Table of Contents

As filed with the Securities and Exchange Commission on November 9, 2007

Registration No. 333-            

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

---

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

---

VISA INC.

(Exact name of Registrant as specified in its charter)

 

---

 

Delaware		7389		26-0267673
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

P.O. Box 8999

San Francisco, California 94128-8999

(415) 932-2100

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Joseph W. Saunders

Chief Executive Officer and Chairman of the Board of Directors

Visa Inc.

P.O. Box 8999

San Francisco, California 94128-8999

Telephone: (415) 932-2100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

---

With copies to:

 

Mark L. Mandel S. Ward Atterbury Colin J. Diamond White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Telephone: (212) 819-8200 Facsimile: (212) 354-8113		Richard J. Sandler Joseph A. Hall Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 Facsimile: (212) 450-3800

 

---

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)(2)		Amount of Registration Fee
Class A common stock, par value $0.0001 per share		$10,000,000,000		$307,000

(1)	Includes             shares subject to the underwriters’ option to purchase additional shares.

(2)	Estimated solely for the purposes of determining the registration fee pursuant to Rule 457(o) promulgated under the Securities Act.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

---

---

Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated November 9, 2007

             Shares

Class A Common Stock

 

---

This is Visa Inc.’s initial public offering. We are offering              shares of our class A common stock. We expect the initial public offering price to be between $             and $             per share.

Currently, no public market exists for our class A common stock. We will apply to list our class A common stock on the                      under the symbol “        .”

Investing in our class A common stock involves risks that are described in the “ Risk Factors” section beginning on page 14 of this prospectus.

 

---

 

		Per Share			Total
Public offering price		$			$
Underwriting discount		$			$
Proceeds, before expenses, to Visa		$			$

To the extent that the underwriters sell more than              shares of class A common stock, the underwriters have the option to purchase up to an additional              shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about                     .

 

---

 

JPMorgan		Goldman, Sachs & Co.

Banc of America Securities LLC		Citi		HSBC		Merrill Lynch & Co.		UBS Investment Bank		Wachovia Securities

 

---

The date of this prospectus is                     

---

Table of Contents

TABLE OF CONTENTS

 

		Page
PROSPECTUS SUMMARY		1
THE OFFERING		7
SUMMARY HISTORICAL CONSOLIDATED AND UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL AND OTHER DATA		12
RISK FACTORS		14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		35
USE OF PROCEEDS		36
DIVIDEND POLICY		36
CAPITALIZATION		37
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS		39
OVERVIEW OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VISA INC.		64
SELECTED COMBINED CONSOLIDATED FINANCIAL AND OTHER DATA OF VISA U.S.A.		73
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VISA U.S.A.		75
THE GLOBAL PAYMENTS INDUSTRY		104
BUSINESS		108
MANAGEMENT		148
PRINCIPAL STOCKHOLDERS		177
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		179
SHARES ELIGIBLE FOR FUTURE SALE		181
MATERIAL CONTRACTS		183
DESCRIPTION OF CAPITAL STOCK		187
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS OF OUR CLASS A COMMON STOCK		199
UNDERWRITING		203
LEGAL MATTERS		208
EXPERTS		208
WHERE YOU CAN FIND MORE INFORMATION		208
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

 

---

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including                      (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This obligation is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

i

---

Table of Contents

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: “Bands Design—Blue, White & Gold;” “Dove” Design; “Interlink;” “Life Takes Visa;” “PLUS;” “Verified by Visa;” “Visa;” “Visa Classic;” “Visa Corporate;” “Visa Electron;” “Visa Fleet;” “Visa Infinite;” “Visa Mobile;” “VisaNet;” “Visa Platinum;” “Visa Purchasing;” “Visa Resolve OnLine;” “Visa ReadyLink;” “Visa Signature;” “Visa Vale;” “Winged V” Design; and “World’s Best Way to Pay.” Other trademarks used in this prospectus are the property of their respective owners.

 

ii

---

Table of Contents

 

1

---

Table of Contents

 

2

---

Table of Contents

 

3

---

Table of Contents

 

4

---

Table of Contents

 

5

---

Table of Contents

 

6

---

Table of Contents

 

7

---

Table of Contents

 

8

---

Table of Contents

 

9

---

Table of Contents

 

10

---

Table of Contents

 

11

---

Table of Contents

 

12

---

Table of Contents

 

13

---

Table of Contents

RISK FACTORS

An investment in our class A common stock involves a high degree of risk. You should carefully consider each of the following risk factors and all other information set forth in this prospectus before investing in our class A common stock. Any of the following risks, if realized, could materially and adversely affect our revenues, operating results, profitability, financial condition, prospects for future growth and overall business. In that case, the trading price of our class A common stock could decline and you could lose all or part of your investment.

Risks Related to Our Business

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 some other regions, although our customers may choose to establish different bilateral or multilateral interchange rates. In certain jurisdictions, default interchange rates are set by the government and not by us. 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.

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.

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, Hungary, Mexico, New Zealand, Norway, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. For example:

 

•

The Reserve Bank of Australia has made regulations under legislation enacted to give it powers over payments systems. A regulation 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.

 

•

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,

 

14

---

Table of Contents

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.

 

•

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 web site.

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. A similar case, filed in 2004, is on appeal by plaintiffs after having been dismissed with prejudice, and has not been transferred to the 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 impacts of settlements 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 “Business—Retrospective Responsibility Plan—Covered Litigation—The Interchange Litigation.”

 

15

---

Table of Contents

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

In 1998, the U.S. Department of Justice filed suit against Visa U.S.A., Visa International and MasterCard International in the U.S. District Court for the Southern District of New York. The suit 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 or Discover), which we refer to as competing payment cards. The district court held that the prohibition constituted an unlawful restraint of trade under the U.S. federal antitrust laws, and this decision was affirmed by the Second Circuit Court of Appeals. In 2004, the U.S. Supreme Court denied our petition for certiorari, thereby exhausting all avenues for further appeal in this case. As a result of this judgment, the Visa U.S.A. bylaw that provided for the prohibition became unenforceable in October 2004 and was subsequently repealed.

Discover filed suit against Visa U.S.A., Visa International and MasterCard International, alleging that prohibiting member financial institutions from issuing competing payment cards caused it injury under the U.S. federal antitrust laws. Discover has requested that the district court give collateral estoppel effect to the court’s findings in the judgment of the 1998 Department of Justice litigation. Although the district court denied that request when made at the outset of the litigation, the district court indicated it would entertain a motion by Discover for collateral estoppel at a later time. If the court were to give collateral estoppel effect to one or more issues, significant elements of Discover’s claims would be established, making it more likely that Visa U.S.A. and Visa International could be found liable and that Discover would be awarded damages. Even if the court declines to give collateral estoppel effect to any of these issues, Discover may nevertheless be successful in establishing these issues in subsequent proceedings. On July 24, 2007, Discover served an expert report purporting to demonstrate that it had incurred substantial damages. Because this lawsuit was brought under the U.S. federal antitrust laws, any actual damages will be trebled and Visa U.S.A. and 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.

American Express filed a suit similar to the Discover litigation against Visa U.S.A., Visa International and certain Visa U.S.A. member financial institutions. The American Express lawsuit is part of the covered litigation, which our retrospective responsibility plan is intended to address. We, Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became effective on November 9, 2007. The settlement agreement in the American Express litigation will be funded through our retrospective responsibility plan.

The Discover lawsuit is also part of the covered litigation. The retrospective responsibility plan may not adequately insulate us from the impacts of settlements of, or judgments in, the Discover lawsuit. Failure to successfully defend against or settle these lawsuits 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. See “Business—Retrospective Responsibility Plan—Covered Litigation.”

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 under the heading “Business—Retrospective Responsibility Plan—Covered Litigation.” The 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 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

 

16

---

Table of Contents

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.

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 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 will pay approximately $20 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 “Business—Other Legal and Regulatory Proceedings—Currency Conversion Litigation.”

 

17

---

Table of Contents

If Visa U.S.A. or Visa International is found liable in certain other lawsuits that have been brought against them 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 Visa U.S.A. and Visa International alleging or seeking information as to violations of various 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 under “Business—Other Legal and Regulatory Proceedings,” include the following:

 

•

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;

 

•

a patent infringement claim against Visa U.S.A. and Visa International involving the Verified by Visa product;

 

•

a claim of patent infringement, misrepresentation, breach of contract and antitrust violations against Visa International relating to a license agreement for smart card technology;

 

•

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;

 

•

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;

 

•

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

 

•

a civil investigative demand to Visa U.S.A. from the Office of the Attorney General for the District of Columbia, in coordination with the Attorneys General of New York and Ohio, seeking information regarding practices related to PIN debit cards;

 

•

a patent infringement claim against Visa U.S.A. and Visa International regarding certain Visa contactless payment technology;

 

•

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

 

•

two civil investigative demands issued by the Antitrust Division of the U.S. Department of Justice to Visa U.S.A., one concerning PIN debit and Visa U.S.A.’s No Signature Required Program, and the other regarding Visa U.S.A.’s agreements with financial institutions that issue Visa debit cards, respectively.

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 specific litigation described under the heading “Business—Retrospective Responsibility Plan—Covered Litigation,” 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

 

18

---

Table of Contents

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 U.S. Department of Justice, or 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 “Business—Other Legal and Regulatory Proceedings—Department of Justice Antitrust Case and Related Litigation.”

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 “Business—Other Legal and Regulatory Proceedings—Department of Justice Antitrust Case and Related Litigation.” 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, but Visa U.S.A. has appealed other aspects of the court’s decision, including the contract termination portion of the court’s remedy. See “Business—Other Legal and Regulatory Proceedings—Department of Justice Antitrust Case and Related Litigation.”

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.

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 the many countries in which our cards are used. Regulation of the payments industry has increased significantly in recent years. Examples of such regulation include:

 

•

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.

 

19

---

Table of Contents

PATRIOT Act, which requires the creation and implementation of comprehensive anti-money laundering programs.

 

•

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.

 

•

Regulation of the price of credit. In recent years, a number of regulations relating to the price of credit 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 other regulations are expected to be issued in 2007. One such regulation pertaining to risk-based pricing 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. Any regulation in this regard could result in a decrease in our payments volume and revenues.

 

•

Regulation of Internet transactions. 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. Such legislation may make it less desirable or more costly to complete Internet transactions using our cards.

 

•

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 will likely consider data security/data breach legislation in 2007 that, 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

 

20

---

Table of Contents

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 members in China are not permitted to issue our cards for domestic use in China. Governments in certain countries that were formerly part of the Soviet Union 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

 

21

---

Table of Contents

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:

 

•

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.

 

•

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.

 

22

---

Table of Contents

•

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.

 

•

Competition from alternative types of payment services, such as online payment services and services that permit direct debit of consumer checking accounts or automatic clearing house, 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 pro forma operating revenues from our four largest customers represented approximately $847.9 million, or 23%, and $870.9 million, or 22%, of our total pro forma operating revenues for the nine months ended June 30, 2007 and fiscal 2006, respectively. In addition, our pro forma operating revenues from JPMorgan Chase accounted for $367.6 million, or 10%, and $408.5 million, or 10%, of our pro forma operating revenues for the nine months ended June 30, 2007 and fiscal 2006, respectively. Most of our larger customer relationships 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 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.

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. 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.

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

 

23

---

Table of Contents

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

 

24

---

Table of Contents

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 65% and 14%, respectively, of our pro forma revenues were generated for the nine months ended June 30, 2007 and, 69% 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. 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 loss suffered due to the failure of a member to fund its daily settlement obligations because of technical problems, a liquidity shortfall, insolvency or other reasons. In certain instances, we indemnify members even in situations in which a transaction is not processed by our system.

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.

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

 

25

---

Table of Contents

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.

 

26

---

Table of Contents

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 typically 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.

As of March 31, 2007, we had over $1 billion in contingent liabilities for settlement payment of all issued and outstanding travelers cheques. Approximately 30% 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.

 

27

---

Table of Contents

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 recent reorganization, 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 former 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. We have limited audit rights, and thus have limited ability to monitor their performance. 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.

 

28

---

Table of Contents

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 right under which we will be required 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 the first anniversary of this offering. 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-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 be limited to the percentage of our class C (series I) common stock that at the settlement date remains subject to the transfer restrictions described under “Description of Capital Stock—Transfer Restrictions.” We must pay the purchase price in cash, however, if the settlement of the put option occurs more than three years after the completion of this offering.

We will incur a substantial financial obligation if Visa Europe exercises the put option. If we are unable to pay the purchase price for the Visa Europe shares with available cash on hand, we will need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering. 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. Any subsequent equity offering required to satisfy this obligation 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.

We recorded the put option at its fair value in our consolidated balance sheet on October 1, 2007 as part of the reorganization. In the future, we will be 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 “Material Contracts—The Put-Call Option Agreement.”

The terms of our reorganization created financial incentives that reward net revenue growth in the four quarters ended December 31, 2007.

