Visa 2012 Annual Report Download - page 91

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
(i) actual return on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns on
various asset classes; and (iv) current and prospective capital market conditions and economic forecasts.
The assumed annual rate of future increases in health benefits for the other postretirement benefits plan is 7.5% for fiscal
2013 . The rate is assumed to decrease to 5% by 2018 and remain at that level thereafter. These trend rates reflect management’s
expectations of future rates. Increasing or decreasing the healthcare cost trend by 1%
would change the postretirement plan benefit
obligation by less than $1 million .
Pension Plan Assets
Plan assets are managed with a long-term perspective to ensure that there is an adequate level of assets to support benefit
payments to participants over the life of the pension plan. Plan assets are managed by external investment managers. Investment
manager performance is measured against benchmarks for each asset class on a quarterly basis. An independent consultant
assists management with investment manager selections and performance evaluations.
Plan assets are broadly diversified to maintain a prudent level of risk and to provide adequate liquidity for benefit payments.
The Company generally evaluates and rebalances the plan assets, as appropriate, to ensure that allocations are consistent with
target allocation ranges. The current target allocation for plan assets is as follows: equity securities of 50% to 80% , fixed income
securities of 25% to 35% and other, primarily consisting of cash to meet near term expected benefit payments and expenses, of up
to 7% . At September 30, 2012 , plan asset allocations for the above categories were 65% , 27% and 8% respectively, which were
within target allocation ranges with the exception of the other category. Pension plan assets in the other category were temporarily
above the Company's target allocation due to an employer contribution made at the end of the plan year. The amount was
subsequently reinvested in line with target asset allocations.
The following table sets forth by level, within the fair value hierarchy, the plan’s investments at fair value as of September 30,
2012 and 2011 , including the impact of unsettled transactions:
Level 1 assets. C ash equivalents (money market funds) and equity securities are classified as Level 1 within the fair value
hierarchy, as fair value is based on quoted prices in active markets.
Level 2 assets. Collective investment funds are unregistered investment vehicles that commingle the assets of multiple
fiduciary clients, such as pension and other employee benefits plans, to invest in portfolios of stocks, bonds, or other securities.
Although the single collective investment fund held by the plan is ultimately invested in the common stocks of companies in the
S&P 500 index, its own unit value is not directly observable, and it is therefore classified as Level 2. The fair values of government-
sponsored and corporate debt securities are based on quoted prices in active markets for similar assets as provided by third-party
pricing vendors. This pricing data is reviewed internally for reasonableness through comparisons with benchmark quotes from
independent third-party sources. Based on this review, the valuation is confirmed or revised accordingly.
88
Fair Value Measurements at September 30
Level 1
Level 2 Level 3 Total
2012 2011 2012 2011 2012 2011 2012 2011
(in millions)
Cash equivalents
$
79
$
55
$
79
$
55
Collective investment funds
$
391
$
289
391
289
Corporate debt securities
115
122
115
122
Debt securities of U.S. Treasury and federal agencies
121
104
121
104
Asset-backed securities
$
25
$
33
25
33
Equity securities
242
180
242
180
Total
$
321
$
235
$
627
$
515
$
25
$
33
$
973
$
783