Visa (V)

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.

Charges. We are evaluating various alternatives for achieving synergies in the global organization and expect to incur additional charges, which may be significant, during the remainder of fiscal 2008 and in fiscal 2009. We incurred charges related to severance and other termination benefits of $12 million and $56 million during the three and nine months ended June 30, 2008, respectively. In connection with the IPO, we granted equity compensation awards to employees and non-employee directors. We incurred $28 million and $47 million in share-based compensation cost during the three and nine months ended June 30, 2008.

Visa Europe put option. We have 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 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.

Income taxes. As a result of completion of 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 $10 million and $19 million for the three and nine months ended June 30, 2008, respectively. We are evaluating our overall global corporate tax structure as a newly formed global company and are considering various tax alternatives and strategies to assist in managing our overall effective tax rates in the future.

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.

Redemption of class C (series II and III) common stock. In October 2008, we intend to redeem all class C (series II) and a portion of class C (series III) common stock. A portion of the net IPO proceeds have been set aside to satisfy these obligations. Accretion will be recognized on the fair value of class C (series II) shares until the time of redemption. See Note 10—Stockholders’ Equity and Redeemable Shares to our unaudited consolidated financial statements elsewhere in this report for additional information about these redeemable shares.

Commercial relationship with Visa Europe. We do not and will not directly operate in the Visa Europe region, which covers the European Union, Iceland, Israel, Liechtenstein, Monaco, Norway, San Marino, Switzerland, Turkey and Vatican City, along with other countries specified in our agreement with Visa Europe, and any other jurisdiction that becomes a full member state of the European Union in the future. Our relationship with Visa Europe is governed by a framework agreement providing for exclusive, perpetual, non-transferable trademark and technology licenses within Visa Europe’s field of use and the provision of certain bilateral services. This agreement is designed to ensure that Visa’s business and processing infrastructures will be both efficient and interoperable on a global basis. This agreement also gives Visa Europe broad rights to operate the Visa business in its region. We will have limited ability to control Visa Europe’s operations and will have limited recourse in the event of a breach of the framework agreement by Visa Europe.

Charges. Certain charges directly connected to the reorganization will affect our results of operations in future periods. These charges will include charges during fiscal 2008 related to workforce consolidation due to elimination of overlapping functions and to certain professional fees related to enhancing our systems and infrastructure to support the global organization. We incurred charges related to severance and other termination benefits of $17 million and $44 million during the three and six months ended March 31, 2008, respectively. We are evaluating various alternatives for achieving synergies in the global organization and expect to incur additional charges, which may be significant, during the remainder of fiscal 2008 and in early fiscal 2009. In March 2008, in connection with the IPO, we granted equity compensation awards to employees and non-employee directors. We incurred $12 million in share-based compensation cost during the three months ended March 31, 2008.

Visa Europe put option. We have 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 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.

Income taxes. As a result of completion of the IPO and consequent ownership by parties other than our financial institution customers, we are no longer eligible to claim the 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 $9 million for the three and six months ended March 31, 2008. We are evaluating our overall global corporate tax structure as a newly formed global company and are considering various tax alternatives and strategies to assist in managing our overall effective tax rates in the future.

One time tax benefit. As anticipated, following our IPO, our earnings for the second fiscal 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.

Redemption of class C (series II and III) common stock. In October 2008 we intend to redeem all class C (series II) and a portion of class C (series III) common stock. A portion of the net IPO proceeds have been set aside to satisfy these obligations. Accretion will be recognized on the fair value of class C (series II) shares until the time of redemption. See Note 10—Stockholders’ Equity and Redeemable Shares for additional information about these redeemable shares.

Commercial relationship with Visa Europe. We do not and will not directly operate in the Visa Europe region, which covers the European Union, Iceland, Israel, Liechtenstein, Monaco, Norway, San Marino, Switzerland, Turkey and Vatican City, along with other countries specified in our agreement with Visa Europe, and any other jurisdiction that becomes a full member state of the European Union in the future. Our relationship with Visa Europe is governed by a framework agreement providing for exclusive, perpetual, non-transferable trademark and technology licenses within Visa Europe’s field of use and the provision of certain bilateral services. This agreement is designed to ensure that Visa’s business and processing infrastructures will be both efficient and interoperable on a global basis. This agreement also gives Visa Europe broad rights to operate the Visa business in its region. We will have limited ability to control Visa Europe’s operations and will have limited recourse in the event of a breach of the framework agreement by Visa Europe.