One of the terms of our reorganization plan was a “true up” mechanism designed to reallocate the shares initially distributed to the former members of Visa U.S.A., Visa Canada, Visa AP, Visa LAC and Visa CEMEA among themselves, based on each participating region’s relative under- or over-achievement of its net revenue targets during a measurement period consisting of the four-quarter period ending with (and including) the latest quarter for which financial statements are included in this registration statement on the date it is declared effective by the SEC. We expect that the measurement period will include the four quarters ended December 31, 2007. This mechanism creates financial incentives that reward net revenue growth in the measurement period. Because comparable incentives did not exist in prior periods and will not exist in future periods, it is possible that the rate of revenue growth in the measurement period will not be representative of rates that may be expected in future periods.

 

29

---

Table of Contents

Our management team is new and does not have a history of working together.

We designated Joseph W. Saunders as our Chief Executive Officer and Chairman of our board in May 2007 and have since assembled a new management team, including John (Hans) C. Morris, our President, and Byron H. Pollitt, our Chief Financial Officer. Our success will largely depend on the ability of the new management team to work together to integrate the operations and business of Visa U.S.A., Visa International and Visa Canada, and to continue to execute our business strategy. Because our management team does not have a significant history of working together and includes individuals recruited from outside our company, they may not be able to work together effectively, which could disrupt our operations and harm our business.

Our recent reorganization will require 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 recent reorganization will require 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 recent 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.

Risks Related to Our Class A Common Stock and this Offering

An active trading market for our class A common stock may not develop, which may cause our class A common stock to trade at a discount from the initial offering price and make it difficult to sell the shares you purchase.

Prior to this offering, there has been no public trading market for our class A common stock. Although we intend to file an application to have our class A common stock listed on a national securities exchange, an active public market for our class A common stock may not develop or continue. The initial public offering price per share of our class A common stock has been determined by agreement among us and the underwriters and may not be indicative of the price at which our class A common stock will trade in the public market after this offering.

 

30

---

Table of Contents

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 after this offering 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 you to sell equity securities in the future.

Upon completion of this offering, we will have              outstanding shares of class A common stock (or              shares if the underwriters exercise their option to purchase additional shares in full). 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.

After the completion of this offering and 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, which we refer to as loss shares. All of the loss shares will be freely tradable without restriction or registration under the Securities Act by persons other than our affiliates.

In addition, immediately following the closing of this offering and the redemption of certain shares of class B and class C common stock as described under “Use of Proceeds,” our existing stockholders will hold              shares of class B common stock and              shares of class C common stock (other than class C (series II) common stock). Subject to limited exceptions, the class B common stock is not transferable until the later of the third anniversary of this offering and 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 the third anniversary of this offering. 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 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.

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 price 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. See “Description of Capital Stock—Conversion.”

The market price of our common stock may be volatile, which could cause the value of your investment to decline.

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 class A common stock:

 

•

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

 

•

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

 

31

---

Table of Contents

•

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

 

•

announcements related to litigation;

 

•

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;

 

•

developments in our industry; and

 

•

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

Certain adjustments to the conversion rate of class B common stock in connection with the creation, or 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.

In connection with this offering and the creation of the escrow account from which settlements of, or judgments in, the covered litigation will be payable, there will be an adjustment, which we refer to as the first adjustment, 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. 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. In that case, there will be one or more subsequent adjustments, which we refer to as the potential subsequent adjustments, to the conversion rate of the class B common stock, which will result in a further 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 the first adjustment or after any prior potential subsequent adjustment, as the case may be).

Neither the first adjustment nor the potential subsequent adjustments should 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 of the first adjustment and the potential subsequent adjustments has 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 the first adjustment or after any potential subsequent 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 none of the first adjustment and the potential subsequent adjustments gives rise to deemed distributions under Section 305 of the Code to holders of our class A common stock.

We urge you to consult with your own tax advisor regarding the tax consequences under Section 305 of the Code (as well as other Code sections) of any adjustment to the conversion rate of the class B common stock in connection with the creation, or additional funding, of the escrow account from which settlements of, or judgments in, the covered litigation will be payable.

 

32

---

Table of Contents

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.

Following this offering, our amended and restated certificate of incorporation will provide 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.

Until the third anniversary of the completion of this offering, 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 yours.

Our amended and restated certificate of incorporation provides that, until the third anniversary of the completion of this offering, 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 (other than the class C (series II) 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. See “Description of Capital Stock—Voting Rights.”

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

 

•

following the closing of this offering until the third anniversary of this offering, six directors will be regional directors from the former unincorporated regions of Visa International and from Visa U.S.A. and Visa Canada;

 

•

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;

 

33

---

Table of Contents

•

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 66 2/3% 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 will be 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.

See “Description of Capital Stock—Limitations on a Change of Control—Amendment of Certificate of Incorporation” and “—Delaware Anti-Takeover Statute.”

Our ability to pay regular dividends to holders of our class A, class B and class C 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.

We have not paid any cash dividends on our common stock. After the consummation of this offering, we intend to pay 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, including our class A common stock.

 

34

---

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include statements regarding the period following the completion of this offering. These statements include, but are not limited to:

 

•

statements regarding the expected growth of the electronic payments industry;

 

•

expectations as to the benefits of the recent reorganization;

 

•

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;

 

•

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

 

•

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

 

•

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;

 

•

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

 

•

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

 

•

expectations as to the payment of dividends; and

 

•

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 “Risk Factors” and elsewhere in this prospectus. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this prospectus. 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.

 

35

---

Table of Contents

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of class A common stock in this offering will be approximately $            , or $             if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $             per share (the midpoint of the range set forth on the cover of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses.

We intend to deposit $            , representing     % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus), into an escrow account from which settlements of, or judgments in, the covered litigation described under “Business—Retrospective Responsibility Plan” will be payable.

Promptly following the closing of this offering, we intend to use $             of the net proceeds to redeem              shares of class B common stock and              shares of class C common stock.

We will use the balance of net proceeds for general corporate purposes, which may include funding the $1.146 billion aggregate redemption price for all of the class C (series II) common stock, which we intend to redeem in October 2008, and the $             redemption price for              shares of class C (series III) common stock, which we will be required to redeem in October 2008 pursuant to our amended and restated certificate of incorporation. See “Unaudited Pro Forma Condensed Combined Statements of Operations.”

DIVIDEND POLICY

Following this offering and subject to legally available funds, we currently intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $             per share of class A common stock (representing a quarterly rate initially equal to $             per share) commencing with the quarter ended                     , 2008. Our class B and class C common stock will share ratably on an as-converted basis in such dividends. The declaration and payment of any dividends will be at the sole 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.

 

 

36

---

Table of Contents

CAPITALIZATION

Prior to the closing of this offering, each of the regional classes of common stock will convert into class C common stock except in the case of common stock held by Visa U.S.A. and its members, which will convert into class B common stock. The following table sets forth our capitalization as of June 30, 2007:

 

•

on an actual basis as adjusted to reflect the conversion of regional shares into class B and class C common stock; and

 

•

on a pro forma basis to give effect to:

 

•

the receipt by us of estimated net proceeds of $             from the sale of              shares of class A common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the range on the cover of this prospectus);

 

•

the application of the net proceeds of this offering as described under “Use of Proceeds,” including the retention of $             for general corporate purposes, the redemption of              shares of class B common stock and              shares of class C (series I) common stock for an assumed price of $             per share, as well as the deposit of $            , representing     % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus), into an escrow account from which settlements of, or judgments in, the covered litigation will be payable;

 

•

the reclassification of all of the shares of class C (series II) common stock to temporary equity reflecting our intention to redeem the class C (series II) common stock in October 2008 at an aggregate price of $1.146 billion, subject to reduction to the extent of dividends paid by us prior to that time and other adjustments; and

 

•

the reclassification of              shares of class C (series III) common stock as a liability on our balance sheet reflecting the fact that these shares, held by Visa Europe, have been called for redemption at a price equal to the price per share of our class A common stock in this offering, net of underwriting discounts and commissions, but that payment for such shares will not be made until October 2008.

 

37

---

Table of Contents

		June 30, 2007
		Actual, As Adjusted			Pro Forma
		(unaudited) (in millions)
Cash and cash equivalents		$	590		$
Restricted cash			—
Total cash, cash equivalents and restricted cash		$	590		$
Liabilities:
Redeemable class C (series III) common stock(1)		$	—		$
Total debt			49
Temporary Equity:
Class C (series II) common stock,              shares authorized and issued pro forma(1)(2)
Stockholders’ Equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized, actual and pro forma; zero shares issued and outstanding, actual and pro forma
Class A common stock, $0.0001 par value, 2,001,622,245,209 shares authorized, actual, as adjusted, and pro forma; zero shares issued and outstanding, actual, as adjusted, and              shares issued and outstanding, pro forma
Class B common stock, $0.0001 par value, 622,245,209 shares authorized, actual, as adjusted, and pro forma;              shares issued and              issued and outstanding, actual, as adjusted, and              shares issued and              issued and outstanding, pro forma
Class C (series I, III and IV) common stock, $0.0001 par value, 878,582,801 shares authorized, actual, as adjusted and pro forma;              shares issued and outstanding, actual, as adjusted, and              shares issued and outstanding, pro forma(1)
Class C (series II) common stock, $0.0001 par value,             shares authorized, actual, as adjusted; and zero shares issued and outstanding, pro forma(1)(2)
Additional paid-in capital			—
Accumulated net income			1,191
Accumulated other comprehensive income (loss)			—
Total members’/stockholders’ equity			1,191
Total capitalization		$	1,241

---

(1)

We intend to redeem all class C (series II) common stock, which is classified as temporary equity in our pro forma presentation, and              shares of class C (series III) common stock, which is classified as a liability in our pro forma presentation, in October 2008 for an aggregate redemption price of $            , after which all remaining class C (series III) and class C (series IV) common stock will automatically convert into class C (series I) common stock on a one-to-one basis.

(2)

Immediately prior to the offering, we will issue             additional shares of class C (series II) common stock pursuant to provisions of our amended and restated certificate of incorporation that require that Visa Europe’s ownership of our common stock on an as-converted basis represent no less than 10% of our total outstanding share capital at all times prior to October 5, 2008. The issuance of these shares will have no cash impact and will not affect our financial results, including earnings per share, as the shares will be classified as temporary equity and all class C (series II) common stock is intended to be redeemed in October 2008 for an aggregate price of $1.146 billion (subject to reduction to the extent of dividends paid by us prior to that time and other adjustments).

The foregoing table should be read in conjunction with “Overview of Financial Condition and Results of Operations of Visa Inc.,” “Unaudited Pro Forma Condensed Combined Statements of Operations” and the audited consolidated financial statements and related notes of Visa Inc. included elsewhere in this prospectus.

 

38

---

Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

The following unaudited pro forma condensed combined statements of operations have been prepared by applying pro forma adjustments to the historical audited consolidated statement of operations for fiscal 2006 and the historical unaudited interim consolidated statement of operations for the nine months ended June 30, 2007 of Visa U.S.A., Visa International and Visa Canada to give pro forma effect to the reorganization and this offering under U.S. GAAP.

The unaudited pro forma condensed combined statements of operations give effect to the reorganization and this offering, including the application of use of proceeds, as if they had occurred on October 1, 2005, except for the purposes of calculating our liability under the framework agreement with Visa Europe. See Note 3 “Visa Europe Transaction” to these unaudited pro forma condensed combined statements of operations.

We have applied pro forma adjustments to reflect the reorganization as follows:

 

•

The reorganization was accounted for as a purchase under the guidelines of Statement of Financial Accounting Standards, or SFAS, No. 141 “Business Combinations” with Visa U.S.A. deemed to be the accounting acquirer of Visa International and Visa Canada, including their respective minority interest in Inovant.

 

•

Visa Europe remains owned and governed by its European member financial institutions. Visa Europe holds an approximate 11.7% equity ownership interest in our common stock, of which 8.1% is represented by class EU (series I) and class EU (series III) common stock and 3.6% is represented by class EU (series II) common stock. Visa Europe received these shares in the reorganization in exchange for both its membership interests in Visa International and its ownership interest in Inovant. The class EU (series I) and (series III) common stock will be converted on a one-to-one basis into class C (series III) and class C (series IV) common stock prior to the completion of this offering. Further, we entered into a framework agreement with Visa Europe, which provides for trademark and technology licenses and bilateral services. See Note 3 “Visa Europe Transaction” to these unaudited pro forma condensed combined statements of operations.

We have applied pro forma adjustments to reflect the offering as follows:

 

•

Historically, Visa U.S.A. and Visa International were both eligible for a special state tax deduction pursuant to which they were not taxed on a substantial portion of the reported income on the basis that they both operated on a cooperative and mutual basis. As a result of the offering and ownership by parties other than our former member financial institutions, we will no longer be eligible to claim a special deduction pursuant to the California Revenue and Taxation Code §24405.

 

•

The application of the estimated net proceeds of this offering, as described under “Use of Proceeds,” which includes the redemption of              shares of class B common stock and              shares of class C common stock at an assumed price of $             per share (the midpoint of the range set forth on the cover of this prospectus) less underwriting discounts and commissions, and the deposit of $            , representing     % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus), into an escrow account from which settlements of, or judgments in, the covered litigation will be payable.

 

•

Reclassification of the class C (series II) common stock to temporary or mezzanine level equity, the issuance of additional class C (series II) common stock pursuant to the terms of these securities and accretion of $42.0 million on the class C (series II) common stock from its initial fair value of $1.104 billion to its redemption value of $1.146 billion.

