AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2002

                                                      REGISTRATION NO. 333-67544
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                AMENDMENT NO. 5

                                       TO

                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                            MASTERCARD INCORPORATED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                                                                            
                DELAWARE                                   7389                                  13-4172551
    (STATE OR OTHER JURISDICTION OF            (PRIMARY STANDARD INDUSTRIAL                   I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)            CLASSIFICATION CODE NUMBER)                 IDENTIFICATION NUMBER


                              2000 PURCHASE STREET
                            PURCHASE, NEW YORK 10577
                                 (914) 249-2000
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
                               ROBERT W. SELANDER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                     MASTERCARD INTERNATIONAL INCORPORATED
                              2000 PURCHASE STREET
                            PURCHASE, NEW YORK 10577
                                 (914) 249-2000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------
                                   COPIES TO:


                                                         
                    NOAH J. HANFT, ESQ.                                        VINCENT PAGANO, ESQ.
               GENERAL COUNSEL AND SECRETARY                                SIMPSON THACHER & BARTLETT
           MASTERCARD INTERNATIONAL INCORPORATED                               425 LEXINGTON AVENUE
                   2000 PURCHASE STREET                                      NEW YORK, NEW YORK 10017
                 PURCHASE, NEW YORK 10577                                         (212) 455-2000
                      (914) 249-2000


                            ------------------------
    APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective and after all
other conditions to the conversion and integration described herein have been
satisfied or waived.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]

    If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 of 1933, as amended, 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(1)



---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                      PRO FORMA BOOK          PROPOSED
              TITLE OF EACH CLASS OF                 AMOUNT TO BE    VALUE PER SHARE     MAXIMUM AGGREGATE        AMOUNT OF
            SECURITIES TO BE REGISTERED               REGISTERED   AS OF JUNE 30, 2001     OFFERING PRICE    REGISTRATION FEE(2)
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
Class A Redeemable Common Stock, par value $.01 per
  share(3).........................................   84,000,000          $7.82             $656,880,000           $164,220
---------------------------------------------------------------------------------------------------------------------------------
Class B Convertible Common Stock, par value $.01
  per share(3).....................................   16,000,000          $7.82             $125,120,000           $31,280
---------------------------------------------------------------------------------------------------------------------------------
Rights to receive additional shares of Class A
  Redeemable Common Stock(4).......................      (4)               (4)                  (4)                  (4)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------


(1) Pursuant to Rule 457(a), no additional filing fee is required since a filing
    fee has previously been paid based on a bona fide estimate of the maximum
    offering price.

(2) Since no market for the common stock of MasterCard Incorporated exists, the
    registration fee is calculated based on book value pursuant to Rule 457(f)
    under the Securities Act of 1933.

(3) The common stock of MasterCard Incorporated being registered is to be
    offered in connection with the transactions described in this registration
    statement in which common stock of MasterCard Incorporated will be issued in
    exchange for (i) the equity rights associated with membership interests in
    MasterCard International Incorporated and (ii) the capital stock of Europay
    International S.A.

(4) Represents rights to receive additional shares of class A redeemable common
    stock of MasterCard Incorporated under certain circumstances. No additional
    filing fee is required for the registration of the rights.
                            ------------------------
    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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                                               [MASTERCARD LOGO]
                           PROXY STATEMENT-PROSPECTUS
                     MASTERCARD INTERNATIONAL INCORPORATED
                            MASTERCARD INCORPORATED

                                          , 2002

Dear MasterCard International Principal, Association or
  Travelers Cheque Member:

    You are invited to attend the special meeting of the principal, association
and travelers cheque members of MasterCard International Incorporated to be held
on          , 2002, at 9:00 a.m., local time, at MasterCard International
Incorporated's offices located at 2000 Purchase Street, Purchase, New York
10577. You are being asked to vote on a proposed plan to convert MasterCard
International Incorporated to a private stock corporation. This plan was
approved by your board of directors at a meeting held on February 8, 2001. At
that same meeting, your board of directors also approved the integration of
Europay International S.A. and MasterCard through the acquisition by MasterCard
Incorporated, a Delaware holding company, of all the outstanding shares of
Europay International S.A. in exchange for MasterCard Incorporated common stock.
The conversion and the integration are important steps in enhancing our position
as an integrated, global organization that is able to respond effectively to
challenges and opportunities in today's fast-paced payments industry.

    In the conversion, each MasterCard International Incorporated principal
member, which for purposes of this proxy statement-prospectus includes
principal, association and travelers cheque members, will receive shares of
class A redeemable and class B convertible common stock of MasterCard
Incorporated, together with a right to receive additional shares of class A
redeemable common stock under certain circumstances, and a class A membership
interest in MasterCard International Incorporated, a Delaware non-stock
corporation and subsidiary of MasterCard Incorporated. The class A membership
interest will represent your continued rights as a licensee to use MasterCard's
brands, programs and services.

    Immediately after the closing of the conversion and integration, 84,000,000
shares of class A redeemable common stock and 16,000,000 shares of class B
convertible common stock of MasterCard Incorporated will be held by the
stockholders of MasterCard Incorporated. Each share of class A redeemable and
class B convertible common stock will be entitled to one vote. Following a
three-year transition period, most of the class B convertible common stock will
be converted to class A redeemable common stock and the remaining shares of
class B convertible common stock will lose their voting rights. Except in
limited circumstances, shares of common stock cannot be transferred during the
transition period. After the transition period, shares of common stock may be
transferred only among the holders of class A membership interests in MasterCard
International, and no stockholder together with its affiliates may own more than
15% of the outstanding shares. Additionally, following the transition period,
each stockholder will be required to maintain its ownership of MasterCard
Incorporated common stock within a range determined by a new global proxy
formula that includes revenues and transaction volume generated by the
stockholder principally in connection with its MasterCard(R), Maestro(R) and
Cirrus(R) branded activity. Following the conversion and integration, European
member-stockholders will hold 33 1/3% of MasterCard Incorporated common stock
with the remaining 66 2/3% being held by non-European member-stockholders. These
percentages will be reallocated at the end of the three-year transition period
and could result in the European member-stockholders receiving between 26% and
44% of MasterCard Incorporated's common stock.

