Visa 2008 Annual Report Download - page 95

Table of Contents
The fair value balances of our fixed-rate investment securities at September 30, 2008 include:
September 30,
2008
Visa Inc.
2007
Visa U.S.A.
(in millions, except
percentages)
U.S. government-sponsored entities 391 1,274
Canadian government-sponsored entities 7 —
Tax-exempt municipal bonds 5 9
Total $ 403 $ 1,283
Percentage of total assets 1% 29%
A hypothetical 100 basis point increase or decrease in interest rates would have impacted the fair value of our investment portfolio by approximately $6
million or $4 million, respectively, at September 30, 2008. A hypothetical 100 basis point increase or decrease in interest rates would have impacted the fair
value of the Visa U.S.A.'s investment portfolio by approximately $7 million or $2 million, respectively, at September 30, 2007.
The fair value balances of our adjustable-rate debt securities were $103 million and $152 million at September 30, 2008 and 2007, respectively.
We have a credit facility to provide liquidity in the event of settlement failures by our customers and other operational needs. This credit facility has
variable rates which are applied to borrowings based on terms and conditions set forth in the agreement. There was no amount outstanding at September 30,
2008 under the credit facility.
We have fixed rate debt which is subject to interest rate risk. A hypothetical 100 basis point increase or decrease in rates would have impacted the fair
value of these notes by approximately $2 million at September 30, 2008.
Equity Price Risk
We own equity securities which are selected to offset obligations in connection with our long-term incentive and deferred compensation plans. Equity
securities primarily consist of mutual fund investments related to various employee compensation plans. For these plans, employees bear the risk of market
fluctuations. Realized gains and losses or other-than-temporary impairments experienced on these equity investments are recorded in investment income, net
on our consolidated statements of operations, and are offset by increases or reductions in personnel expense, respectively. The effect of a hypothetical 10%
change in market value would have increased or decreased unrealized losses and personnel expense, respectively, by $9 million and $5 million for fiscal 2008
and fiscal 2007, respectively.
We have a liability related to the put-call option with Visa Europe which is recorded at fair market value at September 30, 2008. We are required to
record any change in the fair value of the put option on a quarterly basis. In the determination of the fair value of the put option at September 30, 2008, we
have assumed a 40% probability of exercise by Visa Europe at some point in the future and a P/E differential, at the time of exercise, of approximately 5.3x.
The use of a probability of exercise 5% higher than our estimate would have resulted in an increase of approximately $44 million in the value of the put
option. An increase of one in the assumed P/E differential would have resulted in an increase of approximately $71 million in the value of the put option.
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