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Visa 10-K 2008

Documents found in this filing:

Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)


Delaware		26-0267673
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

P.O. Box 8999 San Francisco, California		94128-8999
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (415) 932-2100

Securities registered pursuant to Section 12(b) of the Act:


Title of each Class		Name of each exchange on which registered
Class A common stock, par value $.0001 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The aggregate market value of the registrant’s class A common stock, par value $.0001 per share, held by non-affiliates (using the New York Stock Exchange closing price as of March 31, 2008, the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $27.9 billion. There is currently no established public trading market for the registrant’s class B common stock, par value $.0001 per share, or the registrant’s class C common stock, par value $.0001 per share.

As of November 12, 2008, there were 448,979,024 shares outstanding of the registrant’s class A common stock, par value $.0001 per share, 245,513,385 shares outstanding of the registrant’s class B common stock, par value $.0001 per share, and 151,596,308 shares outstanding of the registrant’s class C common stock, par value $.0001 per share.

Documents incorporated by reference: NONE

TABLE OF CONTENTS


		Page
PART I
Item 1	Business	4
Item 1A	Risk Factors	22
Item 1B	Unresolved Staff Comments	45
Item 2	Properties	45
Item 3	Legal Proceedings	45
Item 4	Submission of Matters to a Vote of Security Holders	45

PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
Item 6	Selected Financial Data	48
Item 7	Management’s Discussion and Analysis of Historical and Pro Forma Financial Condition and Results of Operations	51
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	95
Item 8	Financial Statements and Supplementary Data	96
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	197
Item 9A	Controls and Procedures	197
Item 9B	Other Information	198

PART III
Item 10	Directors, Executive Officers and Corporate Governance	201
Item 11	Executive Compensation	209
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	234
Item 13	Certain Relationships and Related Transactions, and Director Independence	237
Item 14	Principal Accountant Fees and Services	242

PART IV
Item 15	Exhibits and Financial Statement Schedules	244

Unless the context requires otherwise, reference to “Company,” “Visa,” “we,” “us” or “our” refers to Visa Inc. and its subsidiaries.

The registered trademarks of Visa Inc. and its subsidiaries include: “All It Takes;” “Bands Design—Blue, White & Gold;” “Dove” Design; “Interlink;” “Life Takes Visa;” “PLUS;” “Verified by Visa;” “Visa;” “Visa Classic;” “Visa Corporate;” “Porque La Vida es Ahora;” “The World’s Best Way to Pay;” “Visa Electron;” “Visa Europe;” “Visa Fleet;” “Visa Infinite;” “Visa Mobile;” “VisaNet;” “Visa Platinum;” “Visa Purchasing;” “Visa Resolve OnLine;” “Visa ReadyLink;” “Visa Signature;” “Visa Signature Business;” “Visa Vale;” and “Winged V” Design. Other trademarks used in this report are the property of their respective owners.

Forward-Looking Statements

This Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to:

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statements regarding the expected growth of the electronic payments industry;

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expectations as to the benefits of our reorganization and our initial public offering;

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projections as to the future trends in the electronic payments industry, as well as our corresponding business strategies and the expected benefits derived from such strategies;

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statements regarding our relationships with customers and expectations as to the future development of these relationships;

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statements regarding the capabilities and advantages of our processing platform, VisaNet;

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statements as to the market opportunities for certain product segments and in certain geographies, as well as our ability to take advantage of these opportunities;

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statements as to future foreign and domestic regulatory changes and their impact on our business;

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statements as to the impact of litigation and the operation of our retrospective responsibility plan; and

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statements regarding the capacity of our facilities.

In addition, statements that contain the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will” and similar expressions are intended to identify forward-looking statements. In addition, any underlying assumptions are forward-looking statements. By their nature, forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from these forward-looking statements as a result of a variety of factors, including all the risks discussed in Item 1A—“Risk Factors” and elsewhere in this report. You are cautioned not to place undue reliance on such statements, which speak only at the date of this report. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

PART I

ITEM 1.

Business

Overview

Visa operates the world’s largest retail electronic payments network and manages the world’s most recognized global financial services brand. We have more branded credit and debit cards in circulation, more transactions and greater total volume than any of our competitors. We facilitate global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. We provide financial institutions, our primary customers, with product platforms encompassing consumer credit, debit, prepaid and commercial payments. VisaNet, our secure, centralized, global processing platform, enables us to provide financial institutions and merchants with a wide range of product platforms, transaction processing and related value-added services. Based on the size of our network, the strength of the Visa brand and the breadth and depth of our products and services, we believe we are the leading electronic payments company in the world.

Our business primarily consists of the following:

•

we own a family of well known, widely accepted payment brands, including Visa, Visa Electron, PLUS and Interlink, which we license to our customers for use in their payment programs;

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we manage and promote our brands for the benefit of our customers through advertising, promotional and sponsorship initiatives and by encouraging card usage and merchant acceptance;

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we offer a wide range of branded payments product platforms, which our customers use to develop and offer credit, debit, prepaid and cash access programs for cardholders (individuals, businesses and government entities);

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we provide transaction processing services (primarily authorization, clearing and settlement) to our customers through VisaNet, our secure, centralized, global processing platform;

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we provide various other value-added services to our customers, including risk management, debit issuer processing, loyalty services, dispute management and value-added information services;

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we develop new products and services to enable our customers to offer efficient and effective payment methods to their cardholders and merchants; and

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we adopt and enforce a common set of rules adhered to by our customers to ensure the efficient and secure functioning of our payments network and the maintenance and promotion of our brands.

We derive revenues primarily from fees paid by our customers based on payments volume, transactions that we process and certain other related services that we provide. Payments volume is the total monetary value of transactions for goods and services purchased with our cards, as reported by our customers. Cash volume generally includes cash access transactions, balance transfers and convenience check transactions associated with our products. Total volume, which we consider to be an important measure of the scale of our business, is the sum of payments volume and cash volume. The table below shows our product performance for the twelve months ended June 30, 2008, according to data reported to us by our customers:

Visa Inc. Product Performance

Twelve Months Ended June 30, 2008

All numbers in billions, except as noted


	USA		Rest of World		Visa Inc.
Payments Volume
Consumer credit	$	661	$	802	$	1,463
Consumer debit⁽¹⁾		733		133		866
Commercial and other		217		108		325

Total Payments Volume	$	1,611	$	1,043	$	2,654
Cash volume		406		1,127		1,533

Total Volume⁽²⁾	$	2,017	$	2,170	$	4,187

Total Processed Transactions (in millions)⁽³⁾		30,781		6,175		36,956

(1)	Includes prepaid volume.

(2)

Total volume is the sum of total payments volume and cash volume. Total payments volume is the total monetary value of transactions for goods and services that are purchased. Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks.

(3)	Processed Transactions represent transactions processed through our VisaNet system.

Our Reorganization and Initial Public Offering

Visa Inc. was incorporated as a Delaware stock corporation in May 2007. In October 2007, we undertook a reorganization of the global Visa enterprise. Prior to our reorganization, Visa operated as five corporate entities related by ownership and membership: Visa U.S.A., Visa International (comprising the operating regions of Asia Pacific (AP), Latin America and Caribbean (LAC), and Central and Eastern Europe, Middle East and Africa (CEMEA)), Visa Canada, Visa Europe and Inovant, which operated the VisaNet transaction processing system and other related processing systems. Each of Visa U.S.A., Visa Canada, Visa Europe, Visa AP, Visa LAC and Visa CEMEA operated as a separate geographic region, serving its member financial institutions and administering Visa programs in its respective region. As a result of the reorganization, Visa U.S.A., Visa International, Visa Canada and Inovant became direct or indirect subsidiaries of Visa Inc. Visa Europe did not become a subsidiary of Visa Inc., but rather remained owned by its member financial institutions and entered into a set of contractual arrangements with Visa Inc. in connection with the reorganization.

In March 2008, we completed our initial public offering, or IPO. As a result of our offering, the financial institutions that hold our class B and class C shares represent a minority of the outstanding shareholder interest of Visa Inc. For more information about our capital structure and the voting rights of our class A, class B, and class C common stock, see Item 8—“Financial Statements and Supplementary Data” included elsewhere in this report.

Industry Overview

The Global Payments Industry

We operate in the global payments industry, which is undergoing a major shift from paper-based payments, such as cash and checks, to card-based and other electronic payments. For more than 30 years, Visa has played a central role in driving this migration by providing payment products and services that we believe deliver significant benefits to consumers, businesses, governments and merchants. We believe that consumers are increasingly attracted to the convenience, security, enhanced services and rewards associated with electronic payment forms. We also believe that corporations and governments are shifting to electronic payments to improve efficiency, control and security, and that a growing number of merchants are accepting electronic payments to improve sales and customer convenience.

The global payments industry consists of all forms of payment and value transfer, including:

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paper-based payments—cash, personal checks, money orders, government checks, travelers cheques, official checks and other paper-based means of transferring value;

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card-based payments—credit cards, charge cards, debit cards, deferred debit cards, ATM cards, prepaid cards, private label cards and other types of general-purpose and limited-use cards; and

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other electronic payments—wire transfers, electronic benefits transfers, automated clearing house payments and other forms of electronic payment not typically tied to a payment card or similar access device.

We believe that the shift to electronic payment forms is a worldwide phenomenon; however, in many developing countries, it is at an early stage and will be accelerated by globalization of commerce and increased travel. Recent innovations such as contactless cards and mobile payments are also increasing the attractiveness of electronic payments. We believe these trends create a substantial growth opportunity for the global payments industry.

The most common card-based forms of payment are general-purpose cards, which are payment cards that permit widespread usage. General purpose cards are typically categorized as:

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“pay now” cards, such as debit cards, which enable the cardholder to purchase goods and services by an automatic debit to a checking, demand deposit or other current account;

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“pay later” cards, which typically permit a cardholder to carry a balance in a revolving credit account (a credit card or deferred debit card) or require payment of the full balance within a specified period (a charge card); and

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“pay before” cards, such as prepaid cards, which are prefunded up to a certain monetary value.

The primary global general purpose card brands include Visa, MasterCard, American Express, Discover, JCB and Diners Club. While these brands—including Visa—were historically associated primarily with credit or charge cards in the United States and other major international markets, Visa and others have over time broadened their offerings to include debit, ATM, prepaid and commercial cards.

In addition to general purpose cards, a number of retailers and other entities issue limited-purpose credit, charge and prepaid cards that can be used for payment only at the issuing entity. These cards are generally referred to as private label cards. Private label cards are sometimes issued by a financial institution under a contractual agreement with the retailer.

Largest Operators of Open-Loop and Closed-Loop Retail Electronic Payments Networks

The largest operators of open-loop and closed-loop retail electronic payments networks are Visa, MasterCard, American Express, Discover, JCB and Diners Club. With the exception of Discover, which primarily operates in the United States, all of the other network operators can be considered multi-national or global providers of payments network services. Based on payments volume, total volume, number of transactions and number of cards in circulation, Visa is the largest retail electronic payments network in the world. The following chart compares our network with those of our major competitors for calendar year 2007:


Company	Payments Volume		Total Volume		Total Transactions	Cards
	(billions)		(billions)		(billions)	(millions)
Visa Inc.⁽¹⁾	$	2,457	$	3,822	50.3	1,592
MasterCard		1,697		2,276	27.0	916
American Express		637		647	5.0	86
Discover		102		119	1.6	57
JCB		55		61	0.6	58
Diners Club		29		30	0.2	7

(1)	Visa Inc. figures as reported previously in our filings.

Source: The Nilson Report, issue 902 (May 2008) and issue 903 (May 2008).

Note: Visa Inc. figures exclude Visa Europe. Figures for competitors include their respective European operations. Visa figures include Visa, Visa Electron, and Interlink brands. Visa cards include PLUS proprietary cards, but proprietary PLUS cash volume is not included. Domestic China figures are excluded. MasterCard figures include PIN-based debit card figures on MasterCard cards, but not Maestro or Cirrus figures. China commercial funds transfers are excluded. American Express and Discover include business from third-party issuers. JCB figures are for April 2006 through March 2007, but cards and outlets are as of September 2007. JCB total transaction figures are estimates.

Our Primary Operations

We generate revenue from the transaction processing services we offer to our customers. Our customers deliver Visa products and payment services to consumers and merchants based on the product platforms we define and manage. Payments network management is a core part of our operations, as it ensures that our payments system provides a safe, efficient, consistent, and interoperable service to cardholders, merchants, and financial institutions worldwide.

Transaction Processing Services

Core Processing Services

Our core processing services involve the routing of payment information and related data to facilitate the authorization, clearing and settlement of transactions between Visa issuers, which are the financial institutions that issue Visa cards to cardholders, and acquirers, which are the financial institutions that offer Visa network connectivity and payments acceptance services to merchants. In addition, we offer a range of value-added processing services to support our customers’ Visa programs and to promote the growth and security of the Visa payments network.

Authorization is the process of approving or declining a transaction before a purchase is finalized or cash is disbursed. Clearing is the process of delivering final transaction data from an acquirer to an issuer for posting to the cardholder’s account, the calculation of certain fees and charges that apply to the issuer and acquirer involved in the transaction, and the conversion of transaction amounts to the

appropriate settlement currencies. Settlement is the process of calculating, determining, reporting and transferring the net financial position of our issuers and acquirers for all transactions that are cleared.

Visa transactions can be authorized, cleared and settled either as dual-message transactions or as single-message transactions. The choice of processing method may vary depending upon the issuer, the type of card or the region in which the transaction takes place:

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in a single-message transaction, the acquirer submits a single electronic message containing all data required for the authorization, clearing and settlement of the transaction. Actual financial settlement occurs at a later time.

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in a dual-message transaction, the acquirer submits an electronic message at the time of purchase containing the information required for an authorization decision and a second message at a later point in time containing additional data required for clearing and settlement.

Authorization

A typical Visa transaction begins when the cardholder presents his or her Visa card to a merchant as payment for goods or services. The transaction information is then transmitted electronically to the issuer for authorization. In certain cases, we may authorize the transaction on behalf of the issuer through a service known as stand-in processing, based on parameters established by the issuer. The following diagram illustrates the processing steps involved in a typical transaction authorized through our network. In a typical Visa transaction, the authorization process by Visa occurs in approximately one second.

LOGO

The cardholder presents the merchant with a Visa card for payment. The merchant point of sale terminal reads the account number and other data encoded on the card’s magnetic stripe or chip.

The merchant terminal transmits the card information and transaction amount to the acquirer.

The acquiring financial institution or its third party processor combines the transaction information into an authorization request message and transmits it to Visa.

Visa routes the authorization request to the issuer for review. In certain circumstances, such as when the issuer’s systems are unavailable, Visa may perform stand-in processing and review and authorize or deny the transaction.

The issuing financial institution or its third party processor returns an authorization response message, either approving or denying the transaction to Visa.

Visa routes the authorization response to the acquirer.

The acquirer transmits the result of the authorization request to the merchant terminal.

Clearing and Settlement

Clearing occurs at the time of the authorization, for single-message transactions, or in a single daily batch message containing all transactions reported by the acquirer, for dual-message transactions. Settlement occurs on each business day and is conducted on a net basis for all transactions submitted during the previous settlement cycle. The following diagram illustrates the clearing and settlement process between the issuer and acquirer for a typical transaction processed through our system.

LOGO

Clearing

The merchant transmits sales draft information for the transaction, including account numbers and transaction amounts, to the acquirer.

The acquiring financial institution or its third party processor formats this information into a clearing message, which it transmits to Visa.

Visa routes the clearing message to the card issuer and calculates the settlement obligation of the issuer and the amount due to the acquirer, net of certain applicable fees and charges.

Settlement

The issuer sends funds to Visa’s designated settlement bank in the amount of its settlement obligation.

The settlement bank, at the direction of Visa, transfers funds due to the acquirer.

The issuer and acquirer involved in a typical Visa transaction perform additional functions that we do not generally perform or monitor. For example, the acquirer credits the merchant’s account for the amount of the transaction less any fees the acquirer charges in accordance with the contractual agreement between the merchant and the acquirer. In addition, the issuer sends a statement to the cardholder and collects payment, in the case of a credit or deferred debit card, or collects payment directly from the cardholder’s deposit account, in the case of a debit card.

We process virtually all transactions occurring entirely within the United States, the majority of domestic transactions (i.e., transactions where the issuer and the merchant are located in the same country) in certain other countries, as well as all cross-border transactions, involving products carrying our brands. Domestic transactions that we do not process are generally processed by government-controlled payments networks, our financial institution customers, independent companies or joint ventures owned in whole or in part by our financial institution customers.

We perform clearing and settlement through our VisaNet system for transactions involving an issuer that is located in Visa Europe’s region and an acquirer that is located in the rest of the world, or vice versa. In addition, we currently provide clearing and settlement services for Visa transactions

occurring entirely within Visa Europe’s region and will continue to provide such services until completion of deployment of Visa Europe’s own processing system. Visa Europe authorizes transactions for its members through its own processing system.

Other Value-Added Processing Services

The size of our network and our processing capabilities allow us to offer a range of other value-added services in certain countries. These services include risk management, debit issuer processing, loyalty services, dispute management and value-added information services.

Risk Management Services. Our centralized and integrated network architecture allows us to monitor, on a real-time basis, all transactions that we process for authorization. As a result, we provide customers in certain countries with a number of value-added risk-management services, which complement our core authorization services. Our risk management services provide preventive, monitoring, investigative and predictive tools, which are intended to mitigate and help eliminate fraud at the cardholder and merchant level.

Debit Issuer Processing Services. Visa Debit Processing Services provides comprehensive processing services for participating United States issuers of Visa debit, prepaid and ATM payment products. In addition to core issuer authorization processing, Visa Debit Processing Services offers card management services, exception processing, PIN and ATM network gateways, call center services, fraud detection services and ATM terminal driving. Visa Debit Processing Services processes more Visa transactions than any other issuer processor in the world.

Loyalty Services. We offer loyalty services that allow our customers to enhance the attractiveness of their Visa payment programs and to strengthen their relationships with cardholders and merchants. These services are designed to allow our customers to differentiate their Visa program offerings, to support increased card usage and to increase the importance of Visa payments to merchants. One such service, the Visa Incentive Network, enables merchants and financial institution customers to deliver tailored merchant offers to targeted groups of cardholders, offering benefits traditionally associated with a closed-loop system.

Dispute Management Services. We manage Visa Resolve Online, an automated web-based service that allows our customers’ back-office analysts and customer service representatives to manage and resolve Visa transaction disputes more efficiently than with previous paper-based processes. Transaction disputes between issuers and acquirers sometimes arise from suspected fraud, merchant non-fulfillment of transaction requirements or other events. Visa Resolve Online, which is mandatory for all Visa customers, provides real-time access to Visa transaction data, electronic transfer of substantiating documents and automated management of communications between issuers and acquirers.

Value-Added Information Services. We provide our customers with a range of additional information-based business analytics and applications, as well as the transaction data and associated infrastructure required to support them. Through these services, we support and enhance our customers’ business intelligence capabilities, loyalty applications, operational and management performance metrics, transaction research and commercial card reporting.

Processing Infrastructure

We own and operate VisaNet, our secure, centralized, global processing platform, which consists of three synchronized processing centers. In addition, Visa Europe operates one processing center in the United Kingdom, which is part of our synchronized system in accordance with the terms of our

framework agreement with Visa Europe. We are also building a new data center on the east coast of the United States, with construction scheduled to continue through 2010. These centers are linked by a global telecommunications network and are engineered for redundancy. Intelligent access points around the world complete our global processing infrastructure and enable merchants and financial institutions worldwide to access our core processing and value-added services.

Unlike the processing platforms of some of our primary competitors, VisaNet is built on a centralized architecture rather than a distributed architecture. As a result, we are able to view and analyze each authorization transaction we process in real-time and can provide value-added information, such as risk scoring or loyalty applications, to the issuer while the transaction data is being routed through our system.

Product Platforms

We offer a broad range of product platforms to enable our customers to build differentiated, competitive payment programs for their consumer, business, government and merchant clients. Our principal payment platforms enable credit, charge, deferred debit, debit and prepaid payments, as well as cash access, for consumers, businesses and government entities. Our payment platforms are offered under our Visa, Visa Electron, Interlink and PLUS brands.

Consumer Credit

Our consumer credit product platforms allow our issuers to offer deferred payment and financing products that can be customized to meet the needs of all consumer segments. Our baseline consumer credit platform is marketed to our issuers as Visa Traditional in the United States and Visa Classic in the rest of the world. We require issuers offering credit products based on this platform to meet minimum requirements for product functionality and to offer certain services, such as a reporting service for lost or stolen cards.

In addition, we offer premium credit platforms, which enable our issuers to tailor programs to consumers requiring higher credit lines or enhanced benefits, such as loyalty programs. Our premium consumer credit platforms are marketed to issuers, and in some cases, to cardholders, as Visa Gold, Visa Platinum, Visa Signature and Visa Infinite. Issuers offering these credit products are required to provide certain functionality and enhanced cardholder services that may vary by product and region.

Consumer Deposit Access

Our deposit access product platforms enable our issuers to offer consumer payment and cash access products that draw upon consumer deposit accounts, such as checking, demand deposit, asset or other pre-funded accounts.

Consumer Debit

Visa Debit. Our primary consumer debit platform uses the Visa brand mark. Through our rules and product platform requirements, we further segment our Visa debit product platform into Visa Classic, Visa Gold, Visa Platinum and Visa Infinite, which allows our issuers to customize their Visa debit programs and offer a range of benefits to their debit cardholders.

Interlink Debit. We provide the Interlink debit product platform in the United States and certain countries in the AP region. Interlink is a single-message point-of-sale debit network. It generally requires a cardholder to enter a personal identification number, or PIN, for authentication. Interlink allows our issuers to provide a full range of debit card offerings to their deposit account customers. Interlink acceptance marks may be included on Visa debit cards or issued as standalone debit cards.

Visa Electron Debit. Visa Electron is a payment product platform that permits issuers to require all transactions initiated from the card to be authorized electronically. It is primarily used by issuers offering payment programs to higher risk customer segments or in countries where electronic authorization is less prevalent, such as certain markets in the AP, LAC and CEMEA regions. Visa Electron is primarily issued as a consumer debit product, but Visa Electron can also be issued as a credit or prepaid product for consumers or businesses.

POS Check Service. The Visa POS Check Service enables merchants to convert the account information on a consumer’s check into an electronic Visa transaction message at the point of sale if the check is drawn on a demand deposit account held at a participating Visa customer. This service, which is currently offered only in the United States, reduces the cost and time involved in merchant and financial institution processing of checks by taking advantage of Visa’s efficient electronic payments processing.

Cash Access

Our customers can provide global cash access to their cardholders by issuing products accepted at Visa and PLUS branded ATMs. Most Visa and Visa Electron branded cards offer customers cash access at ATMs, as well as at branches of our participating financial institution customers. The PLUS brand may also be included on issuers’ non-Visa branded cards to offer international cash access as a complement to domestic cash access services.

Prepaid

Our prepaid product platform enables issuers to offer products that access a designated pool of funds, allowing cardholders to enjoy the convenience and security of a payment card in lieu of cash or checks. Our prepaid platform includes gift, travel, youth, payroll, money transfer, voucher replacement, corporate incentive, insurance reimbursement and government benefits cards. Our prepaid cards can be distributed through a number of channels, including financial institution branches, Internet sites, merchants and employers.

Commercial

Our commercial product platforms enable multi-national, large, medium and small companies and government organizations to streamline payment processes, manage information and their supply chain, and reduce administrative costs. Our commercial platforms include Visa Business Credit, Visa Business Check Card, Visa Business Debit, Visa Signature Business, Visa Business Electron, Visa Corporate, Visa Purchasing, Visa Fleet, Visa Distribution, Visa Commercial One Card and Visa Commerce.

Large and Medium Companies and Government Organizations. The Visa Corporate product platform offers payment options for travel and entertainment charges, including cash advances, and provides detailed transaction data, which allows companies to track policy compliance and supplier management. Visa Purchasing provides corporate clients with a payment product to easily acquire the goods and services needed to conduct their business by streamlining time- and paper-intensive purchase order and invoice processing, and by providing flexible transaction authorization and verification statements for each cardholder.

Small Businesses. The Visa Business credit and debit platforms provide small businesses with cash flow tools, purchasing savings, rewards and management reporting. Visa Business Electron is an electronic authorization platform used in many countries outside North America and has authorization controls that are similar to those of the consumer Visa Electron products described above.

Core to all Visa Commercial payment platforms are information management, reconciliation and reporting, which integrate payment data into company financial systems. Visa Information Management is a web-based tool that provides access to a suite of reporting and information tools in multiple languages to companies using any of the Visa Commercial platforms.

Product Platform Innovation

We invest in the development and enhancement of payment product platforms with the goal of increasing the migration of consumer and business spending to electronic payments. We believe that innovation results in more secure and versatile payment program options for customers, merchants and consumers. We focus on new payment channels, card technologies, payment account access devices and authentication methods, and have recently made significant investments in the development of contactless payment cards and devices, mobile payments, chip cards, magnetic stripe and unembossed card enhancements, and money transfer.

Payments Network Management

We devote significant resources to ensure that Visa is the payments network of choice for customers, merchants and cardholders. We seek to accomplish this by promoting our brand through marketing and sponsorship activities, increasing acceptance of Visa-branded cards around the world and ensuring that the system operates in a reliable and secure manner for all of our network participants.

Brand Management and Promotion

We engage in a variety of activities designed to maintain and enhance the value of our brand. Our integrated approach to brand management and promotion combines advertising, sponsorships, promotions and public relations to create programs that build active preference for products carrying our brand, promote product usage, increase product acceptance and support cardholder acquisition and retention. For merchants, we work to ensure that the Visa brand represents timely and guaranteed payment, as well as a way to increase their business profitably. For our customers, our marketing is designed to support their card issuance, activation and usage efforts while complementing and enhancing the value of their own brands. For cardholders, we work to ensure that Visa is a symbol of security, convenience and acceptance. By emphasizing these core attributes of our brand, we aim to reinforce the recognition that Visa is “The World’s Best Way to Pay.”

Advertising plays a critical role in building brand awareness and equity, as well as communicating the benefits of our brand and Visa-branded payment products. Through our advertising campaigns, we strive to provide a consistent, recognizable and compelling message that supports our brand positioning. During 2006, we launched our “Life Takes Visa” brand campaign in the United States, reinforcing our brand promise to deliver innovative products and services that empower our cardholders to experience life and business their way and on their terms. In other regions, we promote these same brand messages through tailored regional and country-specific advertising campaigns, such as our “All It Takes” campaign in AP and our “Porque La Vida es Ahora” (“Because Life is Now”) campaign in LAC.

We establish global marketing relationships to promote the Visa brand and to allow customers to conduct marketing programs in conjunction with major sporting and entertainment events. Our primary global sponsorship platforms are the Olympic Games, for which we have been the exclusive payment card sponsor since 1986, and the FIFA World Cup. Through these marketing relationships, our customers may develop marketing programs that include the Visa brand and mention our sponsorship status. In addition, we engage in marketing and sponsorship activities around other national and local events or with associations and companies to provide customized marketing platforms to customers in certain countries and regions.

Our customer and business partner marketing consulting services provide customized advice and support to improve our customers’ cardholder acquisition, cardholder retention and product usage efforts. We conduct strategic reviews of our customers’ marketing activities and portfolio management practices, help them develop acquisition and retention programs, provide training on industry best practices, develop marketing for new products, conduct market segmentation analysis and perform other consultative services.

We also provide marketing support to our customers through our support of Visa co-branded and affinity card programs. Co-branded cards are payment cards bearing the brand marks of an issuer and a marketing partner, usually a merchant, while affinity cards generally bear the marks or logos of charitable, professional, educational or civic organizations.

Our merchant marketing activities bring added value to our merchant partners through the development of marketing programs customized for specific merchants and industry segments. These programs, which we develop in conjunction with merchants, generate awareness for new acceptance channels and locations and increase cardholder spending and merchant sales revenue through special offers and promotions.

Merchant Acceptance Initiatives

Merchants play a vital role in our payments network, and we work continuously to build our merchant acceptance and enhance our relationships with merchants that accept Visa-branded cards.

We aim to maintain and expand our merchant base by focusing on the needs of merchants and consumers and enhancing our programs to increase acceptance in attractive and fast-growing segments, such as bill payment. Our efforts to address these needs include supporting the development of technological innovations, delivering value-added information services, such as the Visa Incentive Network, and evaluating potential modifications to our operating rules and interchange rates to enhance the value of our payments network compared to other forms of payment. In the United States, for example, the Visa Small Ticket Payment Service provides a special interchange rate category and No Signature Required programs eliminate the requirement for a cardholder signature for certain small-value transactions in a number of everyday spend categories, including quick-service restaurants, movie theatres and public transit. Under this program, the merchant will be protected against no signature chargebacks. We believe these initiatives have resulted in a faster check-out process, a reduction in merchants’ operating expenses, increased merchant acceptance and greater transaction volume in these categories.