    WE ENCOURAGE YOU TO READ THE ACCOMPANYING PROXY STATEMENT-PROSPECTUS
CAREFULLY. IN PARTICULAR, PLEASE READ THE SECTION OF THE PROXY
STATEMENT-PROSPECTUS ENTITLED "RISK FACTORS" ON PAGE 18 FOR A DISCUSSION OF
RISKS THAT YOU SHOULD CONSIDER IN EVALUATING THE TRANSACTIONS DESCRIBED IN THE
PROXY STATEMENT-PROSPECTUS.

    The conversion plan requires the approval of at least a majority of the
votes cast at the special meeting of MasterCard International principal members
at which a quorum is present. It is important that as many of our principal
members as possible be present or represented by proxy at the special meeting to
consider and approve the plan of conversion. I look forward to seeing all of you
who attend in person.

                                          Sincerely,

                                          ROBERT W. SELANDER
                                          President and Chief Executive Officer

    NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN
CONNECTION WITH THE CONVERSION AND INTEGRATION, OR DETERMINED IF THE
ACCOMPANYING PROXY STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

    This proxy statement-prospectus is dated          , 2002, and was first
mailed to the principal members of MasterCard International Incorporated on or
about          , 2002.


                                                               [MASTERCARD LOGO]
                     MASTERCARD INTERNATIONAL INCORPORATED
                              2000 PURCHASE STREET
                            PURCHASE, NEW YORK 10577
                            ------------------------

NOTICE OF SPECIAL MEETING OF PRINCIPAL, ASSOCIATION AND TRAVELERS CHEQUE MEMBERS

                         TO BE HELD ON          , 2002

To the Principal, Association and Travelers Cheque Members of
  MasterCard International Incorporated:

    The special meeting of principal members of MasterCard International
Incorporated will be held at 9:00 a.m., local time, on          , 2002 at
MasterCard International Incorporated's offices located at 2000 Purchase Street,
Purchase, New York 10577 to consider and vote on a plan to convert MasterCard
International Incorporated to a private stock corporation. In particular, the
board of directors is asking you to consider and approve the merger of
MasterCard International Incorporated with MasterCard Merger Sub, Inc., a
wholly-owned subsidiary of MasterCard Incorporated formed solely for the purpose
of completing the merger. MasterCard International Incorporated will survive
this merger and become a subsidiary of MasterCard Incorporated. In the
conversion, each MasterCard International Incorporated principal member will
receive shares of class A redeemable and class B convertible common stock of
MasterCard Incorporated, a Delaware holding company, together with a right to
receive additional shares of class A redeemable common stock under certain
circumstances, and a class A membership interest in MasterCard International
Incorporated, a Delaware non-stock corporation and subsidiary of MasterCard
Incorporated. The class A membership interest will represent your continued
rights as a licensee to use MasterCard's brands, programs and services. For
purposes of this notice and the accompanying proxy statement-prospectus, the
principal members of MasterCard International Incorporated are comprised of
MasterCard International Incorporated's principal, association and travelers
cheque members.

    We will not transact any other business at the special meeting.

    The close of business on          , 2002 has been fixed as the record date
for determining those members entitled to vote at the special meeting and any
adjournments or postponements of the meeting. A list of eligible members of
record as of the close of business on the record date will be available at the
special meeting for examination by any member or the member's attorney or agent.
Please note that by delivering a proxy to vote at the special meeting, you are
also granting a proxy voting in favor of any adjournments of the special
meeting.

    Whether or not you plan to attend the special meeting, please sign, date and
return the enclosed proxy card in the accompanying postage-paid envelope or
authorize the individuals named on your proxy card to vote your interests by
calling the toll-free telephone number or by using the Internet as described in
the instructions included with your proxy card. If you attend the meeting, you
may vote in person, which will revoke any signed proxy you have already
submitted. You may also revoke your proxy at any time before the meeting by
notifying us in writing.

    MasterCard International Incorporated must receive your proxy card by 5:00
p.m., New York time, on          , 2002.

                                          By Order of the Board of Directors,

                                          --------------------------------------
                                          NOAH J. HANFT
                                          Secretary

         , 2002
Purchase, New York

    YOUR VOTE IS VERY IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED OR AUTHORIZE THE INDIVIDUALS
NAMED ON YOUR PROXY CARD TO VOTE YOUR INTERESTS BY CALLING THE TOLL-FREE
TELEPHONE NUMBER OR BY USING THE INTERNET AS DESCRIBED IN THE INSTRUCTIONS
INCLUDED WITH YOUR PROXY CARD.

    THE BOARD OF DIRECTORS OF MASTERCARD INTERNATIONAL INCORPORATED RECOMMENDS
THAT MEMBERS VOTE FOR APPROVAL OF THE CONVERSION PLAN.


