measures	will	be	successful.	A	security	breach	or	other	misuse	of	such	data,	or	failures	of	key	operating	systems	and	their	back-ups,	could	harm	our	reputation	and	deter customers	from	using	our	products	and	services,	increase	our	operating	expenses	in	order	to	correct	the	breaches	or	failures,	expose	us	to	unbudgeted	or	uninsured liability,	increase	our	risk	of	regulatory	scrutiny	including	the	imposition	of	penalties	and	fines	under	state,	federal	and	foreign	laws,	and	adversely	affect	our	continued Visa	and	MasterCard	certification	and	financial	institution	sponsorship.

# Reduced	levels	of	consumer	spending	can	adversely	affect	our	revenues	and	earnings.

Significant	portions	of	our	revenue	and	earnings	are	derived	from	fees	from	processing	consumer	credit	card	and	debit	card	transactions	and	electronic	money transfer	transactions.	Any	recession	or	economic	downturn	in	the	United	States	or	any	other	country	where	we	do	business	could	negatively	impact	consumer	spending and	adversely	affect	our	revenues	and	earnings.

Changes	in	state,	federal	and	foreign	laws	and	regulations	affecting	the	electronic	money	transfer	industry	might	make	it	more	difficult	for	our	customers	to	initiate money	transfers,	which	would	adversely	affect	our	revenues	and	earnings.

If	state,	federal	or	foreign	authorities	adopt	new	regulations	or	raise	enforcement	levels	on	existing	regulations	that	make	it	more	difficult	for	our	customers	to initiate,	or	their	beneficiaries	to	receive,	electronic	money	transfers,	then	our	revenues	and	earnings	may	be	negatively	affected.	This	particular	topic	has	been	widely debated	in	the	United	States	at	both	the	state	and	federal	levels,	with	a	currently	unclear	outcome.	Any	regulation	or	enforcement	practices	that	are	more	restrictive	than historical	levels	that	relate	to	Latin	American	immigrants,	including	those	who	are	not	legal	residents	of	the	United	States,	could	adversely	impact	our	electronic	money transfer	revenue	and	earnings.

# Changes	in	immigration	patterns	can	adversely	affect	our	revenues	and	earnings	from	electronic	money	transfers.

Our	electronic	money	transfer	business	primarily	focuses	on	customers	who	immigrate	to	the	United	States	from	Latin	American	countries	in	order	to	find	higher paying	jobs	and	then	send	a	portion	of	their	earnings	to	family	members	in	Latin	America.	In	addition,	our	electronic	money	transfer	business	also	focuses	on	customers

who	immigrate	to	Belgium,	the	United	Kingdom,	and	Spain	from	Latin	American	countries,	Morocco,	the	Philippines,	Romania,	Poland	and	other	countries.	Any changes	in	these	immigration	patterns	for	any	reason,	including	government	policies	or	enforcement,	may	negatively	affect	the	number	of	immigrants	in	Belgium,	the United	Kingdom,	the	United	States,	Spain	and	any	new	countries	in	which	we	expand	our	money	transfer	service	offering	in	the	future,	which	may	reduce	our	customer base	and	our	corresponding	revenues	and	earnings.

In	order	for	us	to	continue	to	grow	and	increase	our	profitability,	we	must	continue	to	expand	our	share	of	the	existing	electronic	payments	and	money	transfer	markets and	also	expand	into	new	markets.

Our	future	growth	and	profitability	depend	upon	our	continued	expansion	within	the	markets	in	which	we	currently	operate,	the	further	expansion	of	these markets,	the	emergence	of	other	markets	for	electronic	transaction	payment	processing,	including	internet	payment	systems,	and	our	ability	to	penetrate	these	markets. As	part	of	our	strategy	to	achieve	this	expansion,	we	are	continually	looking	for	acquisition	opportunities,	investments	and	alliance	relationships	with	other	businesses that	will	allow	us	to	increase	our	market	penetration,	technological	capabilities,	product	offerings	and	distribution	capabilities.	We	may	not	be	able	to	successfully identify	suitable	acquisition,	investment	and	alliance	candidates	in	the	future,	and	if	we	do,	they	may	not	provide	us	with	the	benefits	we	anticipated.	Once	completed, investments	and	alliances	may	not	realize	the	value	that	we	expect.

Our	expansion	into	new	markets	is	also	dependent	upon	our	ability	to	apply	our	existing	technology	or	to	develop	new	applications	to	meet	the	particular	service needs	of	each	new	market.	We	may	not	have	adequate	financial	or	technological	resources	to	develop	products	and	distribution	channels	that	will	satisfy	the	demands	of these	new	markets.	If	we	fail	to	expand	into	new	and	existing	electronic	payments	and	money	transfer	markets,	we	may	not	be	able	to	continue	to	grow	our	revenues	and earnings.

Any	changes	made	to	laws,	regulations,	card	association	rules	or	other	industry	standards	affecting	our	business	in	any	of	the	geographic	regions	in	which	we	operate may	require	significant	development	efforts	or	have	an	unfavorable	impact	to	our	financial	results.

There	may	be	changes	in	the	laws,	regulations,	card	association	rules	or	other	industry	standards	that	affect	the	way	we	do	business.	In	the	United	States, legislation	has	recently	been	introduced	at	the	federal	level	to	regulate	the	fees	charged	to	merchants	for	card	processing	services.	We	are	unable	to	predict	whether	any of	this	potential	legislation	will	be	enacted	or	whether	any	card	association	rule	or	other	industry	standard	will	change.	Furthermore,	we	cannot	predict	the	impact	of	any of	these	changes	on	our	operations	and	financial	condition.	These	changes	may	require	significant	efforts	to	change	our	systems	and	products	and	may	require	changes to	how	we	price	our	services	to	customers.	Failure	to	comply	with	these	laws,	regulations,	and	standards	may	impact	our	ability	to	do	business	and	jeopardize	our	card association	certification	and	financial	institution	sponsorship.

# Increases	in	credit	card	association	fees	may	result	in	the	loss	of	customers	or	a	reduction	in	our	earnings.

From	time	to	time,	the	credit	card	associations,	including	Visa	and	MasterCard,	increase	the	fees	(interchange	and	assessment	fees)	that	they	charge	processors such	as	us.	We	could	attempt	to	pass	these	increases	along	to	our	merchant	customers,	but	this	strategy	might	result	in	the	loss	of	those	customers	to	our	competitors who	do	not	pass	along	the	increases.	If	competitive	practices	prevent	our	passing	along	such	increased	fees	to	our	merchant	customers	in	the	future,	we	may	have	to absorb	all	or	a	portion	of	such	increases	thereby	increasing	our	operating	costs	and	reducing	our	earnings.

# Utility	and	system	interruptions	or	processing	errors	could	adversely	affect	our	operations.

In	order	to	process	transactions	promptly,	our	computer	equipment	and	network	servers	must	be	functional	on	a	24-hour	basis,	which	requires	access	to telecommunications	facilities	and	the	availability	of	electricity.	Furthermore,	with	respect	to	certain	processing	services,	we	are	dependent	on	the	systems	and	services	of third

party	vendors.	Telecommunications	services	and	the	electricity	supply	are	susceptible	to	disruption.	Computer	system	interruptions	and	other	processing	errors,	whether involving	our	own	systems	or	the	systems	operated	by	our	third	party	vendors,	may	result	from	such	disruption	or	from	human	error	or	other	unrelated	causes.	Any extensive	or	long-term	disruptions	in	our	processing	services	could	cause	us	to	incur	substantial	additional	expense	and	the	loss	of	customers,	which	could	have	an adverse	affect	on	our	operations	and	financial	condition.

The	integration	of	our	acquired	operations,	or	other	future	acquisitions,	if	any,	could	result	in	increased	operating	costs	if	the	anticipated	synergies	of	operating	both businesses	as	one	are	not	achieved,	a	loss	of	strategic	opportunities	if	management	is	distracted	by	the	integration	process,	and	a	loss	of	customers	if	our	service	levels drop	during	or	following	the	integration	process.

The	integration	of	these	businesses	with	ours	presents	several	challenges,	including	the	fact	that	they	may	be	based	in	the	regions	where	we	do	not	currently	have operations.	If	the	integration	process	does	not	proceed	smoothly,	the	following	factors	could	reduce	our	revenues	and	earnings,	increase	our	operating	costs,	and/or	result in	a	loss	of	projected	synergies:

•	 we	could	lose	employees	to	our	competitors	in	the	region,	which	could	significantly	affect	our	ability	to	operate	the	business	and	complete	the	integration,	if we	are	unable	to	successfully	integrate	the	benefits	plans,	duties	and	responsibilities,	and	other	factors	of	interest	to	the	management	and	employees	of	the acquired	business;

•	 we	could	lose	customers	to	our	competitors,	which	would	reduce	our	revenues	and	earnings,	if	the	integration	process	causes	any	delays	with	the	delivery	of our	services,	or	the	quality	of	those	services;	and

•the	acquisition	and	the	related	integration	could	divert	the	attention	of	our	management	from	other	strategic	matters	including	possible	acquisitions	and alliances	and	planning	for	new	product	development	or	expansion	into	new	electronic	payments	markets.

Continued	consolidation	in	the	banking	and	retail	industries	could	adversely	affect	our	growth.

As	banks	continue	to	consolidate,	our	ability	to	offer	our	services	through	indirect	channels	successfully	will	depend	in	part	on	whether	the	institutions	that survive	are	willing	to	outsource	their	credit	and	debit	card	processing	to	third	party	vendors	and	whether	those	institutions	have	pre-existing	relationships	with	any	of	our competitors.	Larger	banks	and	larger	merchants	with	greater	transaction	volumes	may	demand	lower	fees	which	could	result	in	lower	revenues	and	earnings	for	us.

# Loss	of	strategic	industries	could	reduce	revenues	and	earnings.

Although	our	merchant	acquiring	portfolio	is	well	diversified	and	neither	one	economic	sector	nor	any	customer	concentration	represents	a	significant	portion	of our	business,	a	decrease	in	strategic	industries	could	cause	us	to	lose	significant	revenues	and	earnings.

If	we	lose	key	personnel	or	are	unable	to	attract	additional	qualified	personnel	as	we	grow,	our	business	could	be	adversely	affected.

We	are	dependent	upon	the	ability	and	experience	of	a	number	of	our	key	personnel	who	have	substantial	experience	with	our	operations,	the	rapidly	changing transaction	processing	and	money	transfer	industries,	and	the	selected	markets	in	which	we	offer	our	services.	It	is	possible	that	the	loss	of	the	services	of	one	or	a combination	of	our	key	personnel	would	have	an	adverse	effect	on	our	operations.	Our	success	also	depends	on	our	ability	to	continue	to	attract,	manage,	and	retain additional	qualified	management	and	technical	personnel	as	we	grow.	We	cannot	guarantee	that	we	will	continue	to	attract	or	retain	such	personnel.

Our	financial	results	may	be	adversely	affected	if	we	have	to	impair	our	intangible	assets	or	goodwill.

As	a	result	of	our	acquisitions,	a	significant	portion	of	our	total	assets	consist	of	intangible	assets	(including	goodwill).	Goodwill	and	intangible	assets,	net	of amortization,	together	accounted	for	approximately	47%	and	52%	of	the	total	assets	on	our	balance	sheet	as	of	May	31,	2008	and	May	31,	2007,	respectively.	We	may not	realize	the	full	fair	value	of	our	intangible	assets	and	goodwill.	We	expect	to	engage	in	additional	acquisitions,	which	may	result	in	our	recognition	of	additional intangible	assets	and	goodwill.	Under	current	accounting	standards,	we	are	able	to	amortize	certain	intangible	assets	over	the	useful	life	of	the	asset,	while	goodwill	is not	amortized.	We	evaluate	on	a	regular	basis	whether	all	or	a	portion	of	our	goodwill	and	other	indefinite-lived	intangible	assets	may	be	impaired.	Under	current accounting	rules,	any	determination	that	impairment	has	occurred	would	require	us	to	write-off	the	impaired	portion	of	goodwill	and	such	intangible	assets,	resulting	in	a charge	to	our	earnings.	Such	a	write-off	could	adversely	affect	our	financial	condition	and	results	of	operations.

We	may	become	subject	to	additional	United	States,	state	or	foreign	taxes	that	cannot	be	passed	through	to	our	merchant	services	or	money	transfer	customers,	in	which case	our	earnings	could	be	adversely	affected.

Payment	processing	companies	like	us	may	be	subject	to	taxation	by	various	jurisdictions	on	our	net	income	or	certain	portions	of	our	fees	charged	to	customers for	our	services.	Application	of	these	taxes	is	an	emerging	issue	in	our	industry	and	the	taxing	authorities	have	not	yet	all	adopted	uniform	regulations	on	this	topic.	If	we are	required	to	pay	such	taxes	and	are	not	able	to	pass	the	tax	expense	through	to	our	merchant	customers,	our	costs	will	increase,	reducing	our	earnings.

Failure	to	maintain	effective	internal	controls	in	accordance	with	Section	404	of	the	Sarbanes-Oxley	Act	could	have	a	material	adverse	effect	on	our	business	and	stock price.

Section	404	of	the	Sarbanes-Oxley	Act	requires	us	to	evaluate	annually	the	effectiveness	of	our	internal	controls	over	financial	reporting	as	of	the	end	of	each fiscal	year	and	to	include	a	management	report	assessing	the	effectiveness	of	our	internal	controls	over	financial	reporting	in	our	annual	report.	If	we	fail	to	maintain	the adequacy	of	our	internal	controls,	we	may	not	be	able	to	ensure	that	we	can	conclude	on	an	ongoing	basis	that	we	have	effective	internal	control	over	financial	reporting in	accordance	with	Section	404	of	the	Sarbanes-Oxley	Act.

Further,	this	assessment	may	be	complicated	by	any	acquisitions	we	may	complete.	During	the	first	fiscal	quarter	of	2007,	we	completed	the	purchase	of	a	fifty- six	percent	ownership	interest	in	the	Asia-Pacific	merchant	acquiring	business	of	The	Hongkong	and	Shanghai	Banking	Corporation	Limited,	or	HSBC	Asia.	This business	provides	card	payment	processing	services	to	merchants	in	the	Asia-Pacific	region.	The	business	includes	HSBC	Asia's	payment	processing	operations	in	the following	ten	countries	and	territories:	Brunei,	China,	Hong	Kong,	India,	Macau,	Malaysia,	Maldives,	Singapore,	Sri	Lanka	and	Taiwan.	In	conjunction	with	this acquisition,	we	entered	into	a	transition	services	agreement	with	HSBC	Asia	that	may	be	terminated	at	any	time.	Under	this	agreement,	we	expect	HSBC	Asia	will continue	to	perform	payment	processing	operations	and	related	support	services	until	we	integrate	these	functions	into	our	own	operations.	Until	we	can	integrate	the acquisition's	financial	reporting	function	into	our	own,	we	will	rely	on	HSBC	Asia	to	provide	financial	data,	such	as	revenue	billed	to	merchants,	to	assist	us	with compiling	our	accounting	records.	Accordingly,	our	internal	controls	over	financial	reporting	could	be	materially	affected,	or	are	reasonably	likely	to	be	materially affected,	by	HSBC	Asia's	internal	controls	and	procedures.	In	order	to	mitigate	this	risk,	we	have	implemented	internal	controls	over	financial	reporting	which	monitor the	accuracy	of	the	financial	data	being	provided	by	HSBC	Asia.	We	will	have	a	similar	situation	in	the	United	Kingdom	as	a	result	of	our	fifty-one	percent	acquisition of	HSBC	Merchant	Services.

While	we	continue	to	dedicate	resources	and	management	time	to	ensuring	that	we	have	effective	controls	over	financial	reporting,	failure	to	achieve	and	maintain an	effective	internal	control	environment	could	have	a	material	adverse	effect	on	the	market's	perception	of	our	business	and	our	stock	price.

Anti-takeover	provisions	of	our	articles	of	incorporation	and	by-laws,	our	rights	agreement	and	provisions	of	Georgia	law	could	delay	or	prevent	a	change	of	control that	individual	shareholders	favor.

Provisions	of	our	articles	of	incorporation	and	by-laws,	our	rights	agreement	and	provisions	of	applicable	Georgia	law	may	discourage,	delay	or	prevent	a	merger or	other	change	of	control	that	shareholders	may	consider	favorable.	The	provisions	of	our	articles	and	by-laws,	among	other	things:

•	 divide	our	Board	of	Directors	into	three	classes,	with	members	of	each	class	to	be	elected	in	staggered	three-year	terms;

•limit	the	right	of	shareholders	to	remove	directors;

•regulate	how	shareholders	may	present	proposals	or	nominate	directors	for	election	at	annual	meetings	of	shareholders;	and

•authorize	our	Board	of	Directors	to	issue	preferred	shares	in	one	or	more	series,	without	shareholder	approval.

We	may	not	be	able	to	or	we	may	decide	not	to	pay	dividends	or	repurchase	shares	at	a	level	anticipated	by	shareholders	on	our	common	stock,	which	could	reduce shareholder	returns.

The	payment	of	dividends	and	repurchase	of	shares	are	at	the	discretion	of	our	Board	of	Directors	and	will	be	subject	to	our	financial	results,	our	working	capital requirements,	the	availability	of	acquisitions	and	other	business	opportunities,	the	availability	of	surplus	funds,	interest	rate	levels,	debt	covenants,	our	stock	price	levels and	restrictions	under	financing	agreements.	No	assurance	can	be	given	that	we	will	be	able	to	or	will	choose	to	pay	any	dividends	or	repurchase	any	shares	in	the foreseeable	future.

# Unfavorable	resolution	of	tax	contingencies	could	adversely	affect	our	tax	expense.

We	have	established	contingent	liabilities	for	tax	exposures	relating	to	deductions,	transactions	and	other	matters	involving	some	uncertainty	as	to	the	proper	tax treatment	of	the	item.	These	liabilities	reflect	what	we	believe	to	be	reasonable	assumptions	as	to	the	likely	final	resolution	of	each	issue	if	raised	by	a	taxing	authority. While	we	believe	that	the	liabilities	are	adequate	to	cover	reasonably	expected	tax	risks,	there	can	be	no	assurance	that,	in	all	instances,	an	issue	raised	by	a	tax	authority will	be	finally	resolved	at	a	financial	cost	less	than	any	related	liability.	An	unfavorable	resolution,	therefore,	could	negatively	impact	our	results	of	operations.

We	conduct	a	portion	of	our	business	in	various	Latin	American,	Eastern	European	and	Asia-Pacific	countries,	where	the	risk	of	continued	political,	economic	and regulatory	change	that	could	impact	our	operating	results	is	greater	than	in	the	United	States.

We	expect	to	continue	to	expand	our	operations	into	various	countries	in	Latin	America,	Eastern	Europe,	and	the	Asia-Pacific.	Some	of	these	countries	have undergone	significant	political,	economic	and	social	change	in	recent	years,	and	the	risk	of	new,	unforeseen	changes	in	these	countries	remains	greater	than	in	the	United States.	In	particular,	changes	in	laws	or	regulations	or	in	the	interpretation	of	existing	laws	or	regulations,	whether	caused	by	a	change	in	government	or	otherwise,	could materially	adversely	affect	our	business,	growth,	financial	condition	or	results	of	operations.

Transmittal	of	data	by	electronic	means	and	telecommunications	is	subject	to	specific	regulation	in	many	countries.	Although	these	regulations	have	not	had	a material	impact	on	us	to	date,	changes	in	these	regulations,	including	taxation	or	limitations	on	transfers	of	data	between	countries,	could	have	a	material	adverse	effect on	our	business,	growth,	financial	condition	or	results	of	operations.

# ITEM	1B—UNRESOLVED	STAFF	COMMENTS

None.

# ITEM	2—PROPERTIES

The	following	summarizes	the	type	of	facilities	we	use	to	operate	our	business	as	of	May	31,	2008:

| Type	of	Facility | Leased | Owned |
| :--- | :--- | :--- |
| Facilities\tin\tthe\tUnited\tStates: |  |  |
| Multi-Purpose\t(Operations,\tSales,\tAdministrative) | 3 | — |
| Operations/Customer\tSupport | 27 | — |
| Sales\tand\tmoney\ttransfer\tretail\tbranches | 800 | 1 |
|  | 830 | 1 |
| International\tFacilities: |  |  |
| Multi-Purpose\t(Operations,\tSales,\tAdministrative) | 15 | 3 |
| Operations/Customer\tSupport | 12 | — |
| Sales\tand\tmoney\ttransfer\tretail\tbranches | 100 | 5 |
|  | 127 | 8 |
| Total | 957 | 9 |

Our	principal	facilities	in	the	United	States	are	located	in	Atlanta,	Georgia;	Owings	Mills,	Maryland;	Arlington,	Texas	and	Niles,	Illinois.	Our	principal international	facilities	are	located	in	Toronto,	Canada;	Prague,	Czech	Republic;	the	Hong	Kong	Special	Administrative	Region;	Mexico	City,	Mexico;	Monterrey, Mexico	and	Madrid,	Spain.	The	majority	of	our	sales	facilities	are	money	transfer	originating	retail	branches.

We	believe	that	all	of	our	facilities	and	equipment	are	suitable	and	adequate	for	our	business	as	presently	conducted.

# ITEM	3—LEGAL	PROCEEDINGS

We	are	party	to	a	number	of	claims	and	lawsuits	incidental	to	the	normal	course	of	our	business.	In	our	opinion,	the	ultimate	outcome	of	such	matters,	in	the aggregate,	will	not	have	a	material	adverse	impact	on	our	financial	position,	liquidity	or	results	of	operations.

# ITEM	4—SUBMISSION	OF	MATTERS	TO	A	VOTE	OF	SECURITY	HOLDERS

No	matters	were	submitted	to	a	vote	of	our	shareholders	during	our	fourth	quarter	ended	May	31,	2008.

# PART	II

# ITEM	5—MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY SECURITIES

Our	common	stock	trades	on	the	New	York	Stock	Exchange	under	the	ticker	symbol	"GPN."	The	table	set	forth	below	provides	the	intraday	high	and	low	sales prices	and	dividends	paid	per	share	of	our	common	stock	for	the	four	quarters	during	fiscal	2008	and	2007.	We	expect	to	continue	to	pay	our	shareholders	a	dividend	per share,	on	a	quarterly	basis,	in	an	amount	comparable	to	the	dividends	indicated	in	the	table.	However,	any	future	determination	to	pay	cash	dividends	will	be	at	the discretion	of	our	Board	of	Directors	and	will	depend	upon	our	results	of	operations,	financial	condition,	capital	requirements	and	such	other	factors	as	the	Board	of Directors	deems	relevant.

|  | High | Low | Per	Share |
| :--- | :--- | :--- | :--- |
| Fiscal\t2008: |  |  |  |
| First\tQuarter | $41.58 | $35.14 | $0.02 |
| Second\tQuarter | \t 48.18 | \t 38.45 | 0.02 |
| Third\tQuarter | \t 46.69 | \t 35.54 | 0.02 |
| Fourth\tQuarter | \t 47.40 | \t 36.86 | 0.02 |
| Fiscal\t2007: |  |  |  |
| First\tQuarter | $49.84 | $36.48 | $0.02 |
| Second\tQuarter | \t 46.15 | \t 37.31 | 0.02 |
| Third\tQuarter | \t 49.13 | \t 37.38 | 0.02 |
| Fourth\tQuarter | \t 41.43 | \t 30.00 | 0.02 |

The	number	of	shareholders	of	record	of	our	common	stock	as	of	July	21,	2008	was	2,400.

# Equity	Compensation	Plan	Information

The	information	regarding	our	compensation	plans	under	which	equity	securities	are	authorized	for	issuance	is	set	forth	in	"Item	12—Security	Ownership	of Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters"	of	this	Report.

# Sale	of	Unregistered	Securities

We	have	not	issued	any	unregistered	securities	during	our	fiscal	year	ended	May	31,	2008.

# Stock	Performance	Graph

The	following	line-graph	presentation	compares	our	cumulative	shareholder	returns	with	the	Standard	&	Poor's	Information	Technology	Index	and	the Standard	&	Poor's	500	Stock	Index	for	the	past	five	years.	The	line	graph	assumes	the	investment	of	$100	in	our	common	stock,	the	Standard	&	Poor's	Information Technology	Index,	and	the	Standard	&	Poor's	500	Stock	Index	on	May	31,	2003	and	assumes	reinvestment	of	all	dividends.

|  | Global |  | Information |
| :--- | :--- | :--- | :--- |
|  | Payments | S&amp;P\t500 | Technology |
| May\t31,\t2003 | $100.00 | $100.00 | $100.00 |
| May\t31,\t2004 | \t 137.75 | \t 118.33 | 121.98 |
| May\t31,\t2005 | \t 205.20 | \t 128.07 | 123.08 |
| May\t31,\t2006 | \t 276.37 | \t 139.14 | 123.99 |
| May\t31,\t2007 | \t 238.04 | \t 170.85 | 152.54 |
| May\t31,\t2008 | \t 281.27 | \t 159.41 | 156.43 |

# Issuer	Purchases	of	Equity	Securities

In	fiscal	2007,	our	Board	of	Directors	approved	a	share	repurchase	program	that	authorized	the	purchase	of	up	to	$100	million	of	Global	Payments'	stock	in	the open	market	or	as	otherwise	may	be	determined	by	us,	subject	to	market	conditions,	business	opportunities,	and	other	factors.	Under	this	authorization,	we	have repurchased	2.3	million	shares	of	our	common	stock.	This	authorization	has	no	expiration	date	and	may	be	suspended	or	terminated	at	any	time.	Repurchased	shares will	be	retired	but	will	be	available	for	future	issuance.

The	shares	repurchased	in	the	fourth	quarter	of	fiscal	2008,	the	average	price	paid,	including	commissions,	and	the	dollar	value	remaining	available	for	purchase are	as	follows:

| Period | Total	Number	of<br>Shares	(or	Units)<br>Purchased<br>(a) | Average<br>Price	Paid	per<br>Share	(or	Unit)<br>(b) | Total	Number	of<br>Shares	(or	Units)<br>Purchased	as	Part	of<br>Publicly	Announced<br>Plans	or	Programs<br>(c) | Shares	(or	Units)<br>that	May	Yet	Be<br>Purchased	Under<br>the	Plans	or<br>Programs<br>(d) |
| :--- | :--- | :--- | :--- | :--- |
| March\t1,\t2008\t–\tMarch\t31,\t2008 | — | $— | — | $12,980,136 |
| April\t1,\t2008\t–\tApril\t30,\t2008 | — | — | — | $12,980,136 |
| May\t1,\t2008\t–\tMay\t31,\t2008 | — | — | — | \t $12,980,136 |
| Total | — | $— | — |  |

# ITEM	6—SELECTED	FINANCIAL	DATA

You	should	read	the	selected	financial	data	set	forth	below	in	conjunction	with	"Item	7—Management's	Discussion	and	Analysis	of	Financial	Condition	and Results	of	Operations"	and	"Item	8—Financial	Statements	and	Supplementary	Data"	included	elsewhere	in	this	annual	report.	The	income	statement	data	for	each	of	the three	fiscal	years	ended	May	31,	2008,	2007,	and	2006	and	the	balance	sheet	data	as	of	May	31,	2008	and	2007	are	derived	from	the	audited	consolidated	financial statements	included	elsewhere	in	this	annual	report.	The	income	statement	data	for	each	of	the	two	fiscal	years	ended	May	31,	2005	and	2004	and	the	balance	sheet	data as	of	May	31,	2006	and	2005	were	derived	from	audited	consolidated	financial	statements	included	in	our	Form	10-K	for	the	fiscal	year	ended	May	31,	2006.	The balance	sheet	data	as	of	May	31,	2004	was	derived	from	audited	consolidated	financial	statements	included	in	our	Form	10-K	for	the	fiscal	year	ended	May	31,	2005.

|  | 2008 | 2007 | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (in\tthousands,\texcept\tper\tshare\tdata) | (in\tthousands,\texcept\tper\tshare\tdata) |  |  |
| Income\tstatement\tdata: |  |  |  |  |  |
| Revenue | $1,274,229 | $1,061,523 | $908,056 | $784,331 | $629,320 |
| Operating\tincome\t(1) | 251,359 | 218,089 | 201,088 | 160,101 | 112,901 |
| Net\tincome | 162,754 | 142,985 | 125,524 | 92,896 | 62,443 |
| Per\tshare\tdata:\t(2) |  |  |  |  |  |
| Basic\tearnings\tper\tshare | $2.05 | $1.78 | $1.59 | $1.20 | $0.83 |
| Diluted\tearnings\tper\tshare | 2.01 | 1.75 | 1.53 | 1.16 | 0.80 |
| Dividends\tper\tshare | 0.08 | 0.08 | 0.08 | 0.08 | 0.08 |
| Balance\tsheet\tdata: |  |  |  |  |  |
| Total\tassets | $1,445,907 | $1,200,629 | $1,018,678 | $853,505 | $862,774 |
| Lines\tof\tcredit | 1,527 | — | — | 50,000 | 122,000 |
| Line\tof\tcredit\twith\tCIBC | — | — | — | 8,606 | 83,109 |
| Obligations\tunder\tcapital\tleases | — | — | 746 | 2,441 | 3,251 |
| Total\tshareholders'\tequity | 1,126,818 | 957,776 | 770,223 | 578,350 | 449,422 |

(2) Fiscal	2004	per	share	amounts	restated	to	reflect	two-for	one	stock	split	effected	in	the	form	of	a	stock	dividend	distributed	October	28,	2005.

# ITEM	7—MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

The	following	discussion	and	analysis	contains	forward-looking	statements	about	our	plans	and	expectations	of	what	may	happen	in	the	future.	Forward-looking statements	are	based	on	a	number	of	assumptions	and	estimates	that	are	inherently	subject	to	significant	risks	and	uncertainties,	and	our	results	could	differ	materially from	the	results	anticipated	by	our	forward-looking	statements	as	a	result	of	many	known	and	unknown	factors,	including	but	not	limited	to	those	discussed	in	"Item	1A —Risk	Factors"	of	this	report.	See	also	"Cautionary	Notice	Regarding	Forward-Looking	Statements"	located	above	"Item	1—Business."