We enter into arrangements with certain merchants under which they receive monetary incentives and rebates for acceptance of products carrying our brands and increasing their payments volume of products carrying our brands or indicating a preference for our cards.

Customer Standards

Our customers are generally required to be financial institutions or other deposit-taking institutions organized under local banking laws or wholly-owned by such institutions. Certain of our customers participate in the full range of functions available to participants in the Visa network, such as soliciting cardholders and issuing cards, soliciting and signing merchants and acquiring merchant transactions. These financial institutions may also sponsor other financial institutions for more limited participation in our network.

Rulemaking and Enforcement

In general, our customers are granted licenses to use our brands and to access our transaction processing systems. Our customers are obligated to honor our rules and standards through agreements with, and in certain cases non-equity membership interests in, our subsidiaries. These rules and standards govern their use of our branded programs and their participation in our transaction processing system. Variations on such rules and standards may exist throughout the world in order to meet the needs of specific geographies. We require our customers to comply with these rules, which relate to such matters as the use of our brands and trademarks, the standards, design and features of payment cards and programs, merchant acquiring activities, including acceptance standards applicable to merchants, use of agents, disputes between members, risk management, guaranteed settlement, customer financial failures and allocation of losses among customers.

We establish dispute management procedures between customers relating to specific transactions. For example, after a transaction is presented to an issuer, the issuer may determine that the transaction is invalid for a variety of reasons, including fraud. If the issuer believes there is a defect in a transaction, the issuer may return, or charge back, the transaction to the acquirer. We enforce rules relating to chargebacks and maintain a dispute resolution process with respect to chargeback disputes.

Credit Risk Management

We indemnify our customers for any settlement loss suffered due to the failure of a customer to fund its daily settlement obligations. In certain instances, we may indemnify customers even in situations in which a transaction is not processed by our system. No material loss related to settlement risk has been incurred in recent years.

To manage our exposure in the event our customers fail to fund their settlement obligations, we have a credit risk policy with a formalized set of credit standards and risk control measures. Customers with significant settlement exposure are evaluated regularly to assess risk. In certain instances, we may require a customer to post collateral or provide other guarantees. If a customer becomes unable or unwilling to meet its obligations, we are able to draw upon such collateral or guarantee in order to minimize any potential loss. We may also apply other risk control measures, such as blocking the authorization and settlement of transactions, limiting the use of certain types of agents, prohibiting initiation of acquiring relationships with certain high risk merchants or suspending or terminating a customer’s rights to participate in our payments network. The exposure to settlement losses is accounted for as a settlement risk guarantee. The fair value of the settlement risk guarantee is estimated using a proprietary model. Key inputs to the model include the probability of customers becoming insolvent, statistically derived loss factors based on historical experience and estimated settlement exposures at period end.

Payment System Integrity

The integrity of our payments system is affected by fraudulent activity and other illegal uses of our products. Fraud is most often committed in connection with lost, stolen or counterfeit cards or stolen account information resulting from security breaches of systems that store cardholder or account data, including systems operated by merchants, financial institutions and other third-party data processors. Fraud is also more likely to occur in association with transactions where the card is not present at the point of sale, such as electronic commerce, or e-commerce, mail order and telephone order transactions. Security and cardholder authentication for these remote channels are particularly critical issues facing our customers and merchants that engage in these forms of commerce, where a signed cardholder sales receipt is generally unavailable.

Our fraud detection and prevention offerings include Verified by Visa, a global Internet authentication product, which permits cardholders to authenticate themselves to their issuing financial institution using a unique personal code; Visa Advanced Authorization, which adds additional fraud detection capability by adding real-time risk scores to authorization messages; and chip and PIN programs that have been demonstrated to reduce the incidence of certain types of fraud at physical point of sale locations. We have also implemented rules that require the use of more secure PIN encryption standards for ATMs and point-of-sale PIN entry devices installed after 2002 and 2003, and we have recently mandated that all PINs transmitted through VisaNet to the issuer be encrypted using the Triple DES, or Data Encryption Standard, by July 1, 2010.

In a 2006 cooperative industry effort, we co-founded the Payment Card Industry (PCI) Data Security Standards Council, an independent council that established security standards to protect cardholder data and to prevent fraud. In late 2006, we introduced a PCI compliance program with both incentives and fines targeted at our largest acquirers in order to improve compliance with the PCI standards by our largest U.S.-based merchants, which we refer to as Level I and Level II merchants. The initiative’s goal is to eradicate the storage of prohibited account data, such as magnetic stripe (also known as track data), CVV2 (the three-digit security code on the back of the card) and PIN data, and to improve PCI compliance among this group of merchants.

Interchange

Interchange represents a transfer of value between the financial institutions participating in an open-loop payments network such as ours. On purchase transactions, interchange fees are typically paid to issuers by acquirers in connection with transactions initiated with cards in our payments system. We set default interchange rates in the United States and other regions. In certain jurisdictions, interchange rates are subject to government regulation. Although we administer the collection and remittance of interchange fees through the settlement process, we generally do not receive any portion of the interchange fees. Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards. We believe that interchange fees are an important driver of system volume.

We believe the default interchange rates that we use promote the efficient operation of our payments network by enabling both the issuer and acquirer to understand the economics of a given transaction before entering into it, and by eliminating the need for each of our customers to negotiate transfer pricing with each other. By establishing and modifying default interchange rates in response to marketplace conditions and strategic demands, we seek to ensure a competitive value proposition for transactions using our cards in order to encourage electronic transactions and to maximize participation in the Visa payments system by issuers and acquirers and, ultimately, consumers and merchants. We believe that proper management of interchange rates benefits consumers, merchants, our customers and us by promoting the overall growth of our payments network in competition with other payment card systems and other forms of payment, and creating incentives for innovation, enhanced data quality and security.

Interchange fees and related practices also have come to the attention of, or have been or are being reviewed by, regulatory authorities and/or central banks in a number of jurisdictions, including the United States, European Union, Australia, Brazil, Canada, Colombia, Germany, Honduras, Hungary, Mexico, New Zealand, Norway, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. In certain countries, such as Australia and Mexico, interchange rates have been adjusted in advance of, or in response to, government regulation. We are currently devoting substantial management and financial resources to explain the importance of and defend interchange fees and other legal and regulatory challenges we face relating to interchange fees. See Item 1A—“Risk Factors—Interchange fees are subject to significant legal and regulatory

scrutiny worldwide, which may have a material adverse impact on our revenues, our prospects for future growth and our overall business,” and Item 8—“Financial Statements and Supplementary Data” elsewhere in this report.

Merchant Discount Rates. Acquirers generally charge merchants a fee for each transaction, called a “merchant discount.” This fee would typically cover costs they incur for participation in four-party payments networks, including those relating to interchange, and compensate them for various other services they provide to merchants. Merchant discount rates and other merchant fees are set by our acquirers without our involvement and by agreement with their merchant customers and are established in competition with other acquirers, other payment card systems and other forms of payment. We do not establish or regulate merchant discount rates or any other fees charged by our acquirers.

Intellectual Property

We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology.

We own a number of valuable trademarks and designs, which are essential to our business, including Visa, Interlink, PLUS, Visa Electron, the “Winged V” design, the “Dove” design and the “Bands Design—Blue, White & Gold.” We also own numerous other valuable trademarks and designs covering various brands, products, programs and services. Through agreements with our customers, we authorize and monitor the use of our trademarks in connection with their participation in our payments network.

In addition, we own a number of patents and patent applications relating to payments solutions, transaction processing, security systems and other matters.

Competition

We compete in the global payment marketplace against all forms of payment, including paper-based forms (principally cash and checks), card-based payments (including credit, charge, debit, ATM, prepaid, private-label and other types of general purpose and limited use cards) and other electronic payments (including wire transfers, electronic benefits transfers, automatic clearing house, or ACH, payments and electronic data interchange).

Within the general purpose payment card industry, we face substantial and intense competition worldwide. The leading global card brands in the general purpose payment card industry are Visa, MasterCard, American Express and Diners Club. Other general purpose card brands are more concentrated in specific geographic regions, such as JCB in AP and Discover in the United States. In certain countries, our competitors have leading positions, such as JCB in Japan and China UnionPay in China, which is the sole domestic payment processor and operates the sole domestic acceptance mark in China due to local regulation. We also compete against private-label cards, which can generally be used to make purchases solely at the sponsoring retail store, gasoline retailer or other merchant.

In the debit card market segment, Visa and MasterCard are the primary global brands. In addition, our Interlink and Visa Electron brands compete with Maestro, owned by MasterCard, and various regional and country-specific debit network brands, such as STAR, owned by First Data Corporation, PULSE, owned by Discover, NYCE, owned by Metavante Corporation, and others in the United States, Interac in Canada, and EFTPOS in Australia. In addition to our PLUS brand, the primary cash access card brands are Cirrus, owned by MasterCard, and many of the online debit network brands referenced

above. In many countries, local debit brands are the primary brands, and our brands are used primarily to enable cross-border transactions, which typically constitute a small portion of overall transaction volume. See Item 8—Financial Statements and Supplementary Data for financial information about geographic areas.

Some of our major competitors, including American Express and Discover, operate closed-loop systems. Closed-loop systems can benefit from direct access to consumer and merchant information, and they tend to have greater control over cardholder service than do operators of open-loop payments networks, like Visa, which depend on their financial institution customers to provide products and services directly to the cardholder. In recent years, the major closed-loop systems, American Express and Discover, have begun working directly with issuing and acquiring financial institutions, thus emulating certain aspects of the open-loop system, including setting transfer pricing.

In addition, we compete against companies that are developing and implementing alternative payments networks. Among other things, these competitors provide Internet currencies, which can be used to buy and sell goods online, virtual checking programs, which permit the direct debit of consumer checking accounts for both online and point-of-sale transactions and services that support payments to and from proprietary accounts for Internet, mobile commerce and other applications. A number of these new entrants rely principally on the Internet to support their services and may enjoy lower costs than we do. In mobile commerce, we also face competition from established network operators that may be in a position to enable mobile devices to process electronic payments or transfer money, and to use their existing billing systems to process these payments and transfers between their customers and third parties without our involvement.

Our Visa Debit Processing Service is the largest provider of issuer processing services for United States issuers of Visa debit, prepaid and ATM products, and thus also competes with third party processors, such as First Data Corporation and Total System Services, Inc., also known as TSYS.

We believe that the primary factors affecting our competitive position in the payments industry include:

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our ability to maintain the quality and integrity of our transaction processing systems;

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our relationships with our customers;

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our relationships with merchants;

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the impact of existing litigation, legislation and government regulation;

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pricing to our customers;

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the impact of globalization and consolidation of financial institutions and merchants; and

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our ability to develop and implement new payment programs, systems and technologies.

Litigation has and may continue to affect our ability to compete in the global payments industry. For example, as a result of the June 2003 settlement of a U.S. merchant lawsuit against Visa U.S.A. and MasterCard, merchants may choose not to accept U.S.-issued Visa debit cards in the United States while still accepting Visa-branded credit cards, and vice versa. In addition, following the final judgment in our Department of Justice litigation, members of Visa U.S.A. may issue certain payment cards that compete with Visa-branded cards, such as American Express or Discover, while remaining Visa members. Since this final judgment, several members of Visa U.S.A., including, but not limited to, Bank of America, Citibank, HSBC/Metris, U.S.A.A., Barclaycard U.S., GE Consumer Finance, Inc., First Bank & Trust, Central National Bank & Trust and Brenham National Bank, have begun to issue, or have announced that they will issue, American Express or Discover-branded cards. Outside of the United States, our customers have historically been permitted to issue American Express cards, as well as the cards of other competing general purpose card networks.

The banking industry has undergone consolidation, and, based on current economic conditions, we have seen this trend accelerate. We expect this trend to continue in the future. A major financial institution customer may be acquired by an institution that has a strong relationship with a competitor, resulting in a substantial loss of business. Because continued consolidation in the banking industry results in fewer financial institutions of increased size, the bargaining power of the remaining financial institutions increases.

Government Regulation

Government regulation impacts key aspects of our business. We are subject to government regulation of the payments industry in many countries in which our cards are used. Our customers are also subject to numerous regulations applicable to banks and other financial institutions in the United States and elsewhere, and as a consequence our business is affected by such regulations. In recent years our business has come under increasing regulatory scrutiny. In particular, interchange fees associated with open-loop payments systems such as ours are being reviewed or challenged in various jurisdictions in which our cards are used.

As the volume of card-based payments has increased in recent years, interchange fees, including our default interchange rates, have become subject to increased regulatory scrutiny worldwide. We believe that regulators are increasingly adopting a similar approach to interchange fees, and, as a result, developments in any one jurisdiction may influence regulatory approaches in other jurisdictions. Interchange fees have been the topic of recent committee hearings in the U.S. House of Representatives and the U.S. Senate, as well as conferences held by a number of U.S. Federal Reserve Banks. In addition, the U.S. House of Representatives has passed a bill that would commission a study by the Federal Trade Commission of the role of interchange fees in alleged price gouging at gas stations. Individual state legislatures in the United States are also reviewing interchange fees, and legislators in a number of states have proposed bills that purport to limit interchange fees or merchant discount rates or to prohibit their application to portions of a transaction. In addition, the Merchants Payments Coalition, a coalition of trade associations representing businesses that accept credit and debit cards, is mounting a challenge to interchange fees in the United States by seeking legislative and regulatory intervention.

A number of bills that would affect interchange fees were introduced in both the U.S. House of Representatives and the U.S. Senate in current Congress. A hearing was held in the House Judiciary Committee on interchange fees and a bill that would regulate the interchange fee process passed the House Judiciary Committee, but, to date, that bill has not been considered further.

Most jurisdictions in which we and our customers operate have implemented, amended or have pending anti-money laundering regulations. In 2002, we and our customers became subject to the provisions of the U.S.A. PATRIOT Act, which requires the creation and implementation of comprehensive anti-money laundering programs. In general, this requires that we make certain efforts to prevent our payments system from being used to facilitate money laundering and the financing of terrorist activities, including, for example, the designation of a compliance officer, training of employees, adoption of internal policies and procedures to mitigate money laundering risks, and periodic audits.

We are subject to regulations imposed by the U.S. Treasury Office of Foreign Assets Control, or OFAC. OFAC restricts financial dealings with Cuba, Iran, Myanmar and Sudan, as well as financial dealings with certain restricted third parties, such as identified money laundering fronts for terrorists or narcotics traffickers. While we prohibit financial institutions that are domiciled in those countries or are restricted parties from being Visa members, many Visa International members are non-U.S. financial

institutions, and thus are not subject to OFAC restrictions. Accordingly, our payments network may be used with respect to transactions in or involving countries or parties subject to OFAC-administered sanctions.

In recent years, a number of regulations relating to the price of credit and directed at our financial institution customers have been implemented in some jurisdictions in which our cards are used. In the United States, regulators and the U.S. Congress have increased their scrutiny of our customers’ pricing and underwriting standards relating to credit. For example, a number of regulations have been issued to implement the U.S. Fair and Accurate Credit Transactions Act, and one regulation under that Act has been proposed, but is yet to be finalized. The proposed regulation pertains to risk-based pricing and could have a significant impact on the application process for credit cards and result in increased costs of issuance and/or a decrease in the flexibility of card issuers to set the price of credit. Other proposed regulations would change the substance and format of consumer disclosures made by credit card issuers and limit the way in which card issuers change prices on credit card accounts, allocate payments to cardholder balances and regulate other aspects of credit card issuer practices. In addition, in the current Congress, legislation on credit card issuer practices has passed the U.S. House of Representatives and other legislation on credit card issuer practices has been introduced in the U.S. Senate. Any regulation or legislation in the area of credit card issuer practices or disclosures could impact our customers’ ability to issue cards profitably in certain segments and impact our payments volume and revenues. See Item 1A—“Risk Factors—Interchange fees are subject to significant legal and regulatory scrutiny worldwide, which may have a material adverse impact on our revenues, our prospects for future growth and our overall business,” and “—The payments industry is the subject of increasing global regulatory focus, which may result in costly new compliance burdens being imposed on us and our customers and lead to increased costs and decreased payments volume and revenues.”

We and our customers are subject to regulations related to privacy, data use and security in the jurisdictions in which we do business. For example, in the United States, our customers are subject to the banking regulators’ information safeguard rules and we are subject to the Federal Trade Commission’s rules under the Gramm-Leach-Bliley Act. These rules require that our customers and we develop, implement and maintain written, comprehensive information security programs containing safeguards that are appropriate to our size and complexity, the nature and scope of our activities and the sensitivity of any customer information at issue. See Item 1A—“Risk Factors—Existing and proposed regulation in the areas of consumer privacy and data use and security could decrease the number of payment cards issued, our payments volume and revenues.”

There has been a heightened legislative and regulatory focus on data security in recent years. In the United States, a number of bills have been introduced in Congress and there have been several Congressional hearings to address these issues. Congress is considering data security/data breach legislation which, if implemented, could affect our customers and us, as such legislation may increase our customers’ and our costs and decrease the number of cards that our customers issue. In addition, a number of U.S. states have enacted security breach legislation, requiring varying levels of consumer notification in the event of a security breach, and several other states are considering similar legislation. See Item 1A—“Risk Factors—Existing and proposed regulation in the areas of consumer privacy and data use and security could decrease the number of payment cards issued, our payments volume and revenues.”

Governments in certain countries have acted, or could act, to provide resources or protection to selected national payment card providers or national payment processing providers to support domestic competitors or to displace us from, prevent us from entering into, or substantially restrict us from participating in, particular geographies. For example, our customers in China are not permitted to issue cards carrying our brands for domestic use in China. Governments in certain other countries have considered similar restrictions from time to time.

Many jurisdictions in which our customers and we operate are considering, or are expected to consider, legislation concerning Internet transactions, and in particular with regard to choice of law, the legality of certain e-commerce transactions, the collection of applicable taxes and copyright and trademark infringement. If implemented, these initiatives could require our customers and us to monitor, filter, restrict or otherwise oversee various categories of payment card transactions or to take other actions. For example, draft regulations were proposed on October 1, 2007 pursuant to recently enacted U.S. legislation regarding Internet gambling, which will require our customers and us to code and block certain types of Internet gambling transactions. Comments on these draft regulations were due December 12, 2007 and final regulations will be forthcoming at a still undetermined date. Various U.S. regulatory agencies are also considering additional regulation covering capital requirements, privacy, disclosure rules, security and marketing, which could impact our customers and us directly. Increases in fraud or other illegal activity involving our cards could also lead to regulatory intervention, such as mandatory card re-issuance.

Certain of our operations in the United States are periodically reviewed by the Federal Financial Institution Examination Council to ensure our compliance with applicable data integrity and security requirements, as well as other requirements applicable to us as a result of our role as a service provider to financial institutions. In recent years, the federal banking regulators in the United States have adopted a series of regulatory measures intended to require more conservative accounting, greater risk management and higher capital requirements for bank credit card activities, particularly in the case of banks that focus on subprime cardholders. Additionally, a number of international initiatives are underway to maintain financial stability by strengthening financial infrastructure. The Committee on Payment and Settlement Systems of the central banks of the Group of Ten countries has developed a set of core principals for “systematically important payment systems.” Government regulators may determine that we are a systemically important payments system and impose settlement risk management requirements on us, including new settlement procedures or other operational rules to address credit and operational risks or new criteria for customer participation and merchant access to our payments system. In addition, outside of the United States, a number of jurisdictions have implemented legal frameworks to regulate their domestic payments systems. For example, regulators in Australia, Mexico, Colombia, India, Singapore and Malaysia have been given statutory authority to regulate certain aspects of the payments systems in those countries.

Concentration of Business

A significant portion of our operating revenues are concentrated among our largest customers. Our five largest customers represented approximately $1.6 billion, or 26% of our operating revenues during fiscal 2008. Our customers can reassess their commitments to us at any time in the future and/or develop their own competitive services. Loss of business from any of our largest customers could have a material adverse effect on our business. Also, consolidations within the financial sector may have the effect of slowing our rate of revenue growth in the future should one of our customers be acquired by a financial institution which is aligned with one of our competitors.

Working Capital Requirements

Payments settlement due from and due to issuing and acquiring customers represents our most consistent liquidity requirement, arising primarily from the payments settlement of certain credit and debit transactions and the timing of payments settlement between financial institution customers with settlement currencies other than the U.S. dollar. These settlement receivables and payables generally remain outstanding for one to two business days, consistent with standard market conventions for domestic transactions and foreign currency transactions. We maintain working capital sufficient to enable uninterrupted daily settlement. During fiscal 2008, we funded average daily net settlement receivable balances of $157 million, with the highest daily balance being $455 million.

Seasonality

We do not expect to experience any pronounced seasonality in our business. No individual quarter of fiscal 2008 or fiscal 2007 accounted for more than 30% of our fiscal 2008 or pro forma fiscal 2007 revenues.

Employees

At September 30, 2008, we employed 5,765 persons worldwide. We consider our relationships with our employees to be good.

Additional Information and SEC Reports

Our Internet address is http://www.visa.com. On our investor relations website, accessible at http://investor.visa.com, we make available free of charge our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained on our website, including the information contained on our investor relations website, is not incorporated by reference into this report or any other report filed with, or furnished to, the SEC.

ITEM 1A.

Risk Factors

Legal and Regulatory Risks

Interchange fees are subject to significant legal and regulatory scrutiny worldwide, which may have a material adverse impact on our revenues, our prospects for future growth and our overall business.

Interchange represents a transfer of value between the financial institutions participating in an open-loop payments network such as ours. On purchase transactions, interchange fees are typically paid to issuers, which are the financial institutions that issue Visa cards to cardholders, by acquirers, which are the financial institutions that offer Visa network connectivity and payments acceptance services to merchants, in connection with transactions initiated with cards in our payments system. We set default interchange rates in the United States and other regions. In certain jurisdictions, interchange rates are subject to government regulation. Although we administer the collection and remittance of interchange fees through the settlement process, we generally do not receive any portion of the interchange fees. Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards. We believe that interchange fees are an important driver of system volume.

Interchange fees have been the topic of recent committee hearings in the U.S. House of Representatives and the U.S. Senate, as well as conferences held by a number of U.S. Federal Reserve Banks. In 2008, legislation concerning interchange, entitled the “Credit Card Fair Fee Act of 2008,” was introduced in the U.S. House of Representatives. On July 16, 2008, the House Judiciary Committee held a mark up of the legislation and the Committee ultimately adopted the legislation by a divided vote of 19-16. At this point, it is not clear whether the Credit Card Fair Fee Act will be considered by the full U.S. House of Representatives. In its current iteration, the legislation seeks to regulate interchange by allowing merchants to collectively seek to lower their interchange costs by exempting such action from the U.S. antitrust laws. The Credit Card Fair Fee Act also requires the U.S.

Department of Justice, or DOJ, to oversee collective merchant negotiations with the Company and its customer financial institutions (and separately with MasterCard and its customer financial institutions) and report results of those negotiations back to the U.S. Congress. Similar legislation to the Credit Card Fair Fee Act has been introduced in the U.S. Senate Judiciary Committee, but there have not been any hearings on, or further movement of, such legislation. Additional interchange legislation also has been introduced in the House, but there have been no further developments with respect to such legislation. In addition, the U.S. House of Representatives has passed a bill that would commission a study by the Federal Trade Commission of the role of interchange fees in alleged price-gouging at gas stations. Individual state legislatures in the United States are also reviewing interchange fees, and legislators in a number of states have proposed bills that purport to limit interchange fees or merchant discount rates or to prohibit their application to portions of a transaction. In addition, the Merchants Payments Coalition, a coalition of trade associations representing businesses that accept credit and debit cards, is mounting a challenge to interchange fees in the United States by seeking legislative and regulatory intervention. The Committee on the Judiciary of the House of Representatives has approved legislation supported by the Merchants Payment Coalition that would provide antitrust immunity to permit merchants to collectively negotiate with Visa and the banks that issue and acquire Visa cards.

Interchange fees and related practices also have been or are being reviewed by regulatory authorities and/or central banks in a number of other jurisdictions, including the European Union, Australia, Brazil, Colombia, Germany, Honduras, Hungary, Mexico, New Zealand, Norway, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Switzerland, the United Kingdom and Venezuela. For example:

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The Reserve Bank of Australia has made regulations under legislation enacted to give it powers over payments systems. One of the regulations controls the costs that can be considered in setting interchange fees for Visa credit and debit cards, but does not regulate the merchant discount charged by any payment system, including competing closed-loop payments systems. In 2007, the RBA commenced a review of these regulations and in September 2008 released its Final Conclusions. These indicate that the RBA is considering imposing additional restrictions that could further reduce the domestic interchange fees of four-party payments systems and/or impose additional regulatory constraints on certain Visa practices, such as Visa’s “honor all cards” rule.

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New Zealand’s competition regulator, the Commerce Commission, filed a civil claim alleging that, among other things, the fixing of default interchange rates by Cards NZ Limited, Visa International, MasterCard and certain Visa International member financial institutions contravenes the New Zealand Commerce Act. A group of New Zealand retailers filed a nearly identical claim against the same parties before the same tribunal. Both the Commerce Commission and the retailers seek declaratory, injunctive and monetary relief.

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In March 2006, Banco de México, the central bank of Mexico, reached an agreement with the Mexican Banks Association to implement a new, value-based interchange methodology. As part of Banco de México’s transparency policies, details of the new interchange rates have been publicly disclosed and are available on Banco de México’s website.

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In December 2007, the European Commission adopted a decision that MasterCard’s multilateral interchange fees for cross-border payment transactions within the European Economic Area violated European Community Treaty rules on restrictive business practices and must be withdrawn within six months.

Regulatory actions such as these, even if not directed at us or if affecting a geographic region in which we do not operate, may nonetheless increase regulatory scrutiny of interchange fees. If we cannot successfully defend our ability to set default interchange rates to maximize system volume, our payments system may become unattractive to issuers and/or acquirers. This result could reduce the

number of financial institutions willing to participate in our open-loop multi-party payments system, lower overall transaction volumes and/or make closed-loop payments systems or other forms of payment more attractive. Issuers could also begin to charge higher fees to consumers, thereby making our card programs less desirable and reducing our transaction volumes and profitability. Acquirers could elect to charge higher merchant discount rates to merchants, regardless of the level of Visa interchange, leading merchants not to accept cards for payment or to steer Visa cardholders to alternate payment systems. In addition, issuers or acquirers could attempt to decrease the expense of their card programs by seeking incentives from us or a reduction in the fees that we charge. Any of the foregoing could have a material adverse impact on our revenues, operating results, prospects for future growth and overall business.

A finding of liability in the interchange litigation may result in substantial damages.

Since 2005, approximately 50 class action and individual complaints have been filed on behalf of merchants against Visa U.S.A., Visa International, MasterCard and other defendants, including certain Visa U.S.A. member financial institutions, which we refer to as the interchange litigation. Among other antitrust allegations, the plaintiffs allege that Visa U.S.A.’s and Visa International’s setting of default interchange rates violated federal and state antitrust laws. The lawsuits have been transferred to a multidistrict litigation in the U.S. District Court for the Eastern District of New York. The class action complaints have been consolidated into a single amended class action complaint and the individual complaints are also being consolidated in the same multidistrict litigation.

The plaintiffs in the interchange litigation seek damages for alleged overcharges in merchant discount fees, as well as injunctive and other relief. The plaintiffs have not yet quantified the damages they seek, although several of the complaints allege that the plaintiffs expect that damages will range in the tens of billions of dollars. Because these lawsuits were brought under the U.S. federal antitrust laws, any actual damages will be trebled and Visa U.S.A. and/or Visa International may be subject to joint and several liability among the defendants if liability is established, which could significantly magnify the effect of any adverse judgment. The interchange litigation is part of the covered litigation, which our retrospective responsibility plan is intended to address; however, the retrospective responsibility plan may not adequately insulate us from the impact of settlements of, or judgments in, the interchange litigation. Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent. In addition, even if our direct financial exposure were covered by our retrospective responsibility plan, settlements or judgments involving the multidistrict litigation could include restrictions on our ability to conduct business, which could increase our cost of doing business and limit our prospects for future growth. See “—Our retrospective responsibility plan may not adequately insulate us from the impact of settlements and judgments in the covered litigation and will not insulate us from other pending or future litigation” and See Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report.

Our retrospective responsibility plan may not adequately insulate us from the impact of settlements and judgments in the covered litigation and will not insulate us from other pending or future litigation.