                               TABLE OF CONTENTS




                                        PAGE
                                        ----
                                     
Questions and Answers About the
  Conversion..........................    1
Questions and Answers About the
  Integration.........................    4
Summary...............................    6
Risk Factors..........................   18
Cautionary Statement Concerning
  Forward-Looking Statements..........   31
The Special Meeting...................   33
The Conversion........................   36
The Integration.......................   40
Opinion of Financial Advisor to
  MasterCard International............   54
Share Allocation and the Global
  Proxy...............................   59
Unaudited Pro Forma Combined Financial
  Statements..........................   68
Capitalization........................   80
Overview of the Global Payments
  Industry............................   81
Business of MasterCard
  International.......................   83
MasterCard Selected Consolidated
  Financial and Other Information.....  102
MasterCard Selected Statistical
  Information.........................  103
MasterCard Management's Discussion and
  Analysis of Financial Condition and
  Results of Operations...............  104
Business of Europay International.....  111






                                        PAGE
                                        ----
                                     
Europay Selected Historical
  Consolidated Financial Data.........  116
Europay Management's Discussion and
  Analysis of Financial Condition and
  Results of Operations...............  118
Management............................  126
Security Ownership of Certain
  Beneficial Owners and Management....  138
Certain Relationships and Related
  Transactions........................  140
Description of Capital Stock of
  MasterCard Incorporated.............  142
Comparison of Rights of MasterCard
  International Members Before and
  After the Conversion and
  Integration.........................  148
Federal Income Tax Consequences of the
  Conversion and the Integration......  158
Material Contracts Between MasterCard
  International and Europay...........  161
Legal Matters.........................  161
Experts...............................  161
Other Matters.........................  161
Stockholders Proposals................  162
Where You Can Find More Information...  162
Index to Consolidated Financial
  Statements..........................  F-1



Annex A -- Agreement and Plan of Merger

Annex B -- Share Exchange and Integration Agreement

Annex C -- Share Exchange Agreement

Annex D -- Amended and Restated Certificate of Incorporation of MasterCard
Incorporated

Annex E -- Amended and Restated Bylaws of MasterCard Incorporated

Annex F -- Amended and Restated Certificate of Incorporation of MasterCard
International Incorporated

Annex G -- Amended and Restated Bylaws of MasterCard International Incorporated

Annex H -- Opinion of Financial Advisor to MasterCard International
                            ------------------------

                                        i


     The registered trademarks of MasterCard International Incorporated, which
we refer to as MasterCard International, include MasterCard(R) and Cirrus(R).
Maestro(R) is a registered trademark of Maestro International Incorporated and
Mondex(R) is a registered trademark of Mondex International Limited. The
registered trademarks of Europay International and its subsidiaries are
Eurocard(R), ec eurocheque(R), ec Pictogram(R), Clip(R) and etc euro travellers
cheque(R). Upon completion of the conversion and integration, all of these
trademarks will be the property of MasterCard Incorporated or its subsidiaries.
Other trademarks used in this proxy statement-prospectus are the property of
their respective owners. References in this proxy statement-prospectus to
MasterCard generally mean the MasterCard trademark or the business conducted by
MasterCard International prior to the conversion and integration and by
MasterCard Incorporated following the conversion and integration.
                            ------------------------


     As of February 12, 2002, the exchange rate between U.S. dollars and euros
was 1.1396 euros per U.S. dollar. As of September 30, 2001 and December 31,
2000, the period end exchange rate between U.S. dollars and euros was 1.10 and
1.07 euros per U.S. dollar, respectively, while the average exchange rate for
the nine month period ended September 30, 2001 and the year ended December 31,
2000 was 1.12 and 1.11 euros per U.S. dollar, respectively. The exchange rates
referred to above are based on the noon buying rate in New York City for cable
transfers in euros as certified for customs purposes by the Federal Reserve Bank
of New York. We make no representation that the dollar or euro amounts referred
to in this proxy statement-prospectus could have been or could in the future be
converted into euros or dollars, as the case may be, at any particular rate or
at all.

                            ------------------------

     You should rely only on the information contained in this proxy
statement-prospectus or to which we have referred you. We have not authorized
anyone to provide you with information that is different. Information on the Web
sites of MasterCard International and Europay International is not part of this
document. This proxy statement-prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
proxy statement-prospectus may be accurate only as of the date of this proxy
statement-prospectus.

                                        ii


                   QUESTIONS AND ANSWERS ABOUT THE CONVERSION

Q. WHAT IS THE CONVERSION?


A. The conversion refers to the process by which MasterCard International will
   merge with a subsidiary of MasterCard Incorporated, a newly formed stock
   holding company. After the conversion, MasterCard International will continue
   as a non-stock corporation and will be a subsidiary of MasterCard
   Incorporated. As a result of the conversion, MasterCard Incorporated will
   hold the only class B membership interest in MasterCard International,
   entitling MasterCard Incorporated to substantially all voting power, and all
   economic rights, in MasterCard International. In addition, the current
   principal members of MasterCard International will hold the class A
   membership interests in MasterCard International and the common stock of
   MasterCard Incorporated. A diagram showing the structure of MasterCard
   Incorporated and MasterCard International after the conversion and
   integration (described below) can be found on page 11.


Q. WHAT WILL HAPPEN TO MY MASTERCARD INTERNATIONAL MEMBERSHIP IN THE CONVERSION?

A. In the conversion, each principal member of MasterCard International will
   receive shares of class A redeemable and class B convertible common stock of
   MasterCard Incorporated, representing that member's equity interest in
   MasterCard Incorporated, and a class A membership interest in MasterCard
   International, representing that member's continued rights to use
   MasterCard's brands, programs and services under the member's current
   MasterCard license. See "Comparison of Rights of MasterCard International
   Members Before and After the Conversion and Integration."