You	should	read	the	following	discussion	and	analysis	in	conjunction	with	"Item	6—Selected	Financial	Data"	and	"Item	8—Financial	Statements	and Supplementary	Data"	appearing	elsewhere	in	this	annual	report.

# Business

We	market	our	products	and	services	throughout	the	United	States,	Canada,	Europe	and	the	Asia-Pacific	region.	We	operate	in	two	business	segments,	merchant services	and	money	transfer,	and	we	offer	various	products	through	these	segments.	Our	merchant	services	segment	targets	customers	in	many	vertical	industries including	financial	institutions,	government,	professional	services,	restaurants,	universities,	utilities,	gaming,	retail	and	health	care.	Our	money	transfer	segment primarily	targets	immigrants	in	the	United	States	and	Europe.	See	Note	11	in	the	notes	to	consolidated	financial	statements	for	additional	segment	information.

Our	offerings	in	the	merchant	services	segment	provide	merchants,	independent	sales	organizations,	or	ISOs,	and	financial	institutions	with	credit	and	debit	card transaction	processing,	as	well	as	check-related	services.	We	use	two	basic	business	models	to	market	our	merchant	services	offerings.	One	model,	referred	to	as	"direct" merchant	services,	features	a	salaried	and	commissioned	sales	force,	ISOs	and	independent	sales	representatives,	all	of	whom	sell	our	end-to-end	services	directly	to merchants.	Our	other	model,	referred	to	as	"indirect"	merchant	services,	provides	the	same	basic	products	and	services	as	direct	merchant	services,	primarily	to	financial institutions	and	a	limited	number	of	ISOs	on	an	unbundled	basis,	that	in	turn	resell	our	products	and	services	to	merchants.	We	also	offer	sales,	installation,	and	servicing of	ATM	and	point	of	sale,	or	POS,	terminals	and	selected	card	issuing	services,	which	are	components	of	indirect	merchant	services,	through	Global	Payments	Europe, s.r.o.,	formerly	known	as	MUZO,	which	is	our	subsidiary	based	in	the	Czech	Republic.	Our	direct	merchant	services	are	marketed	in	the	United	States,	Canada,	and throughout	the	Asia-Pacific	region,	while	our	indirect	merchant	services	are	marketed	in	the	United	States,	Canada,	and	Europe.	Through	our	acquisition	of	HSBC Merchant	Services	in	the	United	Kingdom	on	June	30,	2008,	we	will	be	offering	direct	merchant	services	in	the	United	Kingdom.

Direct	merchant	services	revenue	is	generated	on	services	primarily	priced	as	a	percentage	of	transaction	value,	whereas	indirect	merchant	services	revenue	is generated	on	services	primarily	priced	on	a	specified	amount	per	transaction.	In	both	merchant	services	models,	we	also	charge	for	other	processing	fees	unrelated	to	the number	of	transactions	or	the	transaction	value.

Our	money	transfer	segment	provides	money	transfer	services.	A	majority	of	the	revenue	derived	from	our	money	transfer	offering	consists	of	our	electronic money	transfer	services	marketed	under	our	DolEx	brand	to

first	and	second	generation	Latin	Americans	living	in	the	United	States.	This	consumer	segment	regularly	transfers	money	to	family	and	friends	living	in	Latin	America. Following	the	Europhil	acquisition	in	December	2004,	we	expanded	our	money	transfer	origination	locations	into	Europe	and	our	settlement	locations	to	Morocco,	the Philippines,	Romania,	Poland	and	other	new	destinations.

Money	transfer	revenue	is	earned	on	fees	charged	to	customers	based	on	the	nature	and	amount	of	the	transaction	performed	on	the	customers'	behalf	and	is recognized	at	the	time	of	funds	transfer.	We	also	earn	money	transfer	revenue	on	the	difference	between	the	retail	exchange	rate	quoted	at	the	time	when	the	money transfer	transaction	is	requested	and	the	wholesale	exchange	rate	at	the	time	when	the	currency	is	purchased.	This	revenue	is	recognized	when	the	money	transfer transaction	is	processed	through	the	settlement	system	and	the	funds	are	available	to	the	beneficiary,	as	this	is	the	point	in	time	when	the	amount	of	revenue	is determinable.

Our	products	and	services	are	marketed	through	a	variety	of	distinct	sales	channels	that	include	a	dedicated	direct	sales	force,	ISOs,	an	internal	telesales	group, retail	outlets,	trade	associations,	alliance	bank	relationships	and	financial	institutions.

# Executive	Overview

In	March	2007,	we	decided	to	consolidate	our	technical	support	center	located	in	St.	Louis,	Missouri	into	our	operations	center	in	Owings	Mills,	Maryland.	We believe	this	consolidation	will	improve	our	customer	service	by	allowing	us	to	provide	our	customers	with	a	single	point	of	contact	in	one	physical	location.	This consolidation	resulted	in	staff	reduction,	fixed	asset	abandonment	and	facility	closure	costs	and	was	completed	during	our	second	quarter	of	fiscal	2008.

On	April	5,	2007,	our	Board	of	Directors	approved	a	share	repurchase	program	that	authorized	the	purchase	of	up	to	$100	million	of	Global	Payments'	stock	in the	open	market	or	as	otherwise	may	be	determined	by	us,	subject	to	market	conditions,	business	opportunities,	and	other	factors.	Under	this	authorization,	we repurchased	2.3	million	shares	of	our	common	stock	during	fiscal	2008	at	a	cost	of	$87.0	million,	or	an	average	of	$37.85	per	share,	including	commissions.	As	of May	31,	2008,	we	had	$13.0	million	remaining	under	our	current	share	repurchase	authorization.	No	amounts	were	repurchased	during	fiscal	2007.

On	June	17,	2008,	we	entered	into	a	purchase	agreement	with	HSBC	Bank	plc,	or	HSBC	UK,	to	obtain	an	interest	in	a	newly	formed	limited	partnership	that	will provide	payment	processing	services	to	merchants	in	the	United	Kingdom	and	Internet	merchants	globally.	The	new	partnership	will	operate	under	the	name	HSBC Merchant	Services.	On	June	30,	2008,	we	completed	the	transaction	and	paid	HSBC	UK	$439	million	in	cash	to	acquire	a	51%	majority	ownership	in	the	partnership. We	will	manage	the	day-to-day	operations	of	the	partnership,	will	control	all	major	decisions	and,	accordingly,	will	consolidate	the	partnership's	financial	results	for accounting	purposes	effective	with	the	closing	date.	HSBC	UK	retained	ownership	of	the	remaining	49%	and	contributed	its	existing	merchant	acquiring	business	in	the United	Kingdom	to	the	partnership.	In	addition,	HSBC	UK	entered	into	a	ten-year	marketing	alliance	with	the	partnership	in	which	HSBC	UK	will	refer	customers	to	the partnership	for	payment	processing	services	in	the	United	Kingdom.	On	June	23,	2008,	we	entered	into	a	new	five	year,	$200	million	term	loan	to	fund	a	portion	of	the acquisition.	We	funded	the	remaining	purchase	price	with	excess	cash	and	our	existing	credit	facilities.	See	Note	16	in	the	notes	to	the	consolidated	financial	statements for	a	more	detailed	discussion	of	the	terms	of	the	acquisition.

# Results	of	Operations

The	following	table	shows	key	selected	financial	data	for	the	fiscal	years	ended	May	31,	2008	and	2007,	this	data	as	a	percentage	of	total	revenues,	and	the changes	between	fiscal	years	in	dollars	and	as	a	percentage	of	fiscal	2007.

|  |  | %	of |  | %	of |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2008 | Revenue\t(1) | 2007 | Revenue\t(1) | Change | %\tChange |
|  |  |  | (dollar\tamounts\tin\tthousands) |  |  |  |
| Revenues: |  |  |  |  |  |  |
| Domestic\tdirect | $687,065 | 54% | $558,026 | 53% | $129,039 | 23% |
| Canada | 267,249 | 21 | 224,570 | 21 | 42,679 | 19 |
| Asia-Pacific | 72,367 | 6 | 48,449 | 5 | 23,918 | 49 |
| Central\tand\tEastern\tEurope | 59,778 | 5 | 51,224 | 5 | 8,554 | 17 |
| Domestic\tindirect\tand\tother | 44,150 | 3 | 46,873 | 4 | (2,723) | (6) |
| Merchant\tservices | \t 1,130,609 | 89 | 929,142 | 88 | \t 201,467 | 22 |
| Domestic | 119,019 | 9 | 115,416 | 11 | 3,603 | 3 |
| Europe | 24,601 | 2 | 16,965 | 2 | 7,636 | 45 |
| Money\ttransfer | 143,620 | 11 | 132,381 | 12 | 11,239 | 8 |
| Total\trevenues | $1,274,229 | 100% | $1,061,523 | 100% | $212,706 | 20% |
| Consolidated\toperating\texpenses: |  |  |  |  |  |  |
| Cost\tof\tservice | $475,612 | 37.3% | $414,837 | 39.1% | $60,775 | 15% |
| Sales,\tgeneral\tand\tadministrative | 545,941 | 42.8 | 425,509 | 40.1 | \t 120,432 | 28 |
| Restructuring\tand\tother | 1,317 | 0.1 | 3,088 | 0.3 | (1,771) | (57) |
| Operating\tincome | $251,359 | 19.7% | $218,089 | 20.5% | $33,270 | 15% |
| Operating\tincome\tfor\tsegments: |  |  |  |  |  |  |
| Merchant\tservices | $293,030 |  | $259,670 |  | $33,360 | 13% |
| Money\ttransfer | 13,635 |  | 14,476 |  | (841) | (6) |
| Corporate | (53,989) |  | (52,969) |  | (1,020) | (2) |
| Restructuring\tand\tother | (1,317) |  | (3,088) |  | 1,771 | 57 |
| Operating\tincome | $251,359 |  | $218,089 |  | $33,270 | 15% |
| Operating\tmargin\tfor\tsegments: |  |  |  |  |  |  |
| Merchant\tservices\tsegment | 25.9% |  | 27.9% |  | (2.0)% |  |
| Money\ttransfer\tsegment | 9.5% |  | 10.9% |  | (1.4)% |  |

(1) Percentage	amounts	may	not	sum	to	the	total	due	to	rounding.

# Revenues

We	derive	our	revenues	from	three	primary	sources:	charges	based	on	volumes	and	fees	for	services,	charges	based	on	transaction	quantity,	and	equipment	sales, leases	and	service	fees.	Revenues	generated	by	these	areas	depend	upon	a	number	of	factors,	such	as	demand	for	and	price	of	our	services,	the	technological competitiveness	of	our	product	offerings,	our	reputation	for	providing	timely	and	reliable	service,	competition	within	our	industry,	and	general	economic	conditions.

In	fiscal	2008,	revenue	increased	20%	to	$1,274.2	million	compared	to	the	prior	year's	comparable	period.	We	attribute	this	revenue	growth	primarily	to	our merchant	services	channels.	We	intend	to	continue	to	grow	our	domestic	and	international	presence,	build	our	ISO	sales	channel,	increase	customer	satisfaction,	assess 31

opportunities	for	profitable	growth	through	acquisitions,	pursue	enhanced	products	and	services	for	our	customers,	and	leverage	our	existing	business	model.	We	expect our	fiscal	2009	consolidated	revenues	to	range	from	$1,620	million	to	$1,675	million,	reflecting	growth	of	27%	to	31%	over	fiscal	2008.	This	range	includes	the	partial year	impact	of	our	June	30,	2008	acquisition	of	HSBC	Merchant	Services	in	the	United	Kingdom.

Revenue	from	our	merchant	services	segment	for	fiscal	2008	increased	by	$201.5	million	or	22%	to	$1,130.6	million	compared	to	the	prior	year's	comparable period.

We	have	continued	to	grow	our	domestic	direct	merchant	channel	by	adding	small	and	mid-market	merchants	in	diversified	vertical	markets,	primarily	through our	ISOs.	For	fiscal	2008,	our	credit	and	debit	card	processed	transactions	grew	26%	and	our	revenue	grew	23%	for	this	channel	compared	to	the	prior	year	period.	In fiscal	2008	compared	to	the	prior	year's	comparable	period,	our	domestic	direct	credit	card	average	dollar	value	of	transaction,	or	average	ticket,	decreased	in	the	mid single	digit	percentage	range,	due	to	a	shift	toward	smaller	merchants	added	through	our	ISOs.	Offsetting	this	decline	in	average	ticket	was	a	mid	single	digit	percentage increase	in	our	average	discount	revenue	per	dollar	value	volume,	or	spread,	in	fiscal	2008	compared	to	the	prior	year's	comparable	period.	Our	spread	was	favorably impacted	by	the	shift	towards	smaller	merchants	added	through	our	ISOs.	Smaller	merchants	tend	to	have	lower	average	tickets	and	higher	spreads	than	larger merchants.	Aside	from	the	impact	of	changes	in	our	average	ticket	and	spread,	the	remaining	difference	between	our	transaction	growth	and	revenue	growth	was	due	to our	service	fees,	equipment	fees	and	check-related	services.	The	total	of	this	revenue	grew	at	a	lesser	rate	than	our	credit	and	debit	card	transaction	growth.

For	fiscal	2008,	our	Canadian	direct	credit	and	debit	card	processed	transactions	grew	3%,	with	overall	Canadian	revenue	growth	of	19%	compared	to	the	prior year	period.	The	difference	between	our	transaction	growth	and	revenue	growth	was	primarily	due	to	a	favorable	Canadian	currency	exchange	rate	and	a	positive	impact from	changes	in	the	Canadian	market	interchange	structure	implemented	in	April	2008,	offset	by	the	unfavorable	impact	of	non-recurring	card	association	incentive revenue	realized	during	fiscal	2007.

Our	Asia-Pacific	merchant	services	revenue	for	fiscal	2008	increased	49%	compared	to	the	prior	year	period.	This	growth	was	due	to	enhancing	our	sales	force, industry	expansion	and	strategic	pricing	initiatives.	Also	contributing	to	the	growth	is	the	impact	of	reporting	a	full	year	of	results	in	fiscal	2008	compared	to	a	partial year	in	fiscal	2007.	We	completed	the	purchase	of	our	ownership	in	HSBC's	Asia-Pacific	merchant	acquiring	business	on	July	24,	2006,	and	began	operating	in	this channel	at	that	time.

Our	Central	and	Eastern	European	merchant	services	revenue	for	fiscal	2008	increased	17%	compared	to	the	prior	year	period,	largely	due	to	a	favorable	Czech currency	exchange	rate,	the	impact	of	our	Diginet	acquisition	and	growth	in	credit	and	debit	card	processed	transactions	of	11%.	Revenue	growth	was	offset	by	the	loss of	a	major	customer	which	deconverted	at	the	end	of	fiscal	2007,	in	addition	to	the	impact	of	price	reductions	granted	on	contract	renewals.

We	experienced	continued	and	expected	declines	in	our	domestic	indirect	and	other	channel	during	fiscal	2008,	with	a	decline	in	revenue	of	6%	compared	to	the prior	year's	comparable	period.	We	attributed	this	revenue	decline	to	the	industry	consolidation	of	financial	institutions	and	competitive	pricing	pressures.

For	fiscal	2008,	revenue	from	our	money	transfer	segment	increased	8%	to	$143.6	million	compared	to	the	prior	year's	comparable	period.

Our	domestic	money	transfer	channel	relates	to	all	revenue	originating	from	the	money	transfer	branches	that	we	operate	in	the	United	States,	which	may	include money	transfers	to	destinations	both	inside	and	outside

of	the	United	States.	For	fiscal	2008,	our	domestic	money	transfer	channel	transactions	grew	7%	and	revenue	increased	3%,	compared	to	the	prior	year's	comparable period.

The	growth	in	transactions	was	driven	primarily	by	same	store	sales	growth	and	acquired	branch	locations.	We	decreased	our	domestic	branch	footprint	to	793 domestic	branches	for	fiscal	2008,	compared	to	875	branch	locations	in	fiscal	2007.	On	a	sequential	basis,	our	domestic	branch	footprint	as	of	May	31,	2008	decreased by	32	locations	compared	to	our	domestic	branch	footprint	as	of	February	29,	2008.	This	decrease	in	domestic	branches	was	the	result	of	the	closure	of	underperforming locations,	partially	offset	by	branch	acquisitions	and,	to	a	lesser	extent,	new	branch	openings.

The	difference	between	our	domestic	transaction	growth	and	revenue	growth	was	primarily	due	to	lower	pricing.	We	believe	that	fewer	immigrants	may	be coming	to	the	United	States	due	to	increased	immigration	legislation	and	enforcement,	a	downturn	in	the	United	States	housing	market,	and	an	improving	Mexican economy,	which	may	be	contributing	to	a	competitive	pricing	environment.	We	have	a	significant	amount	of	goodwill	and	other	indefinite-lived	intangible	assets associated	with	this	business.	Although	we	currently	believe	that	these	unfavorable	trends	are	temporary,	if	they	either	worsen	or	continue	for	longer	than	we	expect,	or if	any	future	adverse	trends	arise	in	the	operating	performance	of	this	business,	the	carrying	amount	of	these	intangible	assets	may	be	impacted.	In	contrast	with	the unfavorable	pricing	trends	for	the	full	fiscal	2008	year,	recent	trends	have	improved.	For	the	three	months	ended	May	31,	2008,	we	achieved	13%	revenue	growth	in	this business.	This	growth	reflected	a	significant	improvement	in	operating	performance	compared	to	the	nine	months	ended	February	29,	2008,	primarily	due	to	stabilized pricing.

Our	European	money	transfer	channel	relates	to	all	revenue	generated	from	the	money	transfer	branches	that	we	operate	in	Europe,	which	may	include	money transfers	to	destinations	both	inside	and	outside	of	Europe.	In	Europe,	we	increased	our	branch	footprint	to	90	locations	for	fiscal	2008,	compared	to	68	locations	in	fiscal 2007,	primarily	through	our	acquisition	of	LFS	Spain.	For	fiscal	2008,	our	European	money	transfer	revenue	grew	45%,	primarily	due	to	acquired	and	new	branch locations,	which	resulted	in	transaction	growth	of	34%.	Revenues	for	fiscal	2008	were	also	impacted	by	a	favorable	year-over-year	currency	exchange	rate.

# Consolidated	Operating	Expenses

Cost	of	service	consists	primarily	of	the	following	costs:	operational-related	personnel,	including	those	who	monitor	our	transaction	processing	systems	and settlement;	assessments	and	other	fees	paid	to	card	associations;	transaction	processing	systems,	including	third-party	services	such	as	the	costs	of	settlement	channels for	money	transfer	services;	transition	services	paid	to	HSBC	in	the	Asia-Pacific	market;	network	telecommunications	capability,	depreciation	and	occupancy	costs associated	with	the	facilities	performing	these	functions;	amortization	of	intangible	assets;	and	provisions	for	operating	losses.

Cost	of	service	increased	15%	to	$475.6	million	for	fiscal	2008	compared	to	the	prior	year's	comparable	period.	As	a	percentage	of	revenue,	cost	of	service decreased	to	37.3%	of	revenue	for	fiscal	2008	from	39.1%	in	fiscal	2007.

For	fiscal	2008,	the	decline	in	cost	of	service	as	a	percentage	of	revenue	was	related	to	our	revenue	growth	and	the	related	economies	of	scale	benefits.	The growth	in	cost	of	service	expenses	was	primarily	due	to	the	following	factors:	the	addition	of	our	Asia-Pacific	channel;	costs	associated	with	our	money	transfer segment;	the	weakening	of	the	United	States	dollar	compared	to	the	currencies	of	Canada,	the	Czech	Republic,	and	Spain;	increased	losses	in	our	check	guarantee service	offering;	and	increases	in	variable	processing	expenses	associated	with	our	revenue	growth,	primarily	assessment	fees	paid	to	card	associations.

Sales,	general	and	administrative	expenses	consists	primarily	of	salaries,	wages	and	related	expenses	paid	to	sales	personnel,	non-revenue	producing	customer support	functions	and	administrative	employees	and	management,	commissions	to	independent	contractors	and	ISOs,	advertising	costs,	other	selling	expenses,	share- based	compensation	expenses	and	occupancy	of	leased	space	directly	related	to	these	functions.

Sales,	general	and	administrative	expenses	increased	28%	to	$545.9	million	compared	to	the	prior	year's	comparable	period.	As	a	percentage	of	revenue,	these expenses	increased	to	42.8%	for	fiscal	2008	compared	to	40.1%	in	fiscal	2007.

The	increases	in	sales,	general	and	administrative	expenses	were	primarily	due	to	growth	in	commission	payments	to	ISOs	resulting	from	the	increased	revenue	in this	sales	channel.	The	ISO	channel	generally	has	a	dilutive	effect	on	our	operating	margin	compared	to	our	other	channels	due	to	the	ongoing	commission	payments	to the	ISOs.	The	ISO	commission	model	differs	from	our	other	sales	channels	where	the	commissions	are	primarily	paid	for	only	a	twelve-month	period.	The	addition	of our	new	Asia-Pacific	channel	also	contributed	to	the	increases	in	sales,	general	and	administrative	expenses	due	to	the	investment	in	the	regional	sales	force	and infrastructure.	Lastly,	the	weakening	of	the	United	States	dollar	compared	to	the	currencies	of	Canada,	the	Czech	Republic	and	Spain	also	increased	these	expenses.

Offsetting	the	increases	in	sales,	general	and	administrative	expenses	was	the	favorable	impact	of	a	non-recurring,	non-cash	operating	tax	item	of	$7.0	million	that was	recognized	in	fiscal	2008.	During	fiscal	2008,	we	determined	that	an	accrued	liability	relating	to	a	contingent	operating	tax	matter	was	no	longer	deemed	to	be probable.	We	made	this	determination	as	a	result	of	consultation	with	outside	legal	counsel	and	further	analysis	of	applicable	legislation.	As	such,	we	released	the related	liability.	See	Taxes	under	Note	13	in	the	notes	to	the	consolidated	financial	statements	for	additional	details.

# Operating	Income	and	Operating	Margin	for	Segments

For	the	purpose	of	discussing	segment	operations,	management	refers	to	operating	income	as	calculated	by	subtracting	segment	direct	expenses	from	segment revenue.	Overhead	and	shared	expenses,	including	share-based	compensation	costs,	are	not	allocated	to	the	segments'	operations;	they	are	reported	in	the	caption "Corporate."	Similarly,	references	to	operating	margin	regarding	segment	operations	mean	segment	operating	income	divided	by	segment	revenue.

Operating	income	in	the	merchant	services	segment	increased	13%	to	$293.0	million	for	fiscal	2008	compared	to	the	prior	year's	comparable	period.	The operating	margin	was	25.9%	and	27.9%	for	fiscal	2008	and	fiscal	2007,	respectively.

This	operating	margin	decline	was	primarily	due	to	the	growth	of	our	ISO	channel,	the	ongoing	investments	in	our	Asia-Pacific	channel,	the	customer	attrition	and pricing	pressure	in	our	Central	and	Eastern	European	channel,	increased	losses	in	our	check	guarantee	service	offering,	and	the	prior	year	non-recurring	card	association incentive	revenue	in	Canada.	Offsetting	this	decline	in	operating	margin	was	the	impact	of	the	operating	tax	item	discussed	above.	Lastly,	due	to	strengthened	foreign currencies	compared	to	the	United	States	dollar,	we	received	a	benefit	during	fiscal	2008	of	$42.1	million	in	revenue	and	$0.15	in	diluted	earnings	per	share,	most	of which	relates	to	our	merchant	services	segment.

Operating	income	in	the	money	transfer	segment	decreased	6%	to	$13.6	million	for	fiscal	2008	compared	to	the	prior	year's	comparable	period.	This	decrease resulted	in	an	operating	margin	of	9.5%	for	fiscal	2008,	compared	to	10.9%	in	the	prior	year's	comparable	period.

This	operating	margin	decline	was	primarily	due	to	the	increased	price	competition	discussed	above	and	our	use	of	a	fixed-cost,	branch	model	at	the	point	of	sale. In	addition,	we	incurred	costs	associated	with	the	closure	of	underperforming	locations,	such	as	lease	termination	fees	and	fixed	asset	write-offs.	In	contrast	with	the operating	margin	decline	for	the	full	fiscal	2008	year,	recent	trends	have	improved.	For	the	three	months	ended

May	31,	2008,	we	achieved	operating	income	growth	of	116%	in	this	segment	compared	to	the	prior	year's	comparable	period,	and	our	operating	margin	improved	to 18.6%	compared	to	10.2%	in	the	prior	year's	comparable	period.	These	strong	results	were	primarily	due	to	stabilized	pricing,	the	closure	of	underperforming	branch locations,	and	economies	of	scale	benefits	resulting	from	our	fixed	cost	model.

# Corporate

Our	corporate	expenses	primarily	include	costs	associated	with	our	Atlanta	headquarters,	insurance,	employee	incentive	programs,	Board	of	Directors'	fees, share-based	compensation,	and	certain	corporate	staffing	areas,	including	finance,	accounting,	legal,	human	resources,	marketing,	and	executive.	Our	corporate	costs increased	2%	to	$54.0	million	for	fiscal	2008	compared	to	$53.0	million	for	fiscal	2007.	These	increases	were	primarily	due	to	higher	employee	incentive	program expenses,	offset	by	lower	share-based	compensation	costs.

# Restructuring	and	Other	Charges

During	the	fourth	quarter	of	fiscal	2007,	we	committed	to	plans	to	close	two	locations	and	consolidate	their	functions	into	existing	locations,	which	is	consistent with	our	strategy	to	leverage	infrastructure	and	consolidate	operations.	These	restructuring	plans	required	staff	reduction	and	facility	closure	costs	and	were	completed during	our	second	quarter	of	fiscal	2008.	We	recorded	restructuring	charges	of	$1.3	million	in	fiscal	2008.	We	recorded	restructuring	and	other	charges	of	$3.1	million in	fiscal	2007.

# Consolidated	Operating	Income

Consolidated	operating	income	increased	15%	to	$251.4	million	for	fiscal	2008	compared	to	the	prior	year's	comparable	period.	This	change	resulted	in	an operating	margin	of	19.7%	for	fiscal	2008	compared	to	20.5%	in	the	prior	year's	comparable	period.

# Consolidated	Other	Income/Expense,	Net

Other	income	and	expense	consists	primarily	of	interest	income	and	interest	expense.	Interest	and	other	income,	net	increased	to	$10.0	million	in	fiscal	2008 compared	to	$8.2	million	in	the	prior	year's	comparable	period.	This	improvement	was	largely	due	to	higher	interest	income	due	to	higher	cash	balances.

# Provision	for	Income	Taxes

In	fiscal	2008,	our	effective	tax	rate,	reflected	as	the	provision	for	income	taxes	divided	by	income	before	income	taxes,	including	the	effect	of	minority	interest, increased	to	35.6%	from	34.1%	in	fiscal	2007.	This	increase	was	primarily	due	to	favorable	one-time	tax	benefit	items	in	the	prior	year's	comparable	period	related	to income	tax	statute	expirations	and	certain	tax	planning	initiatives.

# Minority	Interest,	Net	of	Tax

Minority	interest,	net	of	tax	decreased	to	$8.1	million	for	fiscal	2008	compared	to	$9.9	million	in	the	prior	year's	comparable	period.	This	decrease	primarily related	to	our	investment	in	our	Asia-Pacific	channel,	offset	by	growth	in	our	Comerica	Bank	alliance.

# Net	Income	and	Diluted	Earnings	Per	Share

Net	income	increased	14%	to	$162.8	million	in	fiscal	2008	compared	to	the	prior	year's	comparable	period.	This	growth	resulted	in	a	15%	increase	in	diluted earnings	per	share	to	$2.01	in	fiscal	2008	compared	to	the	prior	year's	comparable	period.	We	expect	diluted	earnings	per	share	to	range	from	$2.20	to	$2.30	for	fiscal 2009.

# New	Accounting	Pronouncements

In	September	2006,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	157,	Fair	Value	Measurements	("FAS 157").	This	statement	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	in	generally	accepted	accounting	principles,	and	expands	disclosures	about	fair value	measurements.	Companies	are	required	to	implement	FAS	157	for	the	first	financial	statements	issued	for	fiscal	years	beginning	after	November	15,	2007	for financial	assets	and	liabilities,	as	well	as	for	any	other	assets	and	liabilities	that	are	carried	at	fair	value	on	a	recurring	basis.	In	November	2007,	the	Financial Accounting	Standards	Board	granted	a	one	year	deferral	for	the	implementation	of	FAS	157	for	non-financial	assets	and	liabilities.	The	adoption	of	FAS	157	on	June	1, 2008	is	not	expected	to	have	a	material	impact	on	our	consolidated	balance	sheet	or	consolidated	statement	of	income,	but	the	implementation	of	FAS	157	will	require additional	disclosures.

In	February	2007,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	159,	The	Fair	Value	Option	for	Financial Assets	and	Financial	Liabilities—Including	an	Amendment	of	FASB	Statement	No.	115	("FAS	159").	This	statement	permits	us	to	choose	to	measure	many	financial instruments	and	certain	other	items	at	fair	value.	Upon	adoption	of	FAS	159	on	June	1,	2008,	we	will	not	elect	the	fair	value	option	for	any	financial	instrument	we	do not	currently	report	at	fair	value.

