Visa 2009 Annual Report Download - page 57

Table of Contents
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These assets are included in cash equivalents, short-term
available-for-sale investments and long-term available-for-sale investments. Investments in fixed rate instruments carry a degree of interest rate risk. The fair
value of fixed rate securities may be adversely impacted due to a rise in interest rates. Additionally, a falling rate environment creates reinvestment risk
because as securities mature the proceeds are reinvested at a lower rate, generating less interest income. Historically, we have been able to hold investments
until maturity. Operating results or cash flows have not been, and are not expected to be, materially impacted by a sudden change in market interest rates. The
fair value balances of our fixed-rate investment securities in fiscal 2009 and 2008 were $176 million and $403 million, respectively.
A hypothetical 100 basis point increase or decrease in interest rates would have impacted the fair value of our investment portfolio by approximately $3
million at September 30, 2009.
The fair value balances of our adjustable-rate debt securities were $34 million and $103 million at September 30, 2009 and 2008, respectively.
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, 2009.
Visa Europe Put Option
We have a liability related to the put option with Visa Europe which is recorded at fair market value at September 30, 2009. 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, 2009, 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 1.0x in the assumed P/E differential would have resulted in an increase of approximately $71 million in the value of the put option. See Liquidity
and Capital Resources and Critical Accounting Estimates above.
Pension Plan Assets Risk
Our total defined benefit pension plan assets were $703 million and $624 million at September 30, 2009 and 2008, respectively. Although these assets
are not included in our financial statements, a material adverse decline in the value of pension plan assets could result in increases to our pension liability and
a reduction to stockholders' equity due to an increase in the underfunded status of the plan, increases in pension expense due to a decline in the expected rate
of return on plan assets, and increases in required funding. We will continue to monitor the performance of pension plan assets and market conditions as we
evaluate the amount of our contribution to the plan for fiscal 2010, which we expect to make in September 2010.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are included in Item 7—Management's Discussion and Analysis of Financial Condition and
Results of Operations of this report.
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