Q. WHAT ARE THE REASONS FOR THE CONVERSION?

A. We believe that the conversion will enhance the value of our business and our
   future opportunities by aligning more closely the interests of MasterCard and
   our member-stockholders and providing a more flexible structure to respond to
   opportunities in the marketplace. In particular, we believe the conversion
   will help enhance our member-stockholders' commitment to MasterCard because
   their relative shareholdings in MasterCard Incorporated may increase as they
   increase their MasterCard business. For more information, see "The
   Conversion -- Considerations Relating to the Conversion," and "Risk
   Factors -- Risks Relating to the Conversion."

Q. WHY IS MASTERCARD INTERNATIONAL BEING REORGANIZED AS A TWO-TIERED HOLDING
   COMPANY?

A. The proposed structure will give MasterCard many of the advantages of a stock
   corporation at the holding company level, while enabling it to maintain the
   flexibility of a membership association in governing the operations of its
   global payments programs at the subsidiary level. As is typical of a holding
   company structure, the holding company, MasterCard Incorporated, will control
   the voting power of its operating subsidiary, MasterCard International, with
   regard to nearly all items that currently require a vote of MasterCard
   International's members.

Q. WILL I CONTINUE TO HAVE VOTING RIGHTS?

A. Yes. As a stockholder of MasterCard Incorporated, you will be able to vote on
   all matters submitted to the stockholders for a vote, including the election
   of the board of directors, and extraordinary transactions, such as a merger,
   consolidation or sale of all or substantially all of the assets or
   dissolution of MasterCard Incorporated. Each share of class A redeemable and
   class B convertible common stock will be entitled to one vote. Each
   stockholder, together with its affiliates, will be subject to a 7% voting cap
   in the election of directors regardless of the number of shares owned. For
   more information, see "Description of Capital Stock of MasterCard
   Incorporated."

   The board of directors of MasterCard International will be identical to the
   board of directors of MasterCard Incorporated. In addition, you will continue
   to be able to vote on proposed changes to Article I (Membership) of the
   bylaws of MasterCard International, which will require the approval of the
   holders of at least two-thirds of the voting power held by the class A
   members, but you will no longer be entitled to vote directly with respect to
   any other amendments of the charter or bylaws of MasterCard International.
   See "Comparison of Rights of MasterCard International Members Before and
   After the Conversion and Integration."

                                        1


Q. ARE THERE ANY RESTRICTIONS ON MY ABILITY TO SELL MY SHARES OF CLASS A
   REDEEMABLE OR CLASS B CONVERTIBLE COMMON STOCK OR MY CLASS A MEMBERSHIP
   INTEREST?

A. Yes. Shares of MasterCard Incorporated class A redeemable or class B
   convertible common stock cannot be transferred for three years after the
   conversion except in certain limited circumstances. After three years, each
   stockholder must maintain an ownership percentage of outstanding common stock
   not less than 75% nor more than 125% of that stockholder's most recent global
   proxy calculation. The global proxy calculation is determined by a formula
   specified in the share exchange and integration agreement. If you do not
   satisfy these ownership requirements based on the annual calculation of the
   global proxy, you may be required to purchase or sell shares of MasterCard
   Incorporated.

   In addition, class A redeemable and class B convertible common stock will be
   permitted to be traded only among institutions holding class A membership
   interests in MasterCard International. No stockholder, together with its
   affiliates, may own more than 15% of the outstanding voting stock of
   MasterCard Incorporated.

   Class A membership interests, like your existing membership interests, are
   not transferable. For more information, see "Description of Capital Stock of
   MasterCard Incorporated -- Transfer Restrictions."

Q. WILL THE CONVERSION AFFECT THE RULES FOR QUALIFICATION AS A MEMBER OF
   MASTERCARD INTERNATIONAL?

A. No. The rules for the qualification of members of MasterCard International
   following the conversion will be the same as the current rules for the
   qualification of members of MasterCard International.

Q. WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE CONVERSION?

A. Based on the opinion of our special tax counsel, we believe that we, our
   principal members and the shareholders of Europay and MasterCard/Europay U.K.
   Limited, which we refer to in this proxy statement-prospectus as MEPUK, will
   not recognize any gain or loss for U.S. federal income tax purposes in the
   conversion or integration, except that, as to a portion of any MasterCard
   Incorporated stock received at the end of the three year transition period or
   thereafter pursuant to the integration agreement, a principal member or
   shareholder otherwise subject to U.S. federal income taxation will recognize
   imputed interest income. Notwithstanding the foregoing, a portion of the
   MasterCard Incorporated shares received by a principal member or shareholder
   may be treated for U.S. federal income tax purposes as not having been
   received in exchange for property, in which case the member or shareholder
   could be required to recognize ordinary income.

   We have requested that the Internal Revenue Service issue a ruling on key
   aspects of the conversion and integration, and we expect to receive a
   response during the first quarter of 2002. Receipt of an IRS ruling is not a
   condition to the closing of the conversion or the integration. Principal
   members and Europay and MEPUK shareholders should consult their own tax
   advisors regarding the U.S. federal, as well as any state, local or non-U.S.,
   tax consequences to them of the conversion and integration. For more
   information, see "Federal Income Tax Consequences of the Conversion and the
   Integration."

Q. WHAT ARE THE ACCOUNTING IMPLICATIONS OF THE CONVERSION?

A. Members should consult their financial advisors regarding the potential
   accounting implications of the conversion to them.