In	December	2007,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	141	(Revised)	Business	Combinations ("FAS	141R").	This	statement	establishes	principles	and	requirements	for	how	we	recognize	and	measure	in	our	financial	statements	the	identifiable	assets	acquired,	the liabilities	assumed,	and	any	noncontrolling	interest	in	the	acquiree.	In	addition,	this	standard	establishes	principles	and	requirements	for	how	we	recognize	and	measure the	goodwill	acquired	in	the	business	combination	or	gain	from	a	bargain	purchase,	and	how	we	determine	what	information	to	disclose	to	enable	financial	statement users	to	evaluate	the	nature	and	financial	effects	of	the	business	combination.	FAS	141R	will	become	effective	for	us	for	business	combinations	in	which	the	acquisition date	is	on	or	after	June	1,	2009.

In	December	2007,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	160,	Noncontrolling	Interests	in Consolidated	Financial	Statements	("FAS	160").	This	statement	applies	to	the	accounting	for	noncontrolling	interests	(currently	referred	to	as	minority	interest)	in	a subsidiary	and	for	the	deconsolidation	of	a	subsidiary.	FAS	160	will	become	effective	for	us	on	June	1,	2009.	As	further	described	in	Note	13	and	16	of	the	consolidated financial	statements,	we	have	minority	interest	that	includes	redemption	provisions	that	are	not	solely	within	our	control,	commonly	referred	to	as	a	redeemable	minority interest.	At	the	March	12,	2008	meeting	of	the	FASB	Emerging	Issues	Task	Force	("EITF"),	certain	revisions	occurred	to	EITF	Topic	No.	D-98,	Classification	and Measurement	of	Redeemable	Securities	("Topic	D-98").	These	revisions	clarified	that	Topic	D-98	applies	to	redeemable	minority	interests	and	requires	that	its	provision be	applied	no	later	than	the	effective	date	of	FAS	160.	While	we	are	still	evaluating	the	impact	on	our	consolidated	financial	statements	of	FAS	160,	we	have	determined that,	upon	adoption	of	this	standard	and	in	conjunction	with	the	provisions	of	Topic	D-98,	an	adjustment	for	the	then	fair	value	of	redeemable	minority	interests	will	be required.	This	adjustment	will	ultimately	increase	the	carrying	value	of	redeemable	minority	interests	to	the	redemption	value	with	a	corresponding	charge	to	equity. Under	Topic	D-98,	we	will	have	a	choice	of	either	accreting	redeemable	minority	interest	to	its	redemption	value	over	the	redemption	period	or	recognizing	changes	in the	redemption	value	immediately	as	they	occur.	We	are	currently	evaluating	the	recognition	and	measurement	provisions	of	Topic	D-98,	and	we	have	not	yet	concluded which	measurement	method	we	will	apply.

|  |  | %	of |  | %	of |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2007 | Revenue\t(1) | 2006 | Revenue\t(1) | Change | %\tChange |
|  |  |  | (dollar\tamounts\tin\tthousands) |  |  |  |
| Revenues: |  |  |  |  |  |  |
| Domestic\tdirect | $558,026 | 53% | $481,273 | 53% | $76,753 | 16% |
| Canada | 224,570 | 21 | \t 208,126 | 23 | 16,444 | 8 |
| Asia-Pacific | 48,449 | 5 | — | — | 48,449 | — |
| Central\tand\tEastern\tEurope | 51,224 | 5 | 47,114 | 5 | 4,110 | 9 |
| Domestic\tindirect\tand\tother | 46,873 | 4 | 51,987 | 6 | (5,114) | (10) |
| Merchant\tservices | 929,142 | 88 | \t 788,500 | 87 | \t 140,642 | 18 |
| Domestic | 115,416 | 11 | \t 109,067 | 12 | 6,349 | 6 |
| Europe | 16,965 | 2 | 10,489 | 1 | 6,476 | 62 |
| Money\ttransfer | 132,381 | 12 | \t 119,556 | 13 | 12,825 | 11 |
| Total\trevenues | $1,061,523 | 100% | $908,056 | 100% | $153,467 | 17% |
| Consolidated\toperating\texpenses: |  |  |  |  |  |  |
| Cost\tof\tservice | $414,837 | 39.1% | $358,020 | 39.4% | $56,817 | 16% |
| Sales,\tgeneral\tand\tadministrative | 425,509 | 40.1 | \t 347,070 | 38.2 | 78,439 | 23 |
| Restructuring\tand\tother | 3,088 | 0.3 | 1,878 | 0.2 | 1,210 | 64 |
| Operating\tincome | $218,089 | 20.5% | $201,088 | 22.1% | $17,001 | 8% |
| Operating\tincome\tfor\tsegments: |  |  |  |  |  |  |
| Merchant\tservices | $259,670 |  | $224,221 |  | $35,449 | 16% |
| Money\ttransfer | 14,476 |  | 18,741 |  | (4,265) | (23) |
| Corporate | (52,969) |  | (39,996) |  | (12,973) | (32) |
| Restructuring\tand\tother | (3,088) |  | (1,878) |  | (1,210) | (64) |
| Operating\tincome | $218,089 |  | $201,088 |  | $17,001 | 8% |
| Operating\tmargin\tfor\tsegments: |  |  |  |  |  |  |
| Merchant\tservices\tsegment | 27.9% |  | 28.4% |  | (0.5)% |  |
| Money\ttransfer\tsegment | 10.9% |  | 15.7% |  | (4.8)% |  |

We	derive	our	revenues	from	three	primary	sources:	charges	based	on	volumes	and	fees	for	services,	charges	based	on	transaction	quantity,	and	equipment	sales, leases	and	service	fees.	Revenues	generated	by	these	areas	depend	upon	a	number	of	factors,	such	as	demand	for	and	price	of	our	services,	the	technological competitiveness	of	our	product	offerings,	our	reputation	for	providing	timely	and	reliable	service,	competition	within	our	industry,	and	general	economic	conditions.	In fiscal	2007,	revenue	increased	17%	to	$1,061.5	million	from	$908.1	million	for	fiscal	2006.	We	attribute	this	revenue	growth	primarily	to	our	domestic	direct	and	new Asia-Pacific	merchant	services	channels.

We	have	continued	to	grow	our	domestic	direct	merchant	services	channel	by	adding	small	and	mid-market	merchants	in	diversified	vertical	markets,	primarily through	our	ISOs.	For	fiscal	2007,	our	credit	and	debit	card	processed	transactions	grew	25%	and	our	revenue	grew	16%	for	this	channel	compared	to	the	prior	year.	The difference	between	our	transaction	growth	and	revenue	growth	was	primarily	a	result	of	a	mid	single	digit	percentage	decline	compared	to	the	prior	year	in	our	domestic direct	credit	card	average	dollar	value	of	transaction,	or	average	ticket,	due	to	a	shift	toward	smaller	merchants	added	through	our	ISOs.	Our	average	discount	revenue per	dollar	value	volume,	or	spread,	was	constant	compared	to	the	prior	year	and,	therefore,	did	not	impact	the	difference	between	our	transaction	growth	and	revenue growth.	Our	spread	was	favorably	impacted	by	the	shift	towards	smaller	merchants	added	through	our	ISOs.	Smaller	merchants	tend	to	have	lower	average	tickets	and higher	spreads	than	larger	merchants.	This	favorable	impact	on	spread	was	offset	by	pricing	compression	relating	to	merchants	added	through	our	direct	sales	force. Aside	from	the	decline	in	average	ticket	described	above,	the	remaining	difference	between	our	transaction	growth	and	revenue	growth	was	due	to	our	domestic	direct revenue	that	is	not	based	on	the	amount	of	transactions	or	average	ticket	described	above.	This	type	of	revenue	includes	service	fees,	equipment	fees	and	check-related services.	The	total	of	this	revenue	grew	at	a	lesser	rate	than	our	credit	and	debit	card	transaction	growth.

For	fiscal	2007,	our	Canadian	direct	credit	and	debit	card	processed	transactions	grew	4%,	with	overall	Canadian	revenue	growth	of	8%	compared	to	the	prior year.	Our	Canadian	transaction	growth	was	largely	offset	by	mid	single	digit	percentage	declines	in	our	average	credit	card	spread,	compared	to	the	prior	year.	Our revenue	growth	for	fiscal	2007	was	primarily	due	to	a	favorable	Canadian	currency	exchange	rate	and	card	association	incentive	revenue	relating	to	various	programs being	implemented	in	the	Canadian	market.	These	card	association	incentives	are	not	recurring	in	nature.

Our	Asia-Pacific	merchant	services	revenue	for	fiscal	2007	was	$48.4	million.	We	completed	the	purchase	of	our	ownership	in	HSBC	Asia's	merchant	acquiring business	on	July	24,	2006,	and	began	operating	in	this	channel	at	that	time.

Our	Central	and	Eastern	European	merchant	services	revenue	for	fiscal	2007	increased	9%	compared	to	the	prior	year	period,	largely	due	to	a	favorable	Czech currency	exchange	rate,	the	impact	of	our	Diginet	acquisition	and	growth	in	credit	and	debit	card	processed	transactions	of	15%.	These	factors	were	partially	offset	by the	impact	of	price	reductions	granted	on	contract	renewals.	The	deconversion	process	of	the	large	customer	that	announced	its	intention	to	deconvert	prior	to	the completion	of	our	MUZO	acquisition	was	substantially	completed	during	fiscal	2007.

We	experienced	continued	and	expected	declines	in	our	domestic	indirect	and	other	channel,	with	a	4%	year-over-year	decline	in	credit	and	debit	card transactions	processed	and	a	10%	decline	in	revenue	for	fiscal	2007.	We	attributed	these	revenue	declines	to	the	industry	consolidation	of	financial	institutions	and competitive	pricing	pressures.

For	fiscal	2007,	our	domestic	money	transfer	channel	transactions	grew	18%	and	revenue	grew	6%,	compared	to	fiscal	2006.	The	growth	in	transactions	was driven	primarily	by	same	store	sales	growth	and	an	increasing	domestic	branch	footprint	resulting	in	875	domestic	branches	as	of	May	31,	2007,	compared	to	835 domestic	branch	locations	as	of	May	31,	2006.	The	difference	between	our	transaction	growth	and	our	revenue	growth	was	due	to	lower	pricing	compared	to	the	prior year,	which	was	consistent	with	our	strategy	of	price	leadership.	During	fiscal	2007,	we	experienced	a	highly	competitive	pricing	environment.	Our	fiscal	2007	revenue was	also	negatively	impacted	by	one	of	our	landlords	entering	the	money	transfer	business	and	competing	with	us.	As	a	result,	we	exited	those	locations,	opened	new locations	nearby,	and	responded	to	aggressive	price	competition	from	this	landlord	to	pursue	the	existing	customer	base.

In	Europe,	we	ended	fiscal	2007	with	68	branch	locations,	compared	to	40	locations	as	of	May	31,	2006.	For	fiscal	2007,	our	European	money	transfer	revenue grew	62%,	with	transaction	growth	of	73%.	This	growth	was	largely	due	to	new	branch	locations	compared	to	the	prior	year.

In	fiscal	2007,	the	decline	in	cost	of	service	as	a	percentage	of	revenue	was	partially	related	to	our	revenue	growth	and	the	related	economies	of	scale	benefits.	In addition,	this	decline	was	related	to	several	cost	factors,	including	savings	from	exiting	our	shared	service	agreement	with	our	former	parent	company	and	a	decline	in year-over-year	operating	costs	from	our	domestic	and	Canadian	customer	service	and	back-office	centers,	including	our	Dallas	facility	that	we	closed	in	November	2005. In	addition,	during	the	quarter	ended	August	31,	2005,	we	recognized	an	impairment	loss	of	$2.2	million	in	connection	with	the	MUZO	trademark,	which	is	included	in cost	of	service	in	the	accompanying	consolidated	statement	of	income	for	fiscal	2006.

Sales,	general	and	administrative	expenses	increased	by	$78.4	million	or	23%	to	$425.5	million	for	fiscal	2007	from	$347.1	million	for	fiscal	2006.	As	a percentage	of	revenue,	these	expenses	increased	to	40.1%	for	fiscal	2007	compared	to	38.2%	for	fiscal	2006.

The	increases	in	sales,	general	and	administrative	expenses	were	primarily	due	to	growth	in	commission	payments	to	ISOs	resulting	from	the	increased	revenue	in this	sales	channel.	The	ISO	channel	generally	has	a	dilutive	effect	on	our	operating	margin	compared	to	our	other	channels	due	to	the	ongoing	commission	payments	to the	ISOs.	The	ISO	commission	model	differs	from	our	other	sales	channels	where	the	commissions	are	primarily	paid	for	only	a	twelve-month	period.	The	addition	of our	new	Asia-Pacific	channel	also	contributed	to	the	increases	in	sales,	general	and	administrative	expenses	due	to	the	investment	in	the	regional	sales	force	and infrastructure.

In	addition,	sales,	general	and	administrative	expenses	increased	for	fiscal	2007	compared	to	fiscal	2006	as	a	result	of	our	adoption,	using	the	modified	prospective method,	of	Statement	of	Financial	Accounting	Standards	No.	123	(revised	2004):	Share-based	Payment,	or	FAS	123R,	on	June	1,	2006.	The	total	share-based compensation	cost	that	has	been	included	in	sales,	general	and	administrative	expenses	for	our	share-based	awards	and	option	plans	was	$15.2	million	for	fiscal	2007. The	total	share-based	compensation	cost	that	has	been	included	in	sales,	general	and	administrative	expenses	for	our	share-based	awards	and	option	plans	was	$2.8 million	for	fiscal	2006.	During	fiscal	2007,	we	recognized	$12.4	million	in	incremental	employee	stock	option	expense	as	a	result	of	FAS	123R.

Operating	income	in	the	merchant	services	segment	increased	16%	to	$259.7	million	for	fiscal	2007	compared	to	$224.2	million	for	fiscal	2006.	This	change resulted	in	an	operating	margin	of	27.9%	for	fiscal	2007,	compared	to	28.4%	for	fiscal	2006.	Our	operating	margin	decreased	for	fiscal	2007	primarily	due	to	the increases	in	ISO	commission	payments	and	the	addition	of,	and	our	investment	in,	our	new	Asia-Pacific	channel,	offset	by	merchant	services	revenue	growth	and	the cost	of	service	savings	discussed	above.

Operating	income	in	the	money	transfer	segment	decreased	23%	to	$14.5	million	for	fiscal	2007	compared	to	$18.7	million	for	fiscal	2006.	This	decrease	resulted in	an	operating	margin	of	10.9%	for	fiscal	2007,	compared	to	15.7%	for	fiscal	2006.	This	operating	margin	decline	was	primarily	due	to	the	increased	price	competition discussed	above	and	our	use	of	a	fixed-cost,	branch-owned	model	at	the	point	of	sale.

Our	corporate	expenses	primarily	include	costs	associated	with	our	Atlanta	headquarters,	insurance,	employee	incentive	programs,	Board	of	Directors'	fees,	and certain	corporate	staffing	areas,	including	finance,	accounting,	legal,	human	resources,	marketing,	and	executive.	For	fiscal	2007,	corporate	also	includes	expenses associated	with	our	share-based	compensation.	Our	corporate	costs	increased	32%	to	$53.0	million	for	fiscal	2007	compared	to	$40.0	million	for	fiscal	2006.	These increases	are	primarily	due	to	share-based	compensation	costs	related	to	our	implementation	of	FAS	123R,	as	described	above.

During	the	fourth	quarter	of	fiscal	2007,	we	committed	to	plans	to	close	two	locations	and	consolidate	their	functions	into	existing	locations,	which	is	consistent with	our	strategy	to	leverage	infrastructure	and	consolidate	operations.	These	restructuring	plans	will	required	staff	reduction	and	facility	closure	costs	and	were completed	during	our	second	quarter	of	fiscal	2008.	We	recorded	restructuring	and	other	charges	of	$3.1	million	in	fiscal	2007.	In	fiscal	2006,	we	incurred	$1.9	million in	restructuring	charges	in	connection	with	our	2005	restructuring	plans.

Other	income	and	expense	consists	primarily	of	interest	income	and	interest	expense.	Interest	and	other	income	increased	$7.8	million	to	$8.2	million	for	fiscal 2007	compared	to	$0.4	million	for	fiscal	2006.	This	improvement	was	largely	due	to	higher	interest	income	due	to	higher	cash	balances	and	investment	rates.

In	fiscal	2007,	our	tax	rate,	reflected	as	the	provision	for	income	taxes	divided	by	income	before	income	tax	and	minority	interest,	decreased	to	32.4%	from 33.5%	in	fiscal	2006.	The	changes	in	our	effective	tax	rate	are	due	to	tax	planning	initiatives	and	the	impact	of	international	growth.

Minority	interest,	net	of	tax	increased	$1.4	million	to	$9.9	million	for	fiscal	2007	compared	to	$8.5	million	for	fiscal	2006.	This	increase	was	due	to	our	new HSBC	merchant	acquiring	acquisition	in	the	Asia-Pacific	region.

# Liquidity	and	Capital	Resources

Cash	flow	generated	from	operations	provides	us	with	a	significant	source	of	liquidity	to	meet	our	needs.	For	fiscal	2008,	we	had	cash	and	cash	equivalents totaling	$456.1	million.	For	fiscal	2008,	our	cash	and	cash	equivalents	included	$131.6	million	related	to	Merchant	reserves.	While	this	cash	is	not	restricted	and	can	be used	in	our	general	operations,	we	do	not	intend	to	use	it,	as	we	believe	that	designating	this	cash	to	collateralize	Merchant	reserves	strengthens	our	fiduciary	standing with	our	member	sponsors	and	is	in	accordance	with	the	guidelines	set	by	the	card	associations.	See	Cash	and	cash	equivalents	under	Note	1	in	the	notes	to	the consolidated	financial	statements	for	additional	details.

Net	cash	provided	by	operating	activities	increased	$81.3	million	to	$272.4	million	for	fiscal	2008	from	$191.1	million	in	fiscal	2007.	The	increase	in	cash	flow from	operating	activities	was	primarily	due	to	the	increases	in	net	income	of	$19.8	million	and	cash	provided	by	changes	in	working	capital	of	$57.1	million.

The	working	capital	change	was	primarily	due	to	the	change	in	net	settlement	processing	assets	and	obligations	of	$52.2	million,	the	change	in	income	taxes payable	of	$19.4	million,	the	change	in	accounts	payable	and	accrued	liabilities	of	$3.8	million,	and	the	change	in	payables	to	money	transfer	beneficiaries	of	$2.5 million,	partially	offset	by	the	change	in	accounts	receivable	of	$15.4	million	and	the	change	in	claims	receivable	of	$3.6	million.

The	change	in	net	settlement	processing	assets	and	obligations	relates	to	timing	differences,	processed	volume	changes	and	exchange	rate	fluctuations.	In	addition, the	change	is	associated	with	the	addition	of	certain	Asia-Pacific	jurisdictions	that	have	been	converted	to	our	back-end	processing	systems.	See	Settlement	processing assets	and	obligations	under	Note	1	in	the	notes	to	the	consolidated	financial	statements	for	additional	details.	The	change	in	income	taxes	payable	is	attributed	to	the timing	and	amount	of	estimated	tax	payments	this	year	compared	to	last	year.	The	change	in	accounts	payable	and	accrued	liabilities	is	due	to	timing	differences	related to	payments	versus	accruals,	primarily	ISO	commissions,	year-end	bonus	accruals,	employee	benefit	payments,	obligations	to	purchase	foreign	currencies,	and	third party	processing	charges.	The	change	in	payables	to	money	transfer	beneficiaries	is	attributed	to	timing	differences	which	fluctuate	with	the	volume	and	value	of	our money	transfer	transactions.	The	change	in	accounts	receivable	is	primarily	due	to	the	timing	and	growth	of	our	domestic	direct	revenue	and	foreign	exchange	rate variances	on	our	accounts	receivable	balances.	The	change	in	claims	receivable	fluctuates	based	on	the	current	inventory	of	claims	relative	to	the	character,	value	and age	of	the	claims,	and	the	rate	and	value	of	write-offs.

Net	cash	used	in	investing	activities	decreased	$53.4	million	to	$63.2	million	in	fiscal	2008	from	$116.6	million	in	fiscal	2007	due	to	a	decrease	in	business acquisition	activities.	During	fiscal	2008,	business	and

intangible	asset	acquisitions	required	$18.2	million	for	the	acquisition	of	money	transfer	branch	locations,	the	Discover	portfolio	acquisition,	the	LFS	Spain	acquisition, and	a	customer	list	and	long-term	merchant	referral	agreement	in	our	Canadian	merchant	services	channel.	During	fiscal	2007,	business	acquisition	activity	required $81.3	million	for	the	HSBC	Asia-Pacific	merchant	acquiring	acquisition,	the	Diginet	acquisition,	and	the	acquisition	of	money	transfer	branches.	On	June	30,	2008,	we completed	the	transaction	with	HSBC	Bank	plc	in	the	United	Kingdom	and	paid	$439	million	in	cash	to	acquire	a	51%	majority	ownership	in	the	partnership.	In connection	with	this	acquisition,	on	June	23,	2008,	we	entered	into	a	new	five	year,	$200	million	term	loan	agreement.	We	funded	the	remaining	purchase	price	with excess	cash	and	our	existing	credit	facilities.

Capital	expenditures	increased	to	$45.0	million	in	fiscal	2008	from	$35.4	million	in	fiscal	2007.	These	expenditures	primarily	relate	to	software	and infrastructure,	including	our	next	generation	technology	processing	platform.	The	capital	expenditures	for	fiscal	2008	also	included	spending	for	merchant	terminals	and our	operating	center	consolidation	plan	that	we	committed	to	during	the	fourth	quarter	of	fiscal	2007.

For	fiscal	2008,	$76.4	million,	net	was	used	in	financing	activities	compared	to	$10.9	million,	net	provided	by	financing	activities	in	fiscal	2007.	The	increase	in cash	used	in	financing	activities	was	primarily	due	to	$87.0	million	in	share	repurchases	of	our	common	stock	during	fiscal	2008.	See	the	Executive	Overview	above	for additional	details.

We	believe	that	our	current	level	of	cash	and	borrowing	capacity	under	our	term	loan	and	lines	of	credit	described	below,	together	with	future	cash	flows	from operations,	are	sufficient	to	meet	the	needs	of	our	existing	operations	and	planned	requirements	for	the	foreseeable	future.	For	fiscal	2009,	we	do	not	have	any	material capital	commitments,	other	than	commitments	under	operating	leases	and	planned	expansions,	including	the	HSBC	Merchant	Services	acquisition	in	the	United Kingdom.

We	regularly	evaluate	cash	requirements	for	current	operations,	commitments,	development	activities	and	acquisitions,	and	we	may	elect	to	raise	additional	funds for	these	purposes	in	the	future,	either	through	the	issuance	of	debt,	equity	or	otherwise.	Our	current	cash	flow	strategy	is	to	pay	off	debt,	to	make	planned	capital investments	in	our	business,	to	pursue	acquisitions	that	meet	our	growth	strategies,	to	pay	dividends	and	repurchase	our	shares	at	the	discretion	of	our	Board	of Directors,	to	collateralize	our	Merchant	reserves,	and	to	invest	excess	cash	in	investments	that	we	believe	are	of	high-quality	and	marketable	in	the	short	term.

# Credit	Facilities

In	November	2006,	we	entered	into	a	five	year,	$350	million	unsecured	revolving	credit	facility	agreement	with	a	syndicate	of	banks	based	in	the	United	States, which	we	refer	to	as	our	U.S.	Credit	Facility.	The	credit	agreement	contains	certain	financial	and	non-financial	covenants	and	events	of	default	customary	for	financings of	this	nature.	We	complied	with	these	covenants	as	of	May	31,	2008.	The	facility	expires	in	November	2011,	and	borrowings	bear	a	variable	interest	rate	based	on	a market	short-term	floating	rate	plus	a	margin	that	varies	according	to	our	leverage	position.

In	addition,	the	U.S.	Credit	Facility	allows	us	to	expand	the	facility	size	to	$700	million	by	requesting	additional	commitments	from	existing	or	new	lenders.	We plan	to	use	the	U.S.	Credit	Facility	to	fund	future	strategic	acquisitions,	to	provide	a	source	of	working	capital,	and	for	general	corporate	purposes.	As	of	both	May	31, 2008	and	May	31,	2007,	we	had	no	borrowings	outstanding	on	our	U.S.	Credit	Facility.

In	November	2006,	we	entered	into	an	amendment	to	our	credit	facility,	which	we	refer	to	as	our	Canadian	Credit	Facility,	with	the	Canadian	Imperial	Bank	of Commerce,	or	CIBC,	as	administrative	agent	and	lender.	The	Canadian	Credit	Facility	is	a	facility	which	consists	of	a	line	of	credit	of	$25	million	Canadian	dollars,	or $25.2	million	United	States	dollars	based	on	the	May	31,	2008	exchange	rate.	In	addition,	the	Canadian	Credit	Facility	allows	us	to	expand	the	size	of	the	uncommitted facility	to	$50	million	Canadian	dollars	during	the	peak	holiday	season	and	does	not	have	a	fixed	term.	The	Canadian	Credit	Facility	carries	no	termination	date,	but	can be

terminated	by	CIBC	with	advance	notice.	The	Canadian	Credit	Facility	has	a	variable	interest	rate	based	on	the	Canadian	dollar	London	Interbank	Offered	Rate	plus	a margin.

The	Canadian	Credit	Facility	allows	us	to	provide	certain	Canadian	merchants	with	"same	day	value"	for	their	Visa	credit	card	deposits.	Same	day	value	is	the practice	of	giving	merchants	value	for	credit	card	transactions	on	the	date	of	the	applicable	sale	even	though	we	receive	the	corresponding	settlement	funds	from	Visa Canada/International	at	a	later	date.	The	amounts	borrowed	under	the	Canadian	Credit	Facility	are	restricted	in	use	to	pay	Canadian	Visa	merchants	and	such	amounts are	generally	received	from	Visa	Canada/International	on	the	following	day.

Our	obligations	under	the	Canadian	Credit	Facility	are	secured	by	a	first	priority	security	interest	in	the	members'	accounts	receivable	from	Visa Canada/International	and	Interac	Associates	for	our	transactions	processed	through	the	CIBC	Visa	BIN	and	Interac	debit	network,	the	bank	accounts	in	which	the settlement	funds	are	deposited,	and	by	guarantees	from	certain	of	our	subsidiaries.	These	guarantees	are	subordinate	to	any	guarantees	granted	by	such	subsidiaries under	our	U.S.	Credit	Facility.	The	Canadian	Credit	Facility	also	contains	certain	financial	and	non-financial	covenants	and	events	of	default	customary	for	financings	of this	nature.	We	complied	with	these	covenants	as	of	May	31,	2008.	As	of	both	May	31,	2008	and	May	31,	2007,	we	had	no	borrowings	outstanding	on	our	Canadian Credit	Facility.

In	April	2008,	we	entered	into	a	new	unsecured	revolving	credit	agreement	with	the	National	Bank	of	Canada,	which	we	refer	to	as	our	NBC	Credit	Facility.	The terms	of	this	facility	will	be	subject	to	annual	review	on	March	31	of	each	year.	The	NBC	Credit	Facility	is	a	facility	which	consists	of	a	line	of	credit	of	$40	million Canadian,	or	$40.3	million	United	States	dollars	based	on	the	May	31,	2008	exchange	rate,	and	a	line	of	credit	of	$5	million	United	States	dollars.	We	are	able	to	expand the	size	of	the	facility	to	$80	million	Canadian	on	certain	Canadian	holidays.	The	NBC	Credit	Facility	is	subject	to	revision	and	renewal	each	March	31	and	has	a variable	interest	rate	based	on	the	National	Bank	of	Canada	prime	rate.	The	NBC	Credit	Facility	contains	certain	financial	and	non-financial	covenants	and	events	of default	customary	for	financings	of	this	nature.	We	complied	with	these	covenants	as	of	May	31,	2008.

We	will	use	the	NBC	Credit	Facility	to	provide	certain	Canadian	merchants	with	same	day	value	for	their	United	States	and	Canadian	dollar	MasterCard	credit card	transactions	and	debit	card	transactions.	As	of	May	31,	2008,	we	had	$0.1	million	of	borrowings	outstanding	on	our	NBC	Credit	Facility,	based	on	the	exchange rate	in	effect	on	that	date.

During	the	fiscal	year	2008,	our	Chinese	subsidiary	in	the	Asia-Pacific	region	entered	into	a	revolving	credit	facility	to	provide	a	source	of	working	capital.	This credit	facility	is	denominated	in	Chinese	Renminbi	and	has	a	variable	interest	rate	based	on	the	lending	rate	stipulated	by	the	People's	Bank	of	China.	This	facility	is subject	to	annual	review	up	to	and	including	June	30,	2008.	As	of	May	31,	2008,	this	facility	totaled	$2.5	million,	of	which	we	had	$0.6	million	of	borrowings outstanding,	based	on	the	exchange	rate	in	effect	on	that	date.

During	the	fiscal	year	2008,	our	subsidiary	in	Macau	in	the	Asia-Pacific	region	entered	into	a	revolving	overdraft	facility	which	allows	us	to	fund	merchants	prior to	receipt	of	corresponding	settlement	funds	from	Visa	and	MasterCard.	This	is	denominated	in	Macau	Pataca	and	has	a	variable	interest	rate	based	on	the	lending	rate stipulated	by	The	Hongkong	and	Shanghai	Banking	Corporation	Limited,	plus	a	margin.	This	facility	is	subject	to	review	at	any	time	and	in	any	event	by	January	1, 2009,	and	subject	to	overriding	right	of	withdrawal	and	repayment	on	demand.	As	of	May	31,	2008,	this	facility	totaled	$3.8	million,	of	which	we	had	$0.9	million	of borrowings	outstanding,	based	on	the	exchange	rate	in	effect	on	that	date.

On	June	23,	2008,	we	entered	into	a	new	five	year,	$200	million	term	loan	agreement	with	a	syndicate	of	banks	in	the	United	States.	The	term	loan	bears	interest, at	our	election,	at	the	prime	rate	or	London	Interbank	Offered	Rate	plus	a	margin	based	on	our	leverage	position.	As	of	July	1,	2008,	the	interest	rate	on	the	term	loan was	3.605%.	The	term	loan	calls	for	quarterly	principal	payments	of	$5	million	beginning	with	the	quarter

ending	August	31,	2008	and	increasing	to	$10	million	beginning	with	the	quarter	ending	August	31,	2010	and	$15	million	beginning	with	the	quarter	ending	August	31, 2011.