Our retrospective responsibility plan is intended to address monetary liabilities from settlements of, or final judgments in, the litigation described in Note 23—Legal Matters to our consolidated financial statements included in Item 8 of this report. The retrospective responsibility plan consists of several related mechanisms to fund settlements of, or judgments in, the covered litigation, including an escrow account funded with a portion of the net proceeds of our initial public offering and potential follow-on offerings of our class A common stock, a loss sharing agreement, a judgment sharing agreement and

the indemnification obligation of Visa U.S.A. members pursuant to Visa U.S.A.’s certificate of incorporation and bylaws and in accordance with their membership agreements. These mechanisms are unique and complex. If we are prevented from using one or more of these mechanisms under our retrospective responsibility plan, we could have difficulty funding the payment of a settlement or final judgment against us in a covered litigation, which could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.

Since the retrospective responsibility plan was implemented, we have settled the lawsuits brought by American Express and Discover, both of which are part of the covered litigation. The American Express and Discover suits each alleged, among other things, that Visa U.S.A. restrained competition by prohibiting its member financial institutions from issuing certain payment cards that compete with Visa-branded cards (such as American Express and Discover) and that each was thereby injured. We, Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became effective on November 9, 2007 and is being funded through our retrospective responsibility plan. We, Visa U.S.A., Visa International, and MasterCard International executed a settlement agreement with Discover on October 27, 2008 that became effective on November 4, 2008, upon approval by Visa’s class B shareholders. The settlement will be funded primarily through the retrospective responsibility plan. Visa Inc. will also make a payment related to a separate agreement with MasterCard to obtain releases from claims related to the settlement service fee litigation and other potential claims. See Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report.

The retrospective responsibility plan does not address litigation other than the covered litigation that we currently face, including state court litigation relating to interchange, and will not cover litigation that we may face in the future, except for cases that include claims for damages relating to the period prior to our initial public offering that are transferred for pre-trial proceedings or otherwise included in the interchange litigation. In addition, our retrospective responsibility plan is designed to cover only the potential monetary liability from settlements of, or judgments in, the covered litigation. Settlements and judgments in covered litigation may require us to modify the way we do business in the future, which could adversely affect our revenues, increase our expenses and/or limit our prospects for growth. Therefore, even if our retrospective responsibility plan adequately safeguards us from the monetary impact of settlements of, or judgments in, the covered litigation, it may not be sufficient to insulate us from all potential adverse consequences of settlements of, and judgments in, the covered litigation.

If the settlements of Visa U.S.A.’s and Visa International’s currency conversion cases are not ultimately approved and we are unsuccessful in any of the various lawsuits relating to Visa U.S.A.’s and Visa International’s currency conversion practices, our business may be materially and adversely affected.

Visa U.S.A. and Visa International are defendants in several state and federal lawsuits alleging that their currency conversion practices are or were deceptive, anti-competitive or otherwise unlawful. In particular, a trial judge in California found that the former currency conversion practices of Visa U.S.A. and Visa International were deceptive under California state law, and ordered Visa U.S.A. and Visa International to require their members to disclose the currency conversion process to cardholders in cardholder agreements, applications, solicitations and monthly billing statements. The judge also ordered unspecified restitution to credit card holders. The decision was reversed on appeal on the ground that the plaintiff lacked standing to pursue his claims. After the trial court’s decision, several putative class actions were filed in California state courts challenging Visa U.S.A.’s and Visa International’s currency conversion practices for credit and debit cards. A number of putative class actions relating to Visa U.S.A.’s and Visa International’s former currency conversion practices were also filed in federal court. The federal actions have been coordinated or consolidated in the U.S.

District Court for the Southern District of New York. The consolidated complaint alleges that the former currency conversion practices of Visa U.S.A. and Visa International violated federal antitrust laws.

On July 20, 2006 and September 14, 2006, Visa U.S.A. and Visa International entered into agreements settling or otherwise disposing of the federal and state actions and related matters. Pursuant to the settlement agreements, Visa U.S.A. paid approximately $100 million as part of the defendants’ settlement fund for the federal actions and approximately $19 million to fund settlement of the California cases. The federal court has granted preliminary approval of the settlement agreements, but the settlement is subject to final approval by the court and resolution of all appeals. If final approval of the settlement agreements is not granted, all of the agreements resolving the federal and state actions will terminate. If that occurs, and we are unsuccessful in defending against some or all of these lawsuits, we may have to pay restitution and/or damages, and may be required to modify our currency conversion practices. The potential amount of damages and/or restitution could be substantial. In addition, although Visa U.S.A. and Visa International have substantially changed the practices that were at issue in these litigations, if the courts require further changes to our currency conversion and cross-border transaction practices, it could materially and adversely affect our business. See Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report.

If we, Visa U.S.A. or Visa International is found liable in certain other lawsuits that have been brought against us or if we are found liable in other litigation to which we may become subject in the future, we may be forced to pay substantial damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our financial condition, revenues and profitability.

In recent years, numerous civil actions and investigations have been filed or initiated against a competition, antitrust, consumer protection and other laws. These actions and investigations have been filed or initiated by a variety of different parties, including the U.S. Department of Justice, state attorneys general, merchants, consumers, competing card-issuing companies and other plaintiffs. Examples of such claims, which are described more fully in Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report, include the following:

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various state court actions based on a federal merchant class action lawsuit that Visa U.S.A. settled in 2003, alleging unlawful “tying” of credit and debit card services, attempted monopolization and other state law competition claims;

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a case brought by the European Commission against Visa International and Visa Europe alleging a breach of European competition law related to a Visa membership rule;

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two state unfair competition law claims, one against Visa U.S.A. and Visa International based in part on Visa U.S.A.’s past practice of prohibiting member financial institutions from issuing certain competing payment cards, and another against Visa U.S.A. and Visa International alleging failure to inform cardholders of a security breach in a timely manner;

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a promissory estoppel and misrepresentation claim against Visa U.S.A. and Visa International regarding deferment of a deadline for laboratory certification of ATM devices meeting heightened data encryption standards;

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a trademark infringement claim against Visa International in Venezuela in connection with the Visa Vale product;

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a patent infringement claim against Visa U.S.A. regarding prepaid card products;

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three civil investigative demands issued by the Antitrust Division of the DOJ to Visa U.S.A., concerning (i) Visa U.S.A.’s agreements with financial institutions that issue Visa debit cards, (ii) termination and waiver provisions in certain Visa U.S.A. issuer agreements, and (iii) certain Visa U.S.A. rules relating to merchant acceptance practices; and

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a putative class action against Visa U.S.A. claiming unjust enrichment and/or intentional misrepresentation in connection with alleged fees assessed on the state tax portion of sales transactions.

Private plaintiffs often seek class action certification in cases against us, particularly in cases involving merchants and consumers, due to the size and scope of our business and the large number of parties that are involved in our payment system. Although our retrospective responsibility plan is intended to address potential monetary liabilities arising from the covered litigation as described in Note 5—Retrospective Responsibility Plan and Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report, the plan does not cover other litigation that we currently face, and will not cover litigation, including state court litigation, that we may face in the future, except for cases that include claims for damages relating to the period prior to our initial public offering that are transferred for pre-trial proceedings or otherwise included in the interchange litigation. We cannot predict whether or to what extent we will be subject to litigation liability that is not covered by our retrospective responsibility plan. If we are unsuccessful in our defense against any of the proceedings described above or in any future proceedings, we may be forced to pay substantial damages and/or change our business practices or our pricing structure, any of which could have a material adverse effect on our revenues, operating results, prospects for future growth and overall business.

We have received, and we may in the future receive, notices or inquiries from other companies suggesting that we may be infringing a pre-existing patent or that we need to license use of their patents to avoid infringement. Such notices may, among other things, threaten litigation against us. Holders of patents may pursue claims against us in the future if they believe their patents are being infringed by our product or service offerings. Based on our experience with such claims to date, we do not believe that any such claims would prevent us from continuing to operate our payments system or market any of our significant core products and services in substantially the same or equivalent manner as we have to date.

Limitations on our business and other penalties resulting from litigation or litigation settlements may materially and adversely affect our revenues and profitability.

Certain limitations have been placed on our business in recent years as a result of litigation and litigation settlements. For example, as a result of the June 2003 settlement of a U.S. merchant lawsuit against Visa U.S.A., merchants are able to reject Visa consumer debit cards in the United States while still accepting other Visa-branded cards, and vice versa. In addition, following the final judgment entered in the litigation, the DOJ brought against Visa U.S.A. and Visa International in 1998, as of October 2004, members of Visa U.S.A. may issue certain competing payment cards. Since this final judgment, several members of Visa U.S.A. have begun to issue, or have announced that they will issue, American Express or Discover-branded cards. See Note 23—Legal Matters to our consolidated financial statements included in Item 8 of this report.

In addition, pursuant to a court order, certain Visa U.S.A. debit issuers may be able to terminate some parts of their agreements with us. Visa U.S.A.’s bylaws provided that a settlement service fee was to be paid by certain Visa U.S.A. members that shifted a substantial portion of their offline debit card volume to another debit brand unless that shift was to the American Express or Discover brands. In June 2007, a federal court ruled that the settlement service fee violated the final judgment entered in the case the DOJ brought against Visa U.S.A., Visa International and MasterCard in 1998. See Note 23—Legal Matters to our consolidated financial statements included in Item 8 of this report. As a remedy, the court ordered Visa U.S.A. to repeal the settlement service fee bylaw. Further, any Visa U.S.A. debit issuer subject to the settlement service fee prior to its repeal that entered into an agreement with Visa U.S.A. that includes offline debit issuance on or after June 20, 2003, is now permitted to terminate that agreement, provided that the issuer has entered into an agreement to issue

MasterCard-branded debit cards and has repaid to Visa U.S.A. any unearned benefits or financial incentives under its Visa U.S.A. agreement. The settlement service fee bylaw was rescinded as of the effective date of the order. See Note 23—Legal Matters to our consolidated financial statements included in Item 8 in this report.

The developments discussed above and any future limitations on our business resulting from settlements of, or judgments in, pending or potential litigation could limit the fees we charge and reduce our payments volume, which could materially and adversely affect our revenues, operating results, prospects for future growth and overall business.

If we are partially or wholly unable to realize the benefit of our deferred tax assets related to our litigation expenses incurred in connection with the covered litigation, our financial results and cash flows may be materially and adversely affected.

Our fiscal 2008 statement of operations reflects a litigation provision of $1.5 billion including an additional provision of $1.1 billion related to settlement of the Discover litigation and management’s liability estimate for other matters under the guidelines of SFAS No. 5. For tax purposes, the deduction related to these matters is deferred until the payments are made and thus the Company established deferred tax assets of $857 million at September 30, 2008 related to these and other litigation payments, which is net of a reserve to reflect our best estimate of the amount of the benefit to be realized. Although we believe that the estimates and judgments we made in establishing our deferred tax asset and related reserves are reasonable, some or all of these judgments are subject to review by the taxing authorities. If one or more of the taxing authorities were to successfully challenge our right to realize some or all of the tax benefit we have recorded and we were unable to realize this benefit, it could have a material and adverse effect on our financial results and cash flows.

The payments industry is the subject of increasing global regulatory focus, which may result in costly new compliance burdens being imposed on us and our customers and lead to increased costs and decreased payments volume and revenues.

We and our customers are subject to regulations that affect the payments industry in many countries in which our cards are used. Regulation of the payments industry has increased significantly in recent years. Examples of such regulation include:

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Anti-Money Laundering Regulation. Most jurisdictions in which we and our customers operate have implemented, amended or have pending anti-money laundering regulations, such as the U.S.A. PATRIOT Act, which requires the creation and implementation of comprehensive anti-money laundering programs.

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U.S. Treasury Office of Foreign Assets Control Regulation. Visa U.S.A. and Visa International are subject to regulations imposed by the U.S. Treasury Office of Foreign Assets Control, or OFAC. OFAC restricts financial dealings with Cuba, Iran, Myanmar and Sudan, as well as financial dealings with certain restricted parties, such as identified money laundering fronts for terrorists or narcotics traffickers. While we prohibit financial institutions that are domiciled in those countries or are restricted parties from being Visa members, many Visa International members are non-U.S. financial institutions, and thus are not subject to OFAC restrictions. Accordingly, our payments system may be used for transactions in or involving countries or parties subject to OFAC-administered sanctions.

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Regulation of the Price of Credit. In recent years, legislation, regulations or other legal requirements affecting credit cards have been adopted in a number of the jurisdictions in which our cards are used. For example, in the United States, Congress and the federal

banking agencies have increased their scrutiny of the disclosure and billing practices of credit card issuers. The Federal Reserve Board has proposed significant changes to Regulation AA and Z, under the Federal Truth in Lending Act, which, if implemented, could have a significant affect on the advertising, disclosure and billing practices of card issuers. Proposed or other changes to the laws and or regulations affecting credit card operations and pricing could increase the costs of card issuance and/or decrease the flexibility of card issuers to charge interest rates and fees on credit card accounts. Any such unfavorable regulation of the practices of card issuers could result in a decrease in our payments volume and revenues.

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Regulation of Internet Transactions. Many jurisdictions in which we and our customers operate are considering, or are expected to consider, legislation concerning Internet transactions, and in particular with regard to choice of law, the legality of certain e-commerce transactions, the collection of applicable taxes and copyright and trademark infringement. Such legislation may make it less desirable or more costly to complete Internet transactions using our cards.

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Safety and Soundness Regulation. In recent years, federal banking regulators in the United States have adopted a series of regulatory measures intended to require more conservative accounting, greater risk management and higher capital requirements for bank credit card activities, which may make becoming an issuer of our cards less attractive.

Increased regulatory focus in connection with the matters discussed above may increase our costs, which could materially and adversely affect our financial performance. Similarly, increased regulatory focus on our customers may cause a reduction in payments volume, which could materially adversely affect our revenues, operating results, prospects for future growth and overall business.

Existing and proposed regulation in the areas of consumer privacy and data use and security could decrease the number of payment cards issued, our payments volume and revenues.

We and our customers are subject to regulations related to privacy and data use and security in the jurisdictions in which we do business, and we could be adversely affected by these regulations. For example, in the United States, we and our customers are subject to the banking regulators’ information safeguard rules and the Federal Trade Commission’s rules under the Gramm-Leach-Bliley Act. The rules require that we and our customers develop, implement and maintain written, comprehensive information security programs containing safeguards that are appropriate to our size and complexity, the nature and scope of our activities, and the sensitivity of any customer information at issue.

In recent years, there has been heightened legislative and regulatory focus on data security, including requiring consumer notification in the event of a data breach. In the United States, a number of bills have been introduced in Congress and there have been several Congressional hearings to address these issues. Congress is considering data security/data breach legislation which, if implemented, could affect our customers and us. In addition, a number of U.S. states have enacted security breach legislation requiring varying levels of consumer notification in the event of a security breach, and several other states are considering similar legislation.

Regulation of privacy, data use and security may materially increase our costs and our customers’ costs and may decrease the number of our cards that our customers issue, which could materially and adversely affect our profitability. Our failure, or the failure of our customers, to comply with the privacy and data use and security laws and regulations to which we are subject could result in fines, sanctions and damage to our global reputation and our brand.

Government actions may prevent us from competing effectively against providers of domestic payments services in certain countries, which could adversely affect our ability to maintain or increase our revenues.

Governments in certain countries have acted, or could act, to provide resources or protection to selected national payment card providers or national payment processing providers to support domestic competitors or to displace us from, prevent us from entering into, or substantially restrict us from participating in, particular geographies. For example, our customers in China are not permitted to issue our cards for domestic use in China. Governments in certain other countries have considered similar restrictions from time to time. Our efforts to effect change in countries where our access to the domestic payments segment is limited may not be successful, which could adversely affect our ability to maintain or increase our revenues and extend our global brand.

If government regulators determine that we are a systemically important payments system, we may have to change our settlement procedures or other operations, which could make it more costly to operate our business and reduce our operational flexibility.

A number of international initiatives are underway to maintain financial stability by strengthening financial infrastructure. The Committee on Payment and Settlement Systems of the central banks of the Group of Ten countries has developed a set of core principles for “systemically important payment systems.” Government regulators in the United States or elsewhere may determine that we are a “systemically important payments system” and impose settlement risk management requirements on us, including new settlement procedures or other operational rules to address credit and operational risks or new criteria for member participation and merchant access to our payments system. Any of these developments could make it more costly to operate our business.

Our framework agreement with Visa Europe includes indemnity obligations that could expose us to significant liabilities.

Under our framework agreement with Visa Europe, we are required to indemnify Visa Europe for losses resulting from any claims in the United States or anywhere else outside of Visa Europe’s region arising from our or their activities that relate to our payments business or the payments business of Visa Europe. This obligation applies whether or not we or any of our related parties or agents participated in the actions that gave rise to such claims. Such an obligation could expose us to significant liabilities for activities over which we have little or no control. These liabilities would not be covered by our retrospective responsibility plan.

Business Risks

We face intense competitive pressure on customer pricing, which may materially and adversely affect our revenues and profitability.

We generate revenues from fees we charge our customers that are based on payments volume, transaction messages processed and various other services we provide. In order to increase payments volume, enter new market segments and expand our card base, we offer incentives to customers, such as up-front cash payments, fee discounts, credits, performance-based growth incentives, marketing support payments and other support, such as marketing consulting and market research studies. Over the past several years, we have increased our use of incentives such as up-front cash payments and fee discounts in many countries, including the United States. In order to stay competitive, we may have to continue to increase our use of incentives. Such pricing pressure may make the provision of certain products and services less profitable or unprofitable and materially and adversely affect our operating revenues and profitability. To the extent that we continue to increase incentives to our customers, we

will need to further increase payments volume or the amount of services we provide in order to benefit incrementally from such arrangements and to increase revenues and profit, and we may not be successful in doing so. In addition, we enter into long-term contracts with certain customers, and continued pressure on fees could prevent us from entering into such agreements in the future on terms that we consider favorable or may require us to modify existing agreements in order to maintain relationships. Increased pricing pressure also enhances the importance of cost containment and productivity initiatives in areas other than those relating to customer incentives, and we may not succeed in these efforts.

Our operating results may suffer because of intense competition in the global payments industry.

The global payments industry is intensely competitive. Our payment programs compete against all forms of payment, including cash, checks and electronic transactions such as wire transfers and automated clearing house payments. In addition, our payment programs compete against the card- based payments systems of our competitors, such as MasterCard, American Express, Discover and private-label cards issued by merchants.

Some of our competitors may develop substantially greater financial and other resources than we have, may offer a wider range of programs and services than we offer, may use more effective advertising and marketing strategies to achieve broader brand recognition or merchant acceptance than we have or may develop better security solutions or more favorable pricing arrangements. Our competitors may also introduce more innovative programs and services than ours.

Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative payments systems, operate closed-loop payments systems with direct connections to both merchants and consumers, without involving intermediaries. These competitors seek to derive competitive advantages from their business models. For example, operators of closed-loop payments systems tend to have greater control over consumer and merchant customer service than operators of open-loop multi-party payments systems such as ours, in which we must rely on our issuing and acquiring financial institution customers. In addition, these competitors have not attracted the same level of legal or regulatory scrutiny of their pricing and business practices as have operators of open-loop multi-party payments systems such as ours.

We also expect that there may be changes in the competitive landscape in the future, including:

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Competitors, customers and other industry participants may develop products that compete with or replace value-added services we currently provide to support our transaction processing. For example, in recent years some of our competitors and members have begun to compete with our currency conversion services by providing dynamic currency conversion services. Dynamic currency conversion is a service offered or facilitated by a merchant or processor that allows a cardholder to choose to have a transaction converted from the merchant’s currency into the cardholder’s billing currency at the point of sale in real-time, thereby bypassing our currency conversion processes. Dynamic currency conversion services could, if significant numbers of cardholders choose to use them, replace our own currency conversion processing services or could force us to change our pricing or practices for these services. If we process fewer transactions or are forced to change our pricing or practices for our currency conversion processing because of competing dynamic currency conversion services or otherwise, our revenues may be materially and adversely affected.

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Parties that process our transactions in certain countries may try to eliminate our position in the payments value chain. For example, merchants could process transactions directly with issuers, or processors could process transactions directly between issuers and acquirers.

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Participants in the payments industry may merge, create joint ventures or form other business combinations that may strengthen their existing business propositions or create new payment services that compete with our services.

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Competition from alternative types of payment services, such as online payment services and services that permit direct debit of consumer checking accounts or ACH payments, may increase.

Our failure to compete effectively against any of the foregoing competitive threats, could materially and adversely affect our revenues, operating results, prospects for future growth and overall business.

Our operating revenues would decline significantly if we lost one or more of our largest customers, which could have a material adverse impact on our business.

A significant portion of our operating revenues are concentrated among our largest customers. Our operating revenues from our five largest customers represented approximately $1.6 billion, or 26%, of our operating revenue for fiscal 2008 and $1.2 billion, or 23%, and $938 million, or 24%, of our pro forma operating revenues for fiscal 2007 and fiscal 2006, respectively. In addition, our largest customer, JPMorgan Chase, accounted for $501 million, or 8%, of our operating revenue for fiscal 2008, and $454 million, or 9%, and $408 million, or 10%, of our pro forma operating revenues for fiscal 2007 and 2006, respectively. Most of our larger customer relationships (including our customer relationships with JPMorgan Chase and Bank of America) are not exclusive and in certain circumstances (including, in some cases, on relatively short notice) may be terminated by our customers. Our customers can reassess their commitments to us at any time in the future and/or develop their own competitive services. Loss of business from any of our largest customers could have a material adverse effect on our business.

Consolidation of the banking industry could result in our losing business and may create pressure on the fees we charge our customers, which may materially and adversely affect our revenues and profitability.

Over the last several years, the banking industry has undergone substantial consolidation, and, based on current economic conditions, we have seen this trend accelerate. We expect this trend to continue in the future. Significant ongoing consolidation in the banking industry may result in one of our largest customers being acquired by an institution that has a strong relationship with a competitor, resulting in a substantial loss of business. In addition, one or more of our customers could seek to merge with or acquire one of our competitors, and any such transaction could have a material adverse effect on our business and prospects. Examples of recent consolidations involve financial institutions with substantial Visa card portfolios: the acquisition of assets of Washington Mutual Bank by JP Morgan Chase, and Wachovia’s plans to merge with Wells Fargo.

Continued consolidation in the banking industry would also reduce the overall number of our customers and potential customers and could increase the bargaining power of our remaining customers and potential customers. This consolidation could lead financial institutions to seek greater pricing discounts or other incentives with us. In addition, consolidation could prompt our existing customers to seek to renegotiate their pricing agreements with us to obtain more favorable terms. We may also be adversely impacted by price compression should one of our financial institution customers absorb another financial institution and qualify for higher volume-based discounts on the combined volumes of the merged business. Pressure on the fees we charge our customers caused by such consolidation could materially and adversely affect our revenues, operating results, prospects for future growth and overall business. In addition, the current economic environment could lead some customers to curtail or postpone near-term investments in growing their card portfolios, limit credit lines, or take other actions which impact adversely the growth of our volume and revenue streams from these customers.

Merchants are pursuing litigation and supporting regulatory proceedings relating to the costs associated with payment card acceptance and are negotiating incentive arrangements, including pricing discounts, all of which may increase our costs and materially and adversely affect our profitability.

We rely in part on merchants and their relationships with our customers to maintain and expand the acceptance of our payment cards. We believe that consolidation in the retail industry is producing a set of larger merchants that are having a significant impact on all participants in the global payments industry. For instance, some large merchants are bringing lawsuits against us with regard to, or advocating regulation of, interchange fees, which may represent a significant cost that merchants pay to accept payment cards. The emphasis merchants are placing on the costs associated with payment card acceptance may lead to additional regulation and litigation, which would not be covered by our retrospective responsibility plan and which could impair our revenues, operating results, prospects for future growth and overall business.

We, along with our customers, negotiate pricing discounts and other incentive arrangements with certain large merchants to increase acceptance of our payment cards. If merchants continue to consolidate, we and our customers may have to increase the incentives provided to certain larger merchants, which could materially and adversely affect our revenues, operating results, prospects for future growth and overall business.

Certain financial institutions have exclusive, or near exclusive, relationships with our competitors to issue payment cards, and these relationships may adversely affect our ability to maintain or increase our revenues.

Certain financial institutions have long-standing exclusive, or near exclusive, relationships with our competitors to issue payment cards, and these relationships may make it difficult or cost-prohibitive for us to do material amounts of business with them in order to increase our revenues. In addition, these financial institutions may be more successful and may grow faster than the financial institutions that primarily issue our cards, which could put us at a competitive disadvantage.

We depend significantly on our relationships with our customers and other third parties to deliver services and manage our payments system. As a result, our success and reputation are significantly dependent on the success of our customers and the quality of the services they provide. If we are unable to maintain those relationships, or if third parties on which we depend fail to deliver services on our behalf, our business may be materially and adversely affected.

We are, and will continue to be, significantly dependent on relationships with our customers and their relationships with cardholders and merchants to support our programs and services. We do not issue cards, extend credit to cardholders or determine the interest rates (if applicable) or other fees charged to cardholders using cards that carry our brands. Each issuer determines these and most other competitive card features. In addition, we do not generally solicit merchants to accept our cards and we do not establish the discount rates that merchants are charged for card acceptance, which are responsibilities of acquirers. As a result, the success of our business significantly depends on the continued success and competitiveness of our customers and the strength of our relationships with them.

Outside of the United States and certain other countries, most domestic (as opposed to cross-border) transactions conducted using our payment cards are authorized, cleared and settled by our customers or other processors without involving our processing systems. Because we do not provide domestic transaction processing services in these countries, do not generally have direct relationships with merchants and never have direct relationships with cardholders, we depend on our close working relationships with our customers to effectively manage the processing of transactions involving our

cards. Our inability to control the end-to-end processing on cards carrying our brands in many countries may put us at a competitive disadvantage by limiting our ability to ensure the quality of the services supporting our brand.

In addition, we depend on third parties to provide various services on our behalf and to the extent that any third party vendors fail to deliver services, our business and reputation could be impaired.

Our brands and reputation are key assets of our business and may be affected by how we are perceived in the marketplace.

Our brands and their attributes are key assets of our business. The ability to attract and retain consumer cardholders and corporate clients to Visa-branded products is highly dependent upon the external perceptions of our company and our industry. Our business may be affected by actions taken by our customers that impact the perception of our brands. From time to time, our customers may take actions that we do not believe to be in the best interests of our brands, such as creditor practices that may be viewed as “predatory,” which may materially and adversely impact our business. Adverse developments with respect to our industry may also, by association, impair our reputation, or result in greater regulatory or legislative scrutiny.

Global economic, political and other conditions may adversely affect trends in consumer spending and cross-border travel, which may materially and adversely impact our revenues, operating results, prospects for future growth and overall business.

The global payments industry depends heavily upon the overall level of consumer, business and government spending. For example, a sustained deterioration in general economic conditions, particularly in the United States and the Asia-Pacific region, where approximately 59% and 17%, respectively, of our operating revenues were generated in fiscal 2008, and 66% and 14%, respectively, of our pro forma revenues were generated for fiscal 2007 and, 71% and 12%, respectively, of our pro forma revenues were generated for fiscal 2006, or increases in interest rates in key countries in which we operate, may adversely affect our financial performance by reducing the number or average purchase amount of transactions involving payment cards carrying our brands. In addition, the current economic environment could lead some customers to curtail or postpone near-term investments in growing their card portfolios, limit credit lines, or take other actions which impact adversely the growth of our volume and revenue streams from these customers. A significant portion of the revenues we earn outside the United States results from cross-border business and leisure travel, which may be adversely affected by world geopolitical, economic and other conditions, including the threat of terrorism and outbreak of diseases, such as SARS and avian flu. In particular, revenues from processing foreign currency transactions for our customers fluctuate with cross-border travel and our customers’ need for transactions to be converted into their base currency. In addition, as we are principally domiciled in the United States, a negative perception of the United States could impact the perception of our company, which could materially and adversely affect our revenues, operating results, prospects for future growth and overall business.

As a guarantor of certain obligations of Visa members, we are exposed to risk of loss or insolvency if any member fails to fund its settlement obligations.

We indemnify Visa members for any settlement loss suffered due to the failure of a member to fund its daily settlement obligations. In certain instances, we may indemnify members even in situations in which a transaction is not processed by our system. This indemnification creates settlement risk for us due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. The term and amount of the indemnification are unlimited.