Q. WHEN WILL THE CONVERSION BE COMPLETED?

A. The conversion will be completed as soon as practicable after the conditions
   to the conversion are satisfied, including approval of the plan of conversion
   by the members, the expiration or termination of any waiting periods under
   the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
   rules and regulations promulgated thereunder, which we refer to together as
   the HSR Act, and approval of antitrust authorities in certain European
   countries. We anticipate that these conditions will be satisfied and that the
   conversion will be completed in the first half of 2002. Members should
   consult their advisors to determine whether they are required to make any
   filings under the HSR Act.
                                        2


Q. WHAT WILL HAPPEN IF THE MEMBERS DO NOT APPROVE THE PLAN OF CONVERSION?

A. If the members do not approve the plan of conversion, or if the conversion is
   not completed for any reason, the board of directors of MasterCard
   International presently intends to continue to operate MasterCard
   International in its current form. Completion of the conversion is a
   condition to the integration. If the conversion does not occur for any
   reason, MasterCard International will not be able to proceed with the
   integration.

Q. WILL THE CONVERSION OCCUR EVEN IF THE INTEGRATION WITH EUROPAY IS NOT
   COMPLETED?

A. No, not in its present form. We will not proceed with the conversion in its
   present form if the integration will not also be completed. The board of
   directors of MasterCard International may, however, determine in the future
   that a conversion in some form is in the best interests of MasterCard
   International and its members. If so, MasterCard International would, at that
   time, seek member approval for that transaction.

Q. WHAT ARE MY RIGHTS IF I VOTE AGAINST THE PLAN OF CONVERSION, BUT THE PLAN OF
   CONVERSION PASSES ANYWAY?

A. You are not entitled to rights of appraisal or similar rights for any matter
   to be acted on at the meeting.

Q. WHAT VOTE IS REQUIRED FOR THE PLAN OF CONVERSION PROPOSAL TO PASS?

A. The proposal requires the affirmative vote of a majority of the votes cast at
   the MasterCard International special meeting at which a quorum is present,
   either in person or by proxy.

Q. WHAT DO I NEED TO DO NOW?

A. After carefully reading and considering the information contained in this
   proxy statement-prospectus, please indicate on your proxy card how you want
   to vote and mail your signed and dated form in the enclosed return envelope
   or authorize the individuals named on your proxy card to vote your interests
   by calling the toll-free telephone number or by using the Internet as
   described in the instructions included with your proxy card.

Q. CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?

A. Yes. You may vote by telephone, or electronically through the Internet, by
   following the instructions included with your proxy card.

Q. WHAT DO I DO IF I WANT TO CHANGE MY VOTE?

A. Just send in a later-dated, signed proxy card to the Secretary of MasterCard
   International or authorize the individuals named on your proxy card to vote
   your interests by telephone or by Internet before the special meeting or
   attend the meeting in person and vote.

Q. WHO CAN HELP ANSWER MY QUESTIONS?

A. If you have questions about this proxy statement-prospectus, including
   questions relating to the number of shares of MasterCard Incorporated common
   stock you will receive in the conversion and integration, you should contact:

   MasterCard International Incorporated
   2000 Purchase Street
   Purchase, New York 10577
   Attention: Noah J. Hanft
               Secretary
   Telephone:  (914) 249-2000
   Facsimile:  (914) 249-4262

or Georgeson Shareholder Communications Inc.
   17 State Street
   10th Floor
   New York, New York 10004
   Telephone:  (212) 440-9800
   Facsimile:  (212) 440-9009

                                        3


                  QUESTIONS AND ANSWERS ABOUT THE INTEGRATION

Q. WHAT IS THE INTEGRATION?

A. The integration refers to the acquisition of Europay by MasterCard
   Incorporated and the combination of the businesses of Europay and MasterCard
   International. In connection with the integration, Europay's shareholders,
   other than MasterCard International and MEPUK, will exchange their shares of
   Europay capital stock for shares of class A redeemable common stock and class
   B convertible common stock of MasterCard Incorporated. In a related
   transaction, shareholders of MEPUK will exchange their shares of MEPUK
   capital stock for shares of class A redeemable common stock and class B
   convertible common stock of MasterCard Incorporated. Upon completion of the
   conversion and integration, the European principal members of MasterCard
   International, including the former MEPUK shareholders, will own 33 1/3% of
   the outstanding capital stock of MasterCard Incorporated and the non-European
   principal members will own 66 2/3%. The shares of class A redeemable and
   class B convertible common stock of MasterCard Incorporated will be initially
   allocated within each of the European and non-European shareholder groups in
   accordance with the new global proxy formula described in this proxy
   statement-prospectus. Shares will be reallocated at the end of a three-year
   transition period following the closing of the conversion and integration,
   which could result in the European member-stockholders receiving between 26%
   and 44% of MasterCard Incorporated's common stock. For a summary of the
   integration, see "The Integration" and "Share Allocation and the Global
   Proxy." For a description of the related share exchange proposed for
   shareholders of MEPUK, see "The Integration -- MEPUK."

Q. WHAT ARE THE REASONS FOR THE INTEGRATION?

A. The integration will allow MasterCard and Europay to form an integrated,
   global company with a single management team and governance structure.
   Accordingly, we expect that MasterCard Incorporated will be able to respond
   more effectively to the challenges and opportunities in today's fast-paced
   global payments industry than either MasterCard International or Europay
   could separately. We expect that the integration will combine MasterCard
   International's strengths in global brand building, transaction processing
   and marketing consulting services with Europay's strengths in debit, mobile
   commerce and chip-based card programs. As a result, we anticipate that we
   will be able to manage our collective brands and combined companies more
   effectively, take advantage of many potential operating synergies between the
   two companies and reduce costs and thereby improve profitability. For more
   information, see "The Integration -- Considerations Relating to the
   Integration," and "Risk Factors -- Risks Related to the Integration."