 

•

Reclassification of              shares of class C (series III) common stock as a liability reflecting the fact that these shares, held by Visa Europe, have been called for redemption at a price of $             per share, but that payment for such shares will not be made until October 2008.

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with these unaudited pro forma condensed combined statements of operations. The

 

39

---

Table of Contents

unaudited pro forma condensed combined statements of operations are provided for illustrative purposes only and are not necessarily indicative of the results of operations that would have actually been reported had the reorganization and this offering occurred on the assumed date indicated, nor are they necessarily indicative of our results of operations for any future periods.

The pro forma information presented, including allocations of purchase price, was based on preliminary estimates of the fair values of assets to be acquired and liabilities to be assumed, available information and assumptions that we believe were reasonable under the circumstances. The actual adjustments to our historical consolidated financial statements upon the closing of the reorganization will be based on the net assets acquired at that date and will depend on a number of factors, including completion of the appraisal of the net assets acquired on the reorganization date. Therefore, the actual entries we will record to account for the reorganization will differ from the pro forma adjustments presented below.

The unaudited pro forma condensed combined statements of operations should be read in conjunction with the following:

 

•

the unaudited consolidated financial statements of Visa U.S.A. as of and for the nine months ended June 30, 2007;

 

•

the audited consolidated financial statements of Visa U.S.A. as of and for the year ended September 30, 2006;

 

•

the unaudited consolidated financial statements of Visa International as of and for the nine months ended June 30, 2007; and

 

•

the audited consolidated financial statements of Visa International as of and for the year ended September 30, 2006.

The above referenced financial statements are included elsewhere in the prospectus. The unaudited pro forma condensed combined statements of operations should also be read in conjunction with the information contained in “Risk Factors,” “Capitalization,” “Selected Combined Consolidated Financial and Other Data of Visa U.S.A.,” “Overview of Financial Condition and Results of Operations of Visa Inc.” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Visa U.S.A.”

 

40

---

Table of Contents

VISA INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED JUNE 30, 2007

(in thousands, except share and per share data)

 

		Historical
										Note 2																			Note 5
		Visa U.S.A.				Visa International				Visa Canada			Combination Adjustments				Combined Subtotal				Pro Forma Reorganization Adjustments				Subtotal				Pro Forma Offering Adjustments			Unaudited Pro Forma Visa Inc.
Operating revenues
Card service fees		$	1,208,542			$	695,124			$	63,366		$	(141,727	) B		$	1,825,305			$	(65,295	) F		$	1,760,010			$	—		$	1,760,010
Data processing fees			1,031,724				228,102				22,705			(265	) A			1,217,903				(25,193	) G			1,192,710				—			1,192,710
														(64,363	) B
Volume and support agreements			(356,050	)			—				—			(142,884	) A			(498,934	)			—				(498,934	)			—			(498,934	)
Member incentives							(142,884	)						142,884	A			—				—				—				—			—
International transaction fees			326,635				—				5,587			439,660	A			771,882				(37,022	) H			734,860				—			734,860
International service revenues			—				439,660				—			(439,660	) A			—				—				—				—			—
Other revenues			387,900				137,391				8,057			265	A			431,438				106,875	I			538,313				—			538,313
														(139,270	) B
														37,095	C
Total operating revenues		$	2,598,751			$	1,357,393			$	99,715		$	(308,265	)		$	3,747,594			$	(20,635	)		$	3,726,959				—		$	3,726,959
Operating expenses
Personnel		$	529,230			$	286,187			$	11,342		$	7,982	C		$	834,741				—			$	834,741				—		$	834,741
Affiliates services			—				150,119				15,168			(150,119	) A			—				—				—				—			—
														(15,168	) B
Facilities			67,918				—				2,319			36,806	A			72,945				5,010	D			77,955				—			77,955
														(48,055	) B
														13,957	C
Premises, equipment and software			—				79,950				—			(79,950	) A			—				—				—				—			—
Communication			—				26,976				—			(26,976	) A			—				—				—				—			—
Network, EDP and communications			259,402				—				1,221			70,120	A			330,117				40,148	D			358,250				—			358,250
														(2,112	) B							(12,015	) D
														1,486	C
Advertising, marketing and promotion			406,327				247,105				25,118			15,038	A			693,603				—				693,603				—			693,603
														15	C
Travel and meetings			—				42,006				—			(42,006	) A			—				—				—				—			—
Visa international fees			129,680				—				13,036			(142,716	) B			—				—				—				—			—
Professional and consulting fees			239,303				147,793				5,627			(1,369	) B			395,753				—				395,753				—			395,753
														4,399	C
Administrative and other			38,126				38,157				2,959			173,437	A			109,086				—				109,086				—			109,086
														(146,941	) B
														3,348	C
Litigation obligation provision			14,800				—				—			194	A			14,994				—				14,994				—			14,994
Total operating expenses		$	1,684,786			$	1,018,293			$	76,790		$	(328,630	)		$	2,451,239			$	33,143			$	2,484,382				—		$	2,484,382

See notes to unaudited pro forma condensed combined statements of operations.

 

41

---

Table of Contents

VISA INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED JUNE 30, 2007—(Continued)

(in thousands, except share and per share data)

 

		Historical
									Note 2																			Note 5
		Visa U.S.A.				Visa International			Visa Canada			Combination Adjustments				Combined Subtotal				Pro Forma Reorganization Adjustments				Subtotal				Pro Forma Offering Adjustments				Unaudited Pro Forma Visa Inc.
Operating income		$	913,965			$	339,100		$	22,925		$	20,365			$	1,296,355			$	(53,778	)		$	1,242,577				—			$	1,242,577
Non-operating income, net			—				71,653			—			(60,652	) A			—				—				—				—				—
													(11,001	) B
Other income (expenses)
Equity in earnings of unconsolidated affiliates			37,895				—			750			4,744	A			670				—				670				—				670
													(42,719	) B
Interest income (expense)			(60,226	)			—			704			62	A			(62,312	)			—				(62,312	)			—				(62,312	)
													(2,852	) C
Investment income, net			72,358				—			—			52,390	A			125,046				—				125,046				—				125,046
													298	C
Total other income (expense)		$	50,027				—		$	1,454		$	11,923			$	63,404				—			$	63,404				—			$	63,404
Income before income taxes and minority interest			963,992				410,753			24,379			(39,365	)			1,359,759				(53,778	)			1,305,981				—				1,305,981
Income tax expense/(benefit) (see Note 5)			350,855				175,547			278			18	C			526,698				(18,061	) L			492,705				42,356				535,061
																					(15,932	) K
Income (loss) before minority interest			613,137				235,206			24,101			(39,383	)			833,061				(19,785	)			813,276				(42,356	)			770,920
Minority interest income (expense)			(4,657	)			—			—			3,154	B			(1,503	)			1,503	J			—				—				—
Net income		$	608,480			$	235,206		$	24,101		$	(36,229	)		$	831,558			$	(18,282	)		$	813,276			$	(42,356	)		$	770,920
Pro forma basic and diluted earnings per share:
Class A and C (series I, III and IV) common stock																																$	—
Class B common stock																																$	—
Class C (series II) common stock																																$	—
Pro forma number of shares outstanding, basic and diluted:
Class A and C (series I, III and IV) common stock
Class B common stock
Class C (series II) common stock
See Note 6 “Pro Forma Earnings per Share.”

See notes to unaudited pro forma condensed combined statements of operations.

 

42

---

Table of Contents

VISA INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

(in thousands, except share and per share data)

 

		Historical
						Note 2																			Note 5
		Visa U.S.A.				Visa International				Visa Canada			Combination Adjustments				Combined Subtotal				Pro Forma Reorganization Adjustments				Subtotal				Pro Forma Offering Adjustments			Unaudited Pro Forma Visa Inc.
Operating revenues
Card service fees		$	1,482,439			$	755,440			$	77,403		$	(173,489	) B		$	2,141,793			$	(84,566	) F		$	2,057,227			$	—		$	2,057,227
Data processing fees			1,247,969				246,744				25,430			(215	) A			1,440,738				(28,913	) C			1,411,825				—			1,411,825
														(79,190	) B
Volume and support agreements			(587,751	)			—				—			(302,359	) A			(890,110	)			—				(890,110	)			—			(890,110	)
Member incentives			—				(302,359	)			—			302,359	A			—				—				—				—			—
International transaction fees			397,954				—				504			428,027	A			826,485				(35,670	) H			790,815				—			790,815
International service fees			—				428,027				—			(428,027	) A			—				—				—				—			—
Other revenues			407,515				134,703				10,671			215	A			395,388				142,500	I			537,888				—			537,888
														(204,440	) B
														46,724	C
Total operating revenues		$	2,948,126			$	1,262,555			$	114,008		$	(410,395	)		$	3,914,294			$	(6,649	)		$	3,907,645				—		$	3,907,645
Operating expenses
Personnel		$	671,093			$	317,003			$	13,379		$	9,710	C		$	1,011,185			$	(1,107	) E		$	1,010,078				—		$	1,010,078
Affiliates services			—				212,144				20,630			(212,144	) A			—				—				—				—			—
														(20,630	) B
Premises, equipment and software			—				105,245				—			(105,245	) A			—				—				—				—			—
Facilities			89,298				—				2,600			50,111	A			101,109				5,125	D			106,234				—			106,234
														(61,384	) B
														20,484	C
Communications			—				33,423				—			(33,423	) A			—				—				—				—			—
Network, EDP and communications			327,593				—				1,531			88,557	A			417,162				58,074	D			472,670				—			472,670
														(2,645	) B							(2,566	) D
														2,126	C
Advertising, marketing and promotion			539,258				343,922				49,051			10,634	A			942,896				—				942,896				—			942,896
														31	C
Travel and meetings			—				59,275				—			(59,275	) A			—				—				—				—			—
Visa International fees			159,264				—				15,508			(174,772	) B			—				—				—				—			—
Professional and consulting fees			291,235				119,004				6,508			(4,654	) B			418,059				—				418,059				—			418,059
														5,966	C
Administrative and other			117,837				52,243				5,024			258,923	A			230,487				—				230,487				—			230,487
														(208,040	) B
														4,500	C
Settlement risk guarantee			—				(150	)			—			150	A			—				—				—				—			—
Litigation obligation provision			22,878				—				—			—				22,878				—				22,878				—			22,878
Total operating expenses		$	2,218,456			$	1,242,109			$	114,231		$	(431,020	)		$	3,143,776			$	59,526			$	3,203,302				—		$	3,203,302

See notes to unaudited pro forma condensed combined statements of operations.

 

43

---

Table of Contents

VISA INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006—(Continued)

(in thousands, except share and per share data)

 

		Historical
									Note 2																				Note 5
		Visa U.S.A.				Visa International			Visa Canada				Combination Adjustments				Combined Subtotal				Pro Forma Reorganization Adjustments				Subtotal				Pro Forma Offering Adjustments				Unaudited Pro Forma Visa Inc.
Operating income		$	729,670			$	20,446		$	(223	)		$	20,625			$	770,518			$	(66,175	)		$	704,343				—			$	704,343
Non-operating income, net			—				78,511			—				(63,505	) A			—				—				—				—				—
														(15,006	) B
Other income (expenses)
Equity in earnings of unconsolidated affiliates			13,355				—			2,583				9,203	A			1,356				—				1,356				—				1,356
														(23,785	) B
Interest expense			(89,539	)			—			609				(10,152	) A			(103,149	)			—				(103,149	)			—				(103,149	)
														(4,067	) C																			—
Investment income, net			68,330				—			—				(62,742	) A			131,450				—				131,450				—				131,450
														378	C
Total other income (expense)		$	(7,854	)			—		$	3,192			$	34,319			$	29,657				—			$	29,657				—			$	29,657
Income before income taxes and minority interest			721,816				98,957			2,969				(23,567	)			800,175				(66,175	)			734,000				—				734,000
Income tax expense/(benefit) (see Note 5)			251,338				29,202			924				14	C			281,478				(21,904	) L			274,481				22,938				297,419
																						14,907	K
Income (loss) before minority interest			470,478				69,755			2,045				(23,581	)			518,697				(59,178	)			459,519				(22,938	)			436,581
Minority interest income (expense)			(15,917	)			—			—				10,782	B			(5,135	)			5,135	J			—				—				—
Net income		$	454,561			$	69,755		$	2,045			$	(12,799	)		$	513,562			$	(54,043	)		$	459,519			$	(22,938	)		$	436,581
Pro forma basic and diluted earnings per share:
Class A and C (series I, III and IV) common stock																																	$	—
Class B common stock																																	$	—
Class C (series II) common stock																																	$	—
Pro forma number of shares outstanding, basic and diluted:
Class A and C (series I, III and IV) common stock
Class B common stock
Class C (series II) common stock
See Note 6 “Pro Forma Earnings per Share.”

See notes to unaudited pro forma condensed combined statements of operations.

 

44

---

Table of Contents

Notes to Visa Inc. Unaudited Pro Forma

Condensed Combined Statements of Operations

(in thousands, except as noted)

 

1.	Basis of Presentation

Background and Historical Cross-Ownership

Prior to the reorganization, the global Visa enterprise included four major separately incorporated entities: Visa U.S.A., Visa International, Visa Canada and Visa Europe. At June 30, 2007, Visa U.S.A. held a 69% ownership interest in its consolidated subsidiary, Inovant, and an estimated 26% membership interest in Visa International. The remaining 31% ownership interest in Inovant was held by Visa International (including a portion held by the members of the unincorporated regions), Visa Canada and Visa Europe. The remaining estimated 74% membership interest in Visa International was held by Visa Europe, Visa Canada and the members of the unincorporated regions. The estimated membership interests of Visa International were based on the members’ dividend and dissolution rights under the bylaws of Visa International. The rights were based upon the cumulative volume-based service fees paid by members to Visa International since inception, as a percentage of total volume-based service fees received. Therefore, the percentage of ownership fluctuated over time.

Reorganization Transactions

In October 2007, we consummated a reorganization 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 did not become a subsidiary of Visa Inc. at the time of the reorganization, but exchanged its membership interest in Visa International and its ownership interest in Inovant for a minority shareholding in our common stock and other consideration. Additionally, we entered into a framework agreement with Visa Europe, which provides for trademark and technology licenses and bilateral services. Under these agreements, we granted to Visa Europe exclusive, irrevocable and perpetual licenses to use, within the Visa Europe region, the Visa trademarks and technology intellectual property owned by Visa Inc. and certain of its subsidiaries, in exchange for an annual fee. As a result, we and Visa Europe provide each other with transitional and ongoing services similar to those services previously provided among Visa U.S.A., Visa International, Visa Canada, Inovant and Visa Europe. Additionally, we entered into a put-call option agreement with Visa Europe. See Note 3 “Visa Europe Transaction” to these unaudited pro forma condensed combined statements of operations.

Purchase Accounting

The reorganization was accounted for as a purchase under the guidelines of SFAS No. 141 “Business Combinations” with Visa U.S.A. deemed to be the accounting acquirer of Visa International and Visa Canada. As a result of the exchange of ownership interests, Visa U.S.A. acquired the remaining ownership interest in Visa International and Inovant not previously held. This transaction was accounted for as a step acquisition with the net assets underlying the interests acquired recorded at fair value. Visa U.S.A. further acquired 100% of Visa Canada and recorded the acquisition of the underlying net assets at fair value.

Purchase Consideration

Acquired Regions

The initial allocation of our common stock to the financial institution members of the unincorporated regions of Visa International and the shareholders of Visa Canada, which we collectively refer to as the acquired regions, was based on each acquired region’s projected net income contribution to the overall projected combined Visa enterprise in fiscal 2008, after giving effect to negotiated adjustments. The value of the purchase consideration conveyed to the Visa Canada and Visa International regional members was determined by valuing

 

45

---

Table of Contents

the businesses contributed after giving effect to negotiated adjustments agreed to by each party. As we were a newly created entity with no quoted market price and did not previously exist as a combined entity, we determined that purchase consideration would be more reliably measured by valuing the contributed businesses as opposed to valuing our stock exchanged. We utilized three standard valuation methodologies, which included an analysis of comparable public companies, a 2-year forward earnings multiple analysis and a precedent transaction analysis, to calculate the value of the contributed businesses.

Visa Europe

Visa Europe remains owned and governed by its European member financial institutions. The value of the purchase consideration provided to Visa Europe in exchange for its membership interest in Visa International was derived, for financial accounting reporting purposes, by valuing each of the individual elements which comprised the overall Visa Europe transaction to arrive at the residual value exchanged.

The elements that Visa Europe received included:

 

•

an approximate 11.7% ownership interest in our common stock in the form of 62,213,201 shares of class EU (series I) common stock and 549,587 shares of class EU (series III) common stock collectively representing approximately 8.1% of our outstanding capital stock, and 27,904,464 shares of class EU (series II) common stock representing approximately 3.6% of our outstanding capital stock;

 

•

a put option to require us to purchase all of the outstanding shares of capital stock of Visa Europe from its members;

 

•

irrevocable and perpetual trademark and technology licenses to use the Visa trademarks and technology-related intellectual property owned by Visa Inc., Visa U.S.A., Visa International and Inovant, which we refer to collectively as the licensors, within the Visa Europe region; and

 

•

the right to receive transitional and ongoing services similar to those services currently provided among Visa U.S.A., Visa International, Visa Canada, Inovant and Visa Europe.

The elements that we received included:

 

•

Visa Europe’s membership interest in Visa International;

 

•

Visa Europe’s 10% ownership interest in Inovant; and

 

•

a contingent call option to require Visa Europe to cause the Visa Europe members to convey and deliver to us all of the issued shares in the capital of Visa Europe.

We entered into a framework agreement with Visa Europe, which provides for the above described trademark and technology licenses and bilateral services. See Note 3 “Visa Europe Transaction” to these unaudited pro forma condensed combined statements of operations for a full description of all the elements of the transaction with Visa Europe including a discussion of the determination of fair value for each element.

Measurement Date

For the purpose of these unaudited pro forma condensed combined statements of operations, we preliminarily estimated the value of total purchase consideration at June 15, 2007, the date at which all parties entered into the reorganization agreement, which we refer to as the measurement date.

 

46

---

Table of Contents

Using the above described methods, we determined the total purchase consideration to be approximately $17.3 billion as follows:

 

		(in thousands)
Visa Inc. stock		$	16,785,529
Visa Europe Put Option			417,000
Liability under Framework Agreement			134,000
Total Purchase Consideration		$	17,336,529

See Note 3 “Visa Europe Transaction” for further information regarding the Visa Europe’s put option and the liability under the framework agreement.

Purchase Consideration Allocation

The following table sets forth the preliminary allocation of the estimated purchase consideration to the tangible and intangible assets acquired, liabilities assumed and goodwill, assuming that the reorganization occurred on June 30, 2007. The fair values and remaining useful lives of these net assets were estimated based on our preliminary appraisal. The actual adjustments to our historical consolidated financial statements upon the closing of the reorganization will be based on the net assets acquired at that date and will depend on a number of factors, including completion of an appraisal of the net assets acquired upon consummation. Therefore, the actual adjustments will differ from the pro forma adjustments presented.

The allocation of total purchase consideration to net tangible and intangible assets acquired and to goodwill is as follows:

 

		(in millions)
Net tangible assets and liabilities:
Current assets		$	1,602
Non-current assets			438
Facilities, equipment, and software, net			272
Current liabilities			(1,075	)
Non-current liabilities			(4,130	)
Pension and post-retirement benefits			(84	)
Long-term debt			(36	)
Identifiable intangible assets:
Trademark			2,751
Customer Relationships			6,079
European Franchise Right			1,415
Technology			198
Goodwill			9,906
Total preliminary estimated purchase price		$	17,336

 

2.	Visa Canada Statements of Operations

The Visa Canada statements of operations have been adjusted for reclassifications to conform to the historical statements of operations presentation of Visa U.S.A. In addition, adjustments were applied to reflect the elimination of transactions and cross-ownership among and between Visa U.S.A., Visa International and Visa Canada. The historical statements of operations for Visa Canada was prepared in accordance with accounting principles generally accepted in Canada and reconciled to U.S. GAAP. The currency exchange rate between Canadian dollars and U.S. dollars at June 30, 2007 was used to translate all Visa Canada financial information in this pro forma presentation.

 

47

---

Table of Contents

3.	Visa Europe Transaction

As part of the reorganization, we entered into a multi-element arrangement with Visa Europe. Under this agreement, for financial accounting reporting purposes, in exchange for its membership interest in Visa International and its ownership interest in Inovant, Visa Europe received the following consideration:

Class EU (Series I) and (Series III) Common Stock (Convertible into Class C (Series I), (Series III) and (Series IV) Common Stock)

At the date of reorganization, Visa Europe received an approximate 8.1% ownership interest in our common stock in the form of class EU (series I) and class EU (series III) common stock. We classified the class EU (series I) and (series III) common stock as permanent equity after the date of the reorganization. The class EU (series I) and (series III) common stock will be converted on a one-to-one basis into class C (series III) and class C (series IV) common stock prior to the completion of this offering. Following the redemption described in the following paragraph, the remaining class C (series III) and class C (series IV) common stock will convert on a one-to-one basis into class C (series I) common stock.

The class C (series III) common stock is subject to mandatory redemption in the manner provided by our amended and restated certificate of incorporation. We intend to redeem              shares of class C (series III) common stock (the “class C (series III) redemption shares”) on or about October 6, 2008 for a price per share equal to the price per share of our class A common stock in this offering, less underwriting discounts and commissions. Upon the closing of this offering, for financial accounting purposes, we intend to classify this stock at its redemption value as a liability in our historical consolidated balance sheet.

We determined the fair value of Visa Europe’s 8.1% ownership interest in our common stock to be approximately $3.1 billion at the date of the reorganization based on the value of the purchase consideration provided to the acquired regions in exchange for their historical membership interests in Visa International and Visa Canada.

Class EU (Series II) Common Stock (Convertible into Class C (Series II) Common Stock)

At the date of reorganization, Visa Europe received an approximate 3.6% ownership interest in our common stock in the form of class EU (series II) common stock. We classified the class EU (series II) common stock in permanent equity, as it provides equity rights similar to that of the other regional classes of shares. The class EU (series II) common stock will be converted on a one-to-one basis into class C (series II) common stock prior to the completion of this offering.

The class C (series II) common stock is subject to redemption by us. We are entitled to redeem all, but not less than all, of these shares held by Visa Europe any time after October 10, 2008. In addition, Visa Europe is entitled, through delivery of written notice, to require us to redeem all, but not less than all, of these shares at any time after December 4, 2008; however, we intend to redeem all of these shares held by Visa Europe on or about October 10, 2008. Upon the closing of this offering, for financial accounting purposes, we intend to classify this stock at its then fair value as temporary or mezzanine level equity in our historical consolidated balance sheet. Additionally, over the period from the initial public offering date to October 10, 2008, which we refer to as the accretion period, this stock will be accreted to its redemption price through our retained earnings.

To reflect the impact of this accretion on the net income available to common stockholders, we reported pro forma earnings per share using the two-class method. See Note 6 “Pro Forma Earnings per Share” to these unaudited pro forma condensed combined statements of operations. The redemption price of the class C (series II) common stock is $1.146 billion adjusted for dividends and certain other adjustments. See “Description of Capital Stock—Redemption.”

 

48

---

Table of Contents

We determined the initial fair value of the class C (series II) common stock to be approximately $1.104 billion at the date of reorganization. We determined fair value by discounting the redemption price using a risk-free rate based on the probability and timing of the successful completion of this offering; this event would cause the class C (series II) common stock to become redeemable at the estimated redemption price on or after October 10, 2008. We estimate that the total amount of accretion will be approximately $42.0 million, which represents the difference between its initial fair value and its redemption price assuming no payment of dividends or other applicable adjustments.

The terms of the class C (series II) common stock require Visa Europe’s ownership of our common stock, on an as-converted basis, to represent no less than 10% of our total outstanding share capital at all times prior to October 10, 2008. As the shares sold in this offering will be issued shortly prior to the redemption of certain shares of class B and class C common stock, as described under “Use of Proceeds,” additional class C (series II) common stock will be issued to maintain Visa Europe’s required ownership interest in Visa Inc. during such time. This issuance will not have a cash impact or affect our financial results, including earnings per share, as the shares will be classified as temporary equity and will be redeemed together with all other outstanding class C (series II) common stock for a net aggregate price of $1.146 billion (subject to adjustment as described above) on or about October 10, 2008.

The Put-Call Option Agreement

Under the perpetual put-call option agreement between Visa Inc. and Visa Europe, we have granted Visa Europe a put right under which we are obligated to purchase from the members of Visa Europe all of the share capital of Visa Europe any time following the first anniversary of this offering. Upon exercise of the put, we are required to repurchase the shares of Visa Europe no later than 285 days after such exercise. 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-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. See “Material Contracts—The Put-Call Option Agreement.” For the purposes of these unaudited pro forma condensed combined statements of operations, we determined that at the date of the reorganization, the fair value of the put option was approximately $417.0 million. Subsequent to the reorganization, this liability will be carried at fair value with changes in fair value included in our historical statements of operations similar to the treatment required by of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and reclassified as a short-term liability when it becomes payable within one year.

We determined the fair value of the put option using probability-weighted models designed to estimate our future liability under various future exercise scenarios. These models were designed to approximate the current value of our liability assuming Visa Europe exercised its put option at various times and under various economic conditions in the future. The key assumptions used in these models were determined based on the various elements of the put option strike price calculation and the fair value of Visa Europe. These assumptions included: Visa Europe’s projected financial performance (estimated using a wide range of growth scenarios), identified synergies (estimated by approximating those a market participant would expect to realize upon combination) and our anticipated forward price-to-earnings ratio on the date of exercise (estimated based on comparable public companies and other analyses).

Further, we are entitled to purchase all of the share capital of Visa Europe from its members at any time following certain triggering dates. A triggering event will occur if: (A) there is a 25% or greater decline in the number of merchants and a 45% or greater decline in the number of automated teller machines in Visa Europe’s region that accept Visa-branded products; (B) such rate of decline in each case is at least twice as much as both: (i) the average rate of decline in the number of merchants and ATMs in the Visa Europe region that accept general payment cards and (ii) the average rate of decline in acceptance, if any, in the number of merchants and ATMs outside of Visa Europe’s region that accept Visa-branded cards; and (C) Visa Europe has failed to deliver and implement a remediation plan within six months of the occurrence of such events. We determined that the call option contained in the put-call option agreement has nominal value at the date of the reorganization because the conditions under which the call is exercisable are deemed remote.

 

49

---

Table of Contents

The Framework Agreement

After the reorganization, the relationship between Visa Inc. and Visa Europe is governed by a framework agreement, which provides for bilateral services and trademark and technology licenses.

Bilateral Services Agreement. Visa Inc. and Visa Europe provide each other with transitional and ongoing services similar to those services previously provided among Visa U.S.A., Visa International, Visa Canada, Inovant and Visa Europe. We provide Visa Europe with authorization services for cross-border transactions involving Visa Europe’s region, on the one hand, and the rest of the world, on the other hand, as well as clearing and settlement services both within Visa Europe’s region until Visa Europe’s regional clearing and settlement system is deployed (at which time this service will cease) and between Visa Europe’s region and the rest of the world. In addition, until Visa Europe’s regional clearing and settlement system is deployed, the parties share foreign exchange revenues related to currency conversion for transactions involving European cardholders as well as other cross-border transactions that take place in Visa Europe’s region. The parties also use each others’ switching and processing services. Visa Europe will indemnify us for any claims arising out of these services brought against us by Visa Europe’s member financial institutions, and we will indemnify Visa Europe for any claims arising out of these services brought against Visa Europe by our financial institution customers.

We determined that no material value above or below fair value was exchanged in the bilateral services agreement as a result of agreeing to receive or perform these services at the specified rates. We made this determination by comparing the pricing specified in the agreement to pricing routinely charged by comparable third party service providers. As a result, we did not record an asset or liability to reflect an obligation to provide or the right to receive services at above or below fair value.

Trademark and Technology Licenses. We granted Visa Europe exclusive, irrevocable and perpetual licenses to use the Visa trademarks and technology-related intellectual property owned by us within the Visa Europe region for use in the field of financial services, payments, related information technology and information processing services and participation in the Visa system. Visa Europe’s region consists of 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. Visa Europe may sublicense the Visa trademarks and technology intellectual property to its members and other sublicensees, such as processors, for use within Visa Europe’s region and, in certain limited circumstances, outside the Visa Europe region.

Pricing under the licenses is governed by a formula that depends in part on the dates when certain events occur, including the closing of the Inovant U.S. holdco merger (which occurred on October 2, 2007), the closing of the reorganization (which occurred on October 3, 2007), our initial filing of the registration statement for this offering (which occurred on November 9, 2007) and the closing of this offering. For purposes of these unaudited pro forma condensed combined statements of operations, we assumed that the closing of this offering will occur on March 31, 2008.

On this basis, from October 1, 2007 through November 8, 2007, the fee for the licenses was payable at a rate of $6.0 million per quarter. Thereafter, from November 9, 2007, the base license fee will be payable quarterly at an annual rate of $142.5 million ($35.6 million per quarter), and beginning November 9, 2010, this base license fee will increase annually based on the growth of the gross domestic product of the European Union.

The base license fee will be reduced by two components during the period ending October 5, 2008. First, during the period from November 9, 2007 until October 5, 2008, the annual rate of the base license fee will be reduced by an amount equal to $1.146 billion multiplied by the three-month LIBOR rate plus 100 to 200 basis points (the nominal rate). Second, during the period from the closing date of this offering until October 5, 2008, the annual rate of the base license fee will be further reduced by an amount equal to the product of the following variables: (i) the net price per share of our class A common stock in this offering; (ii) (the number of shares of

 

50

---

Table of Contents

our class C (series III) common stock that would have been redeemed promptly out of the net proceeds of this offering, but for provisions in our amended and restated certificate of incorporation that permit Visa Europe to delay the redemption until October 6, 2008; and (iii) the nominal rate.

We determined that the base license fee, as adjusted in future periods based on the growth of the European Union gross domestic product, approximated fair value. We made this determination through an analysis of the fee rates implied by the economics of the licenses and consultation with third party valuation experts. However, due to the first and second fee reduction components, for financial accounting purposes, the trademark and technology licenses represented a contract that was below fair value.

We calculated our liability to provide these licenses at below fair value to be approximately $134.0 million, based on the November 9, 2007 registration statement filing date, the assumed March 31, 2008 offering closing date and the applicable three-month LIBOR rate at June 30, 2007 of 5.36%. For the period October 1, 2007 through November 8, 2007, the fee for the licenses was approximately $2.5 million, which is approximately $12.5 million below fair value. The first fee reduction component will reduce the fee payable in the period November 9, 2007 through October 5, 2008 by approximately $69.9 million. The second fee reduction component will further reduce the fee payable in the period March 31, 2008 through October 5, 2008 by approximately $51.6 million. The assumptions used represent our best estimate of the future impact of these terms of the framework agreement.

The application of the three-month LIBOR rate plus 100 to 200 basis points in determining the first and second fee reduction components represented a variable interest element embedded within the framework agreement, which we will treat as an embedded derivative with changes in fair value reflected in our statement of operations under the guidelines of SFAS No. 133. This embedded derivative does not impact the unaudited pro forma condensed combined statements of operations.

 

4.	Combination and Pro Forma Reorganization Adjustments

The following describes the combination and pro forma adjustments we applied to the unaudited pro forma condensed combined statements of operations for the nine months ended June 30, 2007 and fiscal 2006 of Visa U.S.A. and Visa International, derived from their historical financial statements included elsewhere in this prospectus, and Visa Canada, to reflect the reorganization and this offering as if they had occurred on October 1, 2005.

Combination Adjustments

A – Represents reclassification adjustments made to the historical statements of operations presentation of Visa U.S.A., Visa International and Visa Canada to consistently conform the presentation of like revenues and expenses. Historically, Visa U.S.A., Visa International and Visa Canada as separate entities have applied different captions to describe similar revenues and expenses. These adjustments were applied to group similar accounts using the captions of Visa U.S.A. as the accounting acquirer. These adjustments have no impact on net income of these entities as reported in their historical financial statements.

 

51

---

Table of Contents

The following table reconciles the individual combination adjustments applied for reclassification purposes to the unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2007:

 

		Visa International Adjustments				Total Adjustments - Tickmark A
		(in thousands)
Operating Revenues
Data processing fees		$	(265	)		$	(265	)
Volume and support agreements			(142,884	) AA			(142,884	)
Member incentives			142,884	AA			142,884
International transaction fees			439,660	AB			439,660
International service revenues			(439,660	) AB			(439,660	)
Other revenues			265				265
Operating Expenses
Affiliates services		$	(150,119	) AC		$	(150,119	)
Facilities			36,806	AD			36,806
Premises, equipment and software			(36,806	) AD			(79,950	)
			(43,144	) AE
Communication			(26,976	) AF			(26,976	)
Network, EDP and communications			43,144	AE			70,120
			26,976	AF
Advertising, marketing and promotion			15,038	AG			15,038
Travel and meetings			(42,006	) AH			(42,006	)
Administration and other expenses			150,119	AC			173,437
			(15,038	) AG
			42,006	AH
			(194	)
			(3,789	)
			392
			(59	)
Litigation obligation provision			194				194
Non-Operating Income, net		$	(56,179	) AI		$	(60,652	)
			392
			(4,744	)
			(121	)
Other Income (Expenses)
Equity in earnings of unconsolidated affiliates		$	4,744			$	4,744
Interest income (expense)			(59	)			62
			121
Investment income, net			56,179	AI			52,390
			(3,789	)

AA—Represents reclassifications of Visa International’s member incentives to volume and support agreements to conform them to the presentation of Visa U.S.A.

AB—Represents reclassifications of Visa International’s international service revenues to international transaction fees to conform them to the presentation of Visa U.S.A.

AC—Represents reclassifications of Visa International’s affiliate services expenses to administration and other expenses to conform them to the presentation of Visa U.S.A.

 

52

---

Table of Contents

AD—Represents reclassifications of Visa International’s premises expenses to facilities expenses to conform them to the presentation of Visa U.S.A.

AE—Represents reclassifications of Visa International’s equipment expenses to network, EDP and communications expenses to conform them to the presentation of Visa U.S.A.

AF—Represents reclassifications of Visa International’s communication expenses to network, EDP and communications expenses to conform them to the presentation of Visa U.S.A.

AG—Represents reclassifications of additional advertising and promotion expenses included in administration and other expenses to advertising, marketing and promotion expenses to conform them to the presentation of Visa U.S.A.

AH—Represents reclassifications of Visa International’s travel and meetings expenses to administration and other expenses to conform them to the presentation of Visa U.S.A.

AI—Represents reclassifications of Visa International’s interest and dividend income and expense to investment income, net, to conform them to the presentation of Visa U.S.A.

 

53

---

Table of Contents

The following table reconciles the individual combination adjustments applied for reclassification purposes to the unaudited pro forma condensed combined statement of operations for fiscal 2006:

 

		Visa International Adjustments				Total Adjustments - Tickmark A
		(in thousands)
Operating Revenues
Data processing fees		$	(215	)		$	(215	)
Volume and support agreements			(302,359	) AJ			(302,359	)
Member incentives			302,359	AJ			302,359
International transaction fees			428,027	AK			428,027
International service revenues			(428,027	) AK			(428,027	)
Other revenues			215				215
Operating Expenses
Affiliates services		$	(212,144	) AL		$	(212,144	)
Premises, equipment and software			(50,111	) AM			(105,245	)
			(55,134	) AN
Facilities			50,111	AM			50,111
Communications			(33,423	) AO			(33,423	)
Network, EDP and communications			55,134	AN			88,557
			33,423	AO
Advertising, marketing and promotion			10,634	AP			10,634
Travel and meetings			(59,275	) AQ			(59,275	)
Administration and other expenses			212,144	AL			258,923
			(10,634	) AP
			59,275	AQ
			371
			(150	)
			(2,017	)
			(66	)
Settlement risk guarantee			150				150
Non-Operating Income, net		$	371			$	(63,505	)
			(9,203	) AR
			10,086	AS
			(64,759	) AT
Other Income (Expenses)
Equity in earnings of unconsolidated affiliates		$	9,203	AR		$	9,203
Interest expense			(66	)			(10,152	)
			(10,086	) AS
Investment income, net			(2,017	)			62,742
			64,759	AT

AJ—Represents reclassifications of Visa International’s member incentives to volume and support agreements to conform them to the presentation of Visa U.S.A.

AK—Represents reclassifications of Visa International’s international service revenues to international transaction fees to conform them to the presentation of Visa U.S.A.

AL—Represents reclassifications of Visa International’s affiliate services expenses to administration and other expenses to conform them to the presentation of Visa U.S.A.

AM—Represents reclassifications of Visa International’s premises expenses to facilities expenses to conform them to the presentation of Visa U.S.A.

AN—Represents reclassifications of Visa International’s equipment expenses to network, EDP and communications expenses to conform them to the presentation of Visa U.S.A.

AO—Represents reclassifications of Visa International’s communication expenses to network, EDP and communications expenses to conform them to the presentation of Visa U.S.A.

AP—Represents reclassifications of additional advertising and promotion expenses included in administration and other expenses to advertising, marketing and promotion expenses to conform them to the presentation of Visa U.S.A.

 

54

---

Table of Contents

AQ—Represents reclassifications of Visa International’s travel and meetings expenses to administration and other expenses to conform them to the presentation of Visa U.S.A.

AR—Represents reclassifications of Visa International’s equity in earnings of unconsolidated affiliates to its own line item to conform it to the presentation of Visa U.S.A.

AS—Represents reclassifications of Visa International’s interest expense to its own line item to conform it to the presentation of Visa U.S.A.

AT—Represents reclassifications of Visa International’s interest and dividend income and expense to investment income, net, to conform them to the presentation of Visa U.S.A.

 

55

---

Table of Contents

B – Represents the adjustments required to eliminate the effects of transactions and cross-ownership among and between Visa U.S.A., Visa International and Visa Canada.

The following table reconciles the individual combination adjustments applied for elimination purposes to the unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2007:

 

		Visa U.S.A. Adjustments				Visa International Adjustments				Visa Canada Adjustments				Real Estate Joint Ventures Adjustments				Total Adjustments - Tickmark B
		(in thousands)
Operating Revenues
Card service fees		$	—			$	(141,727	) BA		$	—			$	—			$	(141,727	)
Data processing fees			(62,088	) BB			(2,275	) BA			—				—				(64,363	)
Other revenues			(102,216	) BB			—				—				(49,181	) BC			(139,270	)
															11,001	BE
															1,126	BE
Total adjustments—operating revenues																		$	(345,360	)
Operating expenses
Affiliates services		$	—			$	—			$	(15,168	) BB		$	—			$	(15,168	)
Facilities			(41,061	) BC			(8,120	) BC			—				—				(48,055	)
							1,126	BE
Network, EDP and communications			(2,112	) BA			—				—				—				(2,112	)
Visa International fees			(129,680	) BA			—				(13,036	) BA			—				(142,716	)
Professional and consulting fees			—				(1,369	) BB			—				—				(1,369	)
Administration and other expenses			—				(148,457	) BB			826	BA			—				(146,941	)
											690	BB
Total adjustments—operating expenses																		$	(356,361	)
Non-operating income, net		$	—			$	(11,001	) BE		$	—			$	—			$	(11,001	)
Other income (expenses)
Equity in earnings of unconsolidated affiliates		$	(36,229	) BD		$	(2,877	) BG		$	(277	) BG		$	—			$	(42,719	)
			(1,668	) BF			(1,668	) BF
Minority interest income (expense)			3,154	BG			—				—				—				3,154
Total adjustments—other income (expenses)																		$	(39,565	)

BA—Represents eliminations of Visa International’s revenues from Visa U.S.A. and Visa Canada for services primarily related to global brand management, global product enhancements and global electronic payment systems.

BB—Represents eliminations of Visa U.S.A.’s revenues from Visa International and Visa Canada for processing and development services and various license and usage rights primarily related to the VisaNet proprietary network.

BC—Represents eliminations of the real estate joint ventures’ rental income from Visa U.S.A. and Visa International

BD—Represents eliminations of Visa U.S.A.’s investment in Visa International and related equity in earnings of unconsolidated affiliates.

BE—Represents eliminations of the real estate joint ventures’ rental expense to Visa International.

BF—Represents eliminations of Visa International’s and Visa U.S.A.’s equity in earnings of unconsolidated affiliates related to the real estate joint ventures.

BG—Represents eliminations of minority interest expense and equity in earnings of affiliates for Visa International’s and Visa Canada’s investment in Inovant LLC.

 

56

---

Table of Contents

The following table reconciles the individual combination adjustments applied for elimination purposes to the unaudited pro forma condensed combined statement of operations for fiscal 2006:

 

		Visa U.S.A. Adjustments				Visa International Adjustments				Visa Canada Adjustments				Real Estate Joint Ventures Adjustments				Total Adjustments - Tickmark B
		(in thousands)
Operating Revenues
Card service fees		$	—			$	(173,489	) BH		$	—			$	—			$	(173,489	)
Data processing fees			(76,349	) BI			(2,841	) BH			—				—				(79,190	)
Other revenues			(158,062	) BI			—				—				(63,175	) BJ			(204,440	)
															15,006	BK
															1,791	BK
Total Adjustments—Operating Revenues																		$	(457,119	)
Operating Expenses
Affiliates services		$	—			$	—			$	(20,630	) BI		$	—			$	(20,630	)
Facilities			(52,435	) BJ			(10,740	) BJ			—				—				(61,384	)
							1,791	BK
Network, EDP and communications			(2,645	) BH			—				—				—				(2,645	)
Visa international fees			(159,264	) BH			—				(15,508	) BH			—				(174,772	)
Professional and consulting fees			—				(4,654	) BI			—				—				(4,654	)
Administrative and other expenses			—				(210,653	) BI			1,087	BH			—				(208,040	)
											1,526	BI
Total Adjustments—Operating Expenses																		$	(472,125	)
Non-Operating Income, net		$	—			$	(15,006	) BK		$	—			$	—			$	(15,006	)
Other Income (Expenses)
Equity in earnings of unconsolidated affiliates		$	(13,254	) BL		$	(7,868	) BN		$	(2,460	) BN		$	—			$	(23,785	)
			(101	) BM			(102	) BM
Minority interest income (expense)			10,782	BN			—				—				—				10,782
Total Adjustments—Other Income (Expenses)																		$	(13,003	)

BH—Represents eliminations of Visa International’s revenues from Visa U.S.A. and Visa Canada for services primarily related to global brand management, global product enhancements and global electronic payment systems.

BI—Represents eliminations of Visa U.S.A.’s revenues from Visa International and Visa Canada for processing and development services and various license and usage rights primarily related to the VisaNet proprietary network.

BJ—Represents eliminations of the real estate joint ventures’ rental income from Visa U.S.A. and Visa International.

BK—Represents eliminations of Visa International’s rental income from the real estate joint ventures.

BL—Represents eliminations of Visa U.S.A.’s investment in Visa International and related equity in earnings of unconsolidated affiliates.

BM—Represents eliminations of Visa International’s and Visa U.S.A.’s equity in earnings of unconsolidated affiliates related to the real estate joint ventures.

BN—Represents eliminations of minority interest expense and equity in earnings of affiliates for Visa International’s and Visa Canada’s investment in Inovant LLC.

 

57

---

Table of Contents

For more information regarding the inter-company transactions and cross-ownership, refer to the disclosures in the following notes to the respective audited and unaudited financial statements of Visa U.S.A. and Visa International:

Visa U.S.A.

 

•

Unaudited consolidated financial statements for the nine months ended June 30, 2007: Note 3 “Visa International, Visa Canada and Visa Europe”

 

•

Audited consolidated financial statements for the year ended September 30, 2006: Note 4 “Inovant, Inc. and Inovant LLC,” Note 5 “Visa International, Visa Canada, Visa Europe” and Note 8 “Investments in Joint Ventures”

Visa International

 

•

Unaudited consolidated financial statements for the nine months ended June 30, 2007: Note 3 “Visa Affiliates”

 

•

Audited consolidated financial statements for the year ended September 30, 2006: Note 5 “Visa Affiliates,” Note 9 “Investments in Real Estate Joint Ventures”

C – Represents the adjustments necessary to record the gross revenues and expense balances related to the real estate joint ventures for the nine months ended June 30, 2007 and for fiscal 2006. Visa U.S.A. and Visa International previously each owned 50% of these real estate joint ventures and accounted for their investments under the equity method. See Note 8 “Investments in Joint Ventures” of the Visa U.S.A. audited consolidated financial statements for fiscal 2006.

 

58

---

Table of Contents

Pro Forma Reorganization Adjustments

D – Represents the increase in value resulting from the preliminary allocation of purchase price to facilities, equipment and software based on our preliminary independent appraisal. The following table provides a reconciliation of the historical basis of Visa U.S.A. facilities, equipment and software to our new basis upon the application of purchase accounting:

 

		Facilities, Equipment and Software, Net
		(in thousands)
Visa U.S.A. historical basis		$	270,077
Minority interest			(19,954	)
Net Visa U.S.A. historical basis			250,123
Visa U.S.A. historical basis in Visa International			42,671
Visa U.S.A. historical basis in real estate joint ventures (see tickmark C)			53,334
Acquired assets (see Note 1)			272,000
Reclassification adjustments(1)			(33,876	)
Total Visa Inc. basis		$	584,252

---

(1)	This adjustment reflects the reclassification of certain Visa U.S.A. technology from facilities, equipment and software to technology.

The adjustment to the statements of operations represents the following pro forma adjustments to record additional non-cash amortization and depreciation expense related to the new basis of intangible and tangible definite lived assets, which were recorded on a pro forma basis at their estimated fair value.

 

		Visa U.S.A. Historical Expense for the Nine Months Ended June 30, 2007			Visa Int’l, Visa Canada, Real Estate Joint Ventures Historical Expense for the Nine Months Ended June 30, 2007			Pro Forma Reorganization Adjustment				Total Expense for the Nine Months Ended June 30, 2007
		(in thousands)
Depreciation		$	55,748		$	22,469		$	(7,005	)		$	71,212
Amortization			38,301			13,218			40,148				91,667
Total		$	94,049		$	35,687		$	33,143			$	162,879
		Visa U.S.A. Historical Expense for Fiscal 2006			Visa Int’l, Visa Canada, Real Estate Joint Ventures Historical Expense for Fiscal 2006			Pro Forma Reorganization Adjustment				Total Expense for Fiscal 2006
		(in thousands)
Depreciation		$	81,259		$	33,022		$	2,559			$	116,840
Amortization			58,904			10,767			58,074				127,745
Total		$	140,163		$	43,789		$	60,633			$	244,585

The following table represents the estimated remaining useful lives we assumed for each asset class to record the adjustment to historical depreciation and amortization:

 

		Estimated Remaining Useful Lives
Trademark		Not depreciated
Customer relationships		Not depreciated
European franchise right		Not depreciated
Facilities
Land		Not depreciated
Buildings and building improvements		17 to 30 years
Leasehold improvements		1 to 5 years
Furniture and fixtures		2 to 6 years
Equipment		1 to 4 years
Software		1.5 to 3 years

 

59

---

Table of Contents

E – Represents the adjustments to the Visa International, Visa Canada and Inovant pension and post-retirement benefit obligations to reflect the difference between the present value of the estimated projected benefit obligation and the fair value of related plan assets, and to eliminate the unrecognized settlement losses recorded in fiscal 2006.

Visa Europe and Other Pro Forma Reorganization Adjustments

F – Represents the adjustment to historical card service fees to reflect the newly negotiated fee structure for on-going service fee commitments pursuant to the bilateral services agreement. For the purposes of our unaudited pro forma condensed combined statements of operations, the adjustment reduces historical card service fees to the amount of services Visa Europe is obligated to purchase from us at fixed prices in the 21 months following the reorganization. This adjustment does not reflect additional optional card services for which Visa Europe is entitled at its discretion at fixed prices under the bilateral services agreement.

G – Represents the adjustment to historical data processing fees to reflect the newly negotiated fee structure for on-going data processing services pursuant to the bilateral services agreement. For the purposes of our unaudited pro forma condensed combined statements of operations presentation, the adjustment reduces historical data processing fees to the amount we would have earned under the newly negotiated fee structure based on actual transaction volume experienced in the nine months ended June 30, 2007 and fiscal 2006. This adjustment does not reflect optional fixed fee services, for which Visa Europe is entitled at its discretion under the bilateral services agreement.

H – Represents the adjustment to historical international transaction fees to reflect the impact of the new foreign exchange revenue sharing agreement with Visa Europe, pursuant to the bilateral services agreement.

I – Represents the adjustments to historical other revenues to record the fee that Visa Europe will pay us pursuant to the framework agreement. The adjustments reflect the first and second fee reduction components and accretion to revenue of the loss liability recorded in purchase accounting which we have calculated based on our assumptions as detailed in Note 3 “Visa Europe Transaction—The Trademark and Technology Licenses” to these unaudited pro forma condensed combined statements of operations.

J – Represents the adjustment to eliminate the minority interest and minority interest income (expense) attributable to the 10% ownership interest in Inovant held by Visa Europe.

Income Tax Pro Forma Adjustments

K – Represents the adjustments to the historical income tax expense for the nine months ended June 30, 2007 and for fiscal 2006, as a result of consolidating Visa U.S.A., Visa International and Visa Canada, including:

 

•

Adjustments to the tax provision of Visa U.S.A. related to Visa U.S.A.’s interest in Visa International;

 

•

Adjustments to the current state tax provision of Visa U.S.A., Visa International and Inovant to account for consolidated apportioned statutory state rates; and

 

•

Adjustments to Visa Canada related to the entity’s change in status from a not-for-profit corporation to a for-profit corporation.

L – Represents the adjustment to reflect the tax provision impact related to purchase accounting adjustments applied to the historical consolidated statements of operations for the nine months ended June 30, 2007 and fiscal 2006.

 

60

---

Table of Contents

5.	Pro Forma Offering Adjustments

Loss of California Cooperative Status

The state of California, where both Visa U.S.A. and Visa International are headquartered, historically had not taxed a substantial portion of the reported net income of these companies on the basis that both operate on a cooperative or mutual basis and were therefore eligible for a special deduction pursuant to California Revenue and Taxation Code §24405, which we refer to as the special deduction. As taxpayers eligible for the special deduction, Visa U.S.A. and Visa International were generally only subject to California taxation on non-member/owner income. Therefore, the majority of each company’s income was not historically taxable.

As a result of this offering and ownership by parties other than our former member financial institutions, we will no longer be eligible to claim the special deduction and will not be exempt from California taxation. Accordingly, pro forma adjustments were applied to these unaudited pro forma condensed combined statements of operations to reflect the potential increase in our California state income tax rate, or tax expenses and benefits, as a result of losing the benefit of the special deduction.

If we did not lose eligibility for the special deduction, our state tax effective rate would decrease by approximately 3%, net of federal tax benefit. Had eligibility for the special deduction been reflected as of October 1, 2005 in the unaudited pro forma condensed combined statements of operations for fiscal 2006, our income tax expense would have been decreased and net income would have been increased by approximately $22.9 million. A corresponding effective tax rate increase reported in the unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2007 would have resulted in a decrease in income tax expense and increase in net income of approximately $42.4 million.

 

6.	Pro Forma Earnings per Share

Pro Forma Shares Outstanding

Based on the assumptions detailed below, the following table sets forth, on a pro forma basis, (i) the number of shares of common stock outstanding following the reorganization and this offering, reflecting the application of $              of the proceeds of this offering to redeem              shares of class B common stock and              shares of class C common stock, assuming an initial public offering price of $              per share (the midpoint of the range set forth on the cover of this prospectus), and (ii) the number of shares of class A common stock issuable upon conversion of the class B common stock and class C common stock into class A common stock:

 

Class of Common Stock		Shares Outstanding Upon Reorganization and Offering		Class A Common Stock Outstanding or Issuable Upon Conversion of the Class B and Class C Common Stock
Class A
Class B
Class C (series I, III and IV)(1)
Class C (series II)
Total

---

(1)	This amount does not include              shares of class C (series III) common stock reclassified as a liability upon closing of this offering. See Note 3, “Visa Europe Transaction” to these unaudited pro forma condensed combined statements of operations.

Prior to this offering, each of the regional classes of common stock will be converted into class C common stock or, in the case of regional common stock held by members of Visa U.S.A., class B common stock.

The conversion rate applicable to any conversion of our class C common stock into class A common stock will be one-to-one, subject to adjustment for stock splits, recapitalizations and similar transactions. Assuming the

 

61

---

Table of Contents

deposit of $            , representing        % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus) into an escrow account, the conversion rate applicable to the class B common stock into class A common stock immediately following the offering will be              shares of class A common stock per share of class B common stock. See “Business—Retrospective Responsibility Plan.”

Calculation of Earnings per Share

Upon the closing of this offering, for financial accounting purposes, we intend to classify all class C (series II) common stock at its then fair value as temporary or mezzanine level equity in our historical consolidated balance sheet. Additionally, over the period from the closing of this offering to on or about October 10, 2008 (the date on which we intend to redeem all of these shares held by Visa Europe) we will accrete this stock to its redemption price through our retained earnings. We estimate that the total amount of accretion will be approximately $42.0 million, which represents the difference between its initial fair value and its redemption price assuming no dividends or other applicable adjustments.

Upon the closing of this offering, for financial accounting purposes, we intend to classify the class C (series III) redemption shares as a liability, at their redemption value, in our historical consolidated balance sheet. From the date of reclassification, these shares shall be excluded from the weighted average number of shares outstanding in the calculation of basic and diluted earnings per share. However, until redeemed, the class C (series III) redemption shares will continue to share ratably (on an as-converted basis) in any dividends or distributions paid on our common stock. Such participation has no impact on the redemption value of this common stock. Therefore, in the calculation of basic and diluted earnings per share, the class C (series III) redemption shares shall be treated as participating in the allocation of net income and will proportionately reduce net income available to all remaining common stockholders.

The total amount of accretion of the class C (series II) common stock and the allocation of net income to the class C (series III) redemption shares reduces the amount of net income available to common stockholders for the purposes of calculating pro forma basic and diluted earnings per share during the period from the closing of this offering until the redemption of the class C (series II) and class C (series III) common stock. We expect to redeem the class C (series II) and the class C (series III) common stock on or about October 10, 2008. For the purposes of presenting pro forma earnings per share, we have assumed a reorganization and an initial public offering date of October 1, 2005. Under these assumptions, the class C (series II) common stock and class C (series III) redemption shares would be redeemed approximately one year after the reorganization, on or about October 10, 2006. We have therefore reported pro forma earnings per share under the two-class method for fiscal 2006 to reflect the accretion of the class C (series II) common stock to its redemption value and the allocation of net income to the class C (series III) redemption shares.

 

62

---

Table of Contents

The holders of class A, class B and class C common stock are entitled to share ratably (on an as-converted basis) in dividends or distributions paid on the common stock, regardless of class or series. Therefore under the guidelines of SFAS No. 128 “Earnings Per Share,” on a pro forma basis we have presented earnings per share using the two-class method with separate disclosure of pro forma earnings per share attributable to (i) class A common stock and class C (series I, III and IV) common stock, (ii), class B common stock, and (iii) class C (series II) common stock. Pro forma net income available to common stockholders for fiscal 2006 is calculated as follows:

 

		(in thousands except per share data)
Pro forma net income		$	436,581
Less: Accretion of class C (series II) common stock			(42,000	)
Less: Amount allocated to participating class C (series III) redemption shares held by Visa Europe
Total pro forma net income available to common stockholders
Pro forma net income available to common stockholders:
Class A and class C (series I, III and IV) common stock
Class B common stock
Class C (series II) common stock(1)
Pro forma earnings per share—two-class method:
Class A and class C (series I, III and IV) common stock
Class B common stock
Class C (series II) common stock(1)

---

(1)

The aggregate redemption price of the class C (series II) common stock is reduced by the aggregate amount of any dividends and other distributions declared and paid. Therefore, for the purposes of calculating pro forma earnings per share, under SFAS No. 128, class C (series II) common stockholders are deemed not to participate in any distribution of pro forma net income available to other common stockholders.

Had the class C (series II) common stock and class C (series III) redemption shares been redeemed on October 1, 2005, the beginning of the period, pro forma earnings per share would have been $             per share of class A and class C (series I, III and IV) common stock and $             per share of class B common stock for fiscal 2006.

Set forth below is the pro forma net income available to common stockholders for the nine months ended June 30, 2007. This presentation reflects the redemption of all class C (series II) shares and class C (series III) redemption shares on October 1, 2006. Upon the redemption of these shares, all remaining class C (series III) and class C (series IV) common stock will automatically convert into class C (series I) common stock on a one-to-one basis, with the result that as of October 1, 2006, our outstanding shares would consist of             shares of class A common stock,             shares of class B common stock and             shares of class C common stock. Pro forma net income available to common stockholders for the nine months ended June 30, 2007 is calculated as follows:

 

		(in thousands except per share data)
Pro forma net income		$	770,920
Pro forma net income available to common stockholders:
Class A and class C common stock
Class B common stock
Pro forma earnings per share—two-class method:
Class A and class C common stock
Class B common stock

 

63

---

Table of Contents

OVERVIEW OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VISA INC.

The following overview contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus and with the information under “Unaudited Pro Forma Condensed Combined Statements of Operations.”

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, our primary customers, 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 in the electronic payments industry. We will continue to explore additional opportunities to enhance our competitive position by expanding the scope of payment solutions to benefit our existing customers and to position Visa to serve more and different constituencies.

Our unaudited pro forma operating revenues were $3,727 million for the nine months ended June 30, 2007 and $3,908 million for fiscal 2006. Revenues for the nine months ended June 30, 2007 reflect 12% growth in underlying payments volume, with double-digit growth across all product categories. Payments volume on credit products grew 16% outside the United States, accounting for 35% of our overall payments volume growth. Our pro forma operating income as a percentage of operating revenues was 33% for the nine months ended June 30, 2007 and 18% for fiscal 2006. The improvement in operating margin for the nine months ended June 30, 2007 reflects the transition to a profit-maximizing business model, particularly in regions outside the United States.

The Reorganization

In order to respond to industry dynamics and enhance Visa’s ability to compete, Visa consummated a reorganization 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 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 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.

We believe that the reorganization provides us with several significant strategic benefits. It allows us to increase our operational efficiency and enhances our ability to deliver more innovative products and services to financial institutions, merchants and cardholders on a global basis. The reorganization allows us to centralize and streamline our strategy and decision making. At the same time, we believe that the reorganization preserves and reinforces the advantages that have made Visa the largest retail electronic payments network in the world.

The reorganization will impact our business, results of operations and financial condition in a number of significant ways:

 

•

Charges. 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 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.

 

64

---

Table of Contents

•

Retrospective responsibility plan. Our retrospective responsibility plan is a central component of the reorganization. The retrospective responsibility plan is designed to address potential liabilities arising from certain litigation that we refer to as the “covered litigation.” 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 of Visa U.S.A. As part of the plan, we intend to deposit $            , representing     % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus), of the net proceeds from this offering in an escrow account from which settlements of, or judgments in, the covered litigation will be payable. Immediately after this offering, the conversion rate applicable to each share of class B common stock will be              shares of class A common stock per share of class B common stock. After the closing of this offering, we may be directed by the litigation committee to sell class A common stock to raise additional funds to be used for such purpose, in which case the conversion rate will further adjust so that each share of class B common stock converts into fewer shares of class A common stock. See “Business—Retrospective Responsibility Plan.”

 

•

Commercial relationship with Visa Europe. We 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.

 

•

Visa Europe put right. We have granted Visa Europe the option to cause the sale of Visa Europe to us. This right is described under “Material Contracts—The Put-Call Option Agreement.” We will record changes in the fair value of this option on a quarterly basis in our statements of operations. Quarterly changes in the value of the put option will result in fluctuations in our reported net income.

Operating Revenues

Our operating revenues consist of card service fees, data processing fees, international transaction fees and other revenues. Operating revenues are offset by payments made to customers and merchants under volume and support agreements. Standard pricing varies among our different geographies and may be modified on a customer-by-customer basis through volume and support agreements.

We do not earn revenues from 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 consumers, 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.

 

65

---

Table of Contents

A significant portion of our operating revenues is concentrated among our largest customers. Our pro forma operating revenues from our four largest customers represented approximately $847.9 million, or 23%, and $870.9 million, or 22%, of our total pro forma operating revenues for the nine months ended June 30, 2007 and fiscal 2006, respectively. In addition, our pro forma operating revenues from JPMorgan Chase accounted for $367.6 million, or 10%, and $408.5 million, or 10%, of our pro forma operating revenue for the nine months ended June 30, 2007 and fiscal 2006, respectively. The following table sets forth the components of our operating revenues in dollars, and as a percentage of total operating revenues, on a pro forma basis for the nine months ended June 30, 2007 and fiscal 2006:

 

		Pro Forma Visa Inc.
		Nine Months Ended June 30, 2007							Fiscal 2006
		(in millions, except percentages)
Card service fees		$	1,760			47.2	%		$	2,057			52.6	%
Data processing fees			1,193			32.0				1,412			36.1
Volume and support agreements			(499	)		(13.4	)			(890	)		(22.8	)
International transaction fees			735			19.7				791			20.3
Other revenues			538			14.5				538			13.8
Total operating revenues		$	3,727			100.0	%		$	3,908			100.0	%

Components of Operating Revenues

Card service fees

Card service fees reflect payments by customers for their participation in card programs carrying our brands. Card 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. Card service fees excluding online PIN-based debit, in a given quarter, are assessed based on payments volume in the prior quarter, excluding online PIN-based debit. Therefore, card service fees reported with respect to the nine months ended June 30, 2007 and fiscal 2006 were based on payments volume reported by our customers for the nine months ended March 31, 2007 and the 12 months ended June 30, 2006, respectively.

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 proprietary, 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.

Volume and support agreements

Volume and support agreements are contracts with 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 are typically multi-year arrangements. These contracts provide incentives based on payments volume growth or card issuance, or provide marketing and program support based on specific performance requirements. Volume and support agreements are recorded as a reduction to operating revenues, because the arrangements are primarily used to build payments volume. 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 agreements. Management routinely reviews volume and support agreements and estimates of performance.

 

66

---

Table of Contents

International transaction fees

International transaction fees are assessed to customers on transactions where an issuer is domiciled in one country and a merchant is located in another country. International transaction fees are generally driven by cross-border payments volume and from currency exchange activities in connection with the settlement of multi-currency transactions. International transaction fees are influenced 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 acceptance fees in support of ongoing acceptance and volume growth initiatives, optional service enhancements, such as extended cardholder protection and concierge services, cardholder and merchant services, and fees for licensing and certification.

Operating Expenses

Our operating expenses consist of personnel expenses, network, electronic data processing, or EDP, and communications expenses, advertising, marketing and promotion expenses, professional and consulting fees, administrative and other expenses, and litigation expenses.

The following table sets forth the components of our operating expenses on a pro forma basis for the nine months ended June 30, 2007 and fiscal 2006.

 

		Pro Forma Visa Inc.
		Nine Months Ended June 30, 2007						Fiscal 2006
		(in millions, except percentages)
Personnel		$	835		33.6	%		$	1,010		31.5	%
Facilities			78		3.2				106		3.3
Network, EDP and communications			358		14.4				473		14.8
Advertising, marketing and promotion			694		27.9				943		29.4
Professional and consulting fees			395		15.9				418		13.1
Administrative and other			109		4.4				230		7.2
Litigation provision			15		0.6				23		0.7
Total operating expenses		$	2,484		100.0	%		$	3,203		100.0	%

Personnel expenses consist of salaries, incentives and various fringe benefits for Visa employees.

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

Advertising, marketing and promotion expenses include expenses, other than personnel expenses, associated with advertising and marketing programs, sponsorships, promotions and other related incentives to promote the Visa brand and assist customers in achieving their goals. Payments relating to sponsorships are included in advertising, marketing and promotion expenses because they are incurred to build brand awareness.

Professional and consulting fees consist of fees for consulting, contractors, legal and other professional services.

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

 

67

---

Table of Contents

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,” 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 refinements of the accrual will be made.

Other Income (Expense)

Other income (expense) primarily consists of interest expense and investment income.

The following table sets forth the components of our other income (expense) on a pro forma basis for the nine months ended June 30, 2007 and fiscal 2006.

 

		Pro Forma Visa Inc.
		Nine Months Ended June 30, 2007							Fiscal 2006
		(in millions, except percentages)
Investment income, net		$	125			195.3	%		$	132			440.0	%
Interest income (expense)			(62	)		(96.9	)			(103	)		(343.3	)
Equity in earnings of unconsolidated affiliates			1			1.6				1			3.3
Total other income		$	64			100.0	%		$	30			100.0	%

Investment income, net represents returns on our fixed-income securities and other investments.

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

Equity in earnings of unconsolidated affiliates consists of investments resulting in ownership of approximately 20-50%, or more than 5% of a flow-through entity (e.g., limited partnerships, limited liability companies).

Income Taxes

The state of California, where Visa U.S.A. and Visa International have been headquartered, historically had not taxed a substantial portion of reported net income of these companies on the basis that both operated on a cooperative or mutual basis and therefore were eligible for a special deduction pursuant the California Revenue and Taxation Code. Visa U.S.A. and Visa International were therefore only subject to California taxation on non-member/owner income. As a result of this offering and ownership by parties other than our former member financial institutions, Visa Inc. will no longer be eligible to claim the special deduction afforded and will not be exempt from California taxation. The loss of eligibility for the special deduction increases our state tax effective rate by approximately 3%, net of federal tax.

Liquidity and Capital Resources

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

Certain charges directly connected with the reorganization will affect our results of operations in future periods. These charges, which may be significant, will include charges during 2008 related to workforce

 

68

---

Table of Contents

consolidation due to elimination of overlapping functions, and certain professional fees related to enhancing our systems and infrastructure to support the global organization. We expect to fund these activities with existing liquid assets and projected cash flows.

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. However, our ability to maintain liquidity could be adversely affected by several factors described under “Risk Factors” including the adverse outcome of any of the legal or regulatory proceedings. Management will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance and other relevant circumstances.

Sources of Liquidity

In addition to the net proceeds from this offering, which we intend to use as described under “Use of Proceeds” our primary sources of liquidity are cash on hand, cash provided by operating activities and our short term investment portfolio. Funds from operations are maintained in cash and cash equivalents, short-term available-for-sale investments, short-term trading assets, or long-term available-for-sale investments based on our estimates of when those funds will be required. At June 30, 2007, our unaudited pro forma total liquid assets, consisting of cash, cash equivalents, trading assets and short- and long-term investment securities, available for sale, were $2.9 billion.

Revolving credit facilities. We maintain certain unsecured revolving credit facilities providing for borrowings of up to $2.25 billion in order to provide liquidity in the event of settlement failures by our customers, to back up the commercial paper program and, in the case of the three-year facility described below, for general corporate purposes. The participating lenders in these revolving credit facilities include certain customers or affiliates. There were no borrowings under these revolving credit facilities during the nine months ended June 30, 2007 or during fiscal 2006. These facilities contain certain covenants and events of default customary for financings of this type. We were in compliance with all covenants with respect to these facilities at September 30, 2006 and June 30, 2007.

Of the $2.25 billion of credit facilities referenced above, $300 million was scheduled to expire on October 7, 2007 and the remainder is scheduled to expire on November 19, 2007. In November 2007, Visa International obtained commitments subject to customary conditions for a single $2.25 billion credit facility that will refinance its existing credit facilities with a single 364-day credit facility maturing in November 2008. The new credit facility will allow Visa International to substitute Visa Inc. as the borrower under this facility and contains covenants and events of default customary for facilities of this type.

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 our primary source of short-term borrowed funds, and commercial paper is issued to cover short-term cash needs during peak settlement periods. At June 30, 2007 and September 30, 2006, we had no obligations outstanding under this program.

Medium-term note program. We have established a medium-term note program authorizing the issuance of a maximum $250.0 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 June 30, 2007 and September 30, 2006, we had notes outstanding in an aggregate amount of $40.0 million, which mature in August 2009.

Uses of Liquidity

Payment 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

 

69

---

Table of Contents

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 the nine months ended June 30, 2007, on a pro forma basis, we funded average daily net settlement receivable balances of $143 million, with the highest daily balance being $352 million. During fiscal 2006, we funded average daily net settlement receivable balances of $109 million, with the highest daily balance being $298 million.

Capital expenditures. We are building a new data center on the east coast of the United States, with a projected completion date in fiscal 2010. At June 30, 2007, we had executed construction agreements totaling $239 million of the $397 million estimated to complete the project. Upon completion, we will migrate our current east coast data center to this new facility. In addition, we continue to make ongoing investments in technology and our payments system infrastructure, some of which we treat as capital expenditures.

Litigation. Visa U.S.A. and Visa International are parties to legal and regulatory proceedings with respect to a variety of matters, including certain litigation that we refer to as the “covered litigation.” We have a retrospective responsibility plan to address settlements and judgments arising from the covered litigation. As part of the plan, we intend to deposit $        , representing     % of the net proceeds of this offering (based on the midpoint of the range set forth on the cover of this prospectus), as determined by the litigation committee, into an escrow account from which settlements of, or judgments in, the covered litigation will be payable. The amount deposited in the escrow account will cause the class B conversion rate to adjust to              shares of class A common stock per share of class B common stock. After the closing of this offering, 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 net proceeds from those sales. See “Business—Retrospective Responsibility Plan.”

We, Visa U.S.A. and Visa International entered into an agreement with American Express that became effective on November 9, 2007 to settle previously disclosed litigation, American Express Travel Related Services Co., Inc. v. Visa U.S.A. Inc. et al, that had been pending since 2004. The settlement ends all current litigation between American Express and Visa U.S.A. and Visa International as well as 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 will be made on or before March 31, 2008, including $945 million from us and $185 million from the five co-defendant banks. Beginning March 31, 2008, we will pay American Express an additional amount of up to $70 million each quarter for 16 quarters, for a maximum total of $1.12 billion.

SFAS No. 5, “Accounting for Contingencies,” requires an accrual by a charge to income for an estimated loss if such a loss is probable and reasonably estimable. Management’s determination of the appropriate loss accrual will be made in light of all relevant factors, including, but not limited to, the litigation committee’s decision as to the escrow amount. As a result, the amount of the accrual could be higher or lower than the escrow amount.

To account for the American Express settlement agreement, Visa U.S.A. expects to record litigation expense in its fiscal 2007 financial statements equal to the present value of the estimated total payments it will be required to make, which is approximately $1.9 billion. We expect to record interest expense to the extent of the remaining obligation of $139 million from October 1, 2008 through December 31, 2011. We intend to use the escrow account to fund payments in connection with the settlement agreement.

 

70

---

Table of Contents

Judgments and settlements in 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. We intend to use $             of the net proceeds to redeem              shares of class B common stock and              shares of class C (series I) common stock promptly following the closing of this offering. In October 2008, we intend to redeem (1) all of the class C (series II) common stock at an aggregate redemption price of $1.146 billion, and (2)              shares of class C (series III) common stock at an aggregate redemption price of $            , equivalent on a per share basis to the price per share of class A common stock in this offering less underwriting discounts and commissions.

Visa Europe put-call option agreement. We have granted Visa Europe a put right under which we will be required 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 the first anniversary of this offering. 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-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 be limited to a percentage equal to the percentage of our class C (series I) common stock that at the settlement date remains subject to transfer restrictions described under “Description of Capital Stock—Transfer Restrictions.” We must pay the purchase price in cash, however, if the settlement of the put option occurs more than three years after the completion of this offering.

We will incur a substantial financial obligation if Visa Europe exercises the put option. If we are unable to pay the purchase price with available cash on hand, we will need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering. For a description of the put-call option agreement see “Material Contracts—The Put-Call Option Agreement.”

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.

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 obligations at September 30, 2007. We believe that we will be able to fund these obligations through cash generated from operations and from our existing cash balances.

 

Payments Due by Period

Less than 1 Year

1-3 Years

3-5 Years

More than 5 Years

Total

(millions)

Purchase order

$

$

$

$

$

Operating leases

Equipment and licenses

Capital leases

Volume and support agreements

Litigation payments

Debt

Total

$

$

$

$

$

 

71

---

Table of Contents

Off-Balance Sheet Arrangements

Settlement of our customers’ transactions is currently guaranteed by members through the indemnification provisions in the bylaws of Visa U.S.A., Visa International and through separate membership agreements with the individual members. Upon the closing of this offering, the members will no longer indemnify Visa for settlement obligations other than their own settlement obligations and those of certain other participants in the system sponsored by the member.

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential for economic losses from changes in market factors such as foreign currency exchange rates, credit, interest rates and equity prices. We believe that we have limited exposure to risks associated with changes in foreign currency exchange rates, credit, 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 interest rate risk due to the short period of time to maturity.

Impact of Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of SFAS No. 109” (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It establishes a probability threshold of greater than 50% to satisfy the requirement to recognize a tax benefit. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” 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. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, adopting of SFAS No. 157 on our consolidated financial statements.

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 No. 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 No. 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. We are currently evaluating the impact, if any, adopting of SFAS 159 on our consolidated financial statements.

 

72

---

Table of Contents

SELECTED COMBINED CONSOLIDATED FINANCIAL AND OTHER DATA OF VISA U.S.A.

The following tables present selected consolidated statements of operations data and consolidated balance sheet data for Visa U.S.A. at and for the 2006, 2005 and 2004 fiscal years that were derived from the audited consolidated financial statements of Visa U.S.A. included elsewhere in this prospectus. The selected Visa U.S.A. consolidated statements of operations data and consolidated balance sheet data presented below at and for the fiscal 2003 and 2002 were derived from audited consolidated financial statements not included in this prospectus. The selected consolidated financial data presented below at and for the nine months ended June 30, 2007 and 2006 were derived from the unaudited consolidated financial statements of Visa U.S.A. included elsewhere in this prospectus and, in the opinion of management, contain all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of Visa U.S.A.’s financial position and results of operations for such periods. Historical results are not necessarily indicative of the results to be expected in the future and results for the nine months ended June 30, 2007 are not necessarily indicative of, and are not projections for, the results to be expected for fiscal 2007.

In October 2007, we consummated the reorganization. The reorganization was accounted for as a purchase under the guidelines of SFAS No. 141, “Business Combinations,” occurring on October 1, 2007, with Visa U.S.A. deemed to be 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). Under the purchase method, the estimated purchase price of the acquired interests in Visa International, Visa Canada and Inovant will be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair value at the date of the completion of the reorganization. Visa Inc. will record goodwill to the extent that the estimated purchase price exceeds the estimated fair value of net assets acquired. The allocation of the purchase price is preliminary and will remain such until Visa Inc. obtains an independent valuation to support its comprehensive analysis of identifiable intangible assets acquired and liabilities assumed. The operating results of the acquired interests in Visa International and Visa Canada will be included in the consolidated statements of operations of Visa Inc. from October 1, 2007.

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. For further information regarding these accounting changes, see Note 3 “Cumulative Effect of Change in Adoption of Accounting Principle,” of the consolidated financial statements for fiscal 2006 of Visa U.S.A. These accounting changes resulted in additional net income of $95.7 million in fiscal 2005 and an additional net expense of $6.2 million in fiscal 2004. On January 1, 2003, Visa U.S.A. purchased Inovant, Inc. and subsequently formed Inovant, which affect the comparability of the financial data of Visa U.S.A. The operating results of Inovant were included in the consolidated statements of operations of Visa U.S.A. from January 1, 2003.

The selected statistical data table presents payments volume. Visa U.S.A.’s members provide payments volume information on their quarterly operating certificates. Current quarter card service fees are assessed and recognized ratably over the quarter using a calculation of pricing applied to prior quarter volumes. Payments volume data accumulated from Visa U.S.A.’s members that reflect data for the 12-month period ended June 30 is used as the basis for recording card service fees during fiscal years ending September 30. Payments volume data accumulated from Visa U.S.A.’s members that reflect data for the nine months ended March 31 is used as the basis for recording card service fees during the nine months ended June 30.

Payments volume information is subject to verification by Visa U.S.A. From time to time, members may update previously submitted payments volume information. Prior year payments volume information presented in the table below has not been updated as changes made were not material. Payments volume excludes cash disbursements obtained with Visa-branded cards, balance transfers and convenience checks. Visa U.S.A. considers payments volume to be an important measure of the scale of its business. The selected statistical data do not purport to indicate results of operations at any future date or for any future period.

 

73

---

Table of Contents

The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Visa U.S.A.” and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.

 

		Nine Months Ended June 30								Fiscal Year Ended September 30
		2007				2006				2006				2005				2004				2003				2002
		(unaudited)
		(in millions, except percentages)
Statement of Operations Data:
Total operating revenues		$	2,599			$	2,203			$	2,948			$	2,665			$	2,429			$	1,980			$	1,564
Operating expenses			1,685				1,651				2,219				2,212				1,999				3,398				1,478
Litigation provision			15				22				23				132				37				1,500				—
Operating income (loss)			914				552				730				453				430				(1,418	)			86
Operating income (loss) as percent of operating revenues			35.2	%			25.1	%			24.8	%			17.0	%			17.7	%			(71.6	)%			5.5	%
Other income (expense)		$	50			$	(4	)		$	(8	)		$	3			$	(75	)		$	(38	)		$	17
Income (loss) before cumulative effect of change in accounting principle			608				340				455				265				216				(885	)			60
Net income (loss)			608				340				455				360				210				(885	)			60
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	590			$	236			$	270			$	135			$	174			$	86			$	46
Short-term investment securities, available-for-sale			728				677				660				681				156				253				143
Total current assets			1,997