# Redeemable	Minority	Interest

We	have	a	redeemable	minority	interest	associated	with	our	Asia-Pacific	merchant	services	channel.	Global	Payments	Asia-Pacific	Limited,	or	GPAP,	is	the entity	through	which	we	conduct	our	merchant	acquiring	business	in	the	Asia-Pacific	region.	We	own	56%	of	GPAP	and	HSBC	Asia	owns	the	remaining	44%.	The GPAP	shareholders	agreement	includes	provisions	pursuant	to	which	HSBC	Asia	may	compel	us	to	purchase,	at	fair	value,	additional	GPAP	shares	from	HSBC	Asia, known	as	the	"Put	Option."	HSBC	Asia	may	exercise	the	Put	Option	on	the	fifth	anniversary	of	the	closing	of	the	acquisition	and	on	each	anniversary	thereafter.	By exercising	the	Put	Option,	HSBC	Asia	can	require	us	to	purchase,	on	an	annual	basis,	up	to	15%	of	the	total	issued	shares	of	GPAP.	While	not	redeemable	until	July 2011,	we	estimate	the	maximum	total	redemption	amount	of	the	minority	interest	under	the	Put	Option	would	be	$87.4	million,	as	of	May	31,	2008.

# Off-Balance	Sheet	Arrangements

We	have	not	entered	into	any	transactions	with	unconsolidated	entities	whereby	we	have	financial	guarantees,	subordinated	retained	interest,	derivative instruments,	or	other	contingent	arrangements	that	expose	us	to	material	continuing	risks,	contingent	liabilities,	or	other	obligations	under	a	variable	interest	in	an unconsolidated	entity	that	provides	us	with	financing,	liquidity,	market,	or	credit	risk	support	other	than	the	guarantee	products	described	under	"Critical	Accounting Estimates"	below.

# Commitments	and	Contractual	Obligations

      The	following	table	summarizes	our	contractual	obligations	and	commitments	as	of	May	31,	2008:

Note: This	table	excludes	other	obligations	that	we	may	have,	such	as	employee	benefit	plan	obligations,	and	other	current	and	long–term	liabilities	reflected	in	our consolidated	balance	sheet	and	the	minority	interest	put	option	rights	described	in	Note	13	and	16.	We	do	not	have	any	material	purchase	commitments	as	of May	31,	2008.

We	believe	that	cash	flows	from	operations	and	borrowing	programs	will	provide	adequate	sources	of	liquidity	and	capital	resources	to	meet	our	expected	long- term	needs	for	the	operation	of	our	business	and	the	satisfaction	of	these	obligations	and	commitments.

# Critical	Accounting	Estimates

In	applying	the	accounting	policies	that	we	use	to	prepare	our	consolidated	financial	statements,	we	necessarily	make	accounting	estimates	that	affect	our reported	amounts	of	assets,	liabilities,	revenues	and	expenses.	Some	of	these	accounting	estimates	require	us	to	make	assumptions	about	matters	that	are	highly	uncertain at	the	time	we	make	the	accounting	estimates.	We	base	these	assumptions	and	the	resulting	estimates	on	historical	information	and	other	factors	that	we	believe	to	be reasonable	under	the	circumstances,	and	we	evaluate	these	assumptions	and	estimates	on	an	ongoing	basis.	In	many	instances,	however,	we	reasonably	could	have	used different	accounting	estimates	and,	in	other	instances,	changes	in	our	accounting	estimates	could	occur	from	period	to	period,	with	the	result	in	each	case	being	a material	change	in	the	financial	statement	presentation

of	our	financial	condition	or	results	of	operations.	We	refer	to	accounting	estimates	of	this	type	as	"critical	accounting	estimates."	The	critical	accounting	estimates	that we	discuss	below	are	those	that	we	believe	are	most	important	to	an	understanding	of	our	consolidated	financial	statements.

Accounting	estimates	necessarily	require	subjective	determinations	about	future	events	and	conditions.	Therefore,	the	following	descriptions	of	critical	accounting estimates	are	forward-looking	statements,	and	actual	results	could	differ	materially	from	the	results	anticipated	by	these	forward-looking	statements.	You	should	read	the following	in	conjunction	with	Note	1	of	the	notes	to	consolidated	financial	statements	and	the	risk	factors	contained	in	"Item	1A—Risk	Factors"	of	this	annual	report.

# Reserve	for	operating	losses

As	a	part	of	our	direct	merchant	credit	card	and	debit	card	processing	services	and	check	guarantee	services	in	the	United	States,	Canada	and	Asia-Pacific,	we experience	merchant	losses	and	check	guarantee	losses,	which	we	collectively	refer	to	as	"operating	losses."	Merchant	losses	occur	when	we	are	unable	to	collect amounts	from	merchant	customers	for	any	charges	properly	reversed	by	the	cardholder.	Check	guarantee	losses	occur	when	we	are	unable	to	collect	the	full	amount	of	a guaranteed	check	from	the	checkwriter.	Please	refer	to	the	notes	to	consolidated	financial	statements	for	a	further	explanation	of	these	operating	losses.

We	process	credit	card	transactions	for	direct	merchants	and	recognize	revenue	based	on	a	percentage	of	the	gross	amount	charged.	Our	direct	merchant customers	have	the	liability	for	any	charges	properly	reversed	by	the	cardholder.	In	the	event,	however,	that	we	are	not	able	to	collect	such	amount	from	the	merchants, due	to	merchant	fraud,	insolvency,	bankruptcy	or	any	other	reason,	we	may	be	liable	for	any	such	reversed	charges.	We	require	cash	deposits,	guarantees,	letters	of credit	and	other	types	of	collateral	by	certain	merchants	to	minimize	any	such	contingent	liability,	and	we	also	utilize	a	number	of	systems	and	procedures	to	manage merchant	risk.	We	have,	however,	historically	experienced	losses	due	to	merchant	defaults.

We	account	for	our	potential	liability	relating	to	merchant	losses	as	guarantees.	We	estimate	the	fair	value	of	these	guarantees	by	adding	a	fair	value	margin	to	our estimate	of	losses.	This	estimate	of	losses	is	comprised	of	known	losses	and	a	projection	of	future	losses	based	on	an	assumed	percentage	of	our	United	States, Canadian,	and	Asia-Pacific	direct	merchant	credit	card	and	off-line	debit	card	sales	volumes	processed,	or	processed	volume.	For	the	years	ended	May	31,	2008,	2007, and	2006,	our	processed	volume	was	$134.7	billion,	$100.1	billion,	and	$86.4	billion,	respectively.	For	these	same	periods,	we	recorded	provisions	for	merchant	losses of	$5.7	million,	$3.1	million,	and	$2.7	million,	respectively.	As	a	percentage	of	processed	volume,	these	charges	were	0.0043%,	0.0031%,	and	0.0032%,	respectively, during	the	above	periods.	For	these	same	years,	we	experienced	actual	losses	of	$5.2	million,	$3.3	million,	and	$3.3	million,	respectively.	Since	actual	losses	were similar	to	the	merchant	loss	provisions	provided	above,	we	believe	that	our	estimation	process	has	been	materially	accurate	on	a	historical	basis.	A	10%	increase	or decrease	in	our	provision	for	merchant	losses	as	a	percentage	of	processed	volume	for	the	year	ended	May	31,	2008	would	have	resulted	in	a	decrease	or	increase	in	net income	of	$0.4	million.	Further,	if	our	provision	for	merchant	losses	as	a	percentage	of	processed	volume	for	our	fiscal	2008	had	equaled	our	provision	for	merchant losses	as	a	percentage	of	processed	volume	of	0.0031%	for	the	same	prior	year	period,	our	net	income	would	have	increased	by	$1.1	million.	As	of	May	31,	2008	and 2007,	$3.4	million	and	$2.8	million,	respectively,	have	been	recorded	for	guarantees	associated	with	merchant	card	processing	and	are	included	in	settlement	processing obligations	in	the	accompanying	consolidated	balance	sheets.

In	our	check	guarantee	service	offering,	we	charge	our	merchants	a	percentage	of	the	gross	amount	of	the	check	and	guarantee	payment	of	the	check	to	the merchant	in	the	event	the	check	is	not	honored	by	the	checkwriter's	bank.	We	have	the	right	to	collect	the	full	amount	of	the	check	from	the	checkwriter	but	have	not historically	recovered	100%	of	the	guaranteed	checks.

Our	check	guarantee	loss	reserve	is	also	comprised	of	known	losses	and	a	projection	of	future	losses	based	on	an	assumed	percentage	of	the	face	value	of	our guaranteed	checks.	For	the	years	ended	May	31,	2008,	2007,

and	2006,	we	guaranteed	total	check	face	values	of	$2.7	billion,	$2.6	billion,	and	$2.5	billion,	respectively.	For	those	same	periods,	we	recorded	provisions	for	check guarantee	losses	of	$23.9	million,	$18.2	million,	and	$17.9	million,	respectively.	As	a	percentage	of	the	total	guaranteed	check	face	value,	these	charges	were	0.90%, 0.70%,	and	0.71%,	respectively,	during	the	years	mentioned	above.	For	these	same	years,	we	experienced	actual	losses	of	$23.0	million,	$18.8	million,	and	$16.1 million,	respectively.	Since	actual	losses	were	similar	to	the	check	guarantee	loss	provisions	provided	above,	we	believe	that	our	estimation	process	has	been	materially accurate	on	a	historical	basis.	A	10%	increase	or	decrease	in	our	percentage	assumption	for	the	year	ended	May	31,	2008	would	have	resulted	in	a	decrease	or	increase	in net	income	of	$1.6	million.	Further,	if	our	guarantee	loss	as	a	percentage	of	guarantee	volume	for	our	fiscal	2008	had	equaled	our	guarantee	loss	as	a	percentage	of guarantee	volume	of	0.70%	for	the	same	prior	year	period,	our	net	income	would	have	increased	by	$3.4	million.	As	of	May	31,	2008	and	2007,	we	had	a	check guarantee	reserve	of	$6.1	million	and	$5.1	million,	respectively,	which	is	included	in	claims	receivable,	net,	in	the	accompanying	consolidated	balance	sheets.

We	derive	our	projected	loss	rate	assumptions	primarily	based	on	a	rolling	six	month	analysis	of	historic	loss	activity.	These	assumptions,	however,	bear	the	risk of	change,	which	may	occur	as	a	result	of	several	qualitative	factors.	For	merchant	losses,	these	factors	include	the	following:	a	change	in	the	creditworthiness	of	our merchant	customers;	a	change	in	the	levels	of	credit	card	fraud	affecting	our	merchant	customers;	and	a	change	in	the	effectiveness	of	our	internal	credit,	risk management,	and	collection	departments.	For	check	guarantee	losses,	these	factors	include	a	change	in	the	levels	of	dishonored	consumer	checks	presented	to	our guarantee	service	merchant	customers	and	a	change	in	the	effectiveness	of	our	internal	check	guarantee	procedures,	customer	acceptance	and	retention	policies,	or collection	protocols.	Application	of	our	percentage	assumptions	involve	uncertainty	regarding	changes	in	any	of	the	factors	above,	especially	those	that	are	outside	of our	control,	such	as	the	financial	health	of	the	United	States,	Canadian,	and	the	Asia-Pacific	regional	economies	at	a	regional	or	national	level	and	the	related	impact	on our	customers.

# Goodwill	and	long-lived	asset	valuations

We	regularly	evaluate	whether	events	and	circumstances	have	occurred	that	indicate	the	carrying	amounts	of	goodwill,	property	and	equipment,	and	other intangible	assets	may	warrant	revision	or	may	not	be	recoverable.	Goodwill	and	other	indefinite-life	intangible	assets	are	evaluated	for	impairment	annually	by	applying a	fair	value	based	test.	Property	and	equipment	and	finite-lived	intangible	assets	are	evaluated	for	impairment	when	facts	and	circumstances	indicate	the	carrying	value of	such	assets	may	exceed	their	fair	values.	When	factors	indicate	that	these	assets	should	be	evaluated	for	possible	impairment,	we	assess	the	potential	impairment	of their	carrying	values	by	determining	whether	the	carrying	value	of	such	long-lived	assets	will	be	recovered	through	the	future	undiscounted	cash	flows	expected	from use	of	the	asset	and	its	eventual	disposition.

We	completed	our	most	recent	annual	goodwill	and	indefinite-life	intangible	asset	impairment	test	as	of	January	1,	2008	and	determined	that	no	impairment charges	were	required	as	of	that	date.

Other	intangible	assets	primarily	represent	customer-related	intangible	assets	(such	as	customer	lists	and	merchant	contracts),	contract-based	intangible	assets (such	as	non-compete	agreements,	referral	agreements	and	processing	rights),	and	trademarks	associated	with	acquisitions.	Customer-related	intangible	assets,	contract- based	intangible	assets	and	certain	trademarks	are	amortized	over	their	estimated	useful	lives	of	up	to	30	years.	The	useful	lives	for	customer-related	intangible	assets	are determined	based	primarily	on	forecasted	cash	flows,	which	include	estimates	for	the	revenues,	expenses,	and	customer	attrition	associated	with	the	assets.	The	useful lives	of	contract-based	intangible	assets	are	equal	to	the	terms	of	the	agreements.	The	useful	lives	of	amortizable	trademarks	are	based	on	our	plans	to	phase	out	the trademarks	in	the	applicable	markets.	We	have	determined	that	the	trademarks	other	than	the	amortizable	trademarks	have	indefinite	lives	and,	therefore,	are	not	being amortized.

For	all	periods	through	November	30,	2006,	the	straight-line	method	of	amortization	was	employed	for	all	customer-related	intangible	assets.	On	December	1, 2006,	we	adopted	the	accelerated	method	of	amortization

described	below	which	is	applied	over	the	respective	periods	of	expected	cash	flows	for	our	then	significant	customer-related	intangible	assets.	These	particular	assets reflected	90%	of	the	carrying	value	of	our	total	customer-related	intangible	assets	as	of	November	30,	2006.	In	determining	amortization	expense	under	our	accelerated method	for	any	given	period,	we	calculate	the	expected	cash	flows	for	that	period	that	were	used	in	determining	the	acquired	value	of	the	asset	and	divide	that	amount	by the	expected	total	cash	flows	over	the	estimated	life	of	the	asset.	We	multiply	that	percentage	by	the	initial	carrying	value	of	the	asset	to	arrive	at	the	amortization expense	for	that	period.	In	addition,	if	the	cash	flow	patterns	that	we	experience	are	less	favorable	than	our	initial	estimates,	we	will	adjust	the	amortization	schedule accordingly.	These	cash	flow	patterns	are	derived	using	certain	assumptions	and	cost	allocations	due	to	a	significant	amount	of	asset	interdependencies	that	exist	in	our business.	During	fiscal	2008,	we	did	not	adjust	the	amortization	schedules.

We	believe	that	our	accelerated	method	better	approximates	the	distribution	of	cash	flows	generated	by	our	acquired	customer	relationships.	We	adopted	this method	prospectively	for	our	existing	significant	customer-related	intangible	assets	described	above	and	intend	to	adopt	this	method	for	future	acquisitions	of	customer- related	intangible	assets.	The	use	of	this	amortization	method	prior	to	December	1,	2006	would	have	resulted	in	amortization	expense	that	is	not	materially	different from	the	amount	recognized	under	the	straight-line	method	used	by	us	during	the	same	periods.	Lastly,	we	will	continue	to	use	the	straight-line	method	of	amortization for	the	certain	customer-related	intangible	assets	that	reflected	10%	of	the	carrying	value	of	our	total	such	assets	as	of	November	30,	2006.	For	these	assets,	the amortization	expense	using	a	straight-line	method	historically	resulted	in,	and	is	expected	to	continue	to	result	in,	amortization	expense	that	is	not	materially	different from	the	amount	that	would	be	recognized	under	the	accelerated	method	of	amortization	described	above.	We	continue	to	use	the	straight-line	method	of	amortization for	our	contract-based	intangibles	and	amortizable	trademarks.

The	other	assets	in	the	accompanying	consolidated	balance	sheets	include	software	rights	purchased	in	September	2001	for	$5	million.	These	rights	would	allow us	to	perform	certain	processing	and	software	support	activities	that	are	currently	performed	on	our	behalf	by	a	third	party.	The	other	assets	in	the	accompanying consolidated	balance	sheets	also	include	software	code	with	a	carrying	value	of	$3.1	million,	which	allows	us	to	perform	certain	processing	activities	currently performed	by	our	other	processing	platforms.	We	expect	these	software	assets	will	be	the	foundation	for	two	separate	projects	planned	to	perform	these	services internally	and	with	a	higher	efficiency	level.	These	plans	are	still	in	the	initial	feasibility	and	design	phase	as	of	May	31,	2008.	If,	in	the	future,	we	were	to	decide	to abandon	these	plans,	the	value	of	these	assets	may	be	substantially	impaired.	While	we	believe	that	these	assets	may	have	a	resale	value,	the	maximum	potential impairment	could	equal	the	carrying	value.

In	our	opinion,	the	carrying	values	of	long-lived	assets,	including	goodwill,	property	and	equipment,	and	other	intangible	assets,	are	not	impaired	at	May	31,	2008 and	May	31,	2007.

# Capitalization	of	Internally	Developed	Software

We	develop	software	that	is	used	in	providing	processing	services	to	customers.	Capitalization	of	internally	developed	software,	primarily	associated	with operating	platforms,	occurs	when	we	have	completed	the	preliminary	project	stage,	management	authorizes	the	project,	management	commits	to	funding	the	project,	it	is probable	the	project	will	be	completed	and	the	project	will	be	used	to	perform	the	function	intended.	The	preliminary	project	stage	consists	of	the	conceptual	formulation of	alternatives,	the	evaluation	of	alternatives,	the	determination	of	existence	of	needed	technology	and	the	final	selection	of	alternatives.	Costs	incurred	prior	to	the preliminary	project	stage	are	expensed	as	incurred.	Currently	unforeseen	circumstances	in	software	development	could	require	us	to	implement	alternative	plans	with respect	to	a	particular	effort,	which	could	result	in	the	impairment	of	previously	capitalized	software	development	costs.	Costs	capitalized	during	fiscal	2008,	2007	and 2006	totaled	$10.2	million,	$11.0	million	and	$11.1	million,	respectively.	Internally	developed	software	has	an	amortization	period	of	5	to	10	years.	Internally developed	software	assets	are	placed	into	service	when	they	are	complete.

# Income	Taxes

The	determination	of	our	provision	for	income	taxes	requires	management's	judgment	in	the	use	of	estimates	and	the	interpretation	and	application	of	complex	tax laws.	Judgment	is	also	required	in	assessing	the	timing	and	amounts	of	deductible	and	taxable	items.	We	believe	our	tax	return	positions	are	fully	supportable;	however, we	establish	liabilities	for	material	tax	exposures	relating	to	deductions,	transactions	and	other	matters	involving	some	uncertainty	as	to	the	proper	tax	treatment	of	the item.	Issues	raised	by	a	tax	authority	may	be	finally	resolved	at	an	amount	different	than	the	related	liability.	When	facts	and	circumstances	change	(including	a resolution	of	an	issue	or	statute	of	limitations	expiration),	these	liabilities	are	adjusted	through	the	provision	for	income	taxes	in	the	period	of	change.	Judgment	will	be required	to	determine	whether	or	not	some	portion	or	all	of	the	deferred	tax	assets	will	not	be	realized.	To	the	extent	we	determine	that	we	will	not	realize	the	benefit	of some	or	all	of	our	deferred	tax	assets,	then	these	deferred	tax	assets	will	be	adjusted	through	our	provision	for	income	taxes	in	the	period	in	which	this	determination	is made.

# ITEM	7A—QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

# Foreign	Currency	Risk

Although	the	majority	of	our	operations	are	conducted	in	United	States	dollars,	some	of	our	operations	are	conducted	in	Euros	and	the	various	currencies	of	the Asia-Pacific	region,	Canada,	Central	and	Eastern	Europe,	and	Latin	America.	Consequently,	a	portion	of	our	revenues	and	expenses	may	be	affected	by	fluctuations	in foreign	currency	exchange	rates.	We	are	also	affected	by	fluctuations	in	exchange	rates	on	assets	and	liabilities	related	to	our	foreign	operations.	We	have	not	hedged our	translation	risk	on	foreign	currency	exposure.	For	the	twelve	months	ended	May	31,	2008,	strengthening	foreign	currencies	compared	to	the	United	States	dollar increased	our	revenues	by	$42.1	million	over	the	comparable	period	in	the	prior	year.	In	addition,	these	foreign	currency	movements	increased	our	net	income	by	$12.5 million	over	the	comparable	period	in	the	prior	year,	calculated	by	applying	our	consolidated	effective	income	tax	rate	before	minority	interest	for	the	appropriate period.	A	10%	change	in	average	foreign	currency	rates	against	the	United	States	dollar	during	the	twelve	months	ended	May	31,	2008	compared	to	the	average	foreign currency	exchange	rates	during	the	twelve	months	ended	May	31,	2007	would	have	increased	or	decreased	our	revenues	and	net	income	by	$42.1	million	and	$10.9 million,	respectively.

# Interest	Rate	Risk

We	have	a	credit	facility	with	Canadian	Imperial	Bank	of	Commerce	for	up	to	$25	million	Canadian	dollars	to	cover	the	pre-funding	of	Canadian	merchants.	The Canadian	Credit	Facility	has	a	variable	interest	rate	based	on	the	Canadian	dollar	London	Interbank	Offered	Rate	plus	a	margin.	Our	$350	million	U.S.	revolving	line	of credit	has	a	variable	interest	rate	based	on	a	market	short-term	floating	rate	plus	a	margin	that	varies	according	to	our	leverage	position.	Accordingly,	we	are	exposed	to the	impact	of	interest	rate	fluctuations.	As	of	May	31,	2008,	we	had	no	borrowings	outstanding	on	these	facilities.

We	have	a	credit	facility	with	the	National	Bank	of	Canada	for	up	to	$80	million	Canadian	dollars	and	$5	million	United	States	dollars	to	provide	certain Canadian	merchants	with	same	day	value	for	their	Canadian	and	United	States	dollar	MasterCard	credit	card	transactions	and	debit	card	transactions.	This	credit	facility has	a	variable	interest	rate	based	on	the	National	Bank	of	Canada	prime	rate.	As	of	May	31,	2008,	we	had	$0.1	million	of	borrowings	outstanding	on	this	credit	facility.

We	have	a	revolving	credit	facility	with	the	People's	Bank	of	China	for	up	to	$2.5	million	to	provide	a	source	of	working	capital.	This	credit	facility	is denominated	in	Chinese	Renminbi	and	has	a	variable	interest	rate	based	on	the	lending	rate	stipulated	by	People's	Bank	of	China.	As	of	May	31,	2008,	we	had	$0.6 million	of	borrowings	outstanding,	based	on	the	exchange	rate	in	effect	on	that	date.

We	have	a	revolving	overdraft	facility	with	The	Hongkong	and	Shanghai	Banking	Corporation	Limited,	or	HSBC	Asia,	for	up	to	$3.8	million	to	fund	merchants prior	to	receipt	of	corresponding	settlement	funds	from	Visa	and	MasterCard.	This	is	denominated	in	Macau	Pataca	and	has	a	variable	interest	rate	based	on	the	lending rate	stipulated	by	HSBC	Asia,	plus	a	margin.	As	of	May	31,	2008,	we	had	$0.9	million	of	borrowings	outstanding,	based	on	the	exchange	rate	in	effect	on	that	date.

A	10%	proportionate	increase	in	interest	rates	on	our	credit	facilities	as	of	May	31,	2008	would	not	have	had	a	material	adverse	impact	on	our	current	or	future consolidated	net	income	or	cash	flows.	However,	see	Note	16	in	the	notes	to	the	consolidated	financial	statements	concerning	a	new	variable	interest	rate	term	loan entered	into	subsequent	to	May	31,	2008.

# Derivative	Financial	Instruments

Historically,	we	have	not	entered	into	derivative	financial	instruments	to	mitigate	interest	rate	fluctuation	risk	or	foreign	currency	exchange	rate	risk,	as	it	has	not been	cost	effective.	We	may	use	derivative	financial	instruments	in	the	future	if	we	deem	it	useful	in	mitigating	our	exposure	to	interest	rate	or	foreign	currency exchange	rate	fluctuations.

# ITEM	8—FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# To	the	Board	of	Directors	and	Shareholders	of

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Global	Payments	Inc.	and	subsidiaries	("the	Company")	as	of	May	31,	2008	and	2007,	and	the related	consolidated	statements	of	income,	changes	in	shareholders'	equity,	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	May	31,	2008.	Our	audits	also included	the	financial	statement	schedule	listed	in	the	Index	at	Item	15.	These	financial	statements	and	financial	statement	schedule	are	the	responsibility	of	the Company's	management.	Our	responsibility	is	to	express	an	opinion	on	the	consolidated	financial	statements	and	financial	statement	schedule	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	such	consolidated	financial	statements	present	fairly,	in	all	material	respects,	the	financial	position	of	Global	Payments	Inc.	and	subsidiaries	as	of May	31,	2008	and	2007,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	May	31,	2008,	in	conformity	with accounting	principles	generally	accepted	in	the	United	States	of	America.	Also	in	our	opinion,	such	financial	statement	schedule,	when	considered	in	relation	to	the	basic consolidated	financial	statements	taken	as	whole,	presents	fairly,	in	all	material	respects,	the	information	set	forth	therein.

As	described	in	Note	1	to	the	consolidated	financial	statements,	the	Company	adopted	Statement	of	Financial	Accounting	Standards	No.	123(R),	Share-based Payment,	on	June	1,	2006,	based	on	the	modified	prospective	application	transition	method.	As	described	in	Note	7	to	the	consolidated	financial	statements,	the Company	changed	its	method	of	accounting	for	uncertainty	in	income	taxes	to	conform	to	Financial	Accounting	Standards	Board	Interpretation	No.	48,	Accounting	for Uncertainty	in	Income	Taxes,	on	June	1,	2007.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	Company's	internal	control	over financial	reporting	as	of	May	31,	2008,	based	on	the	criteria	established	in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	and	our	report	dated	July	30,	2008	expressed	an	unqualified	opinion	on	the	Company's	internal	control	over	financial reporting.

We	have	audited	the	internal	control	over	financial	reporting	of	Global	Payments	Inc.	and	subsidiaries	(the	"Company")	as	of	May	31,	2008,	based	on	criteria established	in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	The	Company's management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial reporting,	included	in	the	accompanying	Management	Report	on	Internal	Control	over	Financial	Reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Company's internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the	design and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	by,	or	under	the	supervision	of,	the	company's	principal	executive	and	principal financial	officers,	or	persons	performing	similar	functions,	and	effected	by	the	company's	board	of	directors,	management,	and	other	personnel	to	provide	reasonable assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted accounting	principles.	A	company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	the	inherent	limitations	of	internal	control	over	financial	reporting,	including	the	possibility	of	collusion	or	improper	management	override	of	controls, material	misstatements	due	to	error	or	fraud	may	not	be	prevented	or	detected	on	a	timely	basis.	Also,	projections	of	any	evaluation	of	the	effectiveness	of	internal control	over	financial	reporting	to	future	periods	are	subject	to	the	risk	that	the	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	May	31,	2008,	based	on	the	criteria established	in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	financial	statements and	financial	statement	schedule	as	of	and	for	the	year	ended	May	31,	2008	of	the	Company	and	our	report	dated	July	30,	2008	expressed	an	unqualified	opinion	on those	financial	statements	and	financial	statement	schedule	and	included	an	explanatory	paragraph	regarding	the	adoption	of	Statement	of	Financial	Accounting Standard	No.	123(R),	Share-based	Payment,	and	Financial	Accounting	Standards	Board	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes.