Q. ARE MASTERCARD INTERNATIONAL PRINCIPAL MEMBERS BEING ASKED TO APPROVE THE
   INTEGRATION OF MASTERCARD AND EUROPAY?

A. Approval by the members of MasterCard International is not required for the
   acquisition of Europay by MasterCard Incorporated in the integration.
   However, approval of the members is required for the plan of conversion,
   which is a condition for the integration.

Q. HOW MANY SHARES OF MASTERCARD INCORPORATED WILL I RECEIVE?

A. Features of both the conversion and integration will determine the number of
   shares of MasterCard Incorporated you receive. The accompanying proxy card
   sets forth the number of class A redeemable and class B convertible shares of
   MasterCard Incorporated that you will receive upon the closing of the
   conversion and integration. For more information, see "Share Allocation and
   the Global Proxy."

Q. WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE INTEGRATION?

A. Based on the opinion of our special tax counsel, we believe that we, our
   principal members and the Europay and MEPUK shareholders will not recognize
   any gain or loss for U.S. federal income tax purposes in the conversion or
   integration, except that, as to a portion of any MasterCard Incorporated
   stock received at the end of the three year transition period or thereafter
   pursuant to the integration agreement, a principal member or shareholder
   otherwise subject to U.S. federal income taxation will recognize imputed
   interest income. Notwithstanding the foregoing, a portion of the MasterCard
   Incorporated shares received by a
                                        4


   principal member or shareholder may be treated for U.S. federal income tax
   purposes as not having been received in exchange for property, in which case
   the member or shareholder could be required to recognize ordinary income.

   We have requested that the Internal Revenue Service issue a ruling on key
   aspects of the conversion and integration, and we expect to receive a
   response during the first quarter of 2002. Receipt of an IRS ruling is not a
   condition to the closing of the conversion or the integration. Principal
   members and Europay and MEPUK shareholders should consult their own tax
   advisors regarding the U.S. federal, as well as any state, local or non-U.S.,
   tax consequences to them of the conversion and integration. For more
   information, see "Federal Income Tax Consequences of the Conversion and the
   Integration."

Q. WHAT ARE THE ACCOUNTING IMPLICATIONS OF THE INTEGRATION?

A. Members should consult their financial advisors regarding the potential
   accounting implications of the integration to them.

Q. WHAT ARE THE CONDITIONS TO THE INTEGRATION?

A. The integration will not occur if the conversion is not also completed. In
   addition, the integration is subject to customary closing conditions, among
   others. For more information, see "The Integration -- Conditions to Closing
   of the Integration."

Q. WHEN WILL THE INTEGRATION BE COMPLETED?

A. If the conditions to the integration have been satisfied or waived, we expect
   to close the integration immediately after the completion of the conversion.

Q. WHAT APPROVALS MUST EUROPAY OBTAIN BEFORE PROCEEDING WITH THE INTEGRATION?

A. Europay's board of directors has already approved the integration. However,
   before proceeding with the integration, Europay shareholders, other than
   MasterCard International and MEPUK, must agree to exchange their shares in
   Europay in accordance with the share exchange and integration agreement.
   MEPUK shareholders must agree to exchange their shares in MEPUK in accordance
   with a related share exchange agreement, which we refer to as the MEPUK
   agreement.

                                        5


                                    SUMMARY

     This summary highlights information contained elsewhere in this proxy
statement-prospectus. This summary does not contain all of the information you
should consider with regard to the transactions described in this proxy
statement-prospectus. You should read this summary together with the entire
proxy statement-prospectus, including MasterCard International's and Europay's
financial statements and the notes to those statements, carefully. See "Where
You Can Find More Information." We have included page references parenthetically
to direct you to more complete descriptions of the topics presented in this
summary.


MASTERCARD INTERNATIONAL (PAGE 83)


     MasterCard International is a leading global payment solutions company
owned by over 1,500 financial institutions worldwide that participate directly
in the business of MasterCard International as its principal members. We manage
a family of well-known, widely accepted payment card brands including
MasterCard, Maestro and Cirrus on behalf of these members and approximately
13,500 affiliate members that participate indirectly in our business. We license
our brands to members, provide a sophisticated set of information and
transaction processing services to members and establish and enforce rules and
standards surrounding the use of cards carrying our brands. We also undertake a
variety of marketing activities designed to maintain and enhance the value of
our brands. As an industry leader in technological innovation, we are developing
highly secure, efficient payment programs for electronic and mobile commerce
applications and helping members launch chip-based card programs in countries
throughout the world.


     On a global scale, we process transactions denominated in more than 180
currencies. In 2000, our gross dollar volume ("GDV"), which represents gross
spending (purchases and cash disbursements) on MasterCard-branded cards for
goods and services, including balance transfers and convenience checks,
increased 22% to $858 billion from $726 billion in 1999. In 2001, our GDV was
$986 billion, an 18% increase over the GDV generated in 2000. At December 31,
2001, the total number of MasterCard cards in circulation worldwide as reported
by our members was 520 million, a 19% increase from 2000, reflecting strong
performance in a number of countries. In addition, our members estimate that
cards carrying MasterCard brands were accepted at over 22 million locations
around the world as of December 31, 2001.


