Visa 2007 Annual Report Download - page 123

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4—Inovant, Inc. and Inovant LLC
On September 30, 2005, Inovant, Inc. sold a 10% interest in Inovant LLC to Visa Europe and a 6% interest to Visa International and its CEMEA region
at a price equivalent to the founders' cost, which was below the book value of underlying equity in fiscal 2005. Inovant, Inc.'s ownership interest in Inovant
LLC, previously 85%, was reduced to 69%.
Inovant LLC's net equity at the time of sale of these minority interests was $97.8 million; the carrying value of the 16% minority interest sold was $15.6
million. Cash contributions by new minority owners totaled $2.4 million. Cash contributions were set below book value to compensate new minority owners
and settle a dispute with them concerning the earnings of and distributions from Inovant LLC since January 1, 2003. In consideration of their mutual release
from claims with respect to these matters, Visa U.S.A. also made payments totaling $3.9 million to Visa Europe and Visa International. These payments and
the difference of $13.2 million between cash contributions and the book value of minority interests sold were reflected in the litigation provision on the
Company's consolidated statements of operations in fiscal 2005.
Note 5—Visa International, Visa Canada, Visa Europe
Visa International, Visa Canada and Visa Europe are all separately incorporated entities. Historically, the Company paid expenses to Visa International
and earned revenues from Visa International, Visa Canada and Visa Europe.
Visa U.S.A. has the rights to various designs and marks by virtue of its membership in Visa International.
The Company paid fees to Visa International, based on payments volume, exclusive of PIN-based debit volume, for services primarily related to global
brand management, global product enhancements and global electronic payment systems. Voting rights in Visa International were based on annual payment
service volume. Dividend and dissolution rights were based on cumulative service fees paid to Visa International. Visa U.S.A. members accounted for
approximately 33.1%, 35.5% and 35.9% of Visa International's annual volume during fiscal 2007, fiscal 2006 and fiscal 2005, respectively. Under Visa
International bylaws at September 30, 2007, no more than eight directors from the Visa U.S.A. membership could be elected or appointed to the twenty-three
member Visa International Board of Directors.
A summary of the major expenses paid to Visa International is as follows:
For the Years Ended September 30,
2007 2006 2005
(in thousands)
Visa International fees $ 172,930 $ 159,264 $ 168,455
Network and EDP services 2,839 2,645 2,392
Total $ 175,769 $ 161,909 $ 170,847
Visa U.S.A. operates a proprietary network, VisaNet, that links issuers and acquirers for transaction processing services. Processing services are
provided through Visa's majority-owned subsidiary, Inovant LLC.
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