Atlanta,	Georgia

# CONSOLIDATED	STATEMENTS	OF	INCOME

(in	thousands,	except	per	share	data)

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Revenues | $1,274,229 | $1,061,523 | $908,056 |
| Operating\texpenses: |  |  |  |
| Cost\tof\tservice | 475,612 | 414,837 | 358,020 |
| Sales,\tgeneral\tand\tadministrative | 545,941 | 425,509 | 347,070 |
| Restructuring\tand\tother | 1,317 | 3,088 | 1,878 |
|  | 1,022,870 | 843,434 | 706,968 |
| Operating\tincome | 251,359 | 218,089 | 201,088 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tand\tother\tincome | 18,210 | 16,706 | 7,576 |
| Interest\tand\tother\texpense | (8,166) | (8,464) | (7,144) |
|  | 10,044 | 8,242 | 432 |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest | 261,403 | 226,331 | 201,520 |
| Provision\tfor\tincome\ttaxes | (90,588) | (73,436) | (67,522) |
| Minority\tinterest,\tnet\tof\ttax | (8,061) | (9,910) | (8,474) |
| Net\tincome | $162,754 | $142,985 | $125,524 |
| Basic\tearnings\tper\tshare | $2.05 | $1.78 | $1.59 |
| Diluted\tearnings\tper\tshare | $2.01 | $1.75 | $1.53 |

# See	Notes	to	Consolidated	Financial	Statements.

# CONSOLIDATED	BALANCE	SHEETS

(in	thousands,	except	share	data)

|  | May	31,<br>2008 | May	31,<br>2007 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $456,060 | $308,872 |
| Accounts\treceivable,\tnet\tof\tallowances\tfor\tdoubtful\taccounts\tof\t$489\tand\t$451,\trespectively | 100,179 | 76,168 |
| Claims\treceivable,\tnet\tof\tallowances\tfor\tlosses\tof\t$6,065\tand\t$5,139,\trespectively | 1,354 | 2,187 |
| Settlement\tprocessing\tassets | 24,280 | 32,853 |
| Inventory,\tnet\tof\tobsolescence\treserves\tof\t$1,028\tand\t$639,\trespectively | 3,821 | 3,435 |
| Income\ttax\treceivable | — | 1,457 |
| Deferred\tincome\ttaxes | 4,119 | 5,216 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 27,597 | 14,241 |
| Total\tcurrent\tassets | 617,410 | 444,429 |
| Property\tand\tequipment | 141,415 | 118,495 |
| Goodwill | 497,136 | 451,244 |
| Other\tintangible\tassets | 175,636 | 175,620 |
| Other | 14,310 | 10,841 |
| Total\tassets | $1,445,907 | $1,200,629 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Lines\tof\tcredit | $1,527 | $— |
| Payables\tto\tmoney\ttransfer\tbeneficiaries | 9,276 | 6,589 |
| Accounts\tpayable\tand\taccrued\tliabilities | 138,243 | 115,671 |
| Settlement\tprocessing\tobligations | 56,731 | 20,617 |
| Income\ttaxes\tpayable | 11,975 | — |
| Total\tcurrent\tliabilities | 217,752 | 142,877 |
| Deferred\tincome\ttaxes | 75,001 | 70,768 |
| Other\tlong-term\tliabilities | 11,612 | 14,275 |
| Total\tliabilities | 304,365 | 227,920 |
| Commitments\tand\tcontingencies\t(See\tNote\t13) |  |  |
| Minority\tinterest\tin\tequity\tof\tsubsidiaries\t(includes\tredeemable\tminority\tinterest\tbook\tvalue\tof\t$2,872\twith\tan\testimated\tmaximum |  |  |
| redemption\tamount\tof\t$87,390\tas\tof\tMay\t31,\t2008) | 14,724 | 14,933 |
| Shareholders'\tequity: |  |  |
| Preferred\tstock,\tno\tpar\tvalue;\t5,000,000\tshares\tauthorized\tand\tnone\tissued | — | — |
| Common\tstock,\tno\tpar\tvalue;\t200,000,000\tshares\tauthorized;\t79,636,629\tand\t80,877,651\tshares\tissued\tand\toutstanding\tat |  |  |
| May\t31,\t2008\tand\tMay\t31,\t2007,\trespectively | — | — |
| Paid-in\tcapital | 380,741 | 430,166 |
| Retained\tearnings | 621,875 | 466,417 |
| Accumulated\tother\tcomprehensive\tincome | 124,202 | 61,193 |
| Total\tshareholders'\tequity | 1,126,818 | 957,776 |
| Total\tliabilities\tand\tshareholders'\tequity | $1,445,907 | $1,200,629 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

(in	thousands)

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tincome | $162,754 | $142,985 | $125,524 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization\tof\tproperty\tand\tequipment | 28,894 | 25,929 | 25,634 |
| Provision\tfor\toperating\tlosses\tand\tbad\tdebts | 30,228 | 21,477 | 21,280 |
| Share-based\tcompensation\texpense | 13,826 | 15,154 | 2,847 |
| Amortization\tof\tacquired\tintangibles | 15,140 | 14,436 | 14,855 |
| Minority\tinterest\tin\tearnings | 8,762 | 9,214 | 8,474 |
| Restructuring\tand\tother\tcharges,\tnon-cash | — | 1,145 | — |
| Deferred\tincome\ttaxes | (1,151) | (2,211) | 777 |
| Other,\tnet | (4,345) | 1,807 | 4,521 |
| Changes\tin\toperating\tassets\tand\tliabilities,\tnet\tof\tthe\teffects\tof\tacquisitions: |  |  |  |
| Accounts\treceivable | (23,957) | (8,579) | (12,815) |
| Claims\treceivable | (23,073) | (19,444) | (17,861) |
| Settlement\tprocessing\tassets\tand\tobligations,\tnet | 38,311 | (13,937) | 31,198 |
| Inventory | (623) | (167) | (520) |
| Prepaid\texpenses\tand\tother\tassets | (3,775) | (2,428) | (415) |
| Accounts\tpayable\tand\taccrued\tliabilities | 15,304 | 11,505 | 11,039 |
| Payables\tto\tmoney\ttransfer\tbeneficiaries | 2,687 | 228 | 667 |
| Income\ttaxes\tpayable | 13,432 | (5,982) | 19,568 |
| Net\tcash\tprovided\tby\toperating\tactivities | \t 272,414 | 191,132 | \t 234,773 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Capital\texpenditures | (44,974) | (35,374) | (25,038) |
| Business\tand\tintangible\tasset\tacquisitions | (18,247) | (81,261) | (4,917) |
| Net\tcash\tused\tin\tinvesting\tactivities | (63,221) | (116,635) | (29,955) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Net\tborrowings\t(payments)\ton\tlines\tof\tcredit | 1,527 | — | (58,606) |
| Principal\tpayments\tunder\tcapital\tlease\tarrangements | — | (746) | (3,042) |
| Proceeds\tfrom\tstock\tissued\tunder\temployee\tstock\tplans | 17,385 | 19,332 | 23,922 |
| Repurchase\tof\tcommon\tstock | (87,020) | — | — |
| Tax\tbenefit\tfrom\texercise\tof\tstock\toptions | 7,571 | 7,495 | — |
| Distributions\tto\tminority\tinterests,\tnet | (9,459) | (8,753) | (10,212) |
| Dividends\tpaid | (6,377) | (6,442) | (6,336) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (76,373) | 10,886 | (54,274) |
| Effect\tof\texchange\trate\tchanges\ton\tcash | 14,368 | 5,014 | 18,952 |
| Increase\tin\tcash\tand\tcash\tequivalents | \t 147,188 | 90,397 | \t 169,496 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | \t 308,872 | 218,475 | 48,979 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $456,060 | $308,872 | $218,475 |

# CONSOLIDATED	STATEMENTS	OF	CHANGES	IN	SHAREHOLDERS'	EQUITY

|  |  |  |  |  | Currency | Minimum | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Number\tof | Paid-in | Retained | Deferred | Translation | Pension | Shareholders' |
|  | Shares | Capital | Earnings | Compensation | Adjustments | Liability | Equity |
| Balance\tat\tMay\t31,\t2005 | 78,200 | $347,431 | $210,686 | $(1,562) | $23,816 | $(2,021) | $578,350 |
| Comprehensive\tincome |  |  |  |  |  |  |  |
| Net\tincome |  |  | 125,524 |  |  |  | 125,524 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tof\t$11,912 |  |  |  |  | 30,036 |  | 30,036 |
| Minimum\tpension\tliability\tadjustment,\tnet\tof\ttax\tof\t$410 |  |  |  |  |  | 1,005 | 1,005 |
| Total\tcomprehensive\tincome |  |  |  |  |  |  | 156,565 |
| Stock\tissued\tunder\temployee\tstock\tplans | 1,614 | 27,060 |  | (1,868) |  |  | 25,192 |
| Tax\tbenefit\tfrom\texercise\tof\tstock\toptions |  | 14,875 |  |  |  |  | 14,875 |
| Dividends\tpaid\t($0.08\tper\tshare) |  |  | (6,336) |  |  |  | (6,336) |
| Amortization\tof\tdeferred\tcompensation |  |  |  | 1,577 |  |  | 1,577 |
| Balance\tat\tMay\t31,\t2006 | 79,814 | \t 389,366 | 329,874 | (1,853) | 53,852 | (1,016) | 770,223 |
| Adjustment\tfor\tthe\tadoption\tof\tFAS\t123R |  | (1,853) |  | 1,853 |  |  | — |
| Comprehensive\tincome |  |  |  |  |  |  |  |
| Net\tincome |  |  | 142,985 |  |  |  | 142,985 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tof\t$4,637 |  |  |  |  | 8,288 |  | 8,288 |
| Minimum\tpension\tliability\tadjustment,\tnet\tof\ttax\tof\t$91 |  |  |  |  |  | 162 | 162 |
| Adjustment\tfor\tthe\tadoption\tof\tFAS\t158,\tnet\tof\ttax\tof\t$(52) |  |  |  |  |  | (93) | (93) |
| Total\tcomprehensive\tincome |  |  |  |  |  |  | 151,342 |
| Stock\tissued\tunder\temployee\tstock\tplans | 1,064 | 19,332 |  |  |  |  | 19,332 |
| Tax\tbenefit\tfrom\texercise\tof\tstock\toptions |  | 8,139 |  |  |  |  | 8,139 |
| Share-based\tcompensation\texpense |  | 15,182 |  |  |  |  | 15,182 |
| Dividends\tpaid\t($0.08\tper\tshare) |  |  | (6,442) |  |  |  | (6,442) |
| Balance\tat\tMay\t31,\t2007 | 80,878 | \t 430,166 | 466,417 | — | 62,140 | (947) | 957,776 |
| Comprehensive\tincome |  |  |  |  |  |  |  |
| Net\tincome |  |  | 162,754 |  |  |  | 162,754 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tof\t$5,570 |  |  |  |  | 62,533 |  | 62,533 |
| Minimum\tpension\tliability\tadjustment,\tnet\tof\ttax\tof\t$267 |  |  |  |  |  | 476 | 476 |
| Total\tcomprehensive\tincome |  |  |  |  |  |  | 225,763 |
| Stock\tissued\tunder\temployee\tstock\tplans | 1,058 | 17,385 |  |  |  |  | 17,385 |
| Tax\tbenefit\tfrom\texercise\tof\tstock\toptions |  | 6,927 |  |  |  |  | 6,927 |
| Share-based\tcompensation\texpense |  | 13,826 |  |  |  |  | 13,826 |
| Adjustment\tfor\tthe\tadoption\tof\tFIN\t48 |  | (543) | (919) |  |  |  | (1,462) |
| Repurchase\tof\tcommon\tstock | (2,299) | (87,020) |  |  |  |  | (87,020) |
| Dividends\tpaid\t($0.08\tper\tshare) |  |  | (6,377) |  |  |  | (6,377) |
| Balance\tat\tMay\t31,\t2008 | 79,637 | $380,741 | $621,875 | $— | $124,673 | $(471) | $1,126,818 |

# NOTES	TO	CONSOLIDATED

# FINANCIAL	STATEMENTS

# NOTE	1—SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES

Business,	Consolidation	and	Presentation—	Global	Payments	Inc.	is	a	high-volume	processor	of	electronic	transactions	for	merchants,	multinational corporations,	financial	institutions,	consumers,	government	agencies	and	other	profit	and	non-profit	business	enterprises	to	facilitate	payments	to	purchase	goods	and services	or	further	other	economic	goals.	Our	role	is	to	serve	as	an	intermediary	in	the	exchange	of	information	and	funds	that	must	occur	between	parties	so	that	a transaction	can	be	completed.	We	were	incorporated	in	Georgia	as	Global	Payments	Inc.	in	September	2000,	and	we	spun-off	from	our	former	parent	company	on January	31,	2001.	Including	our	time	as	part	of	our	former	parent	company,	we	have	provided	transaction	processing	services	since	1967.	Our	fiscal	year	ends	on May	31,	thus	we	refer	to	the	years	ended	May	31,	2008,	2007	and	2006	as	fiscal	years	2008,	2007,	and	2006,	respectively.

The	consolidated	financial	statements	include	our	accounts	and	our	majority-owned	subsidiaries.	These	consolidated	financial	statements	have	been	prepared	on the	historical	cost	basis	in	accordance	with	accounting	principles	generally	accepted	in	the	United	States	and	present	our	financial	position,	results	of	operations,	and cash	flows.	Intercompany	transactions	have	been	eliminated	in	consolidation.

Use	of	estimates—The	preparation	of	financial	statements	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	requires	management to	make	certain	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosures	of	contingent	assets	and	liabilities	at	the	date	of	the financial	statements,	as	well	as	the	reported	amounts	of	revenues	and	expenses	during	the	reported	period.	Actual	results	could	differ	from	those	estimates.

# Revenue	recognition—

Our	merchant	services	segment	primarily	includes	processing	solutions	for	credit	cards,	debit	cards,	and	check-related	services.	This	revenue	is	recognized	as such	services	are	performed.	Revenue	for	processing	services	provided	directly	to	merchants	is	recorded	net	of	interchange	fees	charged	by	credit	card	issuing	banks. We	use	two	basic	business	models	to	market	our	merchant	services	offerings.	One	model,	referred	to	as	"direct"	merchant	services,	features	a	salaried	and	commissioned sales	force,	independent	sales	organizations,	or	ISOs,	and	independent	sales	representatives,	all	of	whom	sell	our	end-to-end	services	directly	to	merchants.	Our	other model,	referred	to	as	"indirect"	merchant	services,	provides	the	same	basic	products	and	services	as	direct	merchant	services,	primarily	to	financial	institutions	and	a limited	number	of	ISOs	on	an	unbundled	basis,	that	in	turn	resell	our	products	and	services	to	merchants.	Direct	merchant	services	revenue	is	generated	on	services primarily	priced	as	a	percentage	of	transaction	value,	whereas	indirect	merchant	services	revenue	is	generated	on	services	primarily	priced	on	a	specified	amount	per transaction.	In	both	merchant	services	models,	we	also	charge	other	processing	fees	unrelated	to	the	number	of	transactions	or	the	transaction	value.

Cash	and	cash	equivalents—	Cash	and	cash	equivalents	include	cash	on	hand	and	all	liquid	investments	with	an	initial	maturity	of	three	months	or	less	when purchased.	These	amounts	also	include	cash	that	we	hold

# FINANCIAL	STATEMENTS—(Continued)

related	to	reserve	funds	collected	from	our	merchants	that	serve	as	collateral	("Merchant	reserves")	to	minimize	contingent	liabilities	associated	with	charges	properly reversed	by	a	cardholder.	While	this	cash	is	not	restricted	and	can	be	used	in	our	general	operations,	we	do	not	intend	to	use	it,	as	we	believe	that	designating	this	cash	to collateralize	Merchant	reserves	strengthens	our	fiduciary	standing	with	our	member	sponsors	and	is	in	accordance	with	guidelines	set	by	the	card	associations.	As	of May	31,	2008	and	2007,	our	cash	and	cash	equivalents	included	$131.6	million	and	$112.2	million,	respectively,	related	to	Merchant	reserves.

Inventory—	Inventory,	which	includes	electronic	point	of	sale	terminals,	automated	teller	machines,	and	related	peripheral	equipment,	is	stated	at	the	lower	of cost	or	market.	Cost	is	determined	by	using	the	average	cost	method.

Settlement	processing	assets	and	obligations—In	order	to	provide	credit	card	transaction	processing	services,	we	must	be	designated	as	a	certified	processor	by MasterCard	and	Visa,	in	addition	to	a	Merchant	Service	Provider	by	MasterCard	and	an	Independent	Sales	Organization	by	Visa.	These	designations	are	dependent	upon member	clearing	banks	of	either	organization	sponsoring	us	and	our	adherence	to	the	standards	of	the	Visa	and	MasterCard	associations.	A	financial	institution	that	is	a member	of	the	Visa	and/or	MasterCard	card	associations	(the	"Member")	must	sponsor	an	electronic	transaction	payment	processor	such	as	Global	Payments.	We	have four	primary	financial	institution	sponsors	in	the	United	States,	Canada,	and	the	Asia-Pacific	region	with	whom	we	have	sponsorship	or	depository	and	processing agreements.	These	agreements	allow	us	to	route	transactions	under	the	member	banks'	control	and	identification	numbers	to	clear	credit	card	transactions	through	Visa and	MasterCard.	The	member	financial	institutions	of	Visa	and	MasterCard,	some	of	which	are	our	competitors,	set	the	standards	with	which	we	must	comply.

For	transactions	processed	on	our	systems,	we	use	our	network	telecommunication	infrastructure	to	deliver	funding	files	to	the	Member,	which	creates	a	file	to fund	the	merchants	using	country-specific	payment	networks	such	as	the	Federal	Reserve's	Automated	Clearing	House	system	in	the	United	States	or	the	Automated Clearing	Settlement	System	or	the	Large	Value	Transfer	System	in	Canada.	In	our	United	States	portfolio	and	in	most	of	our	Canadian	portfolio,	merchant	funding primarily	occurs	after	the	Member	receives	the	funds	from	the	card	issuer	through	the	card	associations.	For	certain	of	our	Canadian	and	Asia-Pacific	merchant accounts,	the	Member	funds	the	merchants	before	the	Member	receives	the	net	settlement	funds	from	the	card	associations,	creating	a	net	settlement	asset	at	the Member.	In	the	Asia-Pacific	region,	the	Member	provides	the	payment	processing	operations	and	related	support	services	on	our	behalf	under	a	transition	services agreement.	The	Member	will	continue	to	provide	these	services	until	we	fully	integrate	the	Asia-Pacific	operations	into	our	own	operations,	which	we	expect	will	be completed	in	phases	through	2010.	After	our	integration,	the	Member	will	continue	to	provide	funds	settlement	services	similar	to	the	functions	performed	by	our Members	in	the	United	States	and	Canada.

Timing	differences,	interchange	expenses,	Merchant	reserves	and	exception	items	cause	differences	between	the	amount	the	Member	receives	from	the	card associations	and	the	amount	funded	to	the	merchants.	The	standards	of	the	card	associations	restrict	us	from	performing	funds	settlement	or	accessing	merchant settlement	funds,	and,	instead,	require	that	these	funds	be	in	the	possession	of	the	Member	until	the	merchant	is	funded.	However,	in	practice	and	in	accordance	with	the terms	of	our	sponsorship	agreements	with	our	Members,	we	follow	a	net	settlement	process	whereby,	if	the	incoming	amount	from	the	card	associations	precedes	the Member's	funding	obligation	to	the	merchant,	we	temporarily	hold	the	surplus	on	behalf	of	the	Member,	in	a	joint	deposit	account	or	in	an	account	at	the	Member	bank, and	record	a	corresponding	liability.	Conversely,	if	the	Member's	funding	obligation	to	the	merchant	precedes	the	incoming	amount	from	the	card	associations,	the amount	of	the	Member's	net	receivable	position	is	either	subsequently	advanced	to	the	Member	by	us	or	the	Member	satisfies	this	obligation	with	its	own	funds.	If	the Member	uses	its	own	funds,	the	Member	assesses	a	funding	cost,	which	is	included	in	interest	and	other	expense	on	the	accompanying	consolidated	statements	of income.	Each	participant	in	the	transaction	process	receives	compensation	for	its	services.

The	settlement	processing	assets	and	obligations	represent	intermediary	balances	arising	in	our	settlement	process	for	direct	merchants.	Settlement	processing assets	consist	primarily	of	(i)	our	receivable	from	merchants	for	the	portion	of	the	discount	fee	related	to	reimbursement	of	the	interchange	expense	("Interchange reimbursement"),	(ii)	our	receivable	from	the	Members	for	transactions	we	have	funded	merchants	on	behalf	of	the	Members	in	advance	of	receipt	of	card	association funding,	and	(iii)	exception	items,	such	as	customer	chargeback	amounts	receivable	from	merchants	("Exception	items"),	all	of	which	are	reported	net	of	(iv)	Merchant reserves	held	to	minimize	contingent	liabilities	associated	with	charges	properly	reversed	by	a	cardholder.	Settlement	processing	obligations	consist	primarily	of (i)	Interchange	reimbursement,	(ii)	our	liability	to	the	Members	for	transactions	for	which	we	have	not	funded	merchants	on	behalf	of	the	Members	but	for	which	we have	received	funding	from	the	Members,	(iii)	Exception	items,	(iv)	Merchant	reserves,	(v)	the	fair	value	of	our	guarantees	of	customer	chargebacks	(see	Reserve	for operating	losses	below),	and	(vi)	the	reserve	for	sales	allowances.	As	of	May	31,	2008	and	2007,	our	settlement	processing	assets	primarily	related	to	our	processing	for direct	merchants	in	Canada,	while	our	settlement	processing	obligations	primarily	related	to	our	processing	for	direct	merchants	in	the	United	States	and	Asia-Pacific. Our	reserve	for	operating	losses	and	reserve	for	sales	allowance	relate	to	our	"direct"	merchant	services	business	model.	A	summary	of	these	amounts	as	of	May	31, 2008	and	2007	is	as	follows:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| Settlement\tprocessing\tassets: |  |  |
| Interchange\treimbursement | $60,734 | $54,279 |
| Liability\tfrom\tMembers | (19,122) | (1,590) |
| Exception\titems | 717 | 469 |
| Merchant\treserves | (18,049) | (20,305) |
| Total | $24,280 | $32,853 |
| Settlement\tprocessing\tobligations: |  |  |
| Interchange\treimbursement | $123,757 | $111,618 |
| Liability\tto\tMembers | (69,823) | (38,986) |
| Exception\titems | 6,722 | 1,776 |
| Merchant\treserves | (113,523) | (91,921) |
| Fair\tvalue\tof\tguarantees\tof\tcustomer\tchargebacks | (3,375) | (2,776) |
| Reserves\tfor\tsales\tallowances | (489) | (328) |
| Total | $(56,731) | $(20,617) |

Reserve	for	operating	losses—As	a	part	of	our	merchant	credit	and	debit	card	processing	and	check	guarantee	services,	we	experience	merchant	losses	and	check guarantee	losses,	which	are	collectively	referred	to	as	"operating	losses."

Our	credit	card	processing	merchant	customers	are	liable	for	any	charges	properly	reversed	by	a	cardholder.	In	the	event,	however,	that	we	are	not	able	to	collect such	amount	from	the	merchants,	due	to	merchant	fraud,	insolvency,	bankruptcy	or	any	other	merchant-related	reason,	we	may	be	liable	for	any	such	reversed	charges based	on	our	Member	sponsorship	agreements.	We	require	cash	deposits,	guarantees,	letters	of	credit,	and	other	types	of	collateral	by	certain	merchants	to	minimize	any such	contingent	liability.	We	also	utilize	a	number	of	systems	and	procedures	to	manage	merchant	risk.	We	have,	however,	historically	experienced	losses	due	to merchant	defaults.

Financial	Accounting	Standards	Board	Interpretation	No.	45:	Guarantor's	Accounting	and	Disclosure	Requirements	for	Guarantees,	Including	Indirect Guarantees	of	Indebtedness	of	Others	("FIN	45")	requires	all	guarantees	be	recorded	at	their	fair	value	at	inception.	We	believe	our	potential	liability	for	the	full	amount of	the	operating	losses	discussed	above	is	a	guarantee	under	FIN	45.	We	estimate	the	fair	value	of	these	guarantees	by	adding	a	fair	value	margin	to	our	estimate	of losses.	This	estimate	of	losses	is	comprised	of	known	losses	and	a	projection	of	future	losses	based	on	a	percentage	of	direct	merchant	credit	card	and	off-line	debit	card sales	volumes	processed.	Historically,	this	estimation	process	has	been	materially	accurate.

As	of	May	31,	2008	and	2007,	$3.4	million	and	$2.8	million,	respectively,	have	been	recorded	to	reflect	the	fair	value	of	guarantees	associated	with	merchant card	processing.	These	amounts	are	included	in	settlement	processing	obligations	in	the	accompanying	consolidated	balance	sheets.	The	expense	associated	with	the	fair value	of	the	guarantees	of	customer	chargebacks	is	included	in	cost	of	service	in	the	accompanying	consolidated	statements	of	income.	For	the	years	ended	May	31, 2008,	2007,	and	2006,	we	recorded	such	expenses	in	the	amounts	of	$5.7	million,	$3.1	million,	and	$2.7	million,	respectively.

In	our	check	guarantee	service	offering,	we	charge	our	merchants	a	percentage	of	the	gross	amount	of	the	check	and	guarantee	payment	of	the	check	to	the merchant	in	the	event	the	check	is	not	honored	by	the	checkwriter's	bank	in	accordance	with	the	merchant's	agreement	with	us.	The	fair	value	of	the	check	guarantee	is equal	to	the	fee	charged	for	the	guarantee	service,	and	we	defer	this	fee	revenue	until	the	guarantee	is	satisfied.	We	have	the	right	to	collect	the	full	amount	of	the	check from	the	checkwriter	but	have	not	historically	recovered	100%	of	the	guaranteed	checks.	Our	check	guarantee	loss	reserve	is	based	on	historical	and	projected	loss experiences.	As	of	May	31,	2008	and	2007,	we	have	a	check	guarantee	loss	reserve	of	$6.1	million	and	$5.1	million,	respectively,	which	is	included	in	net	claims receivable	in	the	accompanying	consolidated	balance	sheets.	Expenses	of	$23.9	million,	$18.2	million,	and	$17.9	million	were	recorded	for	the	years	ended	May	31, 2008,	2007	and	2006,	respectively,	for	these	losses	and	are	included	in	cost	of	service	in	the	accompanying	consolidated	statements	of	income.	The	estimated	check returns	and	recovery	amounts	are	subject	to	the	risk	that	actual	amounts	returned	and	recovered	in	the	future	may	differ	significantly	from	estimates	used	in	calculating the	receivable	valuation	allowance.

As	the	potential	for	merchants'	failure	to	settle	individual	reversed	charges	from	consumers	in	our	merchant	credit	card	processing	offering	and	the	timing	of individual	checks	clearing	the	checkwriters'	banks	in	our	check	guarantee	offering	are	not	predictable,	it	is	not	practicable	to	calculate	the	maximum	amounts	for	which we	could	be	liable	under	the	guarantees	issued	under	the	merchant	card	processing	and	check	guarantee	service	offerings.	It	is	not	practicable	to	estimate	the	extent	to which	merchant	collateral	or	subsequent	collections	of	dishonored	checks,	respectively,	would	offset	these	exposures	due	to	these	same	uncertainties.

Property	and	equipment—Property	and	equipment	are	stated	at	cost.	Depreciation	and	amortization	are	calculated	using	the	straight-line	method.	Leasehold improvements	are	amortized	over	the	shorter	of	the	useful

life	of	the	asset	or	the	term	of	the	lease.	We	capitalize	the	costs	related	to	the	development	of	computer	software	developed	or	obtained	for	internal	use	in	accordance with	the	American	Institute	of	Certified	Public	Accountants	Statement	of	Position	98-1,	Accounting	for	the	Costs	of	Computer	Software	Developed	or	Obtained	for Internal	Use.	Maintenance	and	repairs	are	charged	to	operations	as	incurred.

Goodwill	and	other	intangible	assets—We	completed	our	most	recent	annual	goodwill	and	indefinite-life	intangible	asset	impairment	test	as	of	January	1,	2008 and	determined	that	no	impairment	charges	were	required	as	of	that	date.

For	all	periods	through	November	30,	2006,	the	straight-line	method	of	amortization	was	employed	for	all	customer-related	intangible	assets.	On	December	1, 2006,	we	adopted	the	accelerated	method	of	amortization	described	below	which	is	applied	over	the	respective	periods	of	expected	cash	flows	for	our	then	significant customer-related	intangible	assets.	These	particular	assets	reflected	90%	of	the	carrying	value	of	our	total	customer-related	intangible	assets	as	of	November	30,	2006.	In determining	amortization	expense	under	our	accelerated	method	for	any	given	period,	we	calculate	the	expected	cash	flows	for	that	period	that	were	used	in	determining the	acquired	value	of	the	asset	and	divide	that	amount	by	the	expected	total	cash	flows	over	the	estimated	life	of	the	asset.	We	multiply	that	percentage	by	the	initial carrying	value	of	the	asset	to	arrive	at	the	amortization	expense	for	that	period.	In	addition,	if	the	cash	flow	patterns	that	we	experience	are	less	favorable	than	our	initial estimates,	we	will	adjust	the	amortization	schedule	accordingly.	These	cash	flow	patterns	are	derived	using	certain	assumptions	and	cost	allocations	due	to	a	significant amount	of	asset	interdependencies	that	exist	in	our	business.	During	fiscal	2008,	we	did	not	adjust	the	amortization	schedules.

We	believe	that	our	accelerated	method	better	approximates	the	distribution	of	cash	flows	generated	by	our	acquired	customer	relationships.	We	adopted	this method	prospectively	for	our	existing	significant	customer-related	intangible	assets	described	above	and	intend	to	adopt	this	method	for	future	acquisitions	of	customer- related	intangible	assets.	The	use	of	this	amortization	method	prior	to	December	1,	2006	would	have	resulted	in	amortization	expense	that	is	not	materially	different from	the	amount	recognized	under	the	straight-line	method	used	by	us	during	the	same	periods.	Lastly,	we	will	continue	to	use	the	straight-line	method	of	amortization for	the	certain	customer-related	intangible	assets	that	reflected	10%	of	the	carrying	value	of	our	total	such	assets	as	of	November	30,	2006.	For	these	assets,	the amortization	expense	using	a	straight-line	method	historically	resulted	in,	and	is	expected	to	continue	to	result	in,	amortization	expense	that	is	not	materially	different from	the	amount	that	would	be	recognized	under	the	accelerated	method	of	amortization	described	above.	We	continue	to	use	the	straight-line	method	of	amortization for	our	contract-based	intangible	assets	and	amortizable	trademarks.

Impairment	of	long-lived	assets—We	regularly	evaluate	whether	events	and	circumstances	have	occurred	that	indicate	the	carrying	amount	of	property	and equipment	and	finite-life	intangible	assets	may	warrant	revision	or	may	not	be	recoverable.	When	factors	indicate	that	these	long-lived	assets	should	be	evaluated	for possible	impairment,	we	assess	the	potential	impairment	by	determining	whether	the	carrying	value	of	such	long-lived

assets	will	be	recovered	through	the	future	undiscounted	cash	flows	expected	from	use	of	the	asset	and	its	eventual	disposition.	If	the	carrying	amount	of	the	asset	is determined	not	to	be	recoverable,	a	write-down	to	fair	value	is	recorded.	Fair	values	are	determined	based	on	quoted	market	values,	discounted	cash	flows,	or	external appraisals,	as	applicable.	In	addition,	we	regularly	evaluate	whether	events	and	circumstances	have	occurred	that	indicate	the	useful	lives	of	property	and	equipment	and finite-life	intangible	assets	may	warrant	revision.	In	our	opinion,	the	carrying	values	of	our	long-lived	assets,	including	property	and	equipment	and	finite-life	intangible assets,	were	not	impaired	at	May	31,	2008	and	2007.

Income	taxes—Deferred	income	taxes	are	determined	based	on	the	difference	between	the	financial	statement	and	tax	bases	of	assets	and	liabilities	using	enacted tax	laws	and	rates.	Our	effective	tax	rates	as	applied	to	income	before	income	taxes,	including	the	effect	of	minority	interest,	were	35.6%,	34.1%,	and	35.0%	for	the years	ended	May	31,	2008,	2007,	and	2006,	respectively.	Refer	to	Note	7	for	additional	information	on	our	deferred	income	tax	items	and	effective	tax	rates.

Fair	value	of	financial	instruments—We	consider	that	the	carrying	amounts	of	financial	instruments,	including	cash	and	cash	equivalents,	receivables,	lines	of credit,	accounts	payable	and	accrued	liabilities,	approximate	fair	value	given	the	short-term	nature	of	these	items.

Derivative	instruments	and	hedging	activities—We	account	for	derivatives	and	hedging	activities	in	accordance	with	Statement	of	Financial	Accounting	Standard No.	133:	Accounting	for	Derivative	Instruments	and	Hedging	Activities	("FAS	133")	and	Statement	No.	149:	Amendment	of	Statement	133	on	Derivative	Instruments and	Hedging	Activities	("FAS	149").	FAS	133	requires	that	a	company	recognize	derivatives	as	assets	or	liabilities	on	its	balance	sheet,	and	also	requires	that	the	gain	or loss	related	to	the	effective	portion	of	derivatives	designated	as	cash	flow	hedges	be	recorded	as	a	component	of	other	comprehensive	income.	FAS	149	amends	and clarifies	accounting	for	derivative	instruments,	including	certain	derivative	instruments	embedded	in	other	contracts,	and	for	hedging	activities	under	FAS	133.	We	have not	used	any	derivative	instruments	for	any	period	presented.

Foreign	currencies—We	have	significant	operations	in	subsidiaries	in	Canada,	the	Czech	Republic,	and	the	Asia-Pacific	region	whose	functional	currency	is	their local	currency.	Gains	and	losses	on	transactions	denominated	in	currencies	other	than	the	functional	currencies	are	included	in	determining	net	income	for	the period.	For	the	years	ended	May	31,	2008,	2007,	and	2006	we	recorded	transaction	losses	of	$1.5	million,	$0.2	million	and	$0.5	million,	respectively.

The	assets	and	liabilities	of	subsidiaries	whose	functional	currency	is	a	foreign	currency	are	translated	at	the	period-end	rate	of	exchange.	The	resulting translation	adjustment	is	recorded	as	a	component	of	other	comprehensive	income	and	is	included	in	shareholders'	equity.	Translation	gains	and	losses	on	intercompany balances	of	a	long-term	investment	nature	are	also	recorded	as	a	component	of	other	comprehensive	income.	Income	statement	items	are	translated	at	the	average	rates prevailing	during	the	period.

Earnings	per	share—Basic	earnings	per	share	is	computed	by	dividing	reported	earnings	available	to	common	shareholders	by	weighted	average	shares outstanding	during	the	period.	Earnings	available	to	common	shareholders	are	the	same	as	reported	net	income	for	all	periods	presented.

Diluted	earnings	per	share	is	computed	by	dividing	reported	earnings	available	to	common	shareholders	by	the	weighted	average	shares	outstanding	during	the period	and	the	impact	of	securities	that,	if	exercised,	would	have	a	dilutive	effect	on	earnings	per	share.	All	options	with	an	exercise	price	less	than	the	average	market share	price	for	the	period	generally	are	assumed	to	have	a	dilutive	effect	on	earnings	per	share.	The	diluted	share	base	for	both	the	years	ended	May	31,	2008	and	2007 excludes	incremental	shares	of	0.6	million	related	to	stock

options.	These	shares	were	excluded	since	they	have	an	anti-dilutive	effect	because	their	option	exercise	prices	are	greater	than	the	average	market	price	of	the	common shares.	The	diluted	share	base	excluded	an	insignificant	amount	of	incremental	shares	for	the	year	ended	May	31,	2006.	No	additional	securities	were	outstanding	that could	potentially	dilute	basic	earnings	per	share	that	were	not	included	in	the	computation	of	diluted	earnings	per	share.

The	following	table	sets	forth	the	computation	of	basic	and	diluted	earnings	per	share	for	the	years	ended	May	31,	2008,	2007	and	2006:

| Net	income	available	to	common	shareholders | $162,754 | $142,985 | $125,524 |
| :--- | :--- | :--- | :--- |
| Basic\tweighted\taverage\tshares\toutstanding | 79,518 | 80,229 | 78,874 |
| Earnings\tper\tshare | $2.05 | $1.78 | $1.59 |
| Diluted\tEPS: |  |  |  |
| Net\tincome\tavailable\tto\tcommon\tshareholders | $162,754 | $142,985 | $125,524 |
| Basic\tweighted\taverage\tshares\toutstanding | 79,518 | 80,229 | 78,874 |
| Plus:\tdilutive\teffect\tof\tstock\toptions\tand\trestricted\tstock\tawards | 1,461 | 1,593 | 3,275 |
| Diluted\tweighted\taverage\tshares\toutstanding | 80,979 | 81,822 | 82,149 |
| Earnings\tper\tshare | $2.01 | $1.75 | $1.53 |

Stock	awards	and	options—We	adopted	Statement	of	Financial	Accounting	Standards	No.	123	(revised	2004):	Share-based	Payment	("FAS	123R")	on	June	1, 2006.	We	elected	to	adopt	the	modified	prospective	method	described	in	FAS	123R	which	specifies	that	compensation	expense	for	options	granted	prior	to	the	effective date	be	recognized	in	the	consolidated	statements	of	income	over	the	remaining	vesting	period	of	those	options,	and	that	compensation	expense	for	options	granted subsequent	to	the	effective	date	be	recognized	in	the	consolidated	statements	of	income	over	the	vesting	period	of	those	options.	In	addition,	in	accordance	with	our	use of	the	modified	prospective	method,	prior	period	amounts	have	not	been	restated.	Prior	to	our	adoption	of	FAS	123R,	we	accounted	for	options	under	the	recognition and	measurement	principles	of	Accounting	Principles	Board	Opinion	No.	25:	Accounting	for	Stock	Issued	to	Employees	("APB	25")	and	related	interpretations.	We continue	to	use	the	Black-Scholes	valuation	model	to	calculate	the	fair	value	of	share-based	awards.	Refer	to	Note	9	for	additional	discussion	regarding	details	of	our share-based	employee	compensation	plans	and	the	adoption	of	FAS	123R.

New	accounting	pronouncements—In	September	2006,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards No.	157,	Fair	Value	Measurements	("FAS	157").	This	statement	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	in	generally	accepted	accounting principles,	and	expands	disclosures	about	fair	value	measurements.	Companies	are	required	to	implement	FAS	157	for	the	first	financial	statements	issued	for	fiscal years	beginning	after	November	15,	2007	for	financial	assets	and	liabilities,	as	well	as	for	any	other	assets	and	liabilities	that	are	carried	at	fair	value	on	a	recurring	basis. In	November	2007,	the	Financial	Accounting	Standards	Board	granted	a	one	year	deferral	for	the	implementation	of	FAS	157	for	non-financial	assets	and	liabilities.	The adoption	of	FAS	157	on	June	1,	2008	is	not	expected	to	have	a	material	impact	on	our	consolidated	balance	sheet	or	consolidated	statement	of	income,	but	the implementation	of	FAS	157	will	require	additional	disclosures.

In	February	2007,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	159,	The	Fair	Value	Option	for	Financial Assets	and	Financial	Liabilities	—	Including	an

Amendment	of	FASB	Statement	No.	115	("FAS	159").	This	statement	permits	us	to	choose	to	measure	many	financial	instruments	and	certain	other	items	at	fair	value. Upon	adoption	of	FAS	159	on	June	1,	2008,	we	did	not	elect	the	fair	value	option	for	any	financial	instrument	we	do	not	currently	report	at	fair	value.

In	December	2007,	the	Financial	Accounting	Standards	Board	issued	Statement	of	Financial	Accounting	Standards	No.	160,	Noncontrolling	Interests	in Consolidated	Financial	Statements	("FAS	160").	This	statement	applies	to	the	accounting	for	noncontrolling	interests	(currently	referred	to	as	minority	interest)	in	a subsidiary	and	for	the	deconsolidation	of	a	subsidiary.	FAS	160	will	become	effective	for	us	on	June	1,	2009.	As	further	described	in	Notes	13	and	16,	we	have	minority interest	that	includes	redemption	provisions	that	are	not	solely	within	our	control,	commonly	referred	to	as	a	redeemable	minority	interest.	At	the	March	12,	2008 meeting	of	the	FASB	Emerging	Issues	Task	Force	("EITF"),	certain	revisions	occurred	to	EITF	Topic	No.	D-98,	Classification	and	Measurement	of	Redeemable Securities	("Topic	D-98").	These	revisions	clarified	that	Topic	D-98	applies	to	redeemable	minority	interests	and	requires	that	its	provision	be	applied	no	later	than	the effective	date	of	FAS	160.	While	we	are	still	evaluating	the	impact	on	our	consolidated	financial	statements	of	FAS	160,	we	have	determined	that,	upon	adoption	of	this standard	and	in	conjunction	with	the	provisions	of	Topic	D-98,	an	adjustment	for	the	then	fair	value	of	redeemable	minority	interests	will	be	required.	This	adjustment will	ultimately	increase	the	carrying	value	of	redeemable	minority	interests	to	the	redemption	value	with	a	corresponding	charge	to	equity.	Under	Topic	D-98,	we	will have	a	choice	of	either	accreting	redeemable	minority	interest	to	its	redemption	value	over	the	redemption	period	or	recognizing	changes	in	the	redemption	value immediately	as	they	occur.	We	are	currently	evaluating	the	recognition	and	measurement	provisions	of	Topic	D-98,	and	we	have	not	yet	concluded	which	measurement method	we	will	apply.

# NOTE	2—BUSINESS	AND	INTANGIBLE	ASSET	ACQUISITIONS

These	acquisitions	have	been	recorded	using	the	purchase	method	of	accounting,	and	accordingly,	the	purchase	price	has	been	allocated	to	the	assets	acquired	and liabilities	assumed	based	on	their	estimated	fair	value	as	of	the	date	of	acquisition.	The	operating	results	of	each	acquisition	are	included	in	our	consolidated	statements of	income	from	the	dates	of	each	acquisition.

The	following	table	summarizes	the	preliminary	purchase	price	allocations	of	these	business	acquisitions	(in	thousands):

The	customer-related	intangible	assets	have	amortization	periods	of	up	to	14	years.	The	contract-based	intangible	assets	have	amortization	periods	of	3	to	10 years.

These	business	acquisitions	were	not	significant	to	our	consolidated	financial	statements	and	accordingly,	we	have	not	provided	pro	forma	information	relating	to these	acquisitions.

In	addition,	during	fiscal	2008,	we	acquired	a	customer	list	and	long-term	merchant	referral	agreement	in	our	Canadian	merchant	services	channel	for	$1.7 million.	The	value	assigned	to	the	customer	list	of	$0.1	million	was	expensed	immediately.	The	remaining	value	was	assigned	to	the	merchant	referral	agreement	and	is being	amortized	on	a	straight-line	basis	over	its	useful	life	of	10	years.

On	July	24,	2006,	we	completed	the	purchase	of	a	fifty-six	percent	ownership	interest	in	the	Asia-Pacific	merchant	acquiring	business	of	The	Hongkong	and Shanghai	Banking	Corporation	Limited,	or	HSBC	Asia.	This	business	provides	card	payment	processing	services	to	merchants	in	the	Asia-Pacific	region.	The	business includes	HSBC	Asia's	payment	processing	operations	in	the	following	ten	countries	and	territories:	Brunei,	China,	Hong	Kong,	India,	Macau,	Malaysia,	Maldives, Singapore,	Sri	Lanka	and	Taiwan.	Under	the	terms	of	the	agreement,	we	initially	paid	HSBC	Asia	$67.2	million	in	cash	to	acquire	our	ownership	interest.	We	paid	an additional	$1.4	million	under	this	agreement	during	fiscal	2007,	for	a	total	purchase	price	of	$68.6	million	to	acquire	our	ownership	interest.	In	conjunction	with	this acquisition,	we	entered	into	a	transition	services	agreement	with	HSBC	Asia	that	may	be	terminated	at	any	time.	Under	this	agreement,	we	expect	HSBC	Asia	will continue	to	perform	payment	processing	operations	and	related	support	services	until	we	fully	integrate	these	functions	into	our	own	operations.

The	purpose	of	this	acquisition	was	to	establish	a	presence	in	the	Asia-Pacific	market.	The	key	factors	that	contributed	to	the	decision	to	make	this	acquisition include	historical	and	prospective	financial	statement	analysis,	HSBC	Asia's	market	share	in	the	region,	HSBC	Asia's	retail	presence,	and	previous	business development	activity	by	other	companies	in	the	Asia-Pacific	market.	The	purchase	price	was	determined	by	analyzing	the	historical	and	prospective	financial	statements and	applying	relevant	purchase	price	multiples.

On	November	14,	2006,	we	completed	the	acquisition	of	the	assets	of	Diginet	d.o.o.,	an	indirect	payment	processor	for	both	point-of-sale	and	ATM	transactions based	in	Sarajevo,	Bosnia	and	Herzegovina.	The	purpose	of	this	acquisition	was	to	extend	Global	Payments	Europe's	presence	into	the	Balkan	region.

The	following	table	summarizes	the	purchase	price	allocations	of	these	acquisitions	(in	thousands):

|  | HSBC	Asia | All	Other | Total |
| :--- | :--- | :--- | :--- |
| Goodwill | $51,201 | $9,160 | $60,361 |
| Customer-related\tintangible\tassets | 15,008 | 2,663 | \t 17,671 |
| Trademarks | 2,016 | — | 2,016 |
| Contract-based\tintangible\tassets | — | 1,489 | 1,489 |
| Property\tand\tequipment | 666 | 825 | 1,491 |
| Non-current\tdeferred\ttax\tasset | 1,229 | — | 1,229 |
| Other\tcurrent\tassets | — | 76 | 76 |
| Total\tassets\tacquired | 70,120 | \t 14,213 | \t 84,333 |
| Current\tliabilities | — | (1,400) | (1,400) |
| Long-term\tliabilities | — | (150) | (150) |
| Minority\tinterest\tin\tequity\tof\tsubsidiary | (1,522) | — | (1,522) |
| Net\tassets\tacquired | $68,598 | $12,663 | $81,261 |

The	HSBC	Asia	customer-related	intangible	assets	and	trademarks	acquired	have	an	amortization	period	of	13	years	and	5	years,	respectively.	The	customer- related	intangible	assets	and	contract-based	intangible	assets	created	from	the	other	acquisitions	have	amortization	periods	ranging	up	to	15	years	and	3	years, respectively.

The	fiscal	2007	acquisitions,	whether	considered	individually	or	in	aggregate,	were	not	significant	to	our	consolidated	financial	statements	and	accordingly,	we have	not	provided	pro	forma	operating	information	related	to	these	acquisitions.

We	acquired	a	series	of	money	transfer	branch	locations	beginning	in	September	2005	and	continuing	through	January	2006	from	Remesas	Costamar,	Inc.	d/b/a Costamar	Money	Transfer.	The	total	consideration	for	these	acquisitions	was	$3.2	million,	paid	in	installments	over	the	acquisition	period.	The	purpose	of	the	transaction was	to	increase	the	market	presence	of	our	DolEx-branded	money	transfer	offering.	The	following	table	summarizes	the	purchase	price	allocations	of	the	assets	acquired in	this	transaction:

The	fiscal	2006	acquisition	was	not	significant	to	our	consolidated	statements	of	income	and	accordingly,	we	have	not	provided	pro	forma	operating	information related	to	this	acquisition.	Management	determined	that	the	acquired	customer-related	intangible	assets	and	contract-based	intangible	assets	have	useful	lives	of	3	and	2 years,	respectively.

# NOTE	3—PROPERTY	AND	EQUIPMENT

As	of	May	31,	2008	and	2007,	property	and	equipment	consisted	of	the	following:

|  | Useful	Lives<br>in	Years | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Land | N/A | $2,727 | $2,143 |
| Building | 40 | 37,023 | 25,415 |
| Equipment | 2-5 | \t 111,834 | \t 132,677 |
| Software | 5-10 | 70,444 | 60,387 |
| Leasehold\timprovements | 5-15 | 10,913 | 12,714 |
| Furniture\tand\tfixtures | 5-7 | 8,521 | 8,099 |
| Work\tin\tprogress | N/A | 45,924 | 43,116 |
|  |  | \t 287,386 | \t 284,551 |
| Less\taccumulated\tdepreciation\tand\tamortization\tof\tproperty\tand\tequipment |  | \t 145,971 | \t 166,056 |
|  |  | $141,415 | $118,495 |

Depreciation	and	amortization	expense	of	property	and	equipment	was	$28.9	million,	$25.9	million,	and	$25.6	million	for	fiscal	2008,	2007	and	2006, respectively.

# NOTE	4—GOODWILL	AND	INTANGIBLE	ASSETS

As	of	May	31,	2008	and	2007,	goodwill	and	intangible	assets	consisted	of	the	following:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| Goodwill | $497,136 | $451,244 |
| Customer-related\tintangible\tassets | 287,317 | 271,165 |
| Trademarks,\tindefinite\tlife | 42,944 | 42,944 |
| Trademarks,\tfinite\tlife | 3,188 | 2,992 |
| Contract-based\tintangible\tassets | 5,545 | 2,810 |
|  | 836,130 | 771,155 |
| Less\taccumulated\tamortization\ton: |  |  |
| Customer-related\tintangible\tassets | 158,935 | 141,519 |
| Trademarks | 1,841 | 1,276 |
| Contract-based\tintangible\tassets | 2,582 | 1,496 |
|  | 163,358 | 144,291 |
|  | $672,772 | $626,864 |

The	following	table	discloses	the	changes	in	the	carrying	amount	of	goodwill	for	the	years	ended	May	31,	2008	and	2007:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| Balance\tat\tbeginning\tof\tyear | $451,244 | $387,280 |
| Goodwill\tacquired | 13,536 | 60,361 |
| Effect\tof\ttax\tadjustments\tto\tpurchase\tprice\tallocations | — | (698) |
| Effect\tof\tforeign\tcurrency\ttranslation | 32,356 | 4,301 |
| Balance\tat\tend\tof\tyear | $497,136 | $451,244 |

Customer-related	intangible	assets	and	contract-based	intangible	assets	acquired	during	the	year	ended	May	31,	2008	have	weighted	average	amortization	periods of	11.8	years	and	3.4	years,	respectively.	We	did	not	acquire	any	finite	life	trademarks	during	the	year	ended	May	31,	2008.	Customer-related	intangible	assets,	contract- based	intangible	assets	and	finite	life	trademarks	acquired	during	the	year	ended	May	31,	2007	have	weighted	average	amortization	periods	of	12.9	years,	2.8	years	and 5.0	years,	respectively.	Amortization	expense	of	acquired	intangibles	was	$15.1	million,	$14.4	million,	and	$14.9	million	for	fiscal	2008,	2007	and	2006,	respectively.

The	estimated	amortization	expense	of	acquired	intangibles	as	of	May	31,	2008	for	the	next	five	fiscal	years	is	as	follows	(in	thousands):

Estimated	amortization	expense	for	acquired	intangibles	denominated	in	currencies	other	than	the	United	States	dollar	is	based	on	foreign	exchange	rates	as	of May	31,	2008.

# NOTE	5—ACCOUNTS	PAYABLE	AND	ACCRUED	LIABILITIES

As	of	May	31,	2008	and	2007,	accounts	payable	and	accrued	liabilities	consisted	of	the	following:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| Trade\taccounts\tpayable | $36,347 | $21,670 |
| Compensation\tand\tbenefits | 20,041 | 20,947 |
| Restructuring | 174 | 1,746 |
| Third\tparty\tprocessing\texpenses | 7,624 | 6,593 |
| Commissions\tto\tthird\tparties | 30,699 | 24,442 |
| Assessment\texpenses | 13,801 | 10,743 |
| Transition\tservices\tpayable\tto\tHSBC\tAsia | 3,534 | 6,548 |
| Other | 26,023 | 22,982 |
|  | $138,243 | $115,671 |

# NOTE	6—RETIREMENT	BENEFITS

# Pension	Plans

We	have	a	noncontributory	defined	benefit	pension	plan	covering	our	United	States	employees	who	have	met	the	eligibility	provisions.	The	defined	benefit pension	plan	was	closed	to	new	participants	beginning	June	1,	1998.	Benefits	are	based	on	years	of	service	and	the	employee's	compensation	during	the	highest	five consecutive	years	of	earnings	out	of	the	last	ten	years	of	service.	Plan	provisions	and	funding	meet	the	requirements	of	the	Employee	Retirement	Income	Security	Act	of 1974,	as	amended	("ERISA").	Effective	May	31,	2004,	we	modified	the	pension	plan	to	cease	benefit	accruals	for	increases	in	compensation	levels.

We	also	have	a	noncontributory	defined	benefit	supplemental	executive	retirement	plan	("SERP")	covering	one	participant,	whose	employment	ceased	in	fiscal 2002.	This	plan	was	initially	formed	by	our	former	parent	company	and	was	transferred	to	us	in	the	spin-off	transaction	that	occurred	on	January	31,	2001.	Benefits	are based	on	years	of	service	and	the	employee's	compensation	during	the	highest	three	consecutive	years	of	earnings	out	of	the	last	ten	years	of	service.	The	SERP	is	a nonqualified,	unfunded	deferred	compensation	plan	under	ERISA.

The	measurement	date	for	the	pension	plans	is	May	31,	which	coincides	with	the	plans'	fiscal	year.	Our	plan	expenses	for	fiscal	2008,	2007	and	2006	were actuarially	determined.

The	following	tables	provide	a	reconciliation	of	the	aggregate	pension	plan	changes	in	the	benefit	obligations	and	fair	value	of	assets	over	the	two	year	period ending	May	31,	2008	and	a	statement	of	funded	status	at	May	31	for	each	year:

# Changes	in	benefit	obligations

| Benefit	obligation	at	beginning	of	year | $10,058 | $9,389 |
| :--- | :--- | :--- |
| Interest\tcost | 600 | 576 |
| Actuarial\t(gain)\tor\tloss | (1,055) | 321 |
| Benefits\tpaid | (257) | (228) |
| Balance\tat\tend\tof\tyear | $9,346 | $10,058 |

# Changes	in	plan	assets

| Fair	value	of	plan	assets	at	beginning	of	year | $8,418 | $6,893 |
| :--- | :--- | :--- |
| Actual\treturn\ton\tplan\tassets | 312 | \t 1,046 |
| Employer\tcontributions | 400 | 707 |
| Benefits\tpaid | (257) | (228) |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tyear | $8,873 | $8,418 |

# Amounts	recognized	in	consolidated	balance	sheets

| Current	assets | $149 | $— |
| :--- | :--- | :--- |
| Current\tliabilities | \t — | (979) |
| Noncurrent\tliabilities | (622) | (661) |
| Total | $(473) | $(1,640) |

# Information	about	accumulated	benefit	obligation

| Projected	benefit	obligation | $9,346 | $10,058 |
| :--- | :--- | :--- |
| Accumulated\tbenefit\tobligation | \t 9,346 | \t 10,058 |
| Fair\tvalue\tof\tplan\tassets | \t 8,873 | 8,418 |

# Components	of	net	periodic	benefit	cost

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Interest\tcost | $600 | $576 | $530 |
| Expected\treturn\ton\tplan\tassets | (678) | (571) | (504) |
| Amortization\tof\tprior\tservice\tcost | 14 | 14 | 14 |
| Amortization\tof\tnet\tloss | 40 | 63 | 194 |
| Net\tpension\t(income)\texpense | $(24) | $82 | $234 |

# Other	changes	in	plan	assets	and	benefit	obligations	recognized	in	other	comprehensive	income

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Adjustment\tfor\tthe\tadoption\tof\tFAS\t158 | $ — | $145 | $— |
| Net\tgain | (689) | (176) | (1,207) |
| Amortization\tof\tnet\tloss | (40) | (63) | (194) |
| Amortization\tof\tprior\tservice\tcost | (14) | (14) | (14) |
| Total\trecognized\tin\tother\tcomprehensive\tincome | $(743) | $(108) | $(1,415) |

In	fiscal	2007,	the	adjustment	to	accumulated	other	comprehensive	income	for	the	adoption	of	FAS	158	represents	the	unrecognized	prior	service	costs	associated with	the	SERP,	which	was	previously	netted	against	the	plan's	funded	status	in	our	consolidated	balance	sheet	pursuant	to	the	requirements	of	FAS	87.	This	amount	will be	subsequently	recognized	as	net	periodic	pension	cost	pursuant	to	our	historical	accounting	policy	for	amortizing	such	amounts.	Further,	actuarial	gains	and	losses	that arise	in	subsequent	periods	that	are	not	recognized	as	net	periodic	pension	cost	in	the	same	periods	will	be	recognized	as	a	component	of	other	comprehensive	income. Those	amounts	will	be	subsequently	recognized	as	a	component	of	net	periodic	pension	cost	on	the	same	basis	as	in	the	past,	as	the	adoption	of	FAS	158	had	no	effect	on our	consolidated	statement	of	operations	for	the	fiscal	year	ended	May	31,	2007,	or	for	any	prior	period	presented,	and	it	will	not	affect	our	operating	results	in	future periods.

The	estimated	net	loss	and	prior	service	cost	for	the	deferred	benefit	pension	plans	that	will	be	amortized	from	accumulated	other	comprehensive	income	into	net periodic	benefit	cost	over	the	next	fiscal	year	are	not	significant.

# Amounts	recognized	in	accumulated	other	comprehensive	income

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| Net\tactuarial\tloss | $622 | $1,351 |
| Prior\tservice\tcost | 116 | 130 |
| Deferred\tincome\ttax\tbenefit | (267) | (534) |
| Total | $471 | $947 |

# Weighted	average	assumptions	used	to	determine	benefit	obligations

|  | 2008 | 2007 |
| :--- | :--- | :--- |
| Discount\trate—Qualified\tPlan | 6.75% | 6.00% |
| Discount\trate—SERP | 6.75 | 6.00 |
| Rate\tof\tincrease\tin\tcompensation\tlevels | N/A | N/A |

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Discount\trate—Qualified\tPlan | 6.00% | 6.25% | 5.25% |
| Discount\trate—SERP | 6.00 | 5.50 | 5.75 |
| Expected\tlong-term\trate\tof\treturn\ton\tassets | 8.00 | 8.00 | 8.00 |
| Rate\tof\tincrease\tin\tcompensation\tlevels | N/A | N/A | N/A |

The	expected	long-term	return	on	plan	assets	was	derived	by	applying	the	weighted-average	target	allocation	to	the	expected	return	by	asset	category	shown	in	the table	below.	These	assumptions	and	allocations	were	evaluated	using	input	from	a	third	party	consultant.	Overall,	the	expected	return	assumption	for	each	asset	class utilized	is	based	on	expectation	of	future	returns.

# Plan	assets

The	consolidated	pension	plan	weighted	average	asset	allocations	at	May	31,	2008	and	2007	by	asset	category	are	as	follows:

| Asset	Category | 2008 | 2007 | Target<br>2008 | Expected<br>Return |
| :--- | :--- | :--- | :--- | :--- |
| Equity\tsecurities | 61.1% | 67.8% | 70.0% | 9.0% |
| Debt\tsecurities | 29.0 | 32.1 | 30.0 | 5.7 |
| Real\testate | 2.1 | 0.0 | 0.0 | 0.0 |
| Cash\tequivalents | 7.8 | 0.1 | 0.0 | 3.1 |
| Total | 100.0% | 100.0% | 100.0% | 8.0% |

Our	investment	policy	and	strategies	for	plan	assets	involve	a	balanced	approach	to	achieve	our	long-term	investment	objectives.	We	selected	a	blended investment	approach	to	diversify	the	asset	pool	while	reducing	the	risk	of	wide	swings	in	the	market	from	year-to-year.	The	pension	plan's	investment	goals	are	to generate	a	return	in	excess	of	8.0%	over	a	full	market	cycle.	The	investment	portfolio	contains	enough	diversification	of	investments	to	reduce	risk	and	provide	growth of	capital	and	income.	The	securities	investment	guideline	details	the	categories	of	investments	that	are	not	eligible	for	investment	without	specific	approval.	These include	the	following:	short	sales,	margin	transactions,	commodities	or	other	commodity	contracts,	unregistered	securities,	investment	in	companies	that	have	filed	a petition	for	bankruptcy	or	investments	for	the	purpose	of	exercising	control	of	management.

# Contributions

We	expect	to	contribute	$0.3	million	to	the	noncontributory	defined	benefit	pension	plan	in	fiscal	2009.	We	do	not	expect	to	make	contributions	to	the	SERP	in fiscal	2009.

# Estimated	future	benefit	payments

The	following	benefit	payments	are	expected	to	be	paid	during	the	years	ending	May	31	(in	thousands):

| 2009 | $254 |
| :--- | :--- |
| 2010 | 266 |
| 2011 | 294 |
| 2012 | 318 |
| 2013 | 371 |
| 2014-2018 | \t 2,640 |

# Employee	Retirement	Savings	Plan

We	have	a	deferred	compensation	401(k)	Plan.	The	plan	provides	tax	deferred	amounts	for	each	participant	consisting	of	employee	elective	contributions	and certain	of	our	matching	contributions.	We	contributed	$1.8	million,	$1.4	million	and	$1.4	million	to	the	401(k)	Plan	in	each	of	the	years	ended	May	31,	2008,	2007	and 2006,	respectively.

# NOTE	7—INCOME	TAXES

The	provisions	for	income	taxes	for	the	fiscal	years	ended	May	31	include:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Current\ttax\texpense: |  |  |  |
| Federal | $73,562 | $64,579 | $56,489 |
| State | 4,741 | 3,501 | 3,308 |
| Foreign | 5,807 | 4,668 | 7,195 |
|  | \t 84,110 | \t 72,748 | \t 66,992 |
| Deferred\ttax\texpense\t(benefit): |  |  |  |
| Federal | 4,581 | (179) | 4,043 |
| State | 648 | (414) | (544) |
| Foreign | 1,249 | 1,281 | (2,969) |
|  | 6,478 | 688 | 530 |
| Provision\tfor\tincome\ttaxes | \t 90,588 | \t 73,436 | \t 67,522 |
| Tax\t(benefit)\texpense\tallocated\tto\tminority\tinterest\tin\ta\ttaxable\tentity | (700) | 696 | — |
| Net\tincome\ttax\texpense | $89,888 | $74,132 | $67,522 |

The	following	presents	our	income	before	income	taxes	for	the	fiscal	years	ended	May	31:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest—Domestic | $240,101 | $202,575 | $184,412 |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest—Foreign | 21,302 | 23,756 | 17,108 |
| Minority\tinterest,\tnet\tof\ttax | (8,061) | (9,910) | (8,474) |
| Tax\texpense\t(benefit)\tallocated\tto\tminority\tinterest | (700) | 696 | — |
| Income\tbefore\tincome\ttaxes | $252,642 | $217,117 | $193,046 |

Our	effective	tax	rates,	as	applied	to	income	before	income	taxes	including	the	effect	of	minority	interest,	for	the	years	ended	May	31,	2008,	2007,	and	2006 respectively,	differ	from	federal	statutory	rates	as	follows:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Federal\tstatutory\trate | 35.0% | 35.0% | 35.0% |
| State\tincome\ttaxes,\tnet\tof\tfederal\tincome\ttax\tbenefit | 1.4 | 0.9 | 0.9 |
| Foreign\tincome\ttaxes | (1.1) | (1.6) | (0.9) |
| Tax\tcredits\tand\tother | 0.3 | (0.2) | 0.0 |
| Effective\ttax\trate | 35.6% | 34.1% | 35.0% |

Deferred	income	taxes	as	of	May	31,	2008	and	2007	reflect	the	impact	of	temporary	differences	between	the	amounts	of	assets	and	liabilities	for	financial accounting	and	income	tax	purposes.	Our	investments	in	certain	foreign	subsidiaries	are	permanently	invested	abroad	and	will	not	be	repatriated	to	the	United	States	in the

foreseeable	future.	In	accordance	with	Accounting	Principles	Board	Opinion	No.	23:	Accounting	for	Income	Taxes—Special	Areas,	because	those	earnings	are considered	to	be	indefinitely	reinvested,	no	domestic	federal	or	state	deferred	income	taxes	have	been	provided	thereon.	Upon	distribution	of	those	earnings,	in	the	form of	dividends	or	otherwise,	we	would	be	subject	to	both	domestic	income	taxes	(subject	to	an	adjustment	for	foreign	tax	credits)	and	withholding	taxes	payable	to	the various	foreign	countries.	Because	of	the	availability	of	United	States	foreign	tax	credits,	it	is	not	practicable	to	determine	the	domestic	federal	income	tax	liability	that would	be	payable	if	such	earnings	were	not	reinvested	indefinitely.

As	of	May	31,	2008	and	2007,	principal	components	of	deferred	tax	items	were	as	follows:

| Accrued	expenses	and	other | $5,323 | $7,238 |
| :--- | :--- | :--- |
| Bad\tdebt\texpense | 3,541 | 1,264 |
| Accrued\trestructuring | 27 | 242 |
| Foreign\tNOL\tcarryforward | 3,516 | 1,582 |
| Tax\tcredits | 6,563 | 6,358 |
|  | 18,970 | 16,684 |
| Less:\tvaluation\tallowance | (9,237) | (7,941) |
| Net\tdeferred\ttax\tasset | 9,733 | 8,743 |
| Deferred\ttax\tliabilities: |  |  |
| Foreign\tcurrency\ttranslation | 34,198 | 30,961 |
| Acquired\tintangibles | 44,018 | 40,672 |
| Prepaid\texpenses | 1,063 | 163 |
| Property\tand\tequipment | 1,336 | 2,499 |
|  | 80,615 | 74,295 |
| Net\tdeferred\ttax\tliability | (70,882) | (65,552) |
| Less:\tcurrent\tnet\tdeferred\ttax\tasset | 4,119 | 5,216 |
| Net\tnoncurrent\tdeferred\ttax\tliability | $(75,001) | $(70,768) |

A	valuation	allowance	is	provided	when	it	is	more	likely	than	not	that	some	portion	or	all	of	the	deferred	tax	assets	will	not	be	realized.	Changes	to	our	valuation allowance	during	the	fiscal	year	ended	May	31,	2008	are	summarized	below	(in	thousands):

We	adopted	the	provisions	of	the	Financial	Accounting	Standards	Board	issued	Interpretation	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes—an Interpretation	of	FASB	Statement	No.	109	("FIN	48")	on	June	1,	2007.	This	interpretation	clarifies	the	accounting	for	uncertainty	in	income	taxes	recognized	in	a 73

company's	financial	statements	and	establishes	guidelines	for	recognition	and	measurement	of	a	tax	position	taken	or	expected	to	be	taken	in	a	tax	return.	As	a	result	of this	adoption,	we	recorded	a	$1.5	million	increase	in	the	liability	for	unrecognized	income	tax	benefits,	which	was	accounted	for	as	a	$1.0	million	reduction	to	the June	1,	2007	balance	of	retained	earnings	and	a	$0.5	million	reduction	to	the	June	1,	2007	balance	of	additional	paid-in	capital.	As	of	the	adoption	date,	other	long-term liabilities	included	liabilities	for	unrecognized	income	tax	benefits	of	$3.8	million	and	accrued	interest	and	penalties	of	$0.7	million.	A	reconciliation	of	the	beginning and	ending	amount	of	unrecognized	tax	benefits	is	as	follows	(in	thousands):

As	of	May	31,	2008,	the	total	amount	of	gross	unrecognized	tax	benefits	that,	if	recognized,	would	affect	the	effective	tax	rate	is	$3.7	million.

We	recognize	accrued	interest	related	to	unrecognized	income	tax	benefits	in	interest	expense	and	accrued	penalty	expense	related	to	unrecognized	tax	benefits	in sales,	general	and	administrative	expenses.	During	fiscal	2008,	we	recorded	$0.3	million	of	accrued	interest	and	penalty	expense	related	to	the	unrecognized	income	tax benefits.

We	anticipate	the	total	amount	of	unrecognized	income	tax	benefits	will	decrease	by	$1.1	million	net	of	interest	and	penalties	from	our	foreign	operations	within the	next	12	months	as	a	result	of	the	expiration	of	the	statute	of	limitations.

We	conduct	business	globally	and	file	income	tax	returns	in	the	United	States	federal	jurisdiction	and	various	state	and	foreign	jurisdictions.	In	the	normal	course of	business,	we	are	subject	to	examination	by	taxing	authorities	throughout	the	world,	including	such	major	jurisdictions	as	the	United	States	and	Canada.	With	few exceptions,	we	are	no	longer	subject	to	income	tax	examinations	for	years	ended	May	31,	2003	and	prior.	We	are	currently	under	audit	by	the	Internal	Revenue	Service of	the	United	States	for	the	2004	to	2005	tax	years.	We	expect	that	the	examination	phase	of	the	audit	for	the	years	2004	to	2005	will	conclude	in	fiscal	2009.

# NOTE	8—SHAREHOLDERS'	EQUITY

# NOTE	9—SHARE-BASED	AWARDS	AND	OPTIONS

As	of	May	31,	2008,	we	had	four	share-based	employee	compensation	plans.	For	all	share-based	awards	granted	after	June	1,	2006,	compensation	expense	is recognized	on	a	straight-line	basis.	The	fair	value	of	share-based	awards	granted	prior	to	June	1,	2006	is	amortized	as	compensation	expense	on	an	accelerated	basis	from the	date	of	the	grant.	There	was	no	share-based	compensation	capitalized	during	fiscal	2008,	2007,	and	2006.

We	have	certain	stock	plans	under	which	incentive	stock	options,	non-qualified	stock	options	and	restricted	stock	have	been	granted	to	officers,	key	employees and	directors	under	the	Global	Payments	Inc.	2000	Long-Term	Incentive	Plan,	as	amended	and	restated	(the	"2000	Plan"),	the	Global	Payments	Inc.	Amended	and Restated	2005	Incentive	Plan	(the	"2005	Plan"),	and	an	Amended	and	Restated	2000	Non-Employee	Director	Stock	Option	Plan	(the	"Director	Plan")	(collectively,	the "Plans").	Effective	with	the	adoption	of	the	2005	Plan,	there	are	no	future	grants	under	the	2000	Plan.	Shares	available	for	future	grant	as	of	May	31,	2008	are 5.0	million	for	the	2005	Plan	and	0.5	million	for	the	Director	Plan.

The	total	share-based	compensation	cost	that	has	been	charged	against	income	for	these	plans	aggregated	$13.8	million	and	$15.2	million	for	the	fiscal	years	2008 and	2007,	respectively,	for	(i)	the	continued	vesting	of	all	stock	options	that	remained	unvested	as	of	June	1,	2006,	(ii)	all	stock	options	granted,	modified,	or	cancelled after	our	adoption	of	FAS	123R,	(iii)	our	employee	stock	purchase	plan,	and	(iv)	our	restricted	stock	plan.	The	total	income	tax	benefit	recognized	for	share-based compensation	in	the	accompanying	statements	of	income	was	$4.9	million	and	$4.5	million	for	the	fiscal	years	2008	and	2007,	respectively.

The	following	table	illustrates	the	comparable	pro	forma	effect	on	fiscal	2006	net	income	and	earnings	per	share	had	we	applied	the	fair	value	recognition principles	of	FAS	123R	to	share-based	compensation	(in	thousands):

Prior	to	the	adoption	of	FAS	123R,	cash	flows	resulting	from	the	tax	benefit	related	to	equity-based	compensation	were	included	in	our	operating	activities	in	our statement	of	cash	flows,	along	with	other	income	tax	cash	flows,	in	accordance	with	the	provisions	of	EITF	00-15,	Classification	in	the	Statement	of	Cash	Flows	of	the Income	Tax	Benefit	Received	by	a	Company	Upon	Exercise	of	a	Nonqualified	Employee	Stock	Option.	FAS	123R	now	requires	tax	benefits	relating	to	excess	equity- based	compensation	deductions	be	prospectively	included	as	financing	activities	in	our	statement	of	cash	flows.

# Stock	Options

Stock	options	are	granted	at	100%	of	fair	market	value	on	the	date	of	grant	and	have	10-year	terms.	Stock	options	granted	after	August	2003	vest	one	year	after the	date	of	grant	with	respect	to	25%	of	the	shares	granted,	an	additional	25%	after	two	years,	an	additional	25%	after	three	years,	and	the	remaining	25%	after	four years.	Stock	options	granted	prior	to	August	2003	vest	two	years	after	the	date	of	grant	with	respect	to	20%	of	the	shares	granted,	an	additional	25%	after	three	years,	an additional	25%	after	four	years,	and	the	remaining	30%	after	five	years.	The	Plans	provide	for	accelerated	vesting	under	certain	conditions,	including	a	change	in control.	We	have	historically	issued	new	shares	to	satisfy	the	exercise	of	options.

The	following	table	summarizes	all	outstanding	options	as	of	May	31,	2008	and	the	changes	during	fiscal	2008.

|  | Options<br>(in	thousands) | Weighted	Average<br>Exercise	Price | Aggregate<br>Intrinsic	Value<br>(in	millions) |
| :--- | :--- | :--- | :--- |
| 2000\tPlan |  |  |  |
| Outstanding\tat\tMay\t31,\t2007 | 2,866 | $18 |  |
| Granted | — | — |  |
| Cancelled | (21) | 21 |  |
| Exercised | (617) | 18 |  |
| Outstanding\tat\tMay\t31,\t2008 | 2,228 | $18 | $65.6 |
| 2005\tPlan |  |  |  |
| Outstanding\tat\tMay\t31,\t2007 | 2,053 | $36 |  |
| Granted | 238 | 38 |  |
| Cancelled | (115) | 38 |  |
| Exercised | (163) | 31 |  |
| Outstanding\tat\tMay\t31,\t2008 | 2,013 | $37 | $21.4 |
| Director\tPlan |  |  |  |
| Outstanding\tat\tMay\t31,\t2007 | 252 | $22 |  |
| Granted | 43 | 43 |  |
| Cancelled | — | — |  |
| Exercised | — | — |  |
| Outstanding\tat\tMay\t31,\t2008 | 295 | $25 | $6.6 |

Total	stock	options	outstanding	as	of	May	31,	2008	have	a	weighted	average	exercise	price	of	$27,	a	weighted	average	remaining	contractual	life	of	6	years	and an	aggregate	intrinsic	value	of	$93.6	million.	As	of	May	31,	2008,	stock	options	exercisable	total	2.9	million	and	have	a	weighted	average	exercise	price	of	$22,	a weighted	average	remaining	contractual	life	of	5	years	and	an	aggregate	intrinsic	value	of	$73.7	million.	The	aggregate	intrinsic	value	of	stock	options	exercised	during the	fiscal	years	2008,	2007	and	2006	was	$16.9	million,	$22.3	million	and	$40.3	million,	respectively.	As	of	May	31,	2008,	we	had	$8.7	million	of	total	unrecognized compensation	cost	related	to	unvested	options,	which	we	expect	to	recognize	over	a	weighted	average	period	of	1.2	years.

The	weighted	average	grant-date	fair	values	of	each	option	granted	in	fiscal	2008,	2007,	and	2006	under	each	plan	are	as	follows:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| 2005\tPlan | $13 | $16 | $13 |
| Director\tPlan | \t 15 | \t 14 | \t 13 |

The	fair	value	of	each	option	granted	during	fiscal	2008,	2007	and	2006	was	estimated	on	the	date	of	grant	using	the	Black-Scholes	valuation	model	with	the following	weighted	average	assumptions	used	for	the	grants	during	the	respective	period:

The	risk-free	interest	rate	is	based	on	the	yield	of	a	zero	coupon	United	States	Treasury	security	with	a	maturity	equal	to	the	expected	life	of	the	option	from	the date	of	the	grant.	Our	assumption	on	expected	volatility	is	based	on	our	historical	volatility.	The	dividend	yield	assumption	is	calculated	using	our	average	stock	price over	the	preceding	year	and	the	annualized	amount	of	our	current	quarterly	dividend.	We	based	our	assumptions	on	the	expected	lives	of	the	options	on	our	analysis	of the	historical	exercise	patterns	of	the	options	and	our	assumption	on	the	future	exercise	pattern	of	options.

# Restricted	Stock

Shares	awarded	under	the	restricted	stock	program,	issued	under	the	2000	Plan	and	2005	Plan,	are	held	in	escrow	and	released	to	the	grantee	upon	the	grantee's satisfaction	of	conditions	of	the	grantee's	restricted	stock	agreement.	The	grant	date	fair	value	of	restricted	stock	awards	is	based	on	the	quoted	fair	market	value	of	our common	stock	at	the	award	date.	Compensation	expense	is	recognized	ratably	during	the	escrow	period	of	the	award.

Grants	of	restricted	shares	are	subject	to	forfeiture	if	a	grantee,	among	other	conditions,	leaves	our	employment	prior	to	expiration	of	the	restricted	period. Beginning	June	1,	2006,	new	grants	of	restricted	shares	generally	vest	one	year	after	the	date	of	grant	with	respect	to	25%	of	the	shares	granted,	an	additional	25%	after two	years,	an	additional	25%	after	three	years,	and	the	remaining	25%	after	four	years.	For	restricted	shares	granted	prior	to	June	1,	2006,	the	restrictions	generally	lapse two	years	after	the	date	of	grant	with	respect	to	33%	of	the	shares	granted,	an	additional	33%	after	three	years,	and	the	remaining	33%	after	four	years.

The	following	table	summarizes	the	changes	in	non-vested	restricted	stock	awards	for	the	year	ended	May	31,	2008	(share	awards	in	thousands):

|  |  | Weighted	Average |
| :--- | :--- | :--- |
|  |  | Grant-Date |
|  | Share\tAwards | Fair\tValue |
| Non-vested\tat\tMay\t31,\t2007 | 278 | $37 |
| Granted | 400 | 38 |
| Vested | (136) | 30 |
| Forfeited | (24) | 40 |
| Non-vested\tat\tMay\t31,\t2008 | 518 | $39 |

The	weighted	average	grant-date	fair	value	of	share	awards	granted	in	the	years	ended	May	31,	2007	and	2006	was	$45	and	$36,	respectively.	The	total	fair	value of	share	awards	vested	during	the	years	ended	May	31,	2008,	2007	and	2006	was	$4.1	million,	$1.7	million	and	$1.4	million,	respectively.

We	recognized	compensation	expenses	for	restricted	stock	of	$5.7	million,	$2.7	million,	and	$1.6	million	in	the	years	ended	May	31,	2008,	2007	and	2006.	As	of May	31,	2008,	there	was	$15.2	million	of	total	unrecognized	compensation	cost	related	to	unvested	restricted	stock	awards	that	is	expected	to	be	recognized	over	a weighted	average	period	of	2.9	years.

# Employee	Stock	Purchase	Plan

We	have	an	Employee	Stock	Purchase	Plan	under	which	the	sale	of	2.4	million	shares	of	our	common	stock	has	been	authorized.	Employees	may	designate	up	to the	lesser	of	$25	thousand	or	20%	of	their	annual	compensation	for	the	purchase	of	stock.	For	periods	prior	to	October	1,	2006,	the	price	for	shares	purchased	under	the plan	was	the	lower	of	85%	of	the	market	value	on	the	first	day	or	the	last	day	of	the	quarterly	purchase	period.	With	the	quarterly	purchase	period	beginning	on October	1,	2006,	the	price	for	shares	purchased	under	the	plan	is	85%	of	the	market	value	on	the	last	day	of	the	quarterly	purchase	period	(the	"Purchase	Date").	At May	31,	2008,	0.7	million	shares	had	been	issued	under	this	plan,	with	1.7	million	shares	reserved	for	future	issuance.

The	weighted	average	grant-date	fair	value	of	each	designated	share	purchased	under	this	plan	was	$6,	$8	and	$8	in	the	years	ended	May	31,	2008,	2007	and 2006,	respectively.

For	the	quarterly	purchases	after	October	1,	2006,	the	fair	value	of	each	designated	share	purchased	under	the	Employee	Stock	Purchase	Plan	is	based	on	the	15% discount	on	the	Purchase	Date.

For	purchases	prior	to	October	1,	2006,	the	fair	value	of	each	designated	share	purchased	under	the	Employee	Stock	Purchase	Plan	was	estimated	on	the	date	of grant	using	the	Black-Scholes	valuation	model	using	the	following	weighted	average	assumptions:

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| Risk-free\tinterest\trates | 4.93% | 3.72% |
| Expected\tvolatility | 37.02% | 26.06% |
| Dividend\tyields | 0.19% | 0.34% |
| Expected\tlives | 3\tmonths | 3\tmonths |

The	risk-free	interest	rate	is	based	on	the	yield	of	a	zero	coupon	United	States	Treasury	security	with	a	maturity	equal	to	the	expected	life	of	the	option	from	the date	of	the	grant.	Our	assumption	on	expected	volatility	is	based	on	our	historical	volatility.	The	dividend	yield	assumption	is	calculated	using	our	average	stock	price over	the	preceding	year	and	the	annualized	amount	of	our	current	quarterly	dividend.	Since	the	purchase	price	for	shares	under	the	plan	is	based	on	the	market	value	on the	first	day	or	last	day	of	the	quarterly	purchase	period,	we	use	an	expected	life	of	three	months	to	determine	the	fair	value	of	each	designated	share.

# NOTE	10—RESTRUCTURING	AND	OTHER	CHARGES

The	following	schedule	details	the	rollforward	of	the	restructuring	liability	from	May	31,	2006	to	May	31,	2008:

|  |  | Costs |  |  | Costs |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Liability\nBalance\tas\tof\nMay\t31,\t2006 | Accrued\nDuring\nFiscal\t2007 | Costs\tPaid\nDuring\nFiscal\t2007 | Liability\nBalance\tas\tof\nMay\t31,\t2007 | Accrued\nDuring\nFiscal\t2008 | Costs\tPaid\nDuring\nFiscal\t2008 | Liability\nBalance\tas\tof\nMay\t31,\t2008 |
|  |  |  |  | (in\tthousands) |  |  |  |
| One-time\temployee\ttermination\tbenefits | $248 | $1,866 | $368 | $1,746 | $1,317 | $2,889 | $174 |
| Contract\ttermination\tcosts | 6 | 104 | 110 | — | — | — | — |
| Totals | $254 | $1,970 | $478 | $1,746 | $1,317 | $2,889 | $174 |

During	the	fourth	quarter	of	fiscal	2007,	consistent	with	our	strategy	to	leverage	infrastructure	and	consolidate	operations,	we	committed	to	plans	to	close	two locations	and	consolidate	their	functions	as	well	as	other	functions	into	existing	locations.	In	addition,	we	recognized	other	charges	of	$1.1	million	in	connection	with	a fixed	asset	abandonment	related	to	a	software	development	project	in	process	that	was	abandoned	as	a	result	of	these	restructuring	plans.	We	recorded	restructuring	and other	charges	of	$3.1	million	in	fiscal	2007	in	connection	with	these	plans.	During	fiscal	2008,	we	recorded	$1.3	million	in	additional	restructuring	charges	in	connection with	these	plans.	We	completed	the	plans	during	our	second	quarter	of	fiscal	2008.

During	the	fourth	quarter	of	fiscal	2005,	we	committed	to	plans	to	close	one	location	and	consolidate	its	functions	and	certain	other	functions	into	existing locations.	These	restructuring	plans	required	associated	management	and	staff	reductions	and	required	contract	termination	and	related	facility	closure	costs	in connection	with	an	operating	lease	at	one	location	during	fiscal	2006.	We	incurred	$1.6	million	in	restructuring	charges	relating	to	one-time	employee	termination benefits	during	fiscal	2006.	In	addition,	we	incurred	$0.3	million	in	restructuring	charges	relating	to	contract	termination	costs	during	fiscal	2006.	As	of	May	31,	2007, we	have	paid	all	accrued	restructuring	charges	under	these	plans.

# NOTE	11—SEGMENT	INFORMATION

# General	information

We	operate	in	two	reportable	segments,	merchant	services	and	money	transfer.	The	merchant	services	segment	primarily	offers	processing	solutions	for	credit cards,	debit	cards,	and	check-related	services.	We	have	two	basic	business	models	to	market	our	merchant	services	offerings.	One	model,	referred	to	as	"direct" merchant	services,	features	a	salaried	and	commissioned	sales	force,	ISOs,	and	independent	sales	representatives,	all	of	whom	sell	our	services	directly	to	merchants.	Our other	model,	referred	to	as	"indirect"	merchant	services,	provides	the	same	basic	products	and	services	as	direct	merchant	services,	primarily	to	financial	institutions	and a	limited	number	of	ISOs	on	an	unbundled	basis	that	in	turn	resell	our	products	and	services	to	merchants.	The	money	transfer	segment	offers	money	transfer	services	to consumers,	primarily	from	the	United	States	and	Europe	to	Latin	America,	Morocco,	the	Philippines,	Romania,	Poland	and	other	destinations.

# Information	about	profit	and	assets

We	evaluate	performance	and	allocate	resources	based	on	the	operating	income	of	each	segment.	The	operating	income	of	each	segment	includes	the	revenues	of the	segment	less	those	expenses	that	are	directly	related	to	those	revenues.	Operating	overhead,	shared	costs,	and	certain	compensation	costs	are	included	in	Corporate below.	Interest	expense	or	income	and	income	tax	expense	are	not	allocated	to	the	individual

segments.	Additionally,	restructuring	charges	are	not	allocated	to	the	individual	segments	and	are	separately	presented	below.	Lastly,	we	do	not	evaluate	performance	or allocate	resources	using	segment	asset	data.	The	accounting	policies	of	the	reportable	segments	are	the	same	as	those	described	in	the	summary	of	significant	accounting policies	in	Note	1.

Information	on	segments,	including	revenue	by	geographic	distribution	within	segments,	and	reconciliations	to	consolidated	revenues	and	consolidated	operating income	are	as	follows	for	the	years	ended	May	31,	2008,	2007,	and	2006:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Revenues: |  |  |  |
| Domestic\tdirect | $687,065 | $558,026 | $481,273 |
| Canada | 267,249 | 224,570 | \t 208,126 |
| Asia-Pacific | 72,367 | 48,449 | — |
| Central\tand\tEastern\tEurope | 59,778 | 51,224 | 47,114 |
| Domestic\tindirect\tand\tother | 44,150 | 46,873 | 51,987 |
| Merchant\tservices | \t 1,130,609 | 929,142 | \t 788,500 |
| Domestic | 119,019 | 115,416 | \t 109,067 |
| Europe | 24,601 | 16,965 | 10,489 |
| Money\ttransfer | 143,620 | 132,381 | \t 119,556 |
| Consolidated\trevenues | $1,274,229 | $1,061,523 | $908,056 |
| Operating\tincome\tfor\tsegments: |  |  |  |
| Merchant\tservices | $293,030 | $259,670 | $224,221 |
| Money\ttransfer | 13,635 | 14,476 | 18,741 |
| Corporate | (53,989) | (52,969) | (39,996) |
| Restructuring\tand\tother | (1,317) | (3,088) | (1,878) |
| Consolidated\toperating\tincome | $251,359 | $218,089 | $201,088 |
| Depreciation\tand\tamortization: |  |  |  |
| Merchant\tservices | $38,384 | $35,168 | $34,697 |
| Money\ttransfer | 5,192 | 4,687 | 5,171 |
| Corporate | 458 | 510 | 621 |
| Consolidated\tdepreciation\tand\tamortization | $44,034 | $40,365 | $40,489 |

We	operate	primarily	in	the	United	States,	Canada,	the	Asia-Pacific	region,	and	Europe.	The	table	above	includes	a	breakdown	of	consolidated	revenues	by geographic	region	for	the	years	ended	May	31,	2008,	2007,	and	2006.	Our	results	of	operations	and	our	financial	condition	are	not	significantly	reliant	upon	any	single customer.

The	following	is	a	breakdown	of	long-lived	assets	by	geographic	regions	as	of	May	31,	2008	and	2007:

|  | 2008 | 2007 |
| :--- | :--- | :--- |
|  | (in\tthousands) |  |
| United\tStates | $427,895 | $413,278 |
| Canada | 173,767 | 161,229 |
| Asia-Pacific | 74,234 | 69,957 |
| Europe | 136,409 | 98,281 |
| Latin\tAmerica | 1,882 | 2,614 |
|  | $814,187 | $745,359 |

# NOTE	12—RELATED	PARTY	TRANSACTIONS

In	the	course	of	settling	money	transfer	transactions,	we	purchase	foreign	currency	from	Consultoria	Internacional	Casa	de	Cambio	("CISA"),	a	Mexican company	partially	owned	by	certain	of	our	employees.	As	of	March	31,	2008,	Mr.	Raúl	Limón	Cortes,	a	10%	shareholder	of	CISA,	was	no	longer	an	employee,	and	we no	longer	considered	CISA	a	related	party.	We	purchased	6.1	billion	Mexican	pesos	for	$560.3	million	during	the	ten	months	ended	March	31,	2008	and	8.1	billion Mexican	pesos	for	$736.0	million	during	fiscal	2007	from	CISA.	We	believe	these	currency	transactions	were	executed	at	prevailing	market	exchange	rates.

Also	from	time	to	time,	money	transfer	transactions	are	settled	at	destination	facilities	owned	by	CISA.	We	incurred	related	settlement	expenses,	included	in	cost of	service	in	the	accompanying	consolidated	statements	of	income	of	$0.5	million	in	the	ten	months	ended	March	31,	2008.	In	fiscal	2007	and	2006,	we	incurred	related settlement	expenses,	included	in	cost	of	service	in	the	accompanying	consolidated	statements	of	income	of	$0.7	and	$0.6	million,	respectively.

In	the	normal	course	of	business,	we	periodically	utilize	the	services	of	contractors	to	provide	software	development	services.	One	of	our	employees,	hired	in April	2005,	is	also	an	employee,	officer,	and	part	owner	of	a	firm	that	provides	such	services.	The	services	provided	by	this	firm	primarily	relate	to	software development	in	connection	with	our	planned	next	generation	front-end	processing	system	in	the	United	States.	During	fiscal	2008,	we	capitalized	fees	paid	to	this	firm of	$0.3	million.	As	of	May	31,	2008	and	2007,	capitalized	amounts	paid	to	this	firm	of	$4.9	million	and	$4.6	million,	respectively,	were	included	in	property	and equipment	in	the	accompanying	consolidated	balance	sheets.	In	addition,	we	expensed	amounts	paid	to	this	firm	of	$0.3	million,	$0.1	million	and	$0.5	million	in	the years	ended	May	31,	2008,	2007	and	2006,	respectively.

# NOTE	13—COMMITMENTS	AND	CONTINGENCIES

# Leases

We	conduct	a	major	part	of	our	operations	using	leased	facilities	and	equipment.	Many	of	these	leases	have	renewal	and	purchase	options	and	provide	that	we	pay the	cost	of	property	taxes,	insurance	and	maintenance.	Rent	expense	on	all	operating	leases	for	fiscal	2008,	2007	and	2006	was	$30.4	million,	$27.1	million,	and	$24.4 million,	respectively.