     Our revenue is comprised of operations fees and member assessments.
Operations fees represent user fees for authorization, clearing, settlement and
other member services that facilitate transaction and information management
among our members on a global basis. Member assessments are based principally
upon the GDV of transactions generated by MasterCard-branded cards. In addition
to transaction processing and brand building, we also provide a growing set of
marketing and technology consulting, card enhancement and loyalty rewards
support, and information-based performance analysis services to our members. We
do not issue cards, set fees or determine the interest rates that cardholders
are charged for use of their cards. In addition, we do not solicit merchants to
accept MasterCard cards or establish the discount rate that merchants are
charged for card acceptance. These matters are the responsibility of our
members.


EUROPAY INTERNATIONAL (PAGE 111)


     Europay International is a leading payment solutions company in Europe.
Headquartered in Waterloo, Belgium, Europay is owned and controlled by European
financial institutions and serves approximately 1,200 principal members, who
participate directly in its card business, and approximately 2,700 affiliate
members, who participate in Europay's card business indirectly through a
principal member. Europay offers its member financial institutions a full range
of payment programs and services, including ec eurocheque, Maestro, Cirrus,
Eurocard-MasterCard and ec Pictogram, which they in turn can provide to their
customers -- cardholders and retailers. Europay's primary role is to license the
above brands to its members, provide a sophisticated set of information
processing and transaction delivery services to members and establish and
enforce rules and standards surrounding the use of payment cards carrying the
brands.

     Europay has a long-standing strategic alliance with MasterCard, originating
with Eurocard International's alliance with Interbank Card Association,
MasterCard International's predecessor, in 1968 and enhanced by more recent
agreements. Europay has been granted exclusive licensing rights in Europe for
                                        6


certain MasterCard brands and is responsible for the marketing of these brands
and transaction processing throughout Europe. In addition, Europay and
MasterCard are equal partners in Maestro International, a joint venture which
oversees the global development of the Maestro debit service.

CONVERSION OF MASTERCARD INTERNATIONAL (PAGE 36)

     In connection with the conversion, MasterCard International will merge with
MasterCard Merger Sub, Inc., a wholly-owned subsidiary of MasterCard
Incorporated formed solely for the purpose of completing the merger. Each issued
and outstanding principal membership interest in MasterCard International will
be automatically converted by virtue of the merger into a class A membership
interest of MasterCard International and a specified number of shares of class A
redeemable common stock and class B convertible common stock of MasterCard
Incorporated. After a three-year transition period, the principal members of
MasterCard International will be able to trade the common stock of MasterCard
Incorporated among themselves, subject to certain restrictions. The class A
membership in MasterCard International will continue each member's right to use
MasterCard International's brands, programs and services under the member's
current MasterCard license.

     MasterCard Incorporated will be issued the sole outstanding class B
membership interest in MasterCard International. The class B membership interest
will entitle MasterCard Incorporated to substantially all of the voting power,
and all economic rights, in MasterCard International. MasterCard Incorporated's
stockholders will participate indirectly in the voting power and economic rights
associated with the class B membership interest through their ownership of the
common stock of MasterCard Incorporated.

     For a description of the material terms of the conversion, see "The
Conversion."

CONSIDERATIONS RELATING TO THE CONVERSION (PAGE 37)

     We believe that conversion will enhance the value of the MasterCard
enterprise by:

     - permitting member-stockholders to realize the value of their investment
       in MasterCard as an asset and, subject to certain restrictions, trade
       MasterCard Incorporated shares among themselves.

     - aligning more closely the interests of MasterCard and our
       member-stockholders and helping to enhance our member-stockholders'
       commitment to MasterCard;

     - providing a more flexible structure to respond to opportunities in the
       marketplace;

     - resulting in greater financial transparency for our member-stockholders;
       and

     - making it easier, if desired, for MasterCard Incorporated to raise
       financing in the public securities markets.

     We also considered the following disadvantages relating to the conversion:

     - a market for MasterCard Incorporated common stock may not develop
       sufficiently to provide member-stockholders with enough liquidity in
       trading their shares;

     - stockholders may be required to purchase or sell shares of MasterCard
       Incorporated in order to satisfy certain requirements, which may be
       disadvantageous to them;

     - the conversion may facilitate future strategic transactions that could
       reduce the influence of current MasterCard International members;

     - MasterCard Incorporated and certain member-stockholders will be subject
       to additional regulatory burdens, including Securities and Exchange
       Commission regulations, as a result of the conversion; and

     - the conversion could subject some members to tax liabilities.

     For more information, see "The Conversion -- Considerations Relating to the
Conversion," and "Risk Factors -- Risks Related to the Conversion."

                                        7


THE INTEGRATION (PAGE 40)

     MasterCard Incorporated and MasterCard International intend to enter into
an integration agreement with Europay that provides for MasterCard Incorporated
to acquire Europay's capital stock in exchange for shares of class A redeemable
and class B convertible common stock of MasterCard Incorporated. MasterCard
Incorporated will acquire Europay capital stock directly from Europay's
shareholders and indirectly by acquiring the capital stock of MEPUK from MEPUK's
shareholders. Following this acquisition, Europay will become a consolidated
subsidiary of MasterCard Incorporated. As a result, Europe, like MasterCard's
other regions, will be managed by a regional board of directors that operates
under delegated authority from MasterCard's global board of directors. At the
closing of the conversion and integration, all Europay and MEPUK shareholders
will also be principal members of MasterCard International. For a description of
the material terms of the acquisition of Europay, see "The Integration."