While we believe that we have sufficient liquidity to cover a settlement failure by any of the largest Visa members, concurrent settlement failures of more than one of our largest members or several of the smaller Visa members, or systemic operational failures that last for more than a single day, may exceed our available resources and could materially and adversely affect our business and financial condition. In addition, even if we have sufficient liquidity to cover a settlement failure, we may not be able to recover the amount of such payment and may therefore be exposed to significant losses, which could materially and adversely affect our results of operations, cash flow and financial condition. Settlement at risk (or exposure) is estimated using the average daily volumes during the quarter multiplied by the estimated number of days to settle, and the total balance for outstanding travelers cheques. Our estimated settlement exposure, after consideration of collateral that we require certain financial institutions to post, amounted to approximately $34.8 billion at October 1, 2008. Some Visa members are composed of groups of financial institutions. Some of these members have elected to limit their responsibility for settlement losses arising from the failure of their constituent financial institutions in exchange for managing their constituent financial institutions in accordance with our credit risk policy. To the extent that any settlement failure resulting from a constituent financial institution exceeds the limits established by our credit risk policy, we would have to absorb the cost of such settlement failure, which could materially and adversely affect our cash flow.

If our transaction processing systems are disrupted or we are unable to process transactions efficiently, our revenues or operating results and the perception of our brands could be materially and adversely affected.

Our transaction processing systems may experience service interruptions or degradation as a result of processing or other technology malfunction, fire, natural disasters, power loss, disruptions in long distance or local telecommunications access, fraud, terrorism or accident. Our visibility in the global payments industry may attract terrorists and hackers to conduct physical or computer-based attacks, leading to an interruption in service, increased costs or the compromise of data security. Additionally, we rely on service providers for the timely transmission of information across our global data network. If a service provider fails to provide the communications capacity or services we require, as a result of natural disaster, operational disruption, terrorism or any other reason, the failure could interrupt our services, adversely affect the perception of our brands’ reliability and materially reduce our revenues or profitability.

If we are not able to keep pace with the rapid technological developments in the payments industry to provide customers, merchants and cardholders with new and innovative payment programs and services, the use of our cards could decline, which could reduce our revenues and income.

The payments industry is subject to rapid and significant technological changes, including continuing developments of technologies in the areas of smart cards, radio frequency and proximity payment devices (such as contactless cards), e-commerce and mobile commerce, among others. We cannot predict the effect of technological changes on our business. We rely in part on third parties, including some of our competitors and potential competitors, for the development of and access to new technologies. We expect that new services and technologies applicable to the payments industry will continue to emerge, and these new services and technologies may be superior to, or render obsolete, the technologies we currently use in our card products and services. In addition, our ability to adopt new services and technologies that we develop may be inhibited by a need for industry-wide standards, by resistance from customers or merchants to such changes or by intellectual property rights of third parties. Our future success will depend, in part, on our ability to develop new technologies and adapt to technological changes and evolving industry standards.

Account data breaches involving card data stored by us or third parties could adversely affect our reputation and revenues.

We and our customers, merchants and other third parties store cardholder account information in connection with our payment cards. In addition, our customers may use third-party processors to process transactions generated by cards carrying our brands. Breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving our cards, reputational damage and lead to claims against us. For example, in January 2007, TJX Companies, Inc., a large retailer with stores in the United States, Canada and the United Kingdom, disclosed a significant security breach in connection with card and account information, which exposed tens of millions of payment cards issued under our brands and our competitors’ brands to fraudulent use. If we are sued in connection with any data security breach, we could be involved in protracted litigation. If unsuccessful in defending such lawsuits, we may be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our revenues and profitability. In addition, any reputational damage resulting from an account data breach at one of our customers, merchants or other third parties could decrease the use and acceptance of our cards, which could have a material adverse impact on our payments volume, revenues and future growth prospects. Finally, any data security breach could result in additional regulation, which could materially increase our costs.

An increase in fraudulent and other illegal activity involving our cards could lead to reputational damage to our brands and could reduce the use and acceptance of our cards.

Criminals are using increasingly sophisticated methods to capture cardholder account information to engage in illegal activities such as fraud and identity theft. As outsourcing and specialization become a more acceptable way of doing business in the payments industry, there are more third parties involved in processing transactions using our cards. If fraud levels involving our cards were to rise, it could lead to reputational damage to our brands, which could reduce the use and acceptance of our cards, or to greater regulation, which could increase our compliance costs.

Visa Europe’s payments system operations are becoming increasingly independent from ours, and if we are unable to maintain seamless interaction of our respective systems, our business and the global perception of the Visa brand could be impaired.

Visa Europe currently has a regionally controlled processing platform. In June 2006, Visa Europe began operating an authorization system that is separate from ours and Visa Europe plans to begin operating a transaction clearing and settlement system that is separate from ours. Because we and Visa Europe have independent processing platforms, interoperability must be maintained. Visa Europe’s authorization system has experienced interruptions in service, and it could experience further interruptions in the future. To the extent that system disruptions occur, it may affect our cardholders who are traveling in Visa Europe’s region and impair our reputation. The increasingly independent payments system operations of Visa Europe could present certain challenges to our business because differences between the two processing systems may make it more difficult to maintain the interoperability of our respective systems. In addition, under the framework agreement, we are restricted from requiring Visa Europe to implement certain changes that we may deem important unless we agree to pay for the implementation costs. Any of the foregoing could result in a loss of payments volume or of customers or could materially increase our costs.

Adverse currency fluctuations could decrease revenues and increase expenses.

We conduct business globally in many foreign currencies, but report our financial results in U.S. dollars. We are therefore exposed to adverse movements in foreign currency exchange rates because depreciation of non-U.S. currencies against the U.S. dollar reduces the U.S. dollar value of the non-

U.S. dollar denominated revenues that we recognize and appreciation of non-U.S. currencies against the U.S. dollar increases the U.S. dollar value of expenses that we incur that are denominated in those foreign currencies. We enter into foreign currency hedging contracts to reduce the effect of adverse changes in the value of a limited number of foreign currencies and for a limited period of time (typically up to one year).

Some of our financial incentives to customers are recorded using estimates of our customers’ performance. Material changes in our customers’ performance compared to our estimates could have a material adverse impact on our results of operations.

In certain instances, we offer our customers financial incentives, which are typically tied to their payments volume or transaction messages processed, often under particular programs. These financial incentives are typically recorded as a reduction of revenues. We generally make estimates of our customers’ performance under these programs (sometimes over several years) in order to derive our estimates of the financial incentives that we will pay them. The reduction of revenues that we record each quarter under volume and support agreements is based on these estimates. Material changes in our customers’ performance compared to estimates could have a material adverse impact on our results of operations. For example, if a customer performs better than expected, we may be required to reduce future period revenues to account for the fact that we did not reduce revenues enough in prior periods. On the other hand, if a customer performs worse than expected, we may conclude that we reduced revenues by too much in previous periods.

We have significant contingent liabilities for settlement payment of all issued and outstanding travelers cheques.

At September 30, 2008, we had approximately $830 million in contingent liabilities for settlement payment of all issued and outstanding travelers cheques. Approximately 35% of these travelers cheques were issued outside of the United States by a single issuer. While these obligations are supported in part by a bank guarantee, if the issuer were to fail to pay, we would be obligated to fund partial settlement of presented travelers cheques.

Risks Related to our Structure and Organization

The recent change to our governance structure could have a material adverse effect on our business relationships with our customers.

Prior to our reorganization in October 2007, a number of Visa’s key members had officers who also served on the boards of directors of Visa U.S.A., Visa International, Visa Canada or the regional boards of directors of the unincorporated regions of Visa AP, Visa LAC and Visa CEMEA. As a result of our reorganization, the regional boards of directors of the unincorporated regions have been eliminated, and the boards of directors of Visa U.S.A. and Visa Canada are now comprised of management and are largely administrative in nature. In addition, although our regions are represented on our board by six of our 17 directors, the holders of our class B and class C common stock are not otherwise entitled to vote in the election of directors. As a result, the role of member-nominated and member-elected directors in our corporate governance has been reduced as a result of the reorganization. These changes could have a detrimental effect on our business relationships with members associated with a particular region. In addition, if a member that had an officer who also served on one of the regional boards of directors does not have an officer who currently serves on our board of directors, our business relationship with that member could suffer. A significant loss of revenues or payments volume attributable to such members could have a material adverse effect on our business.

Our relationship with Visa Europe is governed by our framework agreement, which gives Visa Europe very broad rights to operate the Visa business in Visa Europe’s region. We have limited ability to control their operations and limited recourse in the event of a breach by Visa Europe.

Historically, Visa Europe had been subject to the same global operating rules as Visa U.S.A., Visa International and Visa Canada. These global operating rules regulate, among other things, interoperability of payment processing, brand maintenance and investment, standards for products and services, risk management, disputes between members and acceptance standards for merchants. After the reorganization, Visa Europe, unlike Visa U.S.A., Visa International and Visa Canada, did not become our subsidiary. As a result, Visa Europe is no longer subject to the same global operating rules as our subsidiaries and customers.

Our relationship with Visa Europe is now governed by a framework agreement and a subset of operating rules that we have agreed to with Visa Europe and that we have limited ability to change in the future. Although the agreement seeks to ensure that Visa Europe operates in a manner that is acceptable to us, the contractual arrangement is untested and may not be effective in achieving this result. Visa Europe is responsible for designing its own plans to ensure that it is in compliance with the global rules, interoperability, integrity of the system and trademark usage. While we have the right to request changes to these plans, we have no right to audit their compliance with these requirements or examine their books and records in connection with the framework agreement or the put option. The agreement provides Visa Europe with very broad latitude to operate the Visa business and use our brands and technology within Visa Europe’s region and provides us limited controls over the operation of the Visa business in their region. Visa Europe is not required to spend any minimum amount promoting and building the Visa brand in its region, and the strength of the Visa global brand is contingent, in part, on the efforts of Visa Europe to maintain product and service recognition and quality in Europe. Visa Europe may develop, among other things, new brands, payment processing characteristics, products, services, risk management standards, processes for resolving disputes among its members or merchant acceptance profiles that are inconsistent with the operating rules that we apply in the rest of the world.

If we want to change a global rule or require Visa Europe to implement certain changes that would not have a positive return for Visa Europe and its members, then Visa Europe is not required to implement such rule or change unless we agree to pay for the implementation costs and expenses that Visa Europe and its members will incur as a consequence of the implementation to the extent necessary to return Visa Europe and its members to a neutral financial condition. We cannot terminate the framework agreement even in the event of Visa Europe’s material uncured breach, and we can only exercise our call right to purchase Visa Europe under extremely limited circumstances. Our remedies under this agreement, if Visa Europe fails to meet its obligations, are limited. Our inability to terminate and other features of the licenses granted under the agreement may also raise issues concerning the characterization of the licenses for purposes of determining our tax treatment with respect to entering into the licenses and receiving payments thereunder. Any inconsistency in the payment processing services and products that we are able to provide could negatively affect cardholders from Visa Europe using cards in our regions or our cardholders using cards in Visa Europe’s region.

We have granted to Visa Europe the right to require us to purchase all of the outstanding shares of Visa Europe’s capital stock. If Visa Europe exercises this option, we will incur a substantial financial obligation. In addition, we are required to record any change in the fair value of the put option on a quarterly basis, which will impact our net income.

We have granted Visa Europe a put option, which, if exercised, will require us to purchase all of the outstanding shares of capital stock of Visa Europe from its members. Visa Europe may exercise the put option at any time following March 25, 2009. The purchase price of the Visa Europe shares

under the put option is based upon a formula that, subject to certain adjustments, applies the 12-month forward price-to-earnings multiple applicable to our common stock at the time the option is exercised to Visa Europe’s projected sustainable adjusted net operating income for the same 12-month period. Upon exercise of the put option, we will be obligated, subject only to regulatory approvals and other limited conditions, to pay the purchase price within 285 days in cash or, at our option, with a combination of cash and shares of our publicly tradable common stock. The portion of the purchase price we will be able to pay in stock will initially be limited to the percentage of our class C (series I) common stock that at the settlement date remains subject to the transfer restrictions. We must pay the purchase price in cash, however, if the settlement of the put option occurs after March 25, 2011.

We will incur a substantial financial obligation if Visa Europe exercises the put option. The amount of that potential obligation could vary dramatically based on, among other things, the 12-month projected sustainable net operating income of Visa Europe, the allocation of cost synergies, the trading price of our class A common stock, and our 12-month forward price-to-earnings multiple, in each case, as determined at the time the put option is exercised. We are not currently able to estimate the amount of this obligation due to the nature and number of factors involved and the range of important assumptions that would be required. However, depending upon Visa Europe’s level of sustainable profitability and/or our 12-month forward price-to-earnings multiple at the time of any exercise of the option, the amount of this obligation could be several billion dollars or more. We may need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering, in order to meet our obligation. This financing may not be available to us in a sufficient amount within the required 285-day period or on terms that we deem to be reasonable. The payment of part of the exercise price in stock would dilute the ownership interests of our stockholders. Moreover, the acquisition of Visa Europe following an exercise of the put option would require us to integrate the operations of Visa Europe into our business, which could divert the time and attention of senior management.

The fair value of the put option at September 30, 2008 was $346 million. We are required to record any change in the fair value of the put option on a quarterly basis. These adjustments will be recorded through our consolidated statements of operations, which will therefore impact our reported net income and earnings per share. Such quarterly adjustments and their resulting impact on our reported statements of operations could be significant. The existence of these charges could adversely affect our ability to raise capital and/or the price at which we can raise capital. See Item 9B—Other Information.

Our reorganization requires us to make significant changes to our culture and business operations. If we fail to make this transition successfully, our business could be materially and adversely affected.

Our reorganization has required broad and significant changes to our culture and operations. Historically, the primary goal of Visa U.S.A., Visa International and Visa Canada has not been to maximize profit for these entities, but rather to deliver benefits to their members and enhance member opportunity and revenue. As a result of the reorganization, we now must operate our business in a way that maximizes long-term stockholder value. Many of our employees have limited experience operating in a profit-maximizing business environment.

In addition, the Visa enterprise historically has been operated under a decentralized regional structure, and each region has had substantial autonomy in its own business strategies and decisions. Our reorganization has resulted in a more centralized corporate governance structure in which our board of directors exerts centralized management control. We face significant challenges integrating the operations of the different regions. We may also be unable to retain and attract key employees, and we may not realize the cost savings and operational efficiencies that we currently expect. This transition will be subject to risks, expenses and difficulties that we cannot predict and may not be capable of handling in an efficient and timely manner.

Any acquisitions that we make could disrupt our business and harm our financial condition.

We may make strategic acquisitions of complementary businesses, products or technologies. If so, we may not be able to successfully finance or integrate any such businesses, products or technologies. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations. We may spend time and money on projects that do not increase our revenues. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders. While we from time to time evaluate potential acquisitions of businesses, products and technologies, and anticipate continuing to make these evaluations, we have no present understandings, commitments or agreements with respect to any material acquisitions.

Future sales of our class A common stock could depress the market price of our class A common stock.

The market price of our class A common stock could decline as a result of sales of a large number of shares in the public market or the perception that such sales could occur. These sales, or the perception that such sales may occur, could depress the market price of our class A common stock and might make it more difficult for us or holders of our common stock to sell equity securities in the future.

As of October 31, 2008, we had 446,503,244 outstanding shares of class A common stock, not including 1,247,719 shares of restricted stock that we granted to certain of our directors and employees. Except for any shares acquired by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, any of these shares may be resold immediately in the public market.

If the litigation committee so requests in order to increase the size of the escrow account, we will conduct follow-on offerings of our class A common stock.

In addition, as of October 31, 2008, our existing stockholders held 245,513,385 shares of class B common stock (excludes class B common stock held by Visa U.S.A.) and 151,596,308 shares of class C common stock (excludes class C common stock held by Visa International Service Association). Subject to limited exceptions, the class B common stock is not transferable until March 25, 2011 or the date on which all of the covered litigation has been finally resolved. Subject to limited exceptions, the class C common stock is not transferable until March 25, 2011. After the termination of these transfer restrictions, the class B and class C common stock will only be convertible into class A common stock upon transfer to a person that was not, immediately after the October 2007 reorganization, a Visa member. Upon such transfer, each share of class B or class C common stock will automatically convert into class A common stock based on the applicable conversion rate in effect at the time of such transfer. All of the class A common stock issuable upon such conversion will be freely tradable without restriction or registration under the Securities Act by persons other than our affiliates.

The market price of our common stock may be volatile.

Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as the factors listed below, could affect the market price of our common stock:

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quarterly variations in our results of operations or the results of operations of our competitors or those of Visa Europe;

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changes in earning estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earning estimates;

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the announcement of new products or service enhancements by us or our competitors;

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announcements related to litigation;

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potential acquisitions by us of other companies, including the exercise of the put option requiring us to purchase all of the outstanding shares of capital stock of Visa Europe from its members;

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developments in our industry; and

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general economic, market and political conditions and other factors unrelated to our operating performance or the operating performance of our competitors.

The U.S. Internal Revenue Service may treat a portion of our common stock received by a member of Visa International or Visa U.S.A. as taxable income.

Based on the opinion of our special tax counsel, we believe that, subject to the assumptions, qualifications and limitations contained in such opinion, we, the members of Visa International and the members of Visa U.S.A. will not recognize any gain or loss for U.S. federal income tax purposes in connection with the reorganization and the true-up, except that, as to a portion of any Visa Inc. stock received in connection with the true-up, a stockholder of Visa Inc. may recognize imputed interest income. If a stockholder is not a United States person for U.S. federal income tax purposes, we may be required to withhold U.S. federal income tax at a rate of 30% of the imputed interest or, if applicable, at a lower treaty rate.

Notwithstanding the foregoing, the opinion of our special tax counsel does not apply to the extent that the fair market value of our common stock received by a member of Visa International or by a member of Visa U.S.A. pursuant to the reorganization and the true-up (whether received on the date of closing of the reorganization or thereafter) is different from the fair market value of such member’s equity interest in Visa International or Visa U.S.A., as the case may be, immediately before the commencement of the reorganization. Our special tax counsel is unable to opine as to such difference because, in transactions similar to the reorganization and the true-up, treatment as an exchange described in Section 351 of the Internal Revenue Code of 1986, as amended, generally applies only to the extent that a taxpayer transfers property to a corporation in exchange for stock having the same fair market value. The IRS might therefore take the position that the difference (whether received on the date of closing of the reorganization or thereafter), in the case of an excess of value received over value surrendered, should not be treated for U.S. federal income tax purposes as having been received in exchange for property. As a result, a member of Visa International or a member of Visa U.S.A. could be required to recognize income, but only to the extent of the excess or shortfall of value received over value surrendered.

The shares of class B common stock that are retained by members of Visa U.S.A. will be subject to dilution as a result of the establishment of the escrow account and any follow-on offerings of our class A common stock, the proceeds of which will be used to fund additional amounts into the escrow account necessary to resolve the covered litigation.

The shares of class B common stock that are retained by Visa U.S.A. members and that are not redeemed out of the proceeds of the initial public offering are subject to dilution to the extent of the initial amount of the escrow account. This dilution of the shares of class B common stock will be accomplished through an adjustment to the conversion rate of the shares of class B common stock. These shares will not be able to be converted into shares of class A common stock or, subject to limited exceptions, transferred until the later of March 25, 2011 or the final resolution of the covered litigation. The shares of class C common stock, which are held by members other than the Visa U.S.A. members, are not subject to this dilutive adjustment. At the request of the litigation committee, we expect to conduct follow-on offerings of our shares of class A common stock, which we refer to as loss shares, if the litigation committee deems it desirable to increase the escrow account. The proceeds from the sale of loss shares would then be deposited in the escrow account, and the shares of class B common stock would be subject to additional dilution to the extent of the loss shares through a

concurrent adjustment to the conversion rate of the class B common stock. Because the voting power of the class B and class C common stock, and the entitlement of the holders of class B common stock and class C common stock to participate in dividends or distributions upon a liquidation or winding up of Visa Inc. is determined on an as-converted basis, based upon the number of shares of class A common stock into which the class B or class C common stock would be converted at the time of the vote, dividend or distribution, as applicable, the adjustment to the conversion rate applicable to the class B common stock upon the issuance of loss shares will result in a dilution of the voting power of the class B common stock and the entitlement of holders of class B common stock to participate in dividends and distributions upon a liquidation of Visa Inc.

If funds are released from escrow after the resolution of the litigation covered by our retrospective responsibility plan, holders of our class A common stock will suffer dilution as a result of a favorable adjustment to the conversion rate of our class B common stock.

Our retrospective responsibility plan provides that any amounts remaining in the escrow account after the date on which all of the covered litigation is resolved will be released back to us and the conversion rate of the class B common stock then outstanding will be adjusted in favor of the holders of the class B common stock through a formula based on the released escrow amount and the market price of our class A common stock. If any funds remain in the escrow account and are released back to us, the resulting adjustment in the conversion rate of the class B common stock will result in each share of class B common stock then outstanding becoming convertible into an increased number of shares of class A common stock, which in turn will result in dilution of the interest in Visa Inc. held by the holders of class A common stock. The amount of such dilution will depend on the amount, if any, of the funds released from the escrow account and the market price of our class A common stock at the time such funds are released.

Certain adjustments to the conversion rate of class B common stock in connection with the additional funding of the escrow account from which settlements of, or judgments in, the covered litigation will be payable may give rise to taxable deemed dividends for holders of class A common stock.

At the request of the litigation committee, we will consummate one or more follow-on offerings of class A common stock, the net proceeds from which will be added to the escrow account from which settlements of, or judgments in, the covered litigation will be payable. In that case, there will be one or more adjustments, which we refer to as the potential adjustments, to the conversion rate of the class B common stock, which will result in a reduction in the total number of shares of class A common stock into which the class B common stock may be converted (when compared to the number of shares of class A common stock into which the class B common stock was convertible after any prior potential adjustment).

The potential adjustments should not give rise to deemed distributions under Section 305 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, to holders of our class A common stock on the grounds that such adjustments are not within the purview of Section 305 of the Code, because, for example, they are adjustments of the price paid by us to acquire property in our reorganization and, thus, are not, and do not have the effect of, distributions with respect to our class A common stock. There can be no assurance, however, that the IRS will not assert that any potential adjustments have the result of an increase in the proportionate interest in our earnings and profits or assets to holders of our class A common stock and, accordingly, should be treated as giving rise to deemed distributions under Section 305 of the Code with respect to such class A common stock. If such a position were successfully asserted, a holder of our class A common stock would, for U.S. federal income tax purposes, be deemed to receive a distribution from us in an amount equal to the value of the increase in such holder’s proportionate interest in our earnings and profits or assets

reflected in such holder’s class A common stock that would result from the decrease in the total number of shares of class A common stock into which the class B common stock may be converted after any potential adjustments, as the case may be. Such a deemed distribution would be characterized as a dividend to such holder, for U.S. federal income tax purposes, to the extent the deemed distribution is treated as paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any remaining, portion of such a deemed distribution will be treated first as a tax-free return of such holder’s adjusted tax basis in our class A common stock and thereafter as gain. We will take the position that the potential adjustments do not give rise to deemed distributions under Section 305 of the Code to holders of our class A common stock.

The trading market for our class A common stock could be adversely affected because provisions of our amended and restated certificate of incorporation may limit the market-making ability of broker-dealers that are affiliated with Visa members.

Our amended and restated certificate of incorporation provides that no person that is a Visa member or affiliated with a Visa member will be permitted to beneficially own more than 5% of the aggregate outstanding class A common stock or certain other voting stock (or securities convertible or exchangeable into such stock) at any time, subject to a limited number of exceptions. This restriction may limit the ability of a broker-dealer that is affiliated with a Visa member to act as a market-maker in our class A common stock, although this restriction will not prevent such a broker-dealer from executing trades on an agency basis on behalf of third parties. This restriction could adversely affect the trading market for the class A common stock.

All shares of class A common stock acquired by a Visa member, an affiliate of a Visa member or a similar person will be converted automatically into class C common stock and, as a result, will generally not be transferable until March 25, 2011 and will lose substantially all its voting rights.

All shares of common stock acquired by a Visa member, an affiliate of a Visa member or any person that is an operator, member or licensee of any general purpose payment card system that competes with us, or any affiliate of such a person, in each case to the extent, acting as a principal investor, will be converted automatically into class C common stock. Under the terms of our amended and restated certificate of incorporation, class C common stock is not transferable (subject to exceptions, including transfers to other class C stockholders) until March 25, 2011, unless our board makes an exception to this transfer restriction. After this date has passed, the class C common stock will be convertible into class A common stock only if transferred to a person that was not, immediately after our October 2007 reorganization, a Visa member, an affiliate of a Visa member or any person that is an operator, member or licensee of any general purpose payment card system that competes with the Company, or any affiliate of such a person. Upon such transfer, each share of class C common stock will convert into one share of class A common stock.

Until March 25, 2011, six of our 17 directors will be individuals elected or nominated by our regions. In addition, holders of our class B common stock and class C common stock have voting rights concerning certain significant corporate transactions, and their interests in our business may be different than those of holders of our class A common stock.

Our amended and restated certificate of incorporation provides that, until March 25, 2011, six of our 17 directors will be individuals elected or nominated by our regions. Although holders of class B and class C common stock do not have any right to vote on those matters on which stockholders generally are entitled to vote, such holders have the right to cast a number of votes equal to the number of shares of class B common stock or class C common stock, as applicable multiplied by the

applicable conversion rate on certain significant transactions enumerated in the amended and restated certificate of incorporation, such as a proposed consolidation or merger, a decision to exit our core payments business or any other vote required by law. The holders of the class B common stock and class C common stock may not have the same incentive to approve a corporate action that may be favorable to the holders of class A common stock or their interests may otherwise conflict with those of the holders of class A common stock.

Anti-takeover provisions in our governing documents and Delaware law could delay or prevent entirely a takeover attempt or a change in control.

Provisions contained in our amended and restated certificate of incorporation, bylaws and Delaware law could delay or prevent a merger or acquisition that our stockholders consider favorable. Except for limited exceptions, no person may own more than 15% of our total outstanding shares on an as-converted basis or more than 15% of any class or series of our common stock, unless our board of directors approves the acquisition of such shares. In addition, except for common stock issued to a member in connection with the reorganization, or shares issuable on conversion of such common stock, shares held by a member, a competitor, an affiliate or member of a competitor may not exceed 5% of any class of common stock. In addition:

•

our board of directors is divided into three classes, with approximately one-third of our directors elected each year;

•

six directors will be individuals elected or nominated by our regions until March 25, 2011;

•

our independent directors may be removed only upon the affirmative vote of at least 80% of the outstanding shares of class A common stock;

•

our stockholders are not entitled to the right to cumulate votes in the election of directors;

•

holders of our class A common stock are not entitled to act by written consent;

•

our stockholders must provide timely notice for any stockholder proposals and director nominations;

•

we have adopted provisions that eliminate the personal liability of directors for monetary damages for actions taken as a director, with certain exceptions;

•

in addition to certain class votes, a vote of 66²/3 % or more of all of the outstanding shares of our common stock then entitled to vote is required to amend certain sections of our amended and restated certificate of incorporation; and

•

we are governed by Section 203 of the General Corporation Law of the State of Delaware, or DGCL, as amended from time to time, which provides that a corporation shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, except under certain circumstances including upon receipt of prior board approval.

Our ability to pay regular dividends to holders of our common stock in the future is subject to the discretion of our board of directors and will be limited by our ability to generate sufficient earnings and cash flows.

In August 2008, we commenced payment of cash dividends on a quarterly basis on our class A, class B and class C common stock. Any future payment of dividends will be dependent upon our ability to generate earnings and cash flows. However, sufficient cash may not be available to pay such dividends. Payment of future dividends, if any, would be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, capital requirements, covenants in our debt instruments and other factors that our board of directors deems

relevant. Furthermore, no dividend may be declared or paid on any class or series of common stock unless an equivalent dividend is contemporaneously declared and paid on each other class and series of common stock. If, as a consequence of these various factors, we are unable to generate sufficient earnings and cash flows from our business, we may not be able to make payments of dividends on our common stock.

ITEM 1B.

Unresolved Staff Comments

Not applicable.

ITEM 2.

Properties

At September 30, 2008, we owned and leased approximately 2.2 million square feet of office and processing center space in 30 countries around the world, of which approximately 1.4 million square feet are owned and the remaining 800,000 square feet are leased. Our corporate headquarters is located in the San Francisco Bay Area and consists of four buildings that we own, totaling 940,000 square feet. We also own a 167,000 square foot office building in Miami, which serves as our LAC regional headquarters.

In addition, we operate three processing centers: a processing center and an office facility in Colorado totaling 268,000 square feet, which we own, a processing center and office facility in Virginia, totaling 144,000 square feet, which we lease, and an 13,000 square foot leased facility in Japan. In July 2006, we approved a plan to replace our leased processing center in Virginia by building a new 366,000 square foot processing center and a new 116,000 square foot office building in the eastern United States. Construction of these buildings is expected to continue through fiscal 2009 with the data center becoming fully operational in fiscal 2010 after the migration from our current east coast processing center.

We believe that these facilities are suitable and adequate to support our business needs.

ITEM 3.

Legal Proceedings

Refer to Note 23 to the consolidated financial statements included in Item 8 of this report.

ITEM 4.

Submission of Matters to a Vote of Security Holders

Not Applicable.

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our Class A common stock commenced trading on the New York Stock Exchange under the symbol “V” on March 19, 2008. The following table sets forth the intra-day high and low sale prices for our class A common stock from March 19, 2008 and for the two full quarterly periods in 2008 following the Company’s IPO, as reported by the New York Stock Exchange. At September 30, 2008, the Company had 295 stockholders of record for its class A common stock. We believe that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of our class A common stock is held in “street name” by brokers.


2008	High		Low
Second Quarter (from March 19, 2008)	$	69.00	$	55.00
Third Quarter		89.84		60.31
Fourth Quarter		82.40		55.89

There is currently no established public trading market for our class B common stock, class C (series I), class C (series II), class C (series III) or class C (series IV) common stock. There were approximately 1,781 and 1,101 holders of record of our class B common stock and class C (series I) common stock, respectively, as of September 30, 2008. Visa Europe Limited is the holder of record of all the issued and outstanding shares of class C (series II) and class C (series III) common stock. Visa Europe Services was the holder of record of all the issued and outstanding shares of our class C (series IV) common stock. In October 2008, we redeemed all of the class C (series II) shares and a portion of the class C (series III) shares held by Visa Europe Limited and all remaining shares of class C (series III) common stock and all shares of class C (series IV) common stock automatically converted into class C (series I) common stock on a one-to-one basis.

Dividend Declaration and Policy

On August 29, 2008, we paid quarterly cash dividends, which was declared on June 11, 2008 by our board of directors of $0.105 per share on our class A common stock (determined in the case of class B and class C common stock on an “as-converted” basis) to all holders of record of our class A common stock, class B common stock and class C common stock for the third quarter of 2008. However, the declaration and payment of future dividends is at the sole discretion of our board of directors after taking into account various factors, including our financial condition, settlement guarantees, operating results, available cash and current and anticipated cash needs. Prior to the IPO, we did not pay any cash dividends on our shares of outstanding common stock.

Equity Compensation Plan

The table below presents information as of September 30, 2008 for the Visa 2007 Equity Incentive Compensation Plan, or the EIP, which has been approved by stockholders. Visa does not have any equity compensation plans that have not been approved by stockholders. For a description of the EIP, see Note 18–Stock-based Compensation to our consolidated financial statements included in Item 8 of this report and Item 11 “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Components—Long-Term Incentive Compensation.”


Plan category	Number of shares of class A common stock to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of shares of class A common stock remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column)
Equity compensation plans approved by stockholders	9,502,392	⁽¹⁾	$	44.11	48,221,892
Equity compensation plans not approved by stockholders	—		$	—	—

Total	9,502,392⁽¹⁾			$44.11	48,221,892

(1)	In addition to options, the EIP authorizes the issuance of restricted stock, restricted stock units, performance units and other stock-based awards. Of these shares, 581,012 shares have been issued pursuant to outstanding restricted stock units.

Use of Proceeds from the IPO

The following table sets forth the use of net proceeds of $19.1 billion received in connection with our IPO in March 2008:


	(in billions)
Net IPO proceeds	$	19.1
March 2008 redemptions of class B and class C (series I) common stock⁽¹⁾		(13.4	)
Funding of escrow account⁽²⁾		(3.0	)
October 2008 redemptions of class C (series II) and class C (series III) common stock⁽³⁾		(2.7	)
Balance of proceeds following October redemptions	$	—

(1)	In March of 2008, we used $13.4 billion of the net proceeds of the IPO to redeem 154,738,487 shares of class B common stock and 159,657,751 shares of class C (series I) common stock.

(2)

As determined by the Litigation Committee and under the retrospective responsibility plan, we deposited $3.0 billion of the net IPO proceeds into an escrow account from which settlements of, or judgments in, covered litigation will be payable. See Note 5—Retrospective Responsibility Plan to our consolidated financial statements included in Item 8 of this report for additional information.

(3)

In October of 2008, we redeemed 79,748,857 shares of class C (series II) common stock and 35,263,585 shares of our class C (series III) common stock held by Visa Europe for a combined total $2.7 billion, less dividends and certain other adjustments. See Note 4—Visa Europe and Note 16—Stockholders’ Equity and Redeemable Shares to our consolidated financial statements included in Item 8 of this report for additional information.

ITEM 6.

Selected Financial Data

The following tables present selected consolidated statement of operations data for the year ended September 30, 2008 and consolidated balance sheet data at September 30, 2008 for Visa Inc., that were derived from the audited consolidated financial statements of Visa Inc. included elsewhere in this report. The table also presents consolidated pro-forma statement of operations data for the year ended September 30, 2007 and consolidated balance sheet data at October 1, 2007 (the date of the business combination discussed below). The selected Visa U.S.A. consolidated statements of operations data for the years ended September 30, 2007, 2006, 2005 and 2004 and the consolidated balance sheet data at September 30, 2007, 2006, 2005 and 2004 for Visa U.S.A. were derived from audited consolidated financial statements of Visa U.S.A. not included in this report.

In October 2007, we consummated a reorganization in which Visa U.S.A., Visa International, Visa Canada and Visa U.S.A.’s majority-owned subsidiary, Inovant, which operated the VisaNet transaction processing system and other related processing systems, became direct or indirect subsidiaries of Visa Inc. The reorganization was accounted for as a purchase under the guidelines of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” occurring on October 1, 2007, with Visa U.S.A. deemed the accounting acquirer of the ownership interest in Visa Canada, Visa International and Inovant not previously held (including Visa Europe’s interest in Visa International and Inovant). The operating results of the acquired interests in Visa International and Visa Canada are included in the consolidated statements of operations of Visa Inc. from October 1, 2007.

The data set forth below should be read in conjunction with Item 7—“Management’s Discussion and Analysis of Historical and Pro Forma Financial Condition and Results of Operations” and the Visa Inc. fiscal 2008 consolidated financial statements and the notes thereto included elsewhere in this report.

Selected Financial and Statistical Data


Fiscal Years ended September 30	2008			2007 Pro-Forma⁽⁷⁾			2007⁽¹⁾			2006⁽¹⁾			2005⁽¹⁾			2004⁽¹⁾
	(in millions)
Statement of Operations Data:
Total operating revenues	$	6,263		$	5,193		$	3,590		$	2,948		$	2,665		$	2,429
Operating expenses		5,031			6,309			5,039			2,218			2,212			1,999
Litigation provision		1,470			2,653			2,653			23			132			37
Operating income (loss)		1,232			(1,116	)		(1,449	)		730			453			430
Operating income (loss) as a percent of operating revenues		20	%		(21	)%		(40	)%		25	%		17	%		18	%
Other income (expense)		104			108			62			(8	)		3			(75	)
Income (loss) before cumulative effect of change in acccounting principle⁽²⁾		804			(861	)		(1,076	)		455			265			216
Net income (loss)⁽²⁾		804			(861	)		(1,076	)		455			360			210

At September 30 (except as noted)	2008			October 1, 2007			2007⁽¹⁾			2006⁽¹⁾			2005⁽¹⁾			2004⁽¹⁾
	(in millions except per share data)
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	4,979		$	1,278		$	275		$	270		$	135		$	174
Short-term investment securities, available-for-sale		355			842			747			660			681			156
Total current assets		11,174			4,701			2,507			1,594			1,478			920
Long-term investment securities, available-for-sale		244			743			737			515			319			378
Total assets		34,981			27,069			4,390			2,964			2,745			2,294
Current portion of long-term debt⁽³⁾		51			84			41			32			32			32
Current portion of accrued litigation⁽³⁾		2,698			2,236			2,236			216			197			244
Total current liabilities		7,165			4,786			3,282			1,393			1,325			1,070
Long-term debt⁽³⁾		55			40			—			41			74			106
Long-term accrued litigation⁽³⁾		1,060			1,446			1,446			784			1,010			1,019
Total equity (deficit)		21,141			16,286			(501	)		583			126			(230	)
Dividend declared and paid per common share		0.105			—			—			—			—			—

(1)	Historical balances for the statements of operations and balance sheet data prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination.

(2)

Visa U.S.A. recorded a cumulative effect of accounting change in fiscal 2005 related to its membership interest in Visa International and in fiscal 2004 related to Visa U.S.A. changing its method of amortizing volume and support agreements. These accounting changes resulted in additional net income of $96 million in fiscal 2005 and a $6 million decrease to net income in fiscal 2004.

(3)

The long term portion of Visa U.S.A. debt was classified as being due within one year at September 30, 2007 because Visa U.S.A. was in default of certain financial performance covenants as a result of the settlement of the American Express litigation as described in Note 23—Legal Matters to Visa Inc.’s audited financial statements included in Item 8 of in this report.

We believe that payments volume and transactions processed are key drivers of our business. Payments volume is the primary basis for service fee revenue. Payments volume is the total monetary value of transactions for goods and services that are purchased with cards bearing our brands. Transactions processed by VisaNet are the primary basis for data processing revenue. The tables below set forth payments volume and transaction volume for Visa Inc. and Visa U.S.A., deemed the accounting acquirer in the business combination and certain pro-forma comparable payments volume and transaction information for Visa Inc.


	Twelve Months Ended June 30,
	2008			2007			2006			2005			2004
	(unaudited)
	(in millions, except percentages)
Statistical Data:
Visa Inc. pro-forma payments volume⁽⁴⁾	$	2,654,237		$	2,265,937		$	1,997,450		$	1,691,849		$	1,420,669
Year-over-year change		17	%		13	%		18	%		19	%		18	%

	Fiscal Year
	2008			2007			2006
				(unaudited)
	(in millions, except percentages)
Visa Inc. pro-forma total transactions processed⁽⁵⁾⁽⁶⁾		36,956			32,720			29,202
Year-over-year change		13	%		12	%		N/A

(4)	Payments volume is based on quarterly operating certificates from our customers and is unaudited. Year-over-year payments volume change for 2004 represents the change compared to 2003.

(5)	Transactions processed are accumulated by our payment systems.

(6)

Prior to the business combination, there were multiple transaction measures used by different participants in the business combination. The Company adopted a consistent transaction measurement methodology effective with the business combination on October 1, 2007 and Visa U.S.A. conformed to this methodology. Historical comparable transactional data prior to fiscal 2006 is unavailable.

(7)

There is no historical combined statement of operations of Visa Inc. prior to October 1, 2007, because Visa Inc. did not have any operations prior to the reorganization. In order to provide insight into our operating results and trends affecting our business, we have included the pro forma selected statement of operations data for fiscal 2007, as if the reorganization had occurred on October 1, 2006. This pro forma information is derived from our audited consolidated financial statements and presented in accordance with SFAS No. 141, “Business Combinations” (“SFAS 141”).

ITEM 7.

Management’s Discussion and Analysis of Historical and Pro Forma Financial Condition and Results of Operations

Transparency and clarity are integral to successful financial reporting and we continually strive to provide informative financial disclosures with an accurate view of our operating results and financial position.

Our management’s discussion and analysis (“MD&A”) provides a review of the results of operations, financial condition and the liquidity and capital resources of Visa Inc. and its subsidiaries (“Visa”, “we”, “our”, and the “Company”) on a historical and pro forma basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. Our MD&A is presented in nine sections:

•

Overview

•

Results of Operations

•

Liquidity and Capital Resources

•

Off-Balance Sheet Arrangements

•

Contractual Obligations

•

Related Parties

•

Critical Accounting Estimates

•

Impact of Recent Accounting Pronouncements

•

Quantitative and Qualitative Disclosures about Market Risk

The following discussion and analysis should be read in conjunction with Visa Inc.’s audited consolidated financial statements and related notes included elsewhere in this report.

Overview

Visa operates the world’s largest retail electronic payments network and manages the world’s most recognized global financial services brand. We provide financial institutions with platforms that encompass consumer credit, debit, prepaid and commercial payments. We facilitate global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. Each of these constituencies has played a key role in the ongoing worldwide migration from paper-based to electronic forms of payment, and we believe that this transformation will continue to yield significant growth opportunities. We will continue to explore additional opportunities to enhance our competitive position by expanding the scope of payment services to benefit our existing customers and to position Visa to serve more and different constituencies.

In order to respond to industry dynamics and enhance Visa’s ability to compete, Visa consummated a reorganization in October 2007 in which Visa U.S.A., Visa International, Visa Canada and Inovant became direct or indirect subsidiaries of Visa Inc., a Delaware stock corporation. Visa Europe remained an independent company owned by its financial institutions. To further enhance our competitive position, we successfully completed an IPO in March 2008. Further details of our reorganization and IPO are discussed below in “The Reorganization and IPO.” We believe that successful completion of the reorganization and IPO position us to best execute our business strategy.

The global alignment of various functions and best practices subsequent to the IPO provides us the business scale to effectively deliver our existing core products across more and different geographies in the near term and to accelerate the delivery of product innovations across different market segments in the long term. The alignment of our global sales and new product development functions will also help to deliver consistent and superior client services that meet local market needs.

New product development is a critical business priority for Visa. It enables us to maintain our industry leader position by capitalizing on the payment industry’s growth opportunities and to execute our business strategy in the long term. More broadly, new product development encourages economic growth and enhances the trust and integrity of electronic payments. The following business initiatives expand the scope of payment solutions to benefit existing customers and position Visa to serve more and different constituencies. Although the short term volume expected from these initiatives is relatively small in comparison to total Visa volume today, we believe they are the foundation which will fuel incremental volume on our payments network in the long term.

•

Prepaid. By offering consumers an option to “pay ahead”, we are able to reach new demographics, particularly the unbanked or underbanked consumers in the United States and globally. Prepaid products allow us to expand our business relationships with new clients such as those in the government and healthcare sectors, while increasing our brand presence across different market segments. We continue to identify opportunities to deliver prepaid products to meet the needs of specific local and regional markets.

•

Mobile and eCommerce. As the internet and mobile phones become increasingly accessible around the world, they provide ideal platforms for us to expand our network capabilities to deliver not only payment solutions but also related information services – such as cardholder account activity, targeted merchant offers, or instant ATM locator. We have launched a suite of pilot consumer and commercial programs and intend to continually invest in related technologies, either through strategic investments or other partnerships, to help enhance Visa’s brand position as global commerce and information sharing are increasingly conducted over internet and mobile platforms.

•

Money Transfer. Individual and business consumers across the globe transfer money daily to conduct day-to-day business. Our Money Transfer product provides a secure, convenient and person-to-person platform to transfer money between Visa cardholders around the world. Money Transfer is a relevant product that meets current market needs particularly in countries outside the United States.

Our business is affected by overall economic conditions and consumer spending patterns. Many of our financial institution customers are facing increased financial strain due to current turbulence in the financial and credit markets. Should financial institutions face limited access to credit, this may in turn constrain their ability to extend credit, ultimately impacting overall economic spending. Current economic conditions have also led to consolidation in the financial sector. Should the trend toward consolidation in the financial sector continue, this may have the effect of slowing our rate of revenue growth in the future, should one of our customers be acquired by a financial institution which is aligned with one of our competitors. Our rate of revenue growth may also be impacted by price compression should one of our financial institution customers absorb another financial institution and qualify for higher volume-based discounts on the combined volumes of the merged business.

We expect that continued turbulence in overall economic conditions will moderate consumer and commercial discretionary spending, and our rate of credit payments volume growth, in the near term. However, we believe that the continued secular shift to debit payment products for non-discretionary spending will buffer the near term impact to our overall payments volume growth.

There is no historical combined statement of operations of Visa Inc. prior to October 1, 2007, because Visa Inc. did not have any operations prior to the reorganization. In order to provide insight into our operating results and trends affecting our business, this management’s discussion and analysis of our operating results includes a comparison of the results of operations for fiscal 2008 to the pro forma results of operations for fiscal 2007, as if the reorganization had occurred on October 1, 2006. This pro forma information is derived from our audited consolidated financial statements, and

presented in accordance with SFAS No. 141, “Business Combinations” (“SFAS 141”). See Note 3—The Reorganization to our consolidated financial statements included elsewhere in this report. In addition, this management’s discussion and analysis includes a comparison of our operating results for fiscal 2008 to the operating results of Visa U.S.A., deemed the accounting acquirer in the reorganization, for fiscal 2007 and 2006.

We believe that payments volume and processed transactions are key drivers of our business. Payments volume is the basis for service fees and processed transactions are the basis for data processing fees. Current period service fees are generated from payments volume on Visa-branded cards for goods and services in the preceding quarter, exclusive of PIN-based debit volume. Payments volume and revenues are impacted by changes in currency rates. Payments volume and revenues increased, reflecting in part the impact of the weaker U.S. dollar, during fiscal 2008 compared to pro forma fiscal 2007. Payments volume increased 17%, to $2.7 trillion during fiscal 2008, with double-digit growth in all product categories. Growth in the United States continues to reflect increases in non-discretionary spending and growth in debit. Growth outside the U.S. reflects continued penetration into emerging markets. Payments volume does not impact the operating revenues we earn from Visa Europe.

The following tables set forth product payments volumes for the periods presented:


	U.S.A.						Rest of World⁽³⁾						Visa Inc.
	12 months ended June 30, 2008⁽⁴⁾		12 months ended June 30, 2007⁽⁴⁾		% Change		12 months ended June 30, 2008⁽⁴⁾		12 months ended June 30, 2007⁽⁴⁾		% Change		12 months ended June 30, 2008⁽⁴⁾		12 months ended June 30, 2007⁽⁴⁾		% Change
	(in billions, except percentages)
Payments Volume
Consumer credit	$	661	$	624	6	%	$	802	$	634	27	%	$	1,463	$	1,258	16	%
Consumer debit⁽¹⁾		733		637	15	%		133		93	43	%		866		730	19	%
Commercial and other		217		188	16	%		108		90	20	%		325		278	17	%

Total Payments Volume	$	1,611	$	1,449	11	%	$	1,043	$	817	28	%	$	2,654	$	2,266	17	%
Cash volume		406		382	6	%		1,127		834	35	%		1,533		1,216	26	%

Total Volume⁽²⁾	$	2,017	$	1,831	10	%	$	2,170	$	1,651	31	%	$	4,187	$	3,482	20	%

(1)	Includes prepaid volume.

(2)

Total volume is the sum of total payments volume and cash volume. Total payments volume is the total monetary value of transactions for goods and services that are purchased. Cash volume generally consists of cash access transactions, balances access transactions, balance transfers and convenience checks.

(3)	Includes Bulgaria and Romania through March 31, 2007, after which time such countries became part of Visa Europe.

(4)

Service fee revenue in a given quarter is assessed based on payments volume in the prior quarter, excluding PIN-based debit volume. Therefore, service fees reported with respect to the twelve months ended September 30, 2008 and September 30, 2007 were based on payments volume reported by our financial institution customers for the twelve months ended June 30, 2008 and June 30, 2007, respectively.

Processed transactions increased by 4.2 billion, or 13%, to 37.0 billion during fiscal 2008 compared to prior year. Growth in transactions processed in the United States accounted for the majority of growth in transactions processed. We continue to identify opportunities to expand our processing role outside of the United States through the penetration of our core products and the delivery of new and innovative products that meet the needs of regional markets.

The following table sets forth transaction volumes processed by our VisaNet system during the periods presented:


	Visa Inc.
	Fiscal
	2008	2007 Pro Forma	% Change
	(in millions)
Total transactions	36,956	32,720	13	%

Operating income as a percentage of operating revenues, or operating margin, was 20% for fiscal 2008 compared with pro forma operating margin of (21%) in fiscal 2007. Our fiscal 2008 operating income includes a litigation provision of $1.5 billion, which contains an additional litigation provision of $1.1 billion in connection with an agreement reached with Discover Financial Services, to settle pending litigation. Since the Discover litigation is covered by the Company’s Retrospective Responsibility Plan, responsibility for the settlement is allocated to the Company’s class B shareholders via an escrow account and other mechanisms previously established under the plan. Refer to Note 23—Legal Matters and Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report for additional information. The increase in our operating margin during 2008 is primarily attributable to growth in operating revenues resulting from pricing changes and new fees.

Impact of Foreign Currency Rates

Our operating revenues are impacted by fluctuations in foreign currency rates. Operating revenues are impacted by the overall strengthening or weakening of the U.S. dollar compared to local or regional currencies in which our payments volumes occur. Revenue growth attributable to the weakening of the U.S. dollar during fiscal 2008 was approximately 2% compared to the prior year and primarily impacts service fees and international transaction fees. Should the recent strengthening of the U.S. dollar continue, this would have the opposite impact on our revenues.

The Reorganization and IPO

Our reorganization in October 2007 and subsequent IPO in March 2008 generated certain unique and non-recurring business events and transactions. Visa Europe did not become a subsidiary of Visa Inc., but rather remained owned by its member financial institutions and entered into a set of contractual arrangements with Visa Inc. In connection with the reorganization, we issued different classes and series of shares reflecting the different rights and obligations of Visa financial institution members and Visa Europe based on the geographic region in which they are located.

In March 2008, we successfully completed an IPO, selling 446.6 million shares of class A common stock to the public, which raised $19.1 billion in net proceeds. We used $13.4 billion of the net proceeds from the IPO to redeem a portion of the class B and class C (series I) shares of Visa’s financial institution members and as a result Visa is now majority owned by the public. Pursuant to our Retrospective Responsibility Plan, we established an escrow account with $3.0 billion of the net proceeds of the IPO. Our Retrospective Responsibility Plan is a central component of the

reorganization and is designed to address potential liabilities arising from certain litigation that we refer to as covered litigation. Future settlements of, or judgments in, the covered litigation will be payable from the escrow account. Our capital structure was designed to implement a key principle of the Retrospective Responsibility Plan, which is that liability for the covered litigation would remain with the holders of our class B common stock, all of which are members or affiliates of members of Visa U.S.A. See Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report. The remaining net proceeds of $2.7 billion were retained and have been used, in October 2008, to fund the redemption of all of the class C (series II) shares and a portion of the class C (series III) shares held by Visa Europe. See Note 16—Stockholders Equity and Redeemable Shares to our consolidated financial statements elsewhere in this report.

The reorganization and IPO impacted our business, results of operations and financial condition currently and in future periods in a number of significant ways:

•

Charges. We incurred charges related to severance and other termination benefits totaling $93 million during 2008. We continue to evaluate various alternatives for achieving synergies in the global organization and expect to incur additional charges, which may be significant, into fiscal 2009. In connection with the IPO, we granted equity compensation awards to employees and non-employee directors. We incurred $74 million in share-based compensation cost during fiscal 2008.

•

Visa Europe put option. We granted Visa Europe the option to cause the sale of Visa Europe to us. We will record any change in the fair market value of this option in our consolidated statement of operations. Changes in the value of the put option will result in fluctuations in our reported net income. The exercise of the Visa Europe put option would also result in a significant liquidity event. Visa Europe may exercise the put option at any time after March 25, 2009.

•

Income taxes. As a result of completing the IPO and consequent ownership by parties other than our financial institution customers, we are no longer eligible to claim the California special deduction previously available to Visa U.S.A. and Visa International Service Association on the basis that both operated on a cooperative or mutual basis. Our tax provision was updated to reflect the loss of the special deduction during the last six months of fiscal 2008, resulting in an increase in taxes of $29 million in fiscal 2008. We are evaluating our global corporate tax structure as a newly formed global company and are considering various tax alternatives and strategies to assist in managing our effective tax rate in the future. We expect to see a gradual decline in our effective tax rate beginning in fiscal 2009.

•

One time tax benefit. As anticipated, following our IPO, our earnings for the second quarter of fiscal 2008 increased by $107 million as a result of a one-time estimated tax benefit due to a change in our state tax apportionment methodology.

Results of Operations

Operating Revenues and Expenses

Operating Revenues

Our operating revenues consist of gross operating revenues reduced by payments made to customers and merchants under volume and support incentive arrangements. Gross operating revenues consist of service fees, data processing fees, international transaction fees and other revenues. Our operating revenues are primarily generated from fees calculated on the payments volume of activity on Visa-branded cards, which we refer to as service fees, and from the fees charged for providing transaction processing, which we refer to as data processing fees. Payments volume is reported by our customers and transactional information is accumulated by our transaction processing systems. Historically, pricing has varied among our different geographies because geographies outside the United States had operated under an association business model with distinct, autonomous strategies, boards of directors and management teams. In 2007, geographies outside the United States began the transition to a business model seeking to increase profitability and made competitive increases in their pricing structure. Further competitive pricing changes were made during fiscal 2008 and we will continue to assess opportunities for competitive adjustments that align with the value and growth opportunities provided to our customers.

We do not earn revenues from, or bear credit risk with respect to, interest and fees paid by cardholders on Visa-branded cards. Our issuing customers have the responsibility for issuing cards and determining interest rates and fees paid by cardholders, and most other competitive card features. Nor do we earn revenues from the fees that merchants are charged for card acceptance, including the merchant discount rate. Our acquiring customers, which are generally responsible for soliciting merchants, establish and earn these fees.

The following sets forth the components of our operating revenues:

Service fees

Service fees reflect payments by customers for their participation in card programs carrying our brands. Service fees are primarily calculated on the payments volume of products carrying the Visa brand. We rely on our customers to report payments volume to us. Service fees in a given quarter are assessed based on payments volume in the prior quarter, excluding PIN-based debit volume. Therefore, service fees reported with respect to the 12 months ended September 30, 2008, were based on payments volumes reported by our customers for the 12 months ended June 30, 2008. Furthermore, pro forma service fees for the twelve months ended September 30, 2007 were based on payments volumes reported by our customers for the twelve months ended June 30, 2007. These actual and pro forma payments volumes also do not include cash disbursements obtained with Visa-branded cards, balance transfers or convenience checks, which we refer to as cash volume. New service fees were introduced in April 2007, which apply to U.S. consumer debit, consumer credit and commercial payments volume. These fees supersede previously existing issuer programs.

Data processing fees

Data processing fees consist of fees charged to customers for providing transaction processing and other payment services, including processing services provided under our bilateral services agreement with Visa Europe. Data processing fees are based on information we accumulate from VisaNet, our secure, centralized, global processing platform, which provides transaction processing services linking issuers and acquirers. Data processing fees are recognized as revenues in the same period the related transaction occurs or services are rendered.

Data processing fees are primarily driven by the number, size and type of transactions processed and represent fees for processing transactions that facilitate the following services:

•

Authorization. Fees to route authorization requests to the issuer when a merchant, through its acquirer, requests approval of a cardholder’s transaction.

•

Clearing and settlement. Fees for determining and transferring transaction amounts due between acquirers and issuers.

•

Single Message System, or SMS, switching. Fees for use of the SMS for determining and transferring transaction amounts between acquirers and issuers.

•

Member processing. Fees for use of the debit processing service, which provides processing and support for Visa debit products and services.

•

Processing guarantee. Fees charged for network operations and maintenance necessary for ongoing system availability.

•

Other products and services. Fees for miscellaneous services that facilitate transaction and information management among Visa members.

International transaction fees

International transaction fees are assessed to customers on transactions where an issuer is domiciled in one country and a merchant’s acquirer is located in another country. International transaction fees are generally driven by cross-border payments volume, which includes single currency transactions, and currency conversion activities for transactions involving more than one currency. International transaction fees are influenced in large part by levels of travel and the extent to which Visa-branded products are utilized for travel purposes. These fees are recognized as revenues in the same period the related transactions occur or services are performed.

Other revenues

Other revenues consist primarily of optional service or product enhancements, such as extended cardholder protection and concierge services, cardholder services and fees for licensing and certification. Other revenues also include licensing and other service related fees from Visa Europe under the framework agreement entered into as part of the reorganization. Other revenues are recognized in the same period the related transactions occur or services are rendered.

Volume and support incentives

Volume and support incentives are contracts with financial institution customers, merchants and other business partners for various programs designed to build payments volume, increase card issuance and product acceptance and increase Visa-branded transactions. These contracts, which range in term from one to 13 years, provide incentives based on payments volume growth or card issuance, or provide marketing and program support based on specific performance requirements. We provide cash and other incentives to certain customers in exchange for their commitment to generate certain payments volume using Visa-branded products for an agreed period of time.

Pricing varies among our different geographies and may be modified on a customer-by-customer basis through volume and support incentive arrangements. In this regard, volume and support incentives represent a form of price reduction to these customers. Accordingly, we record these arrangements as a reduction to operating revenues. Certain incentives are estimated based on projected performance criteria and may change when actual performance varies from projections, resulting in adjustments to volume and support incentives. Management regularly reviews volume and

support incentives and estimates of performance. Estimated costs associated with these contracts are adjusted as appropriate to reflect payments volume performance and projections that are higher or lower than management’s original expectation or to reflect contract amendments.

Operating Expenses

Our operating expenses consist of: personnel; network, electronic data processing (EDP) and communications; advertising, marketing and promotion; professional and consulting fees; depreciation and amortization; administrative and other; and litigation provision.

Personnel

Personnel expense consists of salaries, stock-based compensation, incentives and various fringe benefits.

Network, EDP and communications

Network, EDP and communications represent expenses for the operation of our electronic payments network, including maintenance, equipment rental and fees for other data processing services.

Advertising, marketing and promotion

Advertising, marketing and promotion include expenses associated with advertising and marketing programs, sponsorships, promotions and other related incentives to promote the Visa brand. In connection with certain sponsorship agreements, we have an obligation to spend certain minimum amounts for advertising and marketing promotion over the terms of the agreements.

Visa International Fees

Prior to the reorganization, Visa U.S.A. paid fees to Visa International based on payments volumes, exclusive of PIN-based debit volume, for services primarily related to global brand management, global product enhancements, management of global system development and interoperability, and corporate support to the entire Visa enterprise. These fees ceased as a result of the reorganization as Visa U.S.A. and Visa International became subsidiaries of Visa Inc.

Professional and consulting fees

Professional and consulting fees consist of fees for consulting, contractors, legal and other professional services. Legal costs for third party services provided in connection with ongoing legal matters are expensed as incurred.

Depreciation and amortization

Depreciation and amortization include depreciation expenses of properties and equipment, as well as amortization of purchased and internally developed software. Also included in this amount are depreciation and amortization of the incremental basis in technology and other assets acquired in the reorganization.

Administrative and other

Administrative and other primarily consist of facilities costs and other corporate and overhead expenses in support of our business, such as travel expenses.

Litigation provision

Litigation provision is an estimate of litigation expense and is based on management’s understanding of our litigation profile, the specifics of the case, advice of counsel to the extent appropriate, and management’s best estimate of incurred loss at the balance sheet dates. In accordance with SFAS No. 5, “Accounting for Contingencies,” (“SFAS 5”) management records a charge to income for an estimated loss if such loss is probable and reasonably estimable. We will continue to review the litigation accrual and, if necessary, future adjustments to the accrual will be made.

Other Income (Expense)

Other income (expense) primarily consists of interest expense, investment income, net and other non-operating income.

Interest expense

Interest expense primarily includes accretion associated with litigation settlements to be paid over periods longer than one year and interest incurred on outstanding debt.

Investment income, net

Investment income, net represents returns on our fixed-income securities and other investments. Investment income also includes cash dividends received from other cost and equity method investments.

Other non-operating income

Other non-operating income relates to the change in fair value of the liability under the framework agreement with Visa Europe.

Visa Inc. Fiscal 2008 compared to Visa Inc. Pro Forma Results for Fiscal 2007

Operating Revenues

In fiscal 2008, operating revenues were $6.3 billion compared to $5.2 billion in fiscal 2007. The increase in operating revenues reflects an increase in payments volume, which increased 17%, as well as an increase in transactions processed, which increased by 13%. Revenue growth was also impacted by increases in the monetary value and the number of cross-border transactions. Current economic conditions have led to consolidation in the financial sector. Should the trend toward consolidation in the financial sector continue, this may have the effect of slowing our rate of revenue growth in the future, should one of our customers be acquired by a financial institution which is aligned with one of our competitors. Our rate of revenue growth may also be impacted by price compression should one of our financial institution customers absorb another financial institution and qualify for higher volume-based discounts on the combined volumes of the merged business. We expect that current turbulence in the financial and credit markets will moderate discretionary spending, and the rate of payments volume and transaction growth, in the near term.

The following table sets forth our actual and pro forma operating revenues earned in the U.S., throughout the rest of the world, and from Visa Europe. Revenues earned from Visa Europe are a result of our contractual arrangement with Visa Europe, as governed by the framework agreement that provides for trademark and technology licenses and bilateral services. See Note 4—Visa Europe to our consolidated financial statements included elsewhere in this report.


	Fiscal Year ended September 30,
	Visa Inc. 2008		Pro Forma 2007		$ Change		% Change
	(in millions, except percentages)
U.S. operating revenues	$	3,664	$	3,312	$	352	11	%
Rest of world operating revenues		2,378		1,688		690	41	%
EU fee operating revenues		221		193		28	15	%

Total Operating Revenues	$	6,263	$	5,193	$	1,070	21	%

Operating revenues earned throughout the rest of the world for the twelve month periods ended September 30, 2008 and 2007 represented 38% and 33% of total operating revenues, respectively. Growth in operating revenues earned throughout the rest of the world accounted for 64% of the increase in total operating revenues for the twelve month periods. The increase in operating revenues throughout the rest of the world reflects the impact of pricing modifications made on various services during the second half of fiscal 2007 as those geographies transitioned to a business model seeking to increase profitability. While we believe that these pricing changes will generate ongoing benefits, we do not believe that this rate of revenue growth is representative of sustainable future revenue growth because it includes the impact of these pricing modifications. We expect future price increases to correlate more closely with innovations in our product line and improvements in our service model. We regularly review our pricing strategy to ensure that it competitively aligns with the value and growth opportunities provided to our customers.

A significant portion of the revenues we earn outside the United States result from cross-border business and leisure travel. Revenues from processing foreign currency transactions for our customers fluctuate with cross-border travel and our customers’ need for transactions to be converted into their base currency. We expect that current worldwide turbulence in the financial and credit markets will moderate discretionary spending, and the rate of cross-border business and leisure travel, in the near term.

The following table sets forth the components of our actual and pro forma total operating revenues.


	Fiscal Year ended September 30,
	Visa Inc. 2008			Pro Forma 2007			$ Change			% Change
	(in millions, except percentages)
Service fees	$	3,061		$	2,582		$	479		19	%
Data processing fees		2,073			1,659			414		25	%
International transaction fees		1,721			1,193			528		44	%
Other revenues		569			473			96		20	%
Volume and support incentives		(1,161	)		(714	)		(447	)	63	%

Total Operating Revenues	$	6,263		$	5,193		$	1,070		21	%

Service fees

Payments volume on Visa-branded cards for goods and services in the preceding quarter, exclusive of PIN-based debit volume, is the basis for service fees. Payments volume increased $388.3 billion, or 17%, to $2.7 trillion for the twelve months ended June 30, 2008, compared to the prior year comparable period. Growth in service fees outpaced the growth in underlying payments volume due primarily to new service fees introduced in April 2007 which superseded previously existing arrangements with issuers. The new fees increased service fee revenue by $131 million, or 5%, in fiscal 2008. As noted above, our rate of future revenue growth may be impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial and credit markets will moderate discretionary spending, and the rate of payments volume growth, in the near term.

Data processing fees

The increase in data processing fees reflects 13% growth in the number of transactions processed. We processed 37.0 billion transactions during fiscal 2008, compared to 32.8 billion in fiscal 2007. Growth in data processing fees outpaced the growth in underlying transaction volumes primarily due to new services and various pricing modifications both inside and outside the United States which collectively increased data processing fees by 7%. Certain of the data processing pricing modifications took place following the beginning of the third quarter of the prior fiscal year resulting in revenues which continued to grow at a faster rate than transactions. The pricing increases outside the United States reflect transition to a business model seeking to increase profitability. While we believe these pricing changes will generate ongoing benefits, we do not believe that the rate of growth in data processing fees is representative of sustainable future revenue growth because it includes the impacts of these changes in pricing. As noted above, our rate of future revenue growth may be impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial and credit markets will moderate discretionary spending, and the rate of payments volume and transaction growth, in the near term.

International transaction fees

The increase in international transaction fees was primarily driven by cross-border payments volume, which experienced double digit growth, reflecting more cross-border transactions and the continued expansion in the use of electronic payments for travel purposes. During fiscal 2008, growth in international transaction fees outpaced the increase in cross-border payments volume primarily due to modifications to pricing structures for certain international transactions in the United States in April 2008, as well as pricing increases outside the United States which took place in all geographical regions during the first half of fiscal 2007 as our businesses outside the United States transitioned to a business model seeking to increase profitability. While we believe the pricing modifications will generate ongoing benefits, we do not believe that the rate of growth in international transaction fees is representative of sustainable future revenue growth because it includes the impacts of these changes in pricing. Growth in international transaction fees also reflects the positive impact of the weak U.S. dollar throughout most of fiscal 2008. As noted above, we expect that current worldwide turbulence in the financial and credit markets will moderate discretionary spending, and the rate of cross-border business and leisure travel, in the near term. The impact of this trend on our revenues could be amplified should the current strengthening of the U.S. dollar continue.

Other revenues

The increase in other revenues was primarily driven by growth in fees related to the Visa Extras loyalty platform in which enrolled Visa cardholders earn reward points toward qualifying purchases. Visa earns revenues from its financial service institution customers for administrative and rewards

fulfillment services performed in support of the Visa Extras platform. Visa Extras contributed to an increase in other revenue of 9%. Growth in other revenues was also impacted by increases in fines associated with our Cardholder Information Security Program for acquirers whose merchants have not yet met compliance standards.

Volume and support incentives

The increase in volume and support incentives in the current period was primarily attributable to unusually lower levels of contra revenue recorded in fiscal 2007. The lower volume and support incentives in fiscal 2007 were primarily driven by significant performance adjustments recorded in the prior year. In addition, fiscal 2008 incentives reflect the accounting impacts of: (i) conforming accounting policies of the acquired regions to that of the accounting acquirer; and (ii) the retirement of certain issuer programs in the prior year. Further detail of these and other factors are provided below.

•

We recorded downward adjustments of $81 million related to U.S. based volume and support incentives in fiscal 2007 compared to $15 million in fiscal 2008, resulting in a year-over-year increase of $66 million.

•

As anticipated, volume and support incentives increased during fiscal 2008 due to a non-recurring charge in the second fiscal quarter related to a customer agreement executed in the period, which increased volume and support incentives by $70 million.

•

As further anticipated, the accounting impact of volume and support incentives assumed upon the restructuring of certain issuer programs in fiscal 2007 increased volume and support incentives by $188 million.

Additional increases in volume and support incentives reflect the impact of new contracts and higher payments volumes and number of transactions processed. The actual amount of volume and support incentives will vary based on modifications to performance expectations for these contracts, amendments to contracts or new contracts.

The net liability of volume and support incentives changed as follows:


	Fiscal 2008			Fiscal 2007
	(in millions)			(in millions)
Beginning balance at October 1, net liability⁽¹⁾	$	(87	)	$	(274	)
Provision
Current year provision		(1,167	)		(805	)
Performance adjustments⁽²⁾		15			81
Contractual amendments⁽³⁾		(9	)		10

Subtotal volume and support incentives		(1,161	)		(714	)

Payments		1,378			901

Ending balance at September 30, net asset (liability)⁽⁴⁾	$	130		$	(87	)

(1)	Balance represents the net of the current and long term asset and current liability portions of volume and support incentives of Visa Inc. at October 1, 2007 and October 1, 2006 on a pro forma basis, respectively.

(2)	Amount represents adjustments resulting from management’s refinement of its estimate of projected sales performance as new information becomes available.

(3)	Amount represents adjustments resulting from amendments to existing contractual terms.

(4)	Balance represents the net of the current and long term asset and current liability portions of volume and support incentives as presented in the consolidated balance sheet of Visa Inc. at September 30, 2008 and September 30, 2007, respectively.

Operating Expenses

Operating expenses decreased 20% for fiscal 2008, compared to the prior year comparable period. The change primarily reflects decreases in the litigation provision and professional and consulting fees.

The following table sets forth the components of our actual and pro forma operating expenses.


	Fiscal Year ended September 30,
	Visa Inc. 2008		Pro Forma 2007		$ Change			% Change
	(in millions, except percentages)
Personnel	$	1,199	$	1,159	$	40		3	%
Network, EDP and communications		339		308		31		10	%
Advertising, marketing and promotion		1,016		1,075		(59	)	(5	)%
Professional and consulting fees		438		552		(114	)	(21	)%
Depreciation and amortization		237		228		9		4	%
Administrative and other		332		334		(2	)	(1	)%
Litigation provision		1,470		2,653		(1,183	)	(45	)%

Total Operating Expenses	$	5,031	$	6,309	$	(1,278	)	(20	)%

Personnel

The increase in personnel expense for fiscal 2008 reflects the offsetting impacts of charges incurred with the reorganization and IPO and reduction of certain pension and incentive expenses.

Personnel expense increased due to the combined impacts of: (i) severance and other charges incurred during the period associated with workforce consolidation and elimination of overlapping functions; (ii) compensation expenses related to stock-based awards granted to employees in connection with our IPO and (iii) a pension settlement charge of $27 million related to early recognition of actuarial losses related to employee attrition during fiscal 2008. During fiscal 2008, we incurred $93 million in severance and other charges related to workforce consolidation, an increase of $80 million over similar charges recorded in the fourth quarter of the prior fiscal year. In connection with our IPO in March 2008, employees were granted stock-based awards and as a result, we recognized $74 million in compensation expense during fiscal 2008.

Charges incurred related to workforce consolidation and equity awards were offset by reductions in pension expense of $34 million due to conversion of our defined benefit pension plan to a cash-balance plan in fiscal 2008 and due to the absence of a special $53 million IPO incentive granted to employees in the fourth quarter of the prior fiscal year.

Due to the deterioration in market conditions and the resulting impact on the fair value of our pension plan assets upon remeasurement at September 30, 2008, we expect that our pension plan expense will increase in fiscal 2009. Also, we continue to evaluate various alternatives for achieving synergies in the global organization and expect to incur additional severance charges, which may be significant, in fiscal 2009.

Network, EDP and communications

The increase in network, EDP and communications expense during fiscal 2008 reflects a 6% increase in maintenance, equipment rental and other costs related to outsourcing certain development activities to remote locations compared to the prior year. Maintenance and equipment rental costs may

continue to increase over time as we continue to evaluate outsourcing alternatives for certain support functions. The remainder of the increase primarily reflects an increase in fees for debit processing services related to processing transactions through non-Visa networks.

Advertising, marketing and promotion

The decrease in advertising, marketing and promotion expense in fiscal 2008 was primarily driven by the absence of certain joint promotional campaigns with financial institution customers from the fourth quarter of fiscal 2007 that did not recur during fiscal 2008. The absence of these joint promotional campaigns reduced advertising, marketing and promotion expense by $104 million. This decrease was offset by higher advertising and promotion spending in connection with the 2008 Beijing Summer Olympics coupled with increased promotional activity related to our Visa Extras reward program.

Professional and consulting fees

The reduction in professional fees during fiscal 2008 reflects the absence of consulting and legal fees incurred in the prior year in connection with our reorganization. During the first half of fiscal 2008, consulting and legal fees incurred to support the IPO in fiscal 2008 were offset against the net proceeds from our IPO, reducing professional and consulting fees by $24 million versus the prior year comparable period. During 2007, professional fees incurred to support the reorganization were expensed. The reduction in consulting and legal fees attributable to the absence of prior year reorganization expenses was $94 million. Additionally, legal fees decreased in fiscal 2008 reflecting settlement of the American Express litigation in fiscal 2007.

Litigation provision

The decrease in litigation provision primarily reflects (i) the absence of a $1.9 billion provision related to the settlement of outstanding litigation with American Express made in the fourth quarter of fiscal 2007, offset by (ii) an increase during the fourth fiscal quarter of fiscal 2008 of $1.1 billion to our litigation provision in connection with settlement of litigation with Discover Financial Services. Since both of these matters are covered by our Retrospective Responsibility Plan, responsibility for the settlement is allocated to our class B shareholders via an escrow account and other mechanisms previously established under the plan. The increase also reflects additional accruals made in fiscal 2008 under the provisions of SFAS 5, related to other covered litigation. See Note 23—Legal Matters and Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report.

Other Income (Expense)

The following table sets forth the components of our other income (expense) for fiscal 2008 compared to our other income (expense) on a pro forma basis for fiscal 2007.


	Fiscal Year ended September 30,
	Visa Inc. 2008			Pro Forma 2007			$ Change			% Change
	(in millions, except percentages)
Equity in earnings of unconsolidated affiliates	$	1		$	—		$	1		NM
Interest expense		(143	)		(96	)		(47	)	49	%
Investment income, net		211			197			14		7	%
Other		35			8			27		NM

Total Other Income (Expense)	$	104		$	109		$	(5	)	(5	)%

Interest expense

The increase in interest expense in fiscal 2008 compared to the prior year comparable period was primarily due to interest accretion attributed to the American Express settlement. See Note 23—Legal Matters to our consolidated financial statements included elsewhere in this report.

Investment income, net

The increase in investment income, net during fiscal 2008 compared to the prior year comparable period was primarily due to interest earned of approximately $70 million on both the litigation escrow, and the portion of the IPO proceeds retained to redeem the shares of class C (series II) and class C (series III) common stock. See Note 4—Visa Europe and Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report. This increase was offset by net realized losses and other-than-temporary impairment of $68 million on investments and a money market fund. See Liquidity and Capital Resources, below, and Note 6— Investments and Note 7—Prepaid Expenses and Other Assets to our consolidated financial statements included elsewhere in this report. We expect that the level of interest income will decrease following the redemption of shares of class C (series II) and class C (series III) common stock which took place in October 2008.

Other non-operating income

Other non-operating income in fiscal 2008 reflects a change in the fair market value of our liability under the Framework Agreement with Visa Europe due to changes in the LIBOR interest rate. See Note 4—Visa Europe to our consolidated financial statements included elsewhere in this report.

Income Taxes

Our effective income tax rate is a combination of federal, state and foreign statutory rates and certain required adjustments to taxable income. The effective income tax rate increased to 40% during the year ended September 30, 2008 from the pro forma 15% during the year ended September 30, 2007. The increase in the effective tax rate is primarily due to tax reserves related to litigation, and the combined effect of the loss of the California special deduction after the IPO, the change in state tax apportionment and a one-time benefit attributable to the remeasurement of deferred taxes.

Included in accrued litigation on our consolidated balance sheet on September 30, 2008 is approximately $3 billion associated with the American Express settlement, the Discover litigation and other matters. For tax purposes, the deduction related to these matters is deferred until the payments are made and thus, as of September 30, 2008, we have a deferred tax asset of $857 million related to these payments, which is net of a reserve to reflect management’s best estimate of the amount of the benefit to be realized.

Prior to our IPO, the State of California, where we are headquartered, historically did not tax a substantial portion of our reported income on the basis that we operated on a cooperative or mutual basis and therefore were eligible for a special deduction. As a result of the IPO and consequent ownership by parties other than our financial institution customers, we are no longer eligible to claim the special deduction, resulting in a tax increase. The tax increase was partially offset by a tax decrease resulting from a change in our state tax apportionment. The change in state tax apportionment resulted in a $115 million one-time tax benefit due to the remeasurement of deferred taxes.

In July 2008, we settled with the California Franchise Tax Board with respect to certain audit issues from 1990 to 2003, which include the eligibility to claim certain items as special deductions, apportionment computation, and research and development credits. As a result of the settlement,

unrecognized tax benefits decreased by $46 million, of which $30 million were disallowed and will not be recognized and $16 million were received in cash as a tax refund.

Visa Inc. Fiscal 2008 compared to Visa U.S.A. Fiscal 2007 and Fiscal 2006

The following discussion of results of operations compares Visa Inc. consolidated results for fiscal 2008, to Visa U.S.A. results for fiscal 2007 and fiscal 2006. Visa U.S.A. was deemed the accounting acquirer in the reorganization that took place on October 1, 2007, and therefore Visa U.S.A. results are considered the historical predecessor for those of Visa Inc.

Operating Revenues

The following table sets forth the components of our total operating revenues for the periods presented.


	Fiscal Year ended September 30,									$ Change					% Change
	Visa Inc. 2008			Visa U.S.A. 2007			Visa U.S.A. 2006			2008 vs. 2007			2007 vs. 2006		2008 vs. 2007		2007 vs. 2006
	(in millions, except percentages)
Service fees	$	3,061		$	1,945		$	1,610		$	1,116		$	335	57	%	21	%
Data processing fees		2,073			1,416			1,248			657			168	46	%	13	%
International transaction fees		1,721			454			398			1,267			56	279	%	14	%
Other revenues		569			280			280			289			—	103	%	—
Volume and support incentives		(1,161	)		(505	)		(588	)		(656	)		83	130	%	(14	)%

Total Operating Revenues	$	6,263		$	3,590		$	2,948		$	2,673		$	642	74	%	22	%

Fiscal 2008 compared to Fiscal 2007

The increase in operating revenues during fiscal 2008 compared to fiscal 2007 primarily reflects the inclusion of $2.4 billion of operating revenues from other regions upon the reorganization on October 1, 2007, offset by the absence of data processing and other revenues previously earned from Visa International and Visa Canada.

Service fees

The increase in service fees during fiscal 2008, is primarily driven by the inclusion of service fees from acquired regions upon the reorganization on October 1, 2007, which represents an increase of $877 million, or 45%. The remainder of the increase primarily reflects U.S. payments volume growth of 11%. As noted above, our rate of future revenue growth may be impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial and credit markets will moderate discretionary spending, and the rate of payments volume growth, in the near term.

Data processing fees

The increase in data processing fees during fiscal 2008 is primarily due to the inclusion of data processing fees from acquired regions upon the reorganization on October 1, 2007, which represents an increase of $463 million, or 33%. The increase also reflects growth in transaction volumes in the United States, which increased by 12%. Competitive pricing increases primarily related to the Interlink Network also increased data processing fees by 4%.

These increases are offset by the absence of data processing revenues previously earned from Visa International regions and Visa Canada. Upon the reorganization, Visa U.S.A., Visa International and Visa Canada became direct or indirect subsidiaries of Visa Inc. and these fees are eliminated in consolidation. As noted above, our rate of future revenue growth may be impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial and credit markets will moderate discretionary spending, and the rate of payments volume and transaction growth, in the near term.

International transaction fees

The increase in international transaction fees during fiscal 2008 is primarily due to the inclusion of international transaction fees of acquired regions upon the reorganization on October 1, 2007, which represents an increase of $1.1 billion, or 233%. Further increases were due to double digit growth in cross-border payments volume reflecting more cross-border transactions and continued expansion in the use of electronic payments for travel purposes. In addition, growth in international transaction fees reflects modifications to pricing structures for certain international transactions in April 2008. As noted above, we expect that current worldwide turbulence in the financial and credit markets will moderate discretionary spending, and the rate of cross-border business and leisure travel, in the near term.

Other revenues

The increase in other revenues during fiscal 2008 reflects inclusion of other revenues from acquired regions upon the reorganization on October 1, 2007, which represents an increase of $217 million, or 78%. License fees and fees for other services provided under the framework agreement with Visa Europe, which became effective at the time of the reorganization, represented an increase of $176 million. Growth in other revenues also reflects increased fees related to the Visa Extras loyalty platform in which enrolled Visa cardholders earn reward points toward qualifying purchases. Visa earns revenues from its financial institution customers for administrative and rewards fulfillment services performed in support of the Visa Extras platform. Growth in other revenues was also impacted by increases in fines associated with our Cardholder Information Security Program for acquirers whose merchants have not yet met compliance standards. During fiscal 2008, these increases were offset by the absence of $160 million in project revenues previously earned for services provided to Visa International regions and Visa Canada in fiscal 2007.

Volume and support incentives

The inclusion of volume and support incentives from the acquired regions upon the reorganization on October 1, 2007 contributed to the increase in volume and support incentives by $236 million, or 47%.

The remainder of the increase in volume and support incentives in the current period was primarily attributable to unusually lower levels of contra revenue recorded in fiscal 2007. The lower volume and support incentives in fiscal 2007 were primarily driven by significant performance adjustments recorded in the period. In addition, fiscal 2008 incentives reflect the accounting impacts of: (i) conforming accounting policies of the acquired regions to that of the accounting acquirer; and (ii) the retirement of certain issuer programs in the prior fiscal year. Further detail of these and other factors are provided below.

•

We recorded downward adjustments of $81 million related to U.S. based volume and support in fiscal 2007 as compared to $15 million in fiscal 2008, resulting in a year-over-year increase of $66 million.

•

Additional increases in volume and support incentives reflect the impact of new contracts and higher payments volumes and number of transactions processed.

The actual amount of volume and support incentives will vary based on modifications to performance expectations for these contracts, amendments to contracts or new contracts.

Fiscal 2007 compared to Fiscal 2006

The increase in operating revenues during fiscal 2007 compared to fiscal 2006 primarily reflects a 9% increase in payments volume (exclusive of PIN-based debit volume), and an 11% increase in transactions. Growth in operating revenues exceeded growth in payments and transactions volumes primarily due to newly introduced service fees. While we believe that these changes in fee structure will generate ongoing benefits, we do not believe that the rate of growth in operating revenues is representative of sustainable future revenue growth because it includes the impacts in fiscal 2007 of the new service fees.

Service fees

Payments volume on Visa-branded cards for goods and services in the preceding quarter, exclusive of PIN-based debit volume, is the basis for service fees. Payments volume increased $105 billion, or 9%, to $1.3 trillion in fiscal 2007. Service fees outpaced the growth in underlying payments volume due primarily to the April 2007 introduction of new service fees. The increase in service fees from these new fees was offset by the corresponding elimination of previously existing issuer fees used to support merchant acceptance and volume growth initiatives. The net impact of the new service fees and the elimination of the existing issuer fees resulted in an increase to service fees of $190 million, or 12%, in fiscal 2007 compared to fiscal 2006.

Data processing fees

The increase in data processing fees is primarily due to the growth in the number of transactions processed during fiscal 2007 compared to fiscal 2006. Data processing fees increased 13%, broadly consistent with the growth in underlying transactions processed. Incremental revenues during fiscal 2007 from the introduction of an updated fraud detection product and additional revenues from Visa U.S.A.’s debit processing services related to non-Visa network transactions offset the continued impact of higher volume-based discounts resulting from consolidation and transaction growth among customers. Of the total data processing fees, $122 million, or 9%, was collectively earned from Visa International, Visa Canada and Visa Europe in each of fiscal 2007 and fiscal 2006.

International transaction fees

The increase in international transaction fees was primarily driven by cross-border payments volume, which increased by 15%, during fiscal 2007, compared to fiscal 2006. The increase in international transaction fees was broadly in line with the growth in multi-currency payments volume, reflecting more cross-border transactions as overall global travel has increased.

Volume and support incentives

The decrease in volume and support incentives was primarily due to the impact of lower revised estimates of performance under these agreements during management’s regular quarterly review of customer performance and due to amendments to volume and support incentives during the period. Performance adjustments reduced volume and support incentives cost by a total of $73 million in fiscal 2007 compared to $36 million in fiscal 2006. As the rate of payments volume growth has softened compared to the prior year, estimates of performance under volume and support incentives have been adjusted accordingly.

Operating Expenses

The following table sets forth components of our total operating expenses for the periods presented.


	Fiscal Year ended September 30,						$ Change						% Change
	Visa Inc. 2008		Visa U.S.A. 2007		Visa U.S.A. 2006		2008 vs. 2007			2007 vs. 2006			2008 vs. 2007		2007 vs. 2006
	(in millions, except percentages)
Personnel	$	1,199	$	721	$	671	$	478		$	50		66	%	7	%
Network, EDP and communications		339		249		213		90			36		36	%	17	%
Advertising, marketing and promotion		1,016		581		474		435			107		75	%	23	%
Visa International fees		—		173		159		(173	)		14		NM		9	%
Professional and consulting fees		438		334		291		104			43		31	%	15	%
Depreciation and amortization		237		126		138		111			(12	)	88	%	(9	)%
Administrative and other		332		202		249		130			(47	)	64	%	(19	)%
Litigation provision		1,470		2,653		23		(1,183	)		2,630		(45	)%	NM

Total Operating Expenses	$	5,031	$	5,039	$	2,218	$	(8	)	$	2,821		—	%	127	%

Fiscal 2008 compared to Fiscal 2007

Operating expenses remained flat during fiscal 2008, compared to the prior year comparable period. The increase in our operating expenses due to inclusion of operating expenses attributed to the acquired regions of $1.3 billion was substantially offset by a decrease in litigation provision of $1.2 billion.

Personnel

The increase in personnel expense during fiscal 2008 over the prior year comparable period was primarily due to:

•

$376 million in personnel expense attributed to the acquired regions;

•

$93 million in severance charges related to workforce consolidation due to the elimination of overlapping functions directly connected to the reorganization; and

•

$74 million in stock based compensation expense reflecting stock-based incentives awarded to our employees in connection with our IPO.

These increases were offset by reductions in personnel and other incentive expense primarily due to changes in our defined benefit pension plan since the prior year comparable period and the absence of a special IPO incentive incurred during the fourth quarter of the prior fiscal year.

Network, EDP and communications

The increase in network, EDP and communications expense during fiscal 2008 primarily reflects $71 million attributed to the acquired regions. The remainder of the increase reflects higher software maintenance and hardware rental expense following the outsourcing of certain development functions during fiscal 2007. Maintenance and equipment rental costs may continue to increase over time as we continue to evaluate outsourcing alternatives for certain support functions.

Advertising, marketing and promotion

The increase in advertising, marketing and promotion during fiscal 2008 primarily reflects $486 million in advertising, marketing and promotion expense attributed to the acquired regions and higher advertising and promotion spending in connection with the 2008 Beijing Summer Olympics coupled with increased promotional activity related to our Visa Extras reward program. These increases were offset by the absence of $67 million of costs incurred during fiscal 2007 to support certain joint promotional campaigns with financial institution customers which did not recur during fiscal 2008.

Visa International fees

Visa International fees ceased as a result of the reorganization, as Visa U.S.A. and Visa International both became direct subsidiaries of Visa Inc.

Professional and consulting fees

The increase in professional and consulting fees primarily reflects increases of $72 million attributed to the acquired regions during fiscal 2008.

Depreciation and amortization

The increase in depreciation and amortization primarily reflects increases of $118 million attributed to the acquired regions during fiscal 2008. Software amortization expense would be expected to increase over time as we are committed to maintaining and enhancing our networks as well as to developing new payment products.

Administrative and other

The increase in administrative and other expense during fiscal 2008, primarily reflects increases of $177 million, attributed to the acquired regions, offset by the absence of $63 million in facilities expense paid to the real estate joint ventures owned by Visa U.S.A. and Visa International, which were consolidated as part of Visa Inc. following the reorganization.

Litigation provision

litigation provision in connection with settlement of litigation with Discover Financial Services. Since both of these matters are covered by the Company’s Retrospective Responsibility Plan, responsibility for the settlement is allocated to the Company’s class B shareholders via an escrow account and other mechanisms previously established under the Plan. The increase also reflects additional accruals made in fiscal 2008 under the provisions of SFAS 5, related to the covered litigation. See Note 23—Legal Matters to our consolidated financial statements included elsewhere in this report.

Fiscal 2007 compared to Fiscal 2006

Total operating expenses increased by 127% to $5.0 billion in fiscal 2007 compared to $2.2 billion in fiscal 2006. The increase primarily reflects the $2.7 billion litigation provision recorded during the year, which represented 94% of that increase. Excluding the litigation provision, operating expenses increased $191 million, or 9%.

Personnel

Personnel expense increased 4% in fiscal 2007 due to a $26 million charge representing the first installment of a one-time special bonus program of $51 million associated with the establishment of Visa Inc. Half of the $51 million special bonus program vested during fiscal 2007. The other half is payable in stock or cash one year after the completion of the initial public offering if certain vesting requirements are met. The remaining increase of 3% reflects severance expense for certain executives, annual salary adjustments, which were broadly in line with economic price increases, offset by the impact of lower average headcount during fiscal 2007.

Network, EDP and communications

The increase in network, EDP and communications expense for fiscal 2007 was primarily due to the following:

•

a $29 million increase in fees paid for debit processing services for charges related to processing transactions through non-Visa networks; and

•

a $12 million increase in maintenance and equipment rental costs.

Fees for data processing services related to processing transactions through non-Visa networks would be expected to grow over time as the worldwide migration from paper-based to electronic payments continues.

Advertising, marketing and promotion

The increase in advertising, marketing and promotion expense in fiscal 2007 was primarily due to the following:

•

a $67 million increase in expenditures for certain joint promotional campaigns with financial institution customers; and

•

a $23 million increase in expenditures associated with Visa Extras, Visa U.S.A.’s point-based rewards program that enables enrolled cardholders to earn reward points on qualifying purchases.

Visa International fees

Although Visa U.S.A.’s percentage of worldwide payments volumes decreased in fiscal 2007 compared to fiscal 2006 due to global emerging markets experiencing higher payments volume growth rates than the more mature U.S. economy, fees paid to Visa International increased due to a one-time fee waiver of $13 million in fiscal 2006 that was not repeated in fiscal 2007.

Professional and consulting fees

Professional and consulting fees increased in fiscal 2007 primarily due to the following:

•

a $23 million increase in contractors and outsourcing expense in connection with the outsourcing of certain data processing and development functions over the course of fiscal 2007, and additional contractors in connection with the support of other development and maintenance projects; and

•

a $19 million increase in legal fees incurred to support ongoing litigation matters.

Depreciation and amortization

The decrease in depreciation and amortization during fiscal 2007 primarily reflects the absence of a $13 million impairment charge for the net carrying value of an intangible asset associated with the patent and rights to market and distribute Mini Cards in the United States incurred during fiscal 2006.

Administrative and other

Administrative and other expenses decreased in fiscal 2007, primarily reflecting the absence of the following expenses incurred in fiscal 2006:

•

a $24 million charge to reimburse customers for production and issuance costs related to discontinued use of Visa-branded cards with the holographic magnetic stripe design; and

•

an $11 million charge to reflect expenses for business objectives related to a litigation settlement in fiscal 2006. The settlement required Visa U.S.A. to either meet certain joint business objectives or make cash payments in lieu of the business objectives over five years. Because Visa U.S.A. expects to make these related cash payments without receiving future benefits, Visa U.S.A. charged the present value of the total payments to its consolidated statements of operations in fiscal 2006.

Litigation provision

Litigation provision increased $2.6 billion reflecting a $1.9 billion provision related to settlement of outstanding litigation with American Express. Future payments under the settlement agreement were discounted at 4.72% over the payment term to determine the amount of the provision. The litigation provision also reflects management’s liability estimate under the guidelines of SFAS 5 related to the Discover litigation. The American Express and Discover litigations are covered by our Retrospective Responsibility Plan and we intend to fund any payment obligations with amounts in the escrow account, in accordance with our Retrospective Responsibility Plan. The remainder of the increase in litigation provision includes various litigation provisions for both settled and unsettled matters.

Other Income (Expense)

The following table sets forth the components of our other income (expense) for the periods presented.


	Fiscal Year ended September 30,									$Change					% Change
	Visa Inc. 2008			Visa U.S.A. 2007			Visa U.S.A. 2006			2008 vs. 2007			2007 vs. 2006		2008 vs. 2007		2007 vs. 2006
	(in millions, except percentages)
Equity in earnings of unconsolidated affiliates	$	1		$	40		$	13		$	(39	)	$	27	(98	)%	208	%
Interest expense		(143	)		(81	)		(89	)		(62	)		8	77	%	(9	)%
Investment income, net		211			103			68			108			35	105	%	51	%
Other		35			—			—			35			—	NM		NA

Total Other Income (Expense)	$	104		$	62		$	(8	)	$	42		$	70	68	%	NM

Fiscal 2008 compared to Fiscal 2007

Equity in earnings of unconsolidated affiliates

The decrease in other non-operating income is primarily due to the absence of equity in earnings of Visa International which was acquired in the reorganization.

Interest expense

Investment income, net

The increase in investment income, net primarily reflects income attributed to the acquired regions, as well as interest income on a portion of the IPO proceeds to be used for redemption of the shares of class C (series II) and class C (series III) common stock and interest income on the litigation escrow account. See Note 4—Visa Europe and Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report. This increase was offset by realized losses and other-than-temporary impairment of $68 million on investments and a money market fund. See Liquidity and Capital Resources, below, and Note 6—Investments and Note 7—Prepaid Expenses and Other Assets to our consolidated financial statements included elsewhere in this report. We expect that the level of interest income will decrease following the redemption of the shares of class C (series II) and class C (series III) common stock which took place in October 2008.

Other non-operating income

Fiscal 2007 compared to Fiscal 2006

Other income was $62 million in fiscal 2007 compared to other expense of $8 million in fiscal 2006. The increase in other income primarily reflected an increase in Visa U.S.A.’s portion of equity

earnings from Visa International as a result of an increase in net income for Visa International and an increase in interest income as the result of a shift in Visa U.S.A.’s investment portfolio from tax-exempt securities to higher yielding money market and auction rate securities.

Equity in earnings of unconsolidated affiliates

The increase in equity in earnings of unconsolidated affiliates in fiscal 2007 primarily reflected higher Visa International net income during fiscal 2007 compared to the prior fiscal year.

Interest expense

The decrease in interest expense in fiscal 2007 primarily reflected lower accretion expense on the declining litigation balance in the Retailers’ Litigation matter. See Note 23—Legal Matters to our consolidated financial statements included elsewhere in this report.

Investment income, net

The increase in investment income, net in fiscal 2007 primarily reflected an increase in interest income due to a shift in the Visa U.S.A.’s investment strategy from tax-exempt municipal bonds to higher yield fixed-income investment securities and to higher average investment balances during the year.

Income Taxes

Fiscal 2008 compared to Fiscal 2007

Visa Inc.’s effective tax rate is a combination of federal, state and foreign statutory rates and certain required adjustments to taxable income. The effective tax rate was 40% for the year ended September 30, 2008, compared to Visa U.S.A.’s 23% for the year ended September 30, 2007. The increase in the effective tax rate is primarily due to tax reserves related to litigation, and the combined effect of the loss of the California special deduction after the IPO, the change in state tax apportionment, and a one-time benefit attributable to the remeasurement of deferred taxes.

Fiscal 2007 compared to Fiscal 2006

The effective tax rate in fiscal 2007 of 23% represented a tax benefit while the effective rate of 35% for the prior year represented a tax expense. The 23% effective tax rate benefit in fiscal 2007 resulted from the loss before income tax realized for the year. This benefit was less than what would otherwise have been realized, primarily as a result of an adjustment to a reserve related to litigation.

The components impacting the effective tax rate are:


	Fiscal Year ended September 30,
	2007					2006
	Dollars			Percent		Dollars			Percent
	(in millions, except percentages)
(Loss) income before income taxes and minority interest	$	(1,387	)			$	722
Minority interest		5					16

U.S. federal statutory tax		(485	)	35	%		253		35	%
State tax effect, net of federal benefit		(11	)	1	%		(11	)	(1	)%
Reserve for tax uncertainties related to litigation		180		(13	)%		—		—
Non-deductible expenses and other differences		2		—	%		15		2	%
Minority interest—not subject to tax		(2	)	—	%		(6	)	(1	)%

Income Tax (Benefit) Expense	$	(316	)	23	%	$	251		35	%

Visa U.S.A.’s fiscal 2007 consolidated statement of operations reflected a litigation provision of $2.7 billion associated with its outstanding and settled litigation. This provision primarily reflected the amount required to settle the American Express litigation and management’s liability estimate under the guidelines of SFAS No. 5 related to the Discover litigation and other matters. For tax purposes, the deduction related to these matters will be deferred until the payments are made and thus we established a deferred tax asset of $778 million related to these payments, which is net of a reserve to reflect Visa U.S.A.’s best estimate of the amount of the benefit to be realized.

Minority Interest

The decrease in minority interest for fiscal 2007 compared to the prior year reflects lower Inovant net income as a result of charges for severance and termination benefits related to Visa U.S.A.’s plans to outsource certain data processing and development support functions.

Liquidity and Capital Resources

Management of Our Liquidity

Prior to our reorganization, Visa U.S.A., Visa International and Visa Canada each managed their own short-term and long-term liquidity needs. With the completion of the reorganization, we now manage our corporate finance and treasury functions on an integrated basis.

Our treasury policies provide management with the guidelines and authority to manage liquidity risk in a manner consistent with corporate objectives. The objectives of these treasury policies are to service the payments of principal and interest on outstanding debt, to provide adequate liquidity to cover operating expenditures and liquidity contingent scenarios, to ensure timely completion of payments settlement activities, to ensure payment of required litigation settlement payments and to optimize income earned within acceptable risk parameters.

Based on our cash flow budgets and forecasts of our short-term and long-term liquidity needs, management believes that our projected sources of liquidity will be sufficient to meet our projected liquidity needs for the next 12 months. Management will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions, and other relevant circumstances.

Consolidated Balance Sheet Data

The following table sets forth summarized balance sheet data for Visa Inc. at September 30, 2008 and at October 1, 2007, the date of the reorganization, and a historical balance sheet data for Visa U.S.A, deemed the accounting acquirer in the business combination, at September 30, 2007:


	September 30, 2008 (Visa Inc.)		October 1, 2007 (Visa Inc.)			September 30, 2007 (Visa U.S.A.)⁽¹⁾
	(in millions)
Cash and cash equivalents	$	4,979	$	1,278		$	275
Current portion of restricted cash—litigation escrow		1,298		—			—
Short-term investment securities, available-for-sale		355		842			747
Total current assets		11,174		4,701			2,507
Long-term restricted cash—litigation escrow		630		—			—
Long-term investment securities, available-for-sale		244		743			737
Current portion of long-term debt		51		84			41
Current portion of accrued litigation obligation		2,698		2,236			2,236
Total current liabilities		7,165		4,786			3,282
Long-term debt		55		40			—
Long-term portion of accrued litigation obligation		1,060		1,446			1,446
Total stockholders’ equity (deficit)		21,141		16,286			(501	)
Working capital		4,009		(85	)		(775	)

(1)	Historical balances for periods prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination.

Cash Flow Data

The following table summarizes cash flows from operating, investing and financing activities for fiscal 2008 and historical cash flows:


	Fiscal 2008			Fiscal 2007⁽¹⁾			Fiscal 2006⁽¹⁾
	(in millions)
Total cash provided by (used in):
Operating activities	$	531		$	505		$	450
Investing activities		554			(463	)		(278	)
Financing activities		3,624			(37	)		(37	)
Effect of exchange rate changes on cash and cash equivalents		(5	)		—			—

Increase in cash and cash equivalents	$	4,704		$	5		$	135

(1)	Historical balances for periods prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination.

Operating Activities

Fiscal 2008

Cash provided by operating activities for fiscal 2008 was $531 million. This amount was lower than income provided by operations primarily due to:

•

Use of cash of $92 million reflecting settlement transactions. The change in net settlement receivables and payables relates to timing differences, processed volume changes and

exchange rate fluctuations. Given the proximity of the 2008 fiscal year end to a weekend, we carried a higher level of multi-currency transactions in our net settlement balances. This use of cash represents the net of the increases in settlement receivable and increases in settlement payable during fiscal 2008;

•

Use of cash reflecting annual compensation benefit payments, offset by accruals for current fiscal year compensation benefits, reflected as a reduction of $115 million in accrued compensation; and

•

Use of cash reflecting volume and support incentive payments of $1,378 million, off-set by amortization on volume and support incentives of $1,161 million, for a net use of cash of $217 million.

These uses of cash were offset by deferred taxes payable on income provided by operations, depreciation and amortization and other non-cash items, as well as changes in other operating assets and liabilities.

Fiscal 2007

Net cash provided by operating activities increased $55 million in fiscal 2007 compared to the prior year. The increase primarily reflected the absence of a substantial program payment in connection with Visa U.S.A.’s Visa Check card program in the prior year. The increase also reflects higher non-cash accruals for accrued compensation and benefits.

Investing Activities

Fiscal 2008

Cash provided by investing activities was $554 million for fiscal 2008. Cash flows from investing activities primarily reflect $1,002 million of cash acquired through the reorganization and net cash proceeds from the sales and maturities of investment securities of $949 million due to a shift in investments from debt securities to shorter-term cash equivalents. We also purchased property, equipment and technology of $415 million primarily related to the new data center under construction on the east coast, contributed $25 million to other investments and received distributions of $22 million from other investments. In addition, in September 2008, our $953 million investment in the Primary Reserve Fund was reclassified from cash equivalents to other current assets on the Company’s consolidated balance sheet. See further discussion under “Sources of Liquidity,” below, and Note 7—Prepaid Expenses and Other Assets to our consolidated financial statements included elsewhere in this report.

Fiscal 2007

The increase in net cash used in investing activities in fiscal 2007 is primarily driven by facilities and equipment purchases related to the new data center discussed above. In addition, investment securities purchasing activity, net of sales and maturities, was higher during fiscal 2007.

Financing Activities

Fiscal 2008

Cash provided by financing activities was $3,624 million for fiscal 2008. This amount includes IPO related activities as follows:

•

Source of cash reflecting proceeds from the issuance of class A common stock of $19.1 billion, net of issuance costs of $550 million;

•

Use of cash reflecting the partial redemption of class B and class C (series I) common stock of $13.4 billion; and

•

Use of cash reflecting the payment to the litigation escrow account of $3.0 billion for the covered litigation matters in accordance with the Retrospective Responsibility Plan. See Note 5—Retrospective Responsibility Plan to our consolidated financial statements included elsewhere in this report.

In addition, there was a source of cash of $1,085 million, reflecting funding of covered litigation payments from the litigation escrow account, offset by use of cash of $93 million and $22 million for dividend and routine debt payments, respectively.

Fiscal 2007

Net cash used in financing activities during fiscal 2007 primarily reflects scheduled quarterly payments on Visa U.S.A.’s series A senior secured notes due December 2007 and series B senior secured notes due December 2012.

We believe that our current level of cash and borrowing capacity under our credit facilities described below, together with future cash flows from operations, are sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future.

We regularly evaluate cash requirements for current operations, commitments, development activities and capital expenditures and we may elect to raise additional funds for these purposes in the future, either through the issuance of debt or equity. Our current cash flow strategy is to provide timely settlement payments due from and due to issuing and acquiring customers, to pay off debt (including litigation settlements), to make planned capital investments in our business, to pay dividends and repurchase our shares at the discretion of the our board of directors, and to invest excess cash in securities that we believe are high-quality and marketable in the short term.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, a fixed income investment portfolio comprised primarily of highly rated debt instruments, cash flow from operating activities and access to various borrowing arrangements. Funds from operations are maintained in cash and cash equivalents, short-term available-for-sale investment securities, or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings, and return that these holdings provide.

At September 30, 2008, October 1, 2007 and September 30, 2007 our total liquid assets, consisting of cash, cash equivalents, short- and long-term available-for-sale investment securities, and our investment in the Reserve Primary Fund (“the fund”), discussed further below, included in prepaid and other current assets at September 30, 2008, were $6.5 billion, $2.9 billion and $1.8 billion, respectively.

We hold a variety of interest bearing auction rate securities, asset backed securities, money market funds, equity securities and cost and equity method investments. The recent uncertainties in the credit markets have affected a number of these holdings.

In September 2008, the fund (as defined above) was unable to honor our request for the full redemption of our investment totaling $983 million, and the fund was subsequently placed into liquidation. The fund announced that its per-share value would drop below $1.00 per share as a result

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.”

Revolving credit facilities. On February 15, 2008, we entered into a $3.0 billion five-year revolving credit facility with a syndicate of banks including affiliates of certain class B and class C stockholders and certain of our customers or affiliates of our customers. Loans under the five-year facility may be in the form of: (1) Base Rate Advance, which will bear interest at a rate equal to the higher of the Federal Funds Rate plus 0.5% or the Bank of America prime rate; (2) Eurocurrency Advance, which will bear interest at a rate equal to LIBOR (as adjusted for applicable reserve requirements) plus an applicable cost adjustment and an applicable margin of 0.11% to 0.30% based on our credit rating; or (3) U.S. Swing Loan, Euro Swing Loan, or Foreign Currency Swing Loan, which will bear interest at the rate equal to the applicable Swing Loan rate for that currency plus the same applicable margin plus additionally for Euro and Sterling loans, an applicable reserve requirement and cost adjustment. We also agreed to pay a facility fee on the aggregate commitment amount, whether used or unused, at a rate ranging from 0.04% to 0.10% and a utilization fee on loans at a rate ranging from 0.05% to 0.10% based on our credit rating. Currently, the applicable margin is 0.15%, the facility fee is 0.05% and the utilization fee is 0.05%. This facility contains certain covenants, including financial covenant requirements relating to a maximum level of debt to EBITDA and events of default customary for financings of this type. This facility expires on February 15, 2013. There have been no borrowings under this facility. At September 30, 2008, we were in compliance with all covenants with respect to this facility.

U.S. commercial paper programs. We maintain a $500 million U.S. commercial paper program, which provides for the issuance of unsecured debt with maturities up to 270 days from the date of issuance at interest rates generally extended to companies with comparable credit ratings. The commercial paper program is a source of short-term borrowed funds that may be used from time to time to cover short-term cash needs. At September 30, 2008, we had no obligations outstanding under this program. There are no financial covenants related to this program.

Medium-term note program. Visa International has established a medium-term note program authorizing the issuance of a maximum of $250 million of unsecured, private placement notes. The notes may be issued with maturities from nine months to 30 years at fixed or floating interest rates. At September 30, 2008, we had notes outstanding in an aggregate amount of $40 million, which mature in August 2009 and have a fixed interest rate of 7.53%. Interest expense on the outstanding notes for fiscal 2008 was approximately $3 million. There are no financial covenants related to this program.

Credit Ratings

At September 30, 2008, Standard and Poor’s and Moody’s rated our long-term and short-term unsecured debt as follows:


	Standard and Poor’s		Moody’s
Debt type	Rating	Outlook	Rating	Outlook
Long-term unsecured debt
Local	A+	Stable	A1	Stable
Foreign	A+	Stable	A1	Stable
Short-term unsecured debt	A-1	Stable	P-1	Stable

Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the electronic payment industry, our financial position and changes in our business strategy. We do not currently foresee any reasonable circumstances under which our credit ratings would be significantly downgraded. If a downgrade were to occur, it could adversely impact, among other things, our future borrowing costs and access to capital markets.

Uses of Liquidity

Payments settlement requirements. Payments settlement due from and due to issuing and acquiring customers represents our most consistent liquidity requirement, arising primarily from the payments settlement of certain credit and debit transactions and the timing of payments settlement between financial institution customers with settlement currencies other than the U.S. dollar. These settlement receivables and payables generally remain outstanding for one to two business days, consistent with standard market conventions for domestic transactions and foreign currency transactions. We maintain a liquidity position sufficient to enable uninterrupted daily net settlement. Typically, the highest seasonal liquidity demand is experienced in December and early January during the holiday shopping season. During fiscal 2008, we funded average daily net settlement receivable balances of $157 million, with the highest daily balance being $455 million.

Litigation. We are parties to legal and regulatory proceedings with respect to a variety of matters, including certain litigation that we refer to as covered litigation. We have a Retrospective Responsibility Plan to address settlements and judgments arising from covered litigation. As part of the plan, we deposited $3.0 billion of our IPO proceeds into an escrow account from which settlements of, or judgments in, covered litigation will be paid. The amount deposited in the escrow account caused the conversion ratio of class B shares to shares of class A common stock to decline. We may be directed by the litigation committee to conduct additional sales of class A common stock in order to increase the escrow amount, in which case the conversion rate of the class B common stock will be subject to an additional dilutive adjustment to the extent of the number of additional class A common shares sold. The litigation committee was established pursuant to a litigation management agreement among Visa Inc., Visa U.S.A., Visa International and the members of the litigation committee, all of whom are affiliated with, or act for, certain Visa U.S.A. members. The litigation committee may recommend or refer the cash payment portion of a proposed settlement of any covered litigation to the Visa Inc. board of directors.

It is our intention to take steps during the first quarter of fiscal 2009 to fund our escrow account with an additional approximate $1.1 billion. Under our Retrospective Responsibility Plan, our class B shareholders will bear the cost of funding the litigation escrow account via a further dilutive adjustment in the conversion ratio of their class B shares to shares of class A common stock, reducing the total number of diluted class A shares outstanding for purposes of calculating EPS. On November 14, 2008 we filed a definitive proxy with the Securities and Exchange Commission seeking to amend our charter to permit us to deposit operating cash directly into the litigation escrow account with a corresponding reduction in the conversion ratio applicable to our class B common shares. Funding the litigation escrow account in this manner would also effectively act as a share repurchase program in the amount of $1.1 billion. In the event that the proxy is not approved by our shareholders it is our intention to fund the litigation escrow with an additional approximate $1.1 billion through an underwritten public offering under the established terms of our Retrospective Responsibility Plan.

In March 2008, we recorded an additional litigation provision of $285 million related to the covered litigation as a charge against income. In the fourth quarter of fiscal 2008 we also recorded a provision of $1.1 billion related to the Discover litigation in connection with an agreement to settle pending litigation with Discover Financial Services. The determination to record both additional provisions was based on management’s present understanding of its litigation profile and the specifics of each case and takes into account the determination of the litigation committee.

Together with Visa U.S.A. and Visa International, we entered into an agreement with American Express that became effective on November 9, 2007 to settle litigation, American Express Travel Related Services Co., Inc. v. Visa U.S.A. Inc. et al, that had been pending since 2004. The settlement ended all current litigation between American Express and Visa U.S.A. and Visa International, as well as the related litigation between American Express and five co-defendant banks. Under the settlement

agreement, American Express will receive maximum payments of $2.25 billion, including up to $2.07 billion from us and $185 million from the five co-defendant banks. An initial payment of $1.13 billion was made in March 2008, including $945 million from us and $185 million from the five co-defendant banks. Beginning April 1, 2008, we are required to pay American Express an additional amount of up to $70 million each quarter for 16 quarters, for a maximum total of $1.12 billion, contingent on American Express meeting certain performance criteria. All payments related to this covered litigation settlement will be funded out of the litigation escrow account.

Judgments in and settlements of litigation, other than covered litigation, could give rise to future liquidity needs. For example, in connection with our retailers’ litigation settlement in fiscal 2003, we are required to make annual settlement payments of $200 million through fiscal 2012.

Redemption of class B and class C common stock. In March 2008, we redeemed 154,738,487 shares of class B common stock for $6,618 million and 159,657,751 shares of class C (series I) common stock for $6,828 million. Subsequent to our fiscal year end, on October 10, 2008, we completed the redemption of 79,748,857 shares of class C (series II) common stock and 35,263,585 shares of our class C (series III) common stock held by Visa Europe for $2,646 million, less dividends and certain other adjustments.

Dividends. On June 11, 2008, our board of directors declared a dividend in the aggregate amount of $0.105 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis) resulting in a payment of $93 million on August 29, 2008. On October 14, 2008 our board of directors declared a dividend in the aggregate amount of $0.105 per share of class A common stock (determined in the case of class B and class C common stock on an as-coverted basis). We expect to pay approximately $80 million in connection with this dividend in December 2008. See Note 16—Stockholders’ Equity and Redeemable Shares to our consolidated financial statements included elsewhere in this report for further information regarding the dividend declarations. We intend to continue paying quarterly dividends in cash, subject to approval by our board of directors, at an annual rate equal to $0.42 per share of class A common stock (representing an ongoing quarterly rate equal to $0.105 per share). Class B and class C common stock will share ratably on an as-converted basis in such future dividends.

Visa Europe put-call option agreement. We have granted Visa Europe a put option which, if exercised, will require us to purchase all of the outstanding shares of capital stock of Visa Europe from its members. Visa Europe may exercise the put option at any time after March 25, 2009. The purchase price of the Visa Europe shares under the put option is based upon a formula that, subject to certain adjustments, applies the 12-month forward price-to-earnings multiple applicable to our common stock at the time the option is exercised to Visa Europe’s projected sustainable adjusted net operating income for the same 12-month period. Upon exercise of the put option, we will be obligated, subject only to regulatory approvals and other limited conditions, to pay the purchase price within 285 days in cash or, at our option, with a combination of cash and shares of our publicly tradable common stock. The portion of the purchase price we will be able to pay in stock will initially be limited to 43.8% based upon the redemption of class C (series I) common stock and will be reduced to the extent of any further redemptions of, or exceptions made by the directors to the transfer restrictions applicable to, the class C (series I) common stock. We must pay the purchase price in cash if the settlement of the put option occurs after March 25, 2011.

We will incur a substantial financial obligation if Visa Europe exercises the put option, and we may need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering in order to fund this payment, which would be due 285 days after exercise. At September 30, 2008, the fair value of the put option liability was $346 million. While this amount represents the fair value of the put option at September 30, 2008, it does not represent the actual purchase price that we

may be required to pay if the option is exercised. The amount of that potential obligation could vary dramatically based on, among other things, the 12 month projected sustainable net operating income of Visa Europe, the allocation of cost synergies, the trading price of our class A common stock, and our 12-month forward price-to-earnings multiple, in each case, as determined at the time the put option is exercised. We are not currently able to estimate the amount of this obligation due to the nature and number of factors involved and the range of important assumptions that would be required. However, depending upon Visa Europe’s level of sustainable profitability and/or our 12-month forward price-to-earnings multiple at the time of any exercise of the option, the amount of this obligation could be several billion dollars or more. See Note 4—Visa Europe to our consolidated financial statements included elsewhere in this report.

Pension and other postretirement benefits. We sponsor various qualified and nonqualified defined benefit pension plans which generally provide benefits based on years of service, age and the employees’ final three to five years of earnings, as well as a postretirement benefit plan which provides postretirement medical benefits for retirees and dependents that meet minimum age and service requirements. Our policy with respect to our qualified pension plan is to contribute annually not less than the minimum required under ERISA. Our postretirement plan is funded on a current basis. We typically fund our pension plan in September of each year. In September 2008 and 2007 we made contributions to our pension and postretirement plans of $190 million and $65 million, respectively. In fiscal 2009 we intend to fund our defined benefits pension plan and postretirement benefit plan by approximately $70 million.

Capital expenditures. We are building a new data center on the east coast of the United States at a current estimated cost of $390 million, of which we expect to capitalize approximately $335 million. In fiscal 2007, we completed the purchase of a parcel of land and commenced construction, which is expected to continue through fiscal 2009. Upon completion, we will migrate our current east coast data center to this new facility. The new data center is intended to support our technology objectives related to reliability, scalability, security and new product development. At September 30, 2008, we had incurred total costs of $264 million related to the new data center. We have remaining committed obligations of $70 million, which is expected to be paid in fiscal 2009. The remaining $56 million of uncommitted estimated costs is expected to be paid in fiscal 2009 and 2010. We will also continue to make ongoing investments in technology and our payments system infrastructure, some of which we treat as capital expenditures.

Other uses of liquidity. In addition to the principal uses of liquidity described above, we are also required to make interest and principal payments under our outstanding indebtedness. Our total outstanding principal balance of debt at September 30, 2008, net of unamortized issuance costs, was $106 million.

Certain charges directly connected to the reorganization will affect our results of operations in future periods. These charges, which may be significant, will include charges during fiscal 2009 related to workforce consolidation due to elimination of overlapping functions. We expect to fund these activities with existing liquid assets and projected operating cash flows.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements are comprised of guarantees. Visa Inc. has no off-balance sheet debt, other than operating leases and purchase order commitments entered into in the ordinary course of business as discussed below and reflected in our contractual obligations table.

Guarantees

Our financial institution customers are responsible for settlement of transactions with other customers. However, under the bylaws of Visa U.S.A. and Visa International, and through separate membership agreements with the individual financial institution customers, these entities indemnify issuing and acquiring customers for settlement losses suffered by reason of the failure of any other issuing and acquiring customer to honor drafts, traveler’s cheques, or other instruments processed in accordance with their operating regulations. This indemnification is unlimited and is the result of the difference in timing between the date of a payment transaction and the date of subsequent settlement. To manage the settlement risk under this indemnification and the resulting risk to all financial institution customers, a formalized set of credit standards is used to review financial institution customers. To reduce potential losses related to settlement risk, Visa Inc. requires certain financial institution customers to post collateral that may include cash equivalents, securities, letters of credit or guarantees in order to ensure their performance of settlement obligations. Our estimated settlement exposure, after consideration of customer collateral obtained, amounted to approximately $34.8 billion at September 30, 2008. The exposure to settlement losses not covered by customer collateral is accounted for as a settlement risk guarantee. The fair value of the settlement risk guarantee is estimated and recorded in our consolidated balance sheet. See Note 13—Settlement Guarantee Management to our consolidated financial statements included elsewhere in this report. The fair value of the settlement risk guarantee was under $1 million at September 30, 2008.

In October 2001, Visa International entered into a 20-year lease agreement for premises in London to be occupied by the EU region and Visa CEMEA. On July 1, 2004, upon the incorporation of the EU region as VESI, a wholly owned subsidiary of Visa Europe, the entire lease was assigned to VESI with Visa International acting as a guarantor to the landlord as required by United Kingdom property law under the existing lease. In the event of a default by VESI, Visa International is obligated to make lease payments. The base rent commitment is £8 million each year or $14 million in U.S. dollars (based on the September 30, 2008 exchange rate). VESI has agreed to reimburse Visa International for any liabilities that may arise under Visa International’s guarantee to the landlord. Since the inception of this arrangement, Visa International has not made any payments under this guarantee. The estimated fair value of this guarantee was under $1 million at September 30, 2008.

Indemnifications

In the ordinary course of business, we enter into contractual arrangements with financial institution and other customers under which we may agree to indemnify the customer for certain types of losses incurred relating to the services we provide or otherwise relating to our performance under the applicable agreement. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments we have made related to these indemnification obligations have been immaterial.

Contractual Obligations

Our contractual commitments will have an impact on our future liquidity. The contractual obligations identified in the table below include both on-and off-balance sheet transactions that represent a material expected or contractually committed future obligation at September 30, 2008. We believe that we will be able to fund these obligations through cash generated from operations and from our existing cash balances, proceeds from our IPO, and available credit facilities.


	Payments Due by Period
	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
	(in millions)
Purchase orders⁽¹⁾	$	666	$	57	$	2	$	—	$	725
Operating leases⁽²⁾		35		47		18		37		137
Equipment, software and other⁽²⁾		14		15		—		—		29
Volume and support incentives⁽³⁾		1,069		1,913		1,318		483		4,783
Marketing and sponsorships⁽⁴⁾		107		152		97		25		381
Litigation payments⁽⁵⁾		2,461		970		270		—		3,701
Redemption of class C (series II) common stock⁽⁶⁾		1,136		—		—		—		1,136
Redemption of class C (series III) common stock⁽⁶⁾		1,508		—		—		—		1,508
Debt⁽⁷⁾		52		24		21		11		108
Interest on debt⁽⁷⁾		7		7		3		1		18

Total	$	7,055	$	3,185	$	1,729	$	557	$	12,526

(1)	Purchase obligations include agreements to purchase goods and services that are enforceable and legally binding and that specify significant terms, including: fixed or minimum quantities to be purchased and fixed, minimum or variable price provisions, and the approximate timing of the transaction.

(2)	Visa Inc. leases certain premises such as its data centers, certain regional offices, equipment and software under non-cancelable operating leases with varying expiration dates.

(3)

Visa Inc. generally has non-cancelable agreements with financial institutions and merchants for various programs designed to build sales volume and increase payment product acceptance. These agreements, which range in term from one to 13 years, provide card issuance, marketing and program support based on specific performance requirements. Payments under these agreements will be offset by revenues earned from higher payments and transaction volumes in connection with these agreements. These amounts are estimates and could change based on customer performance.

(4)

Visa Inc. is a party to contractual sponsorship agreements ranging from less than one year to 8 years. These contracts are designed to help us increase Visa-branded cards and volumes. Over the life of these contracts, Visa is required to make payments in exchange for certain advertising and promotional rights. In connection with these contractual commitments, Visa has an obligation to spend certain minimum amounts for advertising and marketing promotion over the contract terms.

(5)	Represents amounts due in accordance with settlement agreements in the Retailers’ Litigation, American Express, Discover and other litigation settlements.

(6)

In October 2008, we redeemed all of the class C (series II) common stock for an aggregate redemption price of $1.1 billion (subject to reduction for dividends and other adjustments) and we redeemed 35,263,585 shares of class C (series III) common stock for an aggregate redemption price of $1.5 billion. See Note 16—Stockholders’ Equity and Redeemable Shares.

(7)	Represents payments on medium-term notes, 2002 series B senior secured notes, 1994 and 1995 series B secured notes. See Note 11—Debt to our consolidated financial statements included elsewhere in this report.

Effective October 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109. At September 30, 2008, the liability for uncertain tax positions, net of offsetting tax benefits associated with the correlative effects of state and foreign income taxes was $376 million. At September 30, 2008, we also accrued $5 million of interest and $1 million of penalties associated with our uncertain tax positions. We cannot determine the range of cash payments that will be made within the next twelve months associated with our uncertain tax positions.

Also see Note 11—Debt, Note 20—Commitments and Contingencies, and Note 23—Legal Matters to our consolidated financial statements included elsewhere in this report.

Related Parties

During fiscal 2008, a significant portion of our operating revenues were generated from four customers with officers who also serve on our board of directors. Operating revenues from these customers were approximately $538 million, or 9%, of our operating revenues for fiscal 2008. No customer accounted for 10% or more of Visa Inc.’s total operating revenues during this period. The loss of any of these customers could adversely impact our operating revenues and operating income going forward. See Note 21—Related Parties to our consolidated financial statements included elsewhere in this report.

One of the Company’s directors, and the spouse of another of the Company’s directors, are also officers of entities that participated in (or are affiliated with an entity that participated in) our IPO as underwriters, and one of those entities is also one of our customers. As underwriters, each was offered and purchased 113 million shares of class A common stock at a price of $42.77 per share, a discount of $1.23 per share based on the IPO price of $44.00 per share. This price per share is the same as that paid by all underwriters in the IPO. Also as underwriters, each received total underwriter fees from us of $139 million in March 2008.

We are also a party to numerous agreements with Visa Europe, a holder of our class C common stock, which allow each entity to provide services to the other at negotiated fees, including the allocation of costs for office premises which are shared by us and Visa Europe. For fiscal 2008, total operating revenues and operating expenses related to Visa Europe totaled $221 million and $7 million, respectively. At September 30, 2008, Visa Europe owed us approximately $3 million in net accounts receivable. See Note 4—Visa Europe to our consolidated financial statements included elsewhere in this report.

Also see Item 13 “Certain Relationships and Related Transactions, and Director Independence” included elsewhere in this report.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make judgments, assumptions and estimates that affect the amounts reported. Note 2—Summary of Significant Accounting Policies to our consolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements and is included elsewhere in this report. We have established policies and control procedures to seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period to period. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with generally accepted accounting principles. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. The following is a brief description of our current accounting policies involving significant management judgments.

We believe that the following accounting estimates are the most critical to fully understand and evaluate our reported financial results, as they require our most subjective or complex management judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.


Critical Estimates	Assumptions and Judgment	Impact if Actual Results Differ from Assumptions
*Revenue Recognition—Volume and Support Incentives*

We enter into incentive agreements with financial institution customers, merchants and other business partners to build payments volume and to increase product acceptance. Certain volume and support incentives are based on performance targets and are accrued based upon estimates of future performance. Other incentives are fixed payments and are deferred and amortized over the period of benefit.	Volume and support incentives require significant management estimates. Estimation of volume and support incentives relies on forecasts of payments volume, estimates of card issuance and conversion. Performance is estimated using customer reported information, transactional information accumulated from our systems, historical information and discussions with our customers.	If our customers’ actual performance or recoverable cash flows are not consistent with our estimates, volume and support incentives may be materially different than initially recorded. The cumulative impact of a revision in estimates is recorded in the period such revisions become probable and estimable and is recorded as a reduction of revenue. For the year ended September 30, 2008 performance adjustments to volume and support agreements were approximately 0.2% of our operating revenues.

*Fair Value—Visa Europe Put Option*

We have granted Visa Europe a put option under which Visa Inc. is required to purchase all of the share capital of Visa Europe from its members at any time after March 25, 2009. The purchase price of the Visa Europe shares under the put option is based upon a formula that, subject to certain adjustments, applies the 12-month forward price-to-earnings multiple applicable to our common stock at the time the option is exercised to Visa Europe’s projected sustainable adjusted net operating income for the same 12-month period. We determined the fair value of the put option using probability weighted models designed to estimate our liability	The determination of the fair value of the put option requires significant estimates and assumptions. The most significant of these estimates are the assumed probability that Visa Europe will elect to exercise its option and the estimated differential between the 12-month forward price-to-earnings multiple applicable to our common stock and that applicable to Visa Europe on a stand alone basis at the time of exercise, which we refer to as the P/E differential.	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 of 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.


Critical Estimates	Assumptions and Judgment	Impact if Actual Results Differ from Assumptions
assuming various possible exercise decisions that Visa Europe could make, including the possibility it will never exercise its option, under different economic conditions in the future. Using this approach, the estimated fair value is approximately $346 million at September 30, 2008 and is included in other liabilities on the Visa Inc. consolidated balance sheet at September 30, 2008. While this amount represents the fair value of the put option at September 30, 2008, it does not represent the actual purchase price that we may be required to pay if the option was exercised, which would likely be significantly in excess of this amount.

*Fair Value—Goodwill and Intangibles*

The purchase method of accounting for business combinations and associated impairment assessment requires the use of significant estimates and assumptions. We are required to estimate the fair value and useful lives of assets acquired and liabilities assumed. We are required to assess assets acquired and goodwill for impairment subsequently.	Valuation of assets and liabilities assumed in business combinations, including goodwill and intangible assets require the use of management’s judgment. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted average cost of capital and an appropriate discount rate determined by our management. We believe that the assumptions made in this regard are comparable to those that market participants would use in making estimates of fair value. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Determining the expected life of an intangible asset requires	If actual results are not consistent with our assumptions and estimates, we may be exposed to impairment charges. The carrying value of the goodwill and intangible assets was $21.1 billion, including $10.9 billion of indefinite-lived intangible assets at September 30, 2008.


Critical Estimates	Assumptions and Judgment	Impact if Actual Results Differ from Assumptions
	considerable management judgment and is based on the evaluation of a number of factors, including the competitive environment, market share, customer history and macroeconomic factors. We determined that our brand and customer relationships intangible assets have indefinite lives, based on our significant market share, history of strong revenue and cash flow performance, and historical retention rates which we expect to continue for the foreseeable future. Impairment testing for assets, other than goodwill, requires the allocation of cash flows to those assets or group of assets and if required, an estimate of fair value for the assets or group of assets. Impairment testing for goodwill requires us to assign assets and liabilities to reporting units along with estimating future cash flows for those reporting units based on assumptions of future events.

*Legal and Regulatory Matters*

We are currently involved in various claims and legal proceedings, the outcomes of which are not within our complete control or may not be known for prolonged periods of time. Management is required to assess the probability of loss and amount of such loss, if any, in preparing our financial statements.	We evaluate the likelihood of a potential loss from any claim or legal proceeding to which we or any of our subsidiaries is a party in accordance with SFAS No. 5, “Accounting for Contingencies” (SFAS 5). We record a liability for claims and legal proceedings when a loss is considered probable and the amount can be reasonably estimated. In most cases, significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably	Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which we operate, our judgments may be materially different than the actual outcomes, which could have material adverse effects on our business, financial condition and results of operations.


Critical Estimates	Assumptions and Judgment	Impact if Actual Results Differ from Assumptions
	estimable. Our judgments are subjective based on the status of the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel. In determining our liability under SFAS 5 for covered litigation under the Retrospective Responsibility Plan, we also evaluate the actions taken by the litigation committee including its decisions regarding the establishment and funding of the escrow account. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise our estimates.

*Income Taxes*

In calculating our effective tax rate, we make judgments regarding certain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions.	We have various tax filing positions with regard to the timing and amount of deductions and credits, the establishment of reserves for audit matters and the allocation of income among various tax jurisdictions. The adoption of FASB interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” required us to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities.	Although we believe that our estimates and judgments are reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities, including our current and deferred tax benefits of $317 million and $857 million, respectively, associated with the settlement of the American Express litigation and the recognition of a liability under the guidelines of SFAS No. 5 related to the Discover litigation and other matters. See Note 23—Legal Matters to our consolidated financial statements included elsewhere in this report. If one or more of the taxing authorities were to successfully challenge our right to realize some or all of the tax benefit we have recorded, and we were unable to realize this benefit, it could have a material and adverse effect on our financial results and cash flows.

Impact of Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure requirements about fair value measurements. In February 2008, the FASB issued FASB Staff Position (“FSP No. FAS 157-2”), Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which delays the effective date of SFAS 157 until fiscal years beginning after November 15, 2008 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 is effective for financial assets and liabilities for fiscal years beginning after November 15, 2007. We have evaluated the impact of adopting SFAS 157 on our financial assets and liabilities and do not believe that the standard will have a significant impact on our consolidated financial statements upon adoption on October 1, 2008. We are in the process of evaluating the impact, if any, on our consolidated financial statements of adopting FSP FAS 157-2 on our non-financial assets and liabilities.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment to SFAS 115 (“SFAS 159”). SFAS 159 allows the measurement of many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis under a fair value option. In addition, SFAS 159 includes an amendment of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and applies to all entities with available-for-sale and trading securities. SFAS 159 is effective for fiscal years that begin after November 15, 2007. Effective October 1, 2008, we elected the fair value option for certain investment securities which are held in connection with employee compensation plans. These securities will be reported as trading securities with changes in fair value recorded as other income (expense) on our consolidated statements of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, and that any retained noncontrolling equity investment in a deconsolidated former subsidiary be initially measured at fair value. SFAS 160 also requires entities to provide sufficient disclosures to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have an effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the treatment of acquisition related transaction costs, the accounting for preacquisition gain and loss contingencies, the accounting for acquisition-related restructuring cost accruals, and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141R is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. We are currently evaluating the impact, if any, of adopting SFAS 141R on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the

disclosure requirements for derivative instruments and hedging activities. SFAS 161 requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted. We are currently evaluating the impact, if any, of adopting SFAS 161 on our consolidated financial statements.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact, if any, of adopting FSP FAS 142-3 on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with accounting principles generally accepted in the United States of America. SFAS 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The adoption of this statement is not expected to have an effect on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128, Earnings per Share. FSP EITF 03-6-1 requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per share. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008; earlier application is not permitted. We are currently evaluating the impact, if any, of adopting FSP EITF 03-6-1 on our results of operations and earnings per share.

In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (“FSP 133-1 and FIN 45-4”). FSP 133-1 and FIN 45-4 is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. It amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. The FSP also amends FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others (“FIN 45”), to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of the FSP that amend SFAS 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. Lastly, the FSP clarifies the effective date of SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133, as any reporting period (annual or quarterly interim) beginning after November 15, 2008. We are currently evaluating the impact, if any, of adopting this FSP on our consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential economic loss arising from changes in market factors. We believe we are exposed to four significant market risks that could affect our business including: changes in foreign currency rates, interest rates and equity prices. We do not hold or enter into derivatives or other financial instruments for trading or speculative purposes. Aggregate risk exposures are monitored on an ongoing basis, and cash and cash equivalents are not considered to be subject to significant interest rate risk due to the short period of time to maturity.

Foreign Currency Exchange Rate Risk

Our business is conducted globally. Although most of our activities are transacted in U.S. dollars, we are exposed to adverse movements in foreign currency exchange rates. Risks from foreign currency exchange rate fluctuations are related primarily to adverse changes in the dollar value of revenues that are derived from foreign currency-denominated transactions, and to adverse changes in the dollar value of payments in foreign currencies, primarily for costs and expenses at our non-U.S. locations.

These risks are managed by utilizing derivative foreign currency forward and option contracts, which we refer to as foreign currency contracts. Foreign currency contracts are primarily designated as hedges of operational cash flow exposures which result from changes in foreign currency exchange rates. At September 30, 2008, the currency underlying the foreign currency contracts consists of the British pound sterling. Prior to the reorganization, Visa U.S.A. did not engage in foreign currency hedges. Our foreign currency exchange rate risk management program reduces, but does not entirely eliminate, the impact of foreign currency exchange rate movements.

We are also subject to foreign currency exchange risk in daily settlement activities. This risk arises from the timing of rate setting for settlement with customers relative to the timing of market trades for balancing currency positions. The foreign currency exchange risk in settlement activities is limited through daily operating procedures, including the utilization of Visa settlement systems and our interaction with foreign exchange trading counterparties.

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. We do not consider investment securities which are classified as cash and cash equivalents to be subject to significant market risks from a fair value perspective, as amounts consist of liquid investments with original maturities of three months or less. 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. Because we have historically had the ability 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 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.

Pension Plan Assets Risk

Our total defined benefit pension plan assets were $624 million and $604 million at September 30, 2008 and 2007, 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 2009, which we expect to make in September 2009.

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 Historical and Pro Forma Financial Condition and Results of Operations” of this report.

ITEM 8.

Financial Statements and Supplementary Data

VISA INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page
VISA INC.

As of September 30, 2008 and 2007 and for the years ended September 30, 2008, 2007 and 2006

Report of Independent Registered Public Accounting Firm		97
Consolidated Balance Sheets		99
Consolidated Statements of Operations		101
Consolidated Statements of Changes in Stockholders’ Equity		103
Consolidated Statements of Comprehensive Income		105
Consolidated Statements of Cash Flows		106
Notes to the Consolidated Financial Statements		108

Report of Independent Registered Public Accounting Firm

[KPMG LLP letterhead]

The Board of Directors and Stockholders

Visa Inc. and subsidiaries:

We have audited the accompanying consolidated balance sheet of Visa Inc. and subsidiaries as of September 30, 2008, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income, and cash flows for the year ended September 30, 2008, and the consolidated balance sheet of Visa U.S.A. Inc. and subsidiaries (Visa U.S.A) as of September 30, 2007, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income, and cash flows for each of the years in the two-year period ended September 30, 2007. We also have audited Visa Inc.’s internal control over financial reporting as of September 30, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Visa Inc.’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Visa Inc. and subsidiaries as of September 30, 2008, and the results of its operations and its cash flows for the year ended September 30, 2008, and of Visa U.S.A. as of September 30, 2007, and the results of its operations and cash flows for each of the years in the two-years period ended September 30, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Visa Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Notes 2 and 3 to the consolidated financial statements, the consolidated balance sheet as of September 30, 2007, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income, and cash flows for each of the years in the two-year period ended September 30, 2007 are those of Visa U.S.A, the accounting acquirer in the reorganization.

/s/ KPMG LLP

San Francisco, California

November 17, 2008

VISA INC.

CONSOLIDATED BALANCE SHEETS


	September 30, 2008		September 30, 2007⁽¹⁾
	(in millions, except share data)
Assets
Cash and cash equivalents	$	4,979	$	275
Restricted cash—litigation escrow		1,298		—
Investment securities, available-for-sale		355		747
Settlement receivable		1,131		10
Accounts receivable		342		245
Customer collateral		679		68
Current portion of volume and support incentives		256		96
Current portion of deferred tax assets		944		795
Prepaid expenses and other current assets		1,190		271

Total current assets		11,174		2,507
Restricted cash—litigation escrow		630		—
Investment securities, available-for-sale		244		737
Volume and support incentives		123		44
Investment in Visa International		—		227
Property, equipment and technology, net		1,080		313
Deferred tax assets		—		471
Other assets		634		91
Intangible assets		10,883		—
Goodwill		10,213		—

Total assets	$	34,981	$	4,390

Liabilities
Accounts payable	$	159	$	99
Settlement payable		1,095		50
Customer collateral		679		68
Accrued compensation and benefits		420		244
Volume and support incentives		249		188
Accrued liabilities		306		356
Current portion of long-term debt		51		41
Current portion of accrued litigation		2,698		2,236
Redeemable class C (series III) common stock, 35,263,585 shares outstanding at September 30, 2008		1,508		—

Total current liabilities		7,165		3,282
Long-term debt		55		—
Accrued litigation		1,060		1,446
Deferred tax liabilities		3,811		—
Other liabilities		613		125

Total liabilities		12,704		4,853

(1)	Historical balances for periods prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination.

See accompanying notes, which are an integral part of these consolidated financial statements.

VISA INC.

CONSOLIDATED BALANCE SHEETS—(Continued)


	September 30, 2008			September 30, 2007⁽¹⁾
	(in millions, except share and par value data)
Temporary Equity and Minority Interest
Class C (series II) common stock, $0.0001 par value, 218,582,801 shares authorized, 79,748,857 shares issued and outstanding at September 30, 2008, net of subscription receivable	$	1,136		$	—
Minority interest		—			38

Total temporary equity and minority interest		1,136			38

Commitments and contingencies—see Note 20
Stockholders’ Equity
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none issued		—			—
Class A common stock, $0.0001 par value, 2,001,622,245,209 shares authorized, 447,746,261 shares issued and outstanding		—			—
Class B common stock, $0.0001 par value, 622,245,209 shares authorized, 245,513,385 shares issued and outstanding		—			—
Class C (series I) common stock, $0.0001 par value, 813,582,801 shares authorized, 124,622,548 issued and 124,097,105 outstanding		—			—
Class C (series III) common stock, $0.0001 par value, 64,000,000 shares authorized and 26,949,616 shares issued and outstanding		—			—
Class C (series IV) common stock, $0.0001 par value, 1,000,000 shares authorized and 549,587 shares issued and outstanding		—			—
Additional paid-in capital		21,060			—
Class C (series I) treasury stock, 525,443 shares (Note 16)		(35	)		—
Accumulated income (deficit)		186			(501	)
Accumulated other comprehensive loss, net		(70	)		—

Total stockholders’ equity and accumulated income (deficit)		21,141			(501	)

Total liabilities, temporary equity and minority interest, and stockholders’ equity	$	34,981		$	4,390

(1)	Historical balances for periods prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination. As Visa U.S.A. was a non-stock corporation, no stock was authorized, issued, or outstanding at September 30, 2007.

See accompanying notes, which are an integral part of these consolidated financial statements.

100

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Years Ended September 30,
	2008			2007⁽¹⁾			2006⁽¹⁾
	(in millions except per share data)
Operating Revenues
Service fees	$	3,061		$	1,945		$	1,610
Data processing fees		2,073			1,416			1,248
International transaction fees		1,721			454			398
Other revenues		569			280			280
Volume and support incentives		(1,161	)		(505	)		(588	)

Total operating revenues		6,263			3,590			2,948

Operating Expenses
Personnel		1,199			721			671
Network, EDP and communications		339			249			213
Advertising, marketing and promotion		1,016			581			474
Visa International fees		—			173			159
Professional and consulting fees		438			334			291
Depreciation and amortization		237			126			138
Administrative and other		332			202			249
Litigation provision		1,470			2,653			23

Total operating expenses		5,031			5,039			2,218

Operating income (loss)		1,232			(1,449	)		730

Other Income (Expense)
Equity in earnings of unconsolidated affiliates		1			40			13
Interest expense		(143	)		(81	)		(89	)
Investment income, net		211			103			68
Other		35			—			—

Total other income (expense)		104			62			(8	)

Income (loss) before income taxes and minority interest		1,336			(1,387	)		722
Income tax expense (benefit)		532			(316	)		251

Income (loss) before minority interest		804			(1,071	)		471
Minority interest		—			(5	)		(16	)

Net income (loss)	$	804		$	(1,076	)	$	455

Basic net income per share (Note 17)⁽²⁾
Class A common stock	$	0.96

Class B common stock	$	0.85

Class C (series I) common stock	$	0.96

Class C (series II) common stock	$	0.79

Class C (series III and IV) common stock	$	0.96

101

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS—(Continued)


	For the Year Ended September 30,
	2008		2007⁽¹⁾	2006⁽¹⁾
	(in millions except per share data)
Basic weighted average shares outstanding (Note 17)⁽²⁾
Class A common stock		239

Class B common stock		333

Class C (series I) common stock		191

Class C (series II) common stock		56

Class C (series III and IV) common stock		44

Diluted net income per share (Note 17)⁽²⁾
Class A common stock	$	0.96

Class B common stock	$	0.85

Class C (series I) common stock	$	0.96

Class C (series II) common stock	$	0.79

Class C (series III and IV) common stock	$	0.96

Diluted weighted average shares outstanding (Note 17)⁽²⁾
Class A common stock		769

Class B common stock		333

Class C (series I) common stock		191

Class C (series II) common stock		56

Class C (series III and IV) common stock		44

(1)	Historical balances for periods prior to October 1, 2007 represent balances for Visa U.S.A. Inc., deemed the accounting acquirer in the business combination.

(2)	For the years ended September 30, 2007 and 2006, Visa U.S.A. Inc. was a non-stock corporation and therefore there was no comparable metric for net income per share and no common stock outstanding.

See accompanying notes, which are an integral part of these consolidated financial statements.

102

VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


	Common Stock
	Class A	Class B	Class C (series I)	Class C (series II)	Class C (series III and series IV)	Additional Paid in Capital		Treasury Stock		Accumulated Income (Deficit)			Accumulated Other Comprehensive (Loss) Income			Total Equity (Deficit)
	(in millions)
Balance as of September 30, 2005⁽¹⁾	—	—	—	—	—	$	—	$	—	$	129		$	(3	)	$	126

Net income											455						455
Other comprehensive income, net of tax														2			2

Comprehensive income																	457

Balance as of September 30, 2006⁽¹⁾	—	—	—	—	—	$	—	$	—	$	584		$	(1	)	$	583

Net loss											(1,076	)					(1,076	)
Other comprehensive income, net of tax														3			3

Comprehensive loss																	(1,073	)
Adjustment to initially apply SFAS 158, net of tax											(9	)		(2	)		(11	)

Balance as of September 30, 2007⁽¹⁾	—	—	—	—	—			$	—	$	(501	)	$	—		$	(501	)

Tax adjustment as a result of adoption of FIN 48											8						8
Net income											804						804
Other comprehensive loss, net of tax														(70	)		(70	)

Comprehensive income																	734

Visa (V)

Annual Reports

Quarterly Reports

8-K

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Documents found in this filing: