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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
OTHER INVESTMENTS
In 2006, the Company acquired a non-controlling interest
in the common stock of Industrial and Commercial Bank of
China (ICBC) for $200 million. The Company is restricted
from transferring 50 percent of the underlying shares until
April 2009 and the other 50 percent of the underlying shares
until October 2009. As a result of this restriction, the Company
accounts for this investment at cost until 12 months before the
transfer restriction expires (April 2008 and October 2008 for
each 50 percent investment tranche, respectively), at which
time the applicable investment tranche will be accounted for
at fair value (approximately $375 million and $360 million at
December 31, 2007, for each tranche, respectively, considering
the impact of any remaining transfer restriction period).
The Company has $114 million and $120 million in
affordable housing partnership interests at December 31, 2007
and 2006, respectively. The Company has variable interests in
affordable housing partnerships for which it is not considered
the primary beneficiary and, therefore, does not consolidate.
For these variable interests, the Company is a limited partner
and typically has a less than 50 percent interest and receives
the benefits and accepts the risks consistent with its limited
(Millions, except percentages) 2007 2006
Outstanding
Balance
Year-End
Stated
Rate on
Debt(a)
Year-End
Effective
Interest
Rate with
Swaps(a)(b)
Outstanding
Balance
Year-End
Stated
Rate on
Debt(a)
Year-End
Effective
Interest
Rate with
Swaps(a)(b)
Commercial paper $10,490 4.36% 4.33% $ 5,782 5.23% —
Borrowed funds(c) 3,566 4.99% 4.99% 2,609 4.96% 4.95%
Bank notes payable 3,243 5.18% — 6,100 5.31% —
Other(d) 463 1.88% — 745 2.41% —
Total $17,762 4.57% $15,236 5.08%
(a) For floating rate debt issuances, the stated and effective interest rates are based on the floating rates in effect at December 31, 2007 and 2006, respectively. These
rates are not indicative of future interest rates.
(b) Effective interest rates are only presented if swaps are in place to hedge the underlying debt at the respective year-end.
(c) Included in borrowed funds is $313 million and $187 million in 2007 and 2006, respectively, of short-term debt that relates to borrowings with a discontinued
operation (AEB).
(d) Includes interest bearing overdrafts with banks of $463 million and $706 million at December 31, 2007 and 2006, respectively.
Unused lines of credit to support commercial paper borrowings were approximately $8.2 billion and $8.1 billion at December 31, 2007
and 2006, respectively.
partner interests. In the limited cases in which the Company
has a greater than 50 percent interest in affordable housing
partnerships, it was determined that the general partner acts
as the Company’s agent and the general partner is most closely
related to the partnership as it is the key decision maker
and controls the operations. These partnership interests are
accounted for under EITF No. 94-01, “Accounting for Tax
Benefits Resulting from Investments in Affordable Housing
Projects,” and the related accounting guidance of Statement of
Position No. 78-9, “Accounting for Investments in Real Estate
Ventures” and EITF Topic D-46, “Accounting for Limited
Partnership Investments.” The Company’s maximum exposure
to loss as a result of its investment in these partnerships is
represented by the carrying value.
NOTE 9 SHORT- AND LONG-TERM DEBT AND
BORROWING AGREEMENTS
SHORT-TERM DEBT
The Company’s short-term debt outstanding, defined as debt
with original maturities of less than one year, at December 31,
was as follows:
91