CONSIDERATIONS RELATING TO THE INTEGRATION (PAGE 45)

     The integration will allow MasterCard and Europay to form an integrated,
global company with a single management team and governance structure.
Accordingly, we expect that MasterCard Incorporated will be able to respond more
effectively to the challenges and opportunities in today's fast-paced global
payments industry than either MasterCard International or Europay could
separately. MasterCard and Europay are expected to benefit from the integration
through the establishment of:

     - one global management team and governance structure;

     - improved delivery of customized relationship management and professional
       services to customers in all key regions, including Europe; and

     - synergies to reduce costs and improve service, thereby improving
       profitability.

     The integration will allow MasterCard to:

     - establish a more consistent global marketing message, particularly in
       Europe, that is intended to increase MasterCard's presence in Europe and
       thereby make the European region more attractive to all MasterCard
       members; and

     - take advantage of Europay's expertise in debit and chip cards and mobile
       commerce.

     For Europay, the integration represents the opportunity to merge with a
well-capitalized industry leader and, as a result, to leverage its own strengths
based on the broader resources of the MasterCard brand and organization.
Integration with MasterCard provides the opportunity for European members to:

     - participate in the MasterCard system on a much more significant scale
       than they currently do;

     - utilize MasterCard's expertise in brand building and customer-centered
       service; and

     - utilize MasterCard's marketing consulting, internet and corporate product
       management expertise.

     MasterCard and Europay also considered the following disadvantages relating
to the integration:

     - expected synergies may never materialize because of our possible failure
       to reduce costs, merge effectively our management structures, improve our
       programs and services or combine our systems efficiently;

     - the integration will significantly dilute the equity percentage of
       non-European members of MasterCard International in MasterCard
       Incorporated as compared to the non-European members' current equity
       percentage (including voting power and economic rights) in MasterCard
       International; and

     - the integration will adversely impact some members through the
       introduction of the new global proxy formula.

                                        8


     We retained Credit Suisse First Boston, which we refer to as CSFB, to
provide us with a fairness opinion relating to the integration. In rendering its
opinion, CSFB relied on projections of MasterCard's and Europay's management and
did not independently verify those projections.

     For more information, see "The Integration -- Considerations Relating to
the Integration," and "Risk Factors -- Risks Related to the Integration."


SHARE ALLOCATION AND THE GLOBAL PROXY (PAGE 59)


     As a result of the conversion and integration, the principal members of
MasterCard International, including all Europay and MEPUK shareholders, will
receive shares of class A redeemable common stock and class B convertible common
stock of MasterCard Incorporated, together with a right to receive additional
shares of class A redeemable common stock under certain circumstances, and class
A membership interests in MasterCard International. The number of shares of
class A redeemable and class B convertible common stock that you will receive
upon the closing of the conversion and integration is set forth on the
accompanying proxy card. For principal members that are also shareholders of
Europay or MEPUK, the number of shares reported on the proxy card includes all
shares issued in connection with the acquisition of their Europay or MEPUK stock
in the integration. The number of shares that each principal member will receive
is the result of two factors:

        - Whether you are a European or non-European member.  In consideration
          for the acquisition of Europay in the integration, European
          member-stockholders will hold shares of class A redeemable and class B
          convertible common stock at the closing that, together with the shares
          they receive in the conversion, represent 33 1/3% of all shares of
          class A redeemable and class B convertible common stock together then
          outstanding. Non-European member stockholders will hold the remaining
          shares of class A redeemable and class B convertible common stock,
          representing 66 2/3% of all shares together then outstanding. The
          allocation of 33 1/3% of outstanding shares to European
          member-stockholders was determined as a result of extensive
          negotiations between MasterCard International and Europay, as
          described more fully under the heading "The Integration -- Background
          of the Integration." Although this initial allocation is within the
          range of allocations considered by the CSFB fairness opinion, it
          exceeds the allocation supported by MasterCard's valuation analysis.
          See "Risk Factors -- Risks Related to the Integration."

        - Your proportionate share of the new global proxy formula.  The global
          proxy represents an approximation of each member's proportionate share
          of MasterCard's total business and revenues and has traditionally been
          employed to determine the equity rights each principal member receives
          at annual meetings of members of MasterCard International, among other
          things. In connection with the conversion and integration, the global
          proxy will be adjusted from the historic formula that takes into
          account only revenue from MasterCard transactions to a new formula
          that includes transaction volume and revenue earned principally in
          connection with MasterCard, Cirrus and Maestro cards.

     Accordingly, the new global proxy formula based on the 12 month period
ended December 31, 2000, applied on a regional basis to the European pool of
shares (representing 33 1/3% of total shares outstanding) and the non-European
pool of shares (representing 66 2/3% of total shares outstanding), will
determine the number of shares that members receive initially in the conversion
and integration. The application of the new global proxy formula on a European
and non-European basis to determine the allocation of shares to members is the
result of an integrated series of transaction steps in the conversion and
integration, as described more fully under the heading "Share Allocation and the
Global Proxy."

     Three years after the closing, and as an integral component of the
conversion and integration, MasterCard Incorporated shares will be reallocated,
with European members owning between 26% and 44% of the total common stock then
outstanding, based in part on the aggregate global proxy calculation of European
members at that time, and non-European members owning the remaining shares.
Shares of common stock will be allocated to each member within each stockholder
group on the basis of each member's new global proxy

                                        9


calculation in effect at that time. Under the terms of the integration agreement
and as provided for in the bylaws of MasterCard Incorporated, holders of class A
redeemable and class B convertible common stock have a right to receive
additional shares