Visa 2008 Annual Report Download - page 80

Table of Contents
of losses in certain of its holdings in debt securities of Lehman Brothers, who on September 15, 2008 filed for bankruptcy. The fund also announced that it
would liquidate its assets and distribute funds to investors on a pro-rata basis in proportion to the number of shares held by each investor. We understand that
the fund issuer and financial markets are working on a number of alternatives in order for shareholders to recover their investment.
The investment in the fund was originally recorded as a cash equivalent on our consolidated balance sheet. At September 30, 2008, we consider our
shares in this fund to represent an equity investment for which a market price is not readily determinable. Therefore, the investment is accounted for under the
cost method of accounting and classified as an other current asset on our consolidated balance sheet. Upon reclassification to other current assets, we recorded
the investment at fair value with the resulting loss recorded as investment income, net. We estimated the fair value of this investment by discounting the
fund's underlying holdings of securities based upon an estimate of risk inherent to those holdings. Using this method, we recorded a write-down of
approximately $30 million in our fourth fiscal quarter which was recorded in investment income, net on our consolidated statements of operations. This write-
down reflects a per share price of approximately $0.97 at September 30, 2008. In October 2008, an estimated share price of $0.97 for the fund was reported by
the fund manager. On October 31, 2008 we received an initial distribution of $499 million, or 52%, of the total $953 million investment recorded at
September 30, 2008. Based upon the fund's underlying holdings of securities, it is expected that we will receive the remaining liquidation proceeds over the
next 12 months. However, it is not possible to predict the amount or timing of these distributions with certainty.
We expect that the balances we held in our other money market funds as of September 19, 2008 will be covered by the Temporary Guarantee Program
for Money Market Funds announced by the United States Treasury on September 29, 2008.
The liquidity of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact liquidity include changes to
credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral
value, discount rates, and ongoing strength and quality of credit markets. We will continue to review our portfolio in light of evolving market and economic
conditions. However, if current market conditions deteriorate further, or the anticipated recovery in market values does not occur, the liquidity of our
investment portfolio may be impacted.
Recent U.S. sub-prime mortgage defaults have had a significant impact across various sectors of the financial markets, causing global credit and
liquidity issues. If the global credit market continues to deteriorate, our investment portfolio may be impacted and we could determine some of our
investments are impaired, which could adversely impact our financial results. We have policies and procedures that limit the amount of credit exposure to any
one financial institution or type of investment instrument.
A portion of the proceeds from our IPO are held in an escrow account for use in the payment of covered litigation matters. See Note 5—Retrospective
Responsibility Plan to our consolidated financial statements included elsewhere in this report. The balance in this account at September 30, 2008 was $1,928
million and is reflected as restricted cash on our consolidated balance sheet ($1,298 million in current assets and $630 million in long-term assets). As these
funds are restricted for use solely for the purpose of making payments related to covered litigation matters, we have not included them as part of our liquid
assets. However, they should be viewed as a source of cash for purposes of making payments related to settlement of or judgment in covered litigation
matters, as described below under "Uses of Liquidity."
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