Future	minimum	lease	payments	for	all	noncancelable	leases	at	May	31,	2008	were	as	follows:

|  | Operating<br>Leases |
| :--- | :--- |
| 2009 | $22,883 |
| 2010 | 16,359 |
| 2011 | 11,746 |
| 2012 | 5,277 |
| 2013 | 3,365 |
| Thereafter | 7,816 |
| Total\tfuture\tminimum\tlease\tpayments | $67,446 |

# Legal

We	are	party	to	a	number	of	other	claims	and	lawsuits	incidental	to	our	business.	In	the	opinion	of	management,	the	reasonably	possible	outcome	of	such	matters, individually	or	in	the	aggregate,	will	not	have	a	material	adverse	impact	on	our	financial	position,	liquidity	or	results	of	operations.

# Taxes

We	define	operating	taxes	as	those	that	are	unrelated	to	income	taxes,	such	as	sales	and	property	taxes.	During	the	course	of	operations,	we	must	interpret	the meaning	of	various	operating	tax	matters	in	the	United	States	and	in	the	foreign	jurisdictions	in	which	we	do	business.	Taxing	authorities	in	those	various	jurisdictions may	arrive	at	different	interpretations	of	applicable	tax	laws	and	regulations	as	they	relate	to	such	operating	tax	matters,	which	could	result	in	the	payment	of	additional taxes	in	those	jurisdictions.

During	fiscal	2008,	we	determined	that	an	accrued	liability	relating	to	a	contingent	operating	tax	item	was	no	longer	deemed	to	be	probable.	We	made	this determination	as	a	result	of	consultation	with	outside	legal	counsel	and	further	analysis	of	applicable	legislation.	As	such,	we	released	the	related	liability	and	recorded	a $7.0	million	reduction	to	sales,	general	and	administrative	expenses	during	fiscal	2008	in	the	accompanying	statements	of	income.	This	reversal	was	a	non-cash	item	and has	been	reflected	as	an	adjustment	to	reconcile	net	income	to	net	cash	provided	by	operating	activities	in	our	statement	of	cash	flows.

As	of	May	31,	2008	we	did	not	have	a	liability	for	operating	tax	items.	As	of	May	31,	2007,	we	had	liabilities	in	the	amount	of	$8.5	million	for	operating	tax items.	The	amount	of	the	liability	is	based	on	management's	best	estimate	given	our	history	with	similar	matters	and	interpretations	of	current	laws	and	regulations.

In	November	2006,	we	entered	into	an	amendment	to	our	credit	facility,	which	we	refer	to	as	our	Canadian	Credit	Facility,	with	the	Canadian	Imperial	Bank	of Commerce,	or	CIBC,	as	administrative	agent	and	lender.	The	Canadian	Credit	Facility	is	a	facility	which	consists	of	a	line	of	credit	of	$25	million	Canadian	dollars,	or $25.2	million	United	States	dollars	based	on	the	May	31,	2008	exchange	rate.	In	addition,	the	Canadian	Credit	Facility	allows	us	to	expand	the	size	of	the	uncommitted facility	to	$50	million	Canadian	dollars	during	the	peak	holiday	season	and	does	not	have	a	fixed	term.	The	Canadian	Credit	Facility	carries	no	termination	date,	but	can be	terminated	by	CIBC	with	advance	notice.	The	Canadian	Credit	Facility	has	a	variable	interest	rate	based	on	the	Canadian	dollar	London	Interbank	Offered	Rate	plus	a margin.

# BIN/ICA	Agreements

In	connection	with	our	acquisition	of	merchant	credit	card	operations	of	banks,	we	have	also	entered	into	sponsorship	or	depository	and	processing	agreements with	certain	of	the	banks.	These	agreements	allow	us	to	use	the	banks'	identification	numbers,	referred	to	as	Bank	Identification	Number	for	Visa	transactions	and Interbank	Card	Association	number	for	MasterCard	transactions,	to	clear	credit	card	transactions	through	Visa	and	MasterCard.	Certain	of	such	agreements	contain financial	covenants,	and	we	were	in	compliance	with	all	such	covenants	as	of	May	31,	2008.

Global	Payments	Asia-Pacific	Limited	("GPAP")	is	the	entity	through	which	we	conduct	our	merchant	acquiring	business	in	the	Asia-Pacific	region.	We	own 56%	of	GPAP	and	HSBC	Asia	owns	the	remaining	44%.	The	GPAP	shareholders	agreement	includes	provisions	pursuant	to	which	HSBC	Asia	may	compel	us	to

purchase,	at	fair	value,	additional	GPAP	shares	from	HSBC	Asia	(the	"Put	Option").	HSBC	Asia	may	exercise	the	Put	Option	on	the	fifth	anniversary	of	the	closing	of the	acquisition	and	on	each	anniversary	thereafter.	By	exercising	the	Put	Option,	HSBC	Asia	can	require	us	to	purchase,	on	an	annual	basis,	up	to	15%	of	the	total	issued shares	of	GPAP.	While	not	redeemable	until	July	2011,	we	estimate	the	maximum	total	redemption	amount	of	the	minority	interest	under	the	Put	Option	would	be	$87.4 million,	as	of	May	31,	2008.

# NOTE	14—SUPPLEMENTAL	CASH	FLOW	INFORMATION

Supplemental	cash	flow	disclosures	and	non-cash	investing	and	financing	activities	for	the	years	ended	May	31,	2008,	2007	and	2006	are	as	follows:

|  | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
|  |  | (in\tthousands) |  |
| Supplemental\tcash\tflow\tinformation: |  |  |  |
| Income\ttaxes\tpaid,\tnet\tof\trefunds | $72,827 | $75,207 | $ 44,522 |
| Interest\tpaid | 6,339 | 6,686 | 3,858 |

# NOTE	15—QUARTERLY	CONSOLIDATED	FINANCIAL	INFORMATION	(UNAUDITED)

Summarized	quarterly	results	for	the	years	ended	May	31,	2008	and	2007	are	as	follows:

|  | August	31 | November	30 | February	29 | May	31 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | (in\tthousands,\texcept\tper\tshare\tdata) | (in\tthousands,\texcept\tper\tshare\tdata) |  |
| 2008: |  |  |  |  |
| Revenues | $310,980 | $308,776 | $310,641 | $343,832 |
| Operating\tincome | 66,232 | 58,431 | 59,911 | 66,785 |
| Net\tincome | 43,575 | 38,313 | 40,055 | 40,811 |
| Basic\tearnings\tper\tshare | 0.54 | 0.48 | 0.51 | 0.51 |
| Diluted\tearnings\tper\tshare | 0.53 | 0.48 | 0.50 | 0.50 |

|  | August	31 | November	30 | February	28 | May	31 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | (in\tthousands,\texcept\tper\tshare\tdata) | (in\tthousands,\texcept\tper\tshare\tdata) |  |
| 2007: |  |  |  |  |
| Revenues | $260,308 | $260,697 | $260,418 | $280,100 |
| Operating\tincome | 63,527 | 52,303 | 51,193 | 51,066 |
| Net\tincome | 41,509 | 34,002 | 34,296 | 33,178 |
| Basic\tearnings\tper\tshare | 0.52 | 0.42 | 0.43 | 0.41 |
| Diluted\tearnings\tper\tshare | 0.51 | 0.42 | 0.42 | 0.40 |

# NOTE	16—	SUBSEQUENT	EVENTS

On	June	17,	2008,	we	entered	into	a	purchase	agreement	with	HSBC	Bank	plc,	or	HSBC	UK,	to	obtain	an	interest	in	a	newly	formed	limited	partnership	that	will provide	payment	processing	services	to	merchants	in	the	United	Kingdom	and	Internet	merchants	globally.	The	new	partnership	will	operate	under	the	name	HSBC Merchant	Services.

On	June	30,	2008,	we	completed	the	transaction	and	paid	HSBC	UK	$439	million	in	cash	to	acquire	a	51%	majority	ownership	in	the	partnership.	We	will	manage the	day-to-day	operations	of	the	partnership,	will	control	all	major	decisions	and,	accordingly,	will	consolidate	the	partnership's	financial	results	for	accounting	purposes effective	with	the	closing	date.	HSBC	UK	retained	ownership	of	the	remaining	49%	and	contributed	its	existing

merchant	acquiring	business	in	the	United	Kingdom	to	the	partnership.	In	addition,	HSBC	UK	entered	into	a	ten-year	marketing	alliance	with	the	partnership	in	which HSBC	UK	will	refer	customers	to	the	partnership	for	payment	processing	services	in	the	United	Kingdom.	On	June	23,	2008,	we	entered	into	a	new	five	year,	$200 million	term	loan	to	fund	a	portion	of	the	acquisition.	We	funded	the	remaining	purchase	price	with	excess	cash	and	our	existing	credit	facilities.

The	term	loan	bears	interest,	at	our	election,	at	the	prime	rate	or	London	Interbank	Offered	Rate	plus	a	margin	based	on	our	leverage	position.	As	of	July	1,	2008, the	interest	rate	on	the	term	loan	was	3.605%.	The	term	loan	calls	for	quarterly	principal	payments	of	$5	million	beginning	with	the	quarter	ending	August	31,	2008	and increasing	to	$10	million	beginning	with	the	quarter	ending	August	31,	2010	and	$15	million	beginning	with	the	quarter	ending	August	31,	2011.

The	partnership	agreement	includes	provisions	pursuant	to	which	HSBC	UK	may	compel	us	to	purchase,	at	fair	value,	additional	membership	units	from	HSBC UK	(the	"Put	Option").	HSBC	UK	may	exercise	the	Put	Option	on	the	fifth	anniversary	of	the	closing	of	the	acquisition	and	on	each	anniversary	thereafter.	By exercising	the	Put	Option,	HSBC	UK	can	require	us	to	purchase,	on	an	annual	basis,	up	to	15%	of	the	total	membership	units.	Additionally,	on	the	tenth	anniversary	of closing	and	each	tenth	anniversary	thereafter,	HSBC	UK	may	compel	us	to	purchase	all	of	their	membership	units	at	fair	value.	While	not	redeemable	until	June	2013, we	estimate	the	maximum	total	redemption	amount	of	the	minority	interest	under	the	Put	Option	would	be	$421.4	million,	as	of	May	31,	2008.

The	purpose	of	this	acquisition	was	to	establish	a	presence	in	the	United	Kingdom.	The	key	factors	that	contributed	to	the	decision	to	make	this	acquisition include	historical	and	prospective	financial	statement	analysis	and	HSBC	UK's	market	share	and	retail	presence	in	the	United	Kingdom.	The	purchase	price	was determined	by	analyzing	the	historical	and	prospective	financial	statements	and	applying	relevant	purchase	price	multiples.

The	purchase	price	totaled	$441.1	million,	consisting	of	$438.6	million	cash	consideration	plus	$2.5	million	of	direct	out	of	pocket	costs.	The	acquisition	has	been recorded	using	the	purchase	method	of	accounting,	and,	accordingly,	the	purchase	price	has	been	allocated	to	the	assets	acquired	and	liabilities	assumed	based	on	their estimated	fair	values	at	the	date	of	acquisition.	The	following	table	summarizes	the	preliminary	purchase	price	allocation:

|  | Total |
| :--- | :--- |
| Goodwill\nCustomer-related\tintangible\tassets\nContract-based\tintangible\tassets\nTrademark\nProperty\tand\tequipment\nOther\tcurrent\tassets | $294,741\n\t 116,920\n13,437\n2,204\n26,955\n100 |
| Total\tassets\tacquired | \t 454,357 |
| Minority\tinterest\tin\tequity\tof\tsubsidiary\t(at\thistorical\tcost) | (13,257) |
| Net\tassets\tacquired | $441,100 |

Due	to	the	recent	timing	of	the	transaction,	the	allocation	of	the	purchase	price	is	preliminary.

All	of	the	goodwill	associated	with	the	acquisition	is	expected	to	be	deductible	for	tax	purposes.	The	customer-related	intangible	assets	have	amortization	periods of	up	to	13	years.	The	contract-based	intangible	assets	have	amortization	periods	of	7	years.	The	trademark	has	an	amortization	period	of	5	years.

# SCHEDULE	II

# Valuation	&	Qualifying	Accounts

| Column	A | Column	B | Column	C | Column	C | Column	D | Column	E |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | 1 | 2 |  |  |
|  | Balance\tat | Charged\tto |  | Uncollectible | Balance\tat |
| Description | Beginning\nof\tYear | Costs\tand\nExpenses | Acquired\nBalances | Accounts\nWrite-Off | End\tof\nYear |
|  |  |  | (in\tthousands) |  |  |
| Allowance\tfor\tdoubtful\taccounts |  |  |  |  |  |
| May\t31,\t2006 | $366 | $751 | — | $497 | $620 |
| May\t31,\t2007 | 620 | 731 | — | 900 | 451 |
| May\t31,\t2008 | 451 | 1,396 | — | 1,358 | 489 |
| Reserve\tfor\toperating\tlosses—Merchant\tcard\tprocessing\t(1) |  |  |  |  |  |
| May\t31,\t2006 | $3,633 | $2,726 | — | $3,298 | $3,061 |
| May\t31,\t2007 | 3,061 | 3,061 | — | 3,346 | 2,776 |
| May\t31,\t2008 | 2,776 | 5,749 | — | 5,150 | 3,375 |
| Reserve\tfor\tsales\tallowances—Merchant\tcard\tprocessing\t(1) |  |  |  |  |  |
| May\t31,\t2006 | $569 | $2,755 | — | $3,066 | $258 |
| May\t31,\t2007 | 258 | 3,923 | — | 3,853 | 328 |
| May\t31,\t2008 | 328 | 4,248 | — | 4,087 | 489 |
| Reserve\tfor\toperating\tlosses—Check\tguarantee\tprocessing |  |  |  |  |  |
| May\t31,\t2006 | $3,989 | $17,895 | — | $16,108 | $5,776 |
| May\t31,\t2007 | 5,776 | 18,160 | — | 18,797 | 5,139 |
| May\t31,\t2008 | 5,139 | 23,906 | — | 22,980 | 6,065 |

(1) Included	in	settlement	processing	obligations

# ITEM	9—CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# ITEM	9A—CONTROLS	AND	PROCEDURES

# Evaluation	of	Disclosure	Controls	and	Procedures

Our	management,	including	our	principal	executive	officer	and	principal	financial	officer,	concluded	an	evaluation	of	the	effectiveness	of	our	disclosure	controls and	procedures	as	of	May	31,	2008.	Our	evaluation	tested	controls	and	other	procedures	designed	to	ensure	that	information	required	to	be	disclosed	by	us	in	the	reports that	we	file	or	submit	under	the	Securities	and	Exchange	Act	of	1934,	as	amended,	or	the	Exchange	Act,	is	recorded,	processed,	summarized	and	reported	within	the	time periods	specified	in	the	SEC's	rules	and	forms.	Based	on	our	evaluation,	as	of	May	31,	2008,	our	management,	including	our	principal	executive	officer	and	principal financial	officer,	concluded	that	our	disclosure	controls	and	procedures	were	effective.

There	were	no	significant	changes	in	our	internal	controls	or	in	other	factors	that	occurred	during	our	last	fiscal	quarter	that	has	materially	affected,	or	is reasonably	likely	to	materially	affect,	our	internal	controls	over	financial	reporting.

# Management	Report	on	Internal	Control	over	Financial	Reporting

Our	management	team	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	as	defined	in	Rules	13a-15(f)	and	15d- 15(f)	under	the	Exchange	Act.	Our	management	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	May	31,	2008.	In	making	this assessment,	our	management	used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO)	in	Internal	Control- Integrated	Framework.	As	of	May	31,	2008,	management	believes	that	its	internal	control	over	financial	reporting	is	effective	based	on	those	criteria.	Our	independent registered	public	accounting	firm	has	issued	an	audit	report	on	our	internal	control	over	financial	reporting,	which	is	included	in	this	annual	report.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	all	misstatements.	Projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.	Internal	control	over	financial	reporting	cannot	provide	absolute	assurance	of	achieving	financial	reporting	objectives	because	of its	inherent	limitations.	Internal	control	over	financial	reporting	is	a	process	that	involves	human	diligence	and	compliance	and	is	subject	to	lapses	in	judgment	and breakdowns	resulting	from	human	failures.	Internal	control	over	financial	reporting	also	can	be	circumvented	by	collusion	or	improper	management	override.	Due	to such	limitations,	there	is	a	risk	that	material	misstatements	may	not	be	prevented	or	detected	on	a	timely	basis	by	internal	control	over	financial	reporting.	However, these	inherent	limitations	are	known	features	of	the	financial	reporting	process.	Therefore,	it	is	possible	to	design	into	the	process	safeguards	to	reduce,	though	not eliminate,	such	risk.

# Changes	in	Internal	Control	over	Financial	Reporting

There	were	no	changes	in	our	internal	control	over	financial	reporting	or	in	other	factors	that	occurred	during	the	quarter	ended	May	31,	2008	that	have	materially affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# ITEM	9B—OTHER	INFORMATION

# PART	III

# ITEM	10—DIRECTORS,	EXECUTIVE	OFFICERS	OF	THE	REGISTRANT	AND	CORPORATE	GOVERNANCE

We	incorporate	by	reference	in	this	Item	10	information	about	our	directors	and	our	corporate	governance	contained	under	the	headings	"Certain	Information Concerning	the	Nominees	and	Directors,"	"Other	Information	About	the	Board	and	its	Committees"	and	information	about	compliance	with	Section	16(a)	of	the Securities	and	Exchange	Act	of	1934	by	our	directors	and	executive	officers	under	the	heading	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	from	our proxy	statement	to	be	delivered	in	connection	with	our	2008	Annual	Meeting	of	Shareholders	to	be	held	on	September	26,	2008.

Set	forth	below	is	information	relating	to	our	executive	officers.	There	is	no	family	relationship	between	any	of	our	executive	officers	or	directors	and	there	are no	arrangements	or	understandings	between	any	of	our	executive	officers	or	directors	and	any	other	person	pursuant	to	which	any	of	them	was	elected	an	officer	or director,	other	than	arrangements	or	understandings	with	our	directors	or	officers	acting	solely	in	their	capacities	as	such.	Our	executive	officers	serve	at	the	pleasure	of our	Board	of	Directors.

| Name | Age | Current	Position(s) | Other	Principal	Business	Affiliations |
| :--- | :--- | :--- | :--- |
| Paul\tR.\tGarcia | 56 | Chairman\tof\tthe\tBoard\tof | Chairman\tof\tthe\tBoard\tof\tDirectors\t(since\tOctober\t2002);\tPresident\tand\tChief\tExecutive |
|  |  | Directors,\tPresident\tand\tChief Officer\tof\tGlobal\tPayments\t(since\tSeptember\t2000);\tChief\tExecutive\tOfficer\tof\tNDC | Directors,\tPresident\tand\tChief Officer\tof\tGlobal\tPayments\t(since\tSeptember\t2000);\tChief\tExecutive\tOfficer\tof\tNDC |
|  |  | Executive\tOfficer | eCommerce\t(July\t1999–January\t2001);\tPresident\tand\tChief\tExecutive\tOfficer\tof |
|  |  |  | Productivity\tPoint\tInternational\t(March\t1997–September\t1998);\tGroup\tPresident\tof\tFirst |
|  |  |  | Data\tCard\tServices\t(1995–1997);\tChief\tExecutive\tOfficer\tof\tNational\tBancard |
|  |  |  | Corporation\t(NaBANCO)\t(1989–1995). |
| James\tG.\tKelly | 46 | Senior\tExecutive\tVice | Senior\tExecutive\tVice\tPresident\t(since\tApril\t2004)\tand\tChief\tOperating\tOfficer\t(since |
|  |  | President\tand\tChief\tOperating October\t2005)\tof\tGlobal\tPayments;\tChief\tFinancial\tOfficer\tof\tGlobal\tPayments\t(February | President\tand\tChief\tOperating October\t2005)\tof\tGlobal\tPayments;\tChief\tFinancial\tOfficer\tof\tGlobal\tPayments\t(February |
|  |  | Officer | 2001-October\t2005),\tChief\tFinancial\tOfficer\tof\tNDC\teCommerce\t(April\t2000–January |
|  |  |  | 2001);\tManaging\tDirector,\tAlvarez\t&amp;\tMarsal\t(March\t1996–April\t2000);\tDirector,\tAlvarez |
|  |  |  | &amp;\tMarsal\t(1992–1996)\tand\tAssociate,\tAlvarez\t&amp;\tMarsal\t(1990–1992);\tand\tManager,\tErnst |
|  |  |  | &amp;\tYoung's\tmergers\tand\tacquisitions/audit\tgroups\t(1989–1990). |
| Joseph\tC.\tHyde | 34 | Executive\tVice\tPresident\tand | Executive\tVice\tPresident\tand\tChief\tFinancial\tOfficer\t(since\tOctober\t2005)\tof\tGlobal |
|  |  | Chief\tFinancial\tOfficer | Payments;\tSenior\tVice\tPresident\tof\tFinance\tof\tGlobal\tPayments\t(December\t2001–October |
|  |  |  | 2005);\tVice\tPresident\tof\tFinance\tof\tGlobal\tPayments\t(February\t2001-December\t2001); |
|  |  |  | Vice\tPresident\tof\tFinance\tof\tNDC\teCommerce\t(June\t2000–January\t2001);\tAssociate, |
|  |  |  | Alvarez\t&amp;\tMarsal\t(1998–2000);\tAnalyst,\tThe\tBlackstone\tGroup\t(1996-1998). |
| Martin\tA.\tPicciano | 42 | Senior\tVice | Senior\tVice\tPresident\tof\tAccounting\t(since\tJune\t2004)\tand\tChief\tAccounting\tOfficer |
|  |  | President\tand\tChief | (since\tOctober\t2005)\tof\tGlobal\tPayments;\tVice\tPresident\tand\tController\tof\tGlobal |
|  |  | Accounting\tOfficer | Payments\t(February\t2001-May\t2004);\tAssistant\tController\tof\tNational\tData\tCorporation |

President	of	the	Merchant	Services	Division	(1992–1996);	President	&	CEO	of	JBS,

Inc.	(1981–1992)	(acquired	by	National	Processing	Corporation).

We	have	adopted	a	code	of	ethics	that	applies	to	our	senior	financial	officers.	The	senior	financial	officers	include	our	Chief	Executive	Officer,	Chief	Financial Officer,	Chief	Accounting	Officer,	Controller	or	persons	performing	similar	functions.	The	code	of	ethics	is	available	in	the	investor	information	section	of	our	website at	www.globalpaymentsinc.com,	and	as	indicated	in	the	section	entitled	"Where	To	Find	Additional	Information"	in	Part	I	to	this	Annual	Report	on	Form	10-K.

# ITEM	11—	EXECUTIVE	COMPENSATION

We	incorporate	by	reference	in	this	Item	11	the	information	relating	to	executive	and	director	compensation	contained	under	the	headings	"Other	Information about	the	Board	and	its	Committees,"	"Compensation	and	Other	Benefits"	and	"Report	of	the	Compensation	Committee"	from	our	proxy	statement	to	be	delivered	in connection	with	our	2008	Annual	Meeting	of	Shareholders	to	be	held	on	September	26,	2008.

# ITEM	12—	SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

We	incorporate	by	reference	in	this	Item	12	the	information	relating	to	ownership	of	our	common	stock	by	certain	persons	contained	under	the	headings "Common	Stock	Ownership	of	Management"	and	"Common	Stock	Ownership	by	Certain	Other	Persons"	from	our	proxy	statement	to	be	delivered	in	connection	with our	2008	Annual	Meeting	of	Shareholders	to	be	held	on	September	26,	2008.

We	have	four	compensation	plans	under	which	our	equity	securities	are	authorized	for	issuance.	The	Global	Payments	Inc.	Amended	and	Restated	2000	Long- Term	Incentive	Plan,	Global	Payments	Inc.	Amended	and	Restated	2005	Incentive	Plan,	the	Non-Employee	Director	Stock	Option	Plan,	and	Employee	Stock	Purchase Plan	have	been	approved	by	security	holders.	The	information	in	the	table	below	is	as	of	May	31,	2008.	For	more	information	on	these	plans,	see	Note	9	to	notes	to consolidated	financial	statements.

| Plan	category | Number	of	securities	to<br>be	issued	upon<br>exercise<br>of	outstanding<br>options,	warrants	and<br>rights<br>(a) | Weighted-<br>average	exercise<br>price	of	outstanding<br>options,	warrants<br>and	rights<br>(b) | Number	of	securities<br>remaining	available	for<br>future	issuance	under<br>equity	compensation	plans<br>(excluding	securities<br>reflected	in	column	(a))<br>(c) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders: | 4,536,468 | $27 | 7,178,782\t(1) |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity |  |  |  |
| holders: | — | — | — |
| Total | 4,536,468 | $27 | 7,178,782\t(1) |

(1) Also	includes	shares	of	common	stock	available	for	issuance	other	than	upon	the	exercise	of	an	option,	warrant	or	right	under	the	Global	Payments	Inc.	2000 Long-Term	Incentive	Plan,	as	amended	and	restated,	the	Global	Payments	Inc.	Amended	and	Restated	2005	Incentive	Plan	and	an	Amended	and	Restated	2000 Non-Employee	Director	Stock	Option	Plan.

# ITEM	13—CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

We	incorporate	by	reference	in	this	Item	13	the	information	regarding	certain	relationships	and	related	transactions	between	us	and	some	of	our	affiliates	and	the independence	of	our	Board	of	Directors	contained	under	the	headings	"Certain	Relationships	and	Related	Transactions"	and	"Other	Information	about	the	Board	and	its Committees—Director	Independence"	from	our	proxy	statement	to	be	delivered	in	connection	with	our	2008	Annual	Meeting	of	Shareholders	to	be	held	on September	26,	2008.

# ITEM	14—PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

We	incorporate	by	reference	in	this	Item	14	the	information	regarding	principal	accounting	fees	and	services	contained	under	the	heading	"Auditor	Information" from	our	proxy	statement	to	be	delivered	in	connection	with	our	2008	Annual	Meeting	of	Shareholders	to	be	held	on	September	26,	2008.

# PART	IV

# ITEM	15—EXHIBITS,	FINANCIAL	STATEMENT	SCHEDULES

# (a)	1.				Consolidated	Financial	Statements

Our	consolidated	financial	statements	listed	below	are	set	forth	in	"Item	8-Financial	Statements	and	Supplementary	Data"	of	this	report:

All	other	schedules	to	our	consolidated	financial	statements	have	been	omitted	because	they	are	not	required	under	the	related	instruction	or	are	inapplicable,	or because	we	have	included	the	required	information	in	our	consolidated	financial	statements	or	related	notes.

The	following	exhibits	either	(i)	are	filed	with	this	report	or	(ii)	have	previously	been	filed	with	the	SEC	and	are	incorporated	in	this	Item	15	by	reference	to	those prior	filings.

10.17* Form	of	Performance	Unit	Award	(Non-U.S.	Officers)	pursuant	to	the	Global	Payments	Inc.	Amended	and	Restated	2005	Incentive	Plan	filed	as Exhibit	10.4	to	the	Registrant's	Quarterly	Report	on	Form	10-Q,	dated	November	30,	2006,	File	No.	001-16111	and	incorporated	herein	by reference.

* Compensatory	management	agreement

** Filed	with	this	report

See	the	"Index	to	Exhibits"	on	page	96.

# (c)				Financial	Statement	Schedules

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	Global	Payments	Inc.	has	duly	caused	this	report	to	be	signed	on	its behalf	by	the	undersigned,	thereunto	duly	authorized,	on	July	30,	2008.

# Paul	R.	Garcia

Chairman	of	the	Board	of	Directors,	President	and

# Chief	Executive	Officer

(Principal	Executive	Officer)

# Joseph	C.	Hyde

Executive	Vice	President	and	Chief	Financial	Officer

(Principal	Financial	Officer)

# Martin	A.	Picciano

Senior	Vice	President	and	Chief	Accounting	Officer

(Principal	Accounting	Officer)

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	a	majority	of	the	Board	of	Directors	of	the	Registrant on	the	dates	indicated.

| Signature |  | Title | Date |
| :--- | :--- | :--- | :--- |
| /s/\t\t\t\tPAUL\tR.\tGARCIA | Chairman\tof\tthe\tBoard |  | July\t30,\t2008 |
| Paul\tR.\tGarcia |  |  |  |
| /s/\t\t\t\tWILLIAM\tI\tJACOBS | Lead\tDirector |  | July\t30,\t2008 |
| William\tI\tJacobs |  |  |  |
| /s/\t\t\t\tEDWIN\tH.\tBURBA,\tJR. | Director |  | July\t30,\t2008 |
| Edwin\tH.\tBurba,\tJr. |  |  |  |
| /s/\t\t\t\tALEX\tW.\t(PETE)\tHART | Director |  | July\t30,\t2008 |
| Alex\tW.\t(Pete)\tHart |  |  |  |
| /s/\t\t\t\tRAYMOND\tL.\tKILLIAN | Director |  | July\t30,\t2008 |
| Raymond\tL.\tKillian |  |  |  |
| /s/\t\t\t\tRUTH\tANN\tMARSHALL | Director |  | July\t30,\t2008 |
| Ruth\tAnn\tMarshall |  |  |  |
| /s/\t\t\t\tALAN\tM.\tSILBERSTEIN | Director |  | July\t30,\t2008 |
| Alan\tM.\tSilberstein |  |  |  |
| /s/\t\t\t\tMICHAEL\tW.\tTRAPP | Director |  | July\t30,\t2008 |

# INDEX	TO	EXHIBITS



Question: what portion of the net assets acquired is related to goodwill?
Calculation: goodwill = 13536
total_assets = 16594
percent_goodwill = goodwill / total_assets
answer = percent_goodwill * 100
Answer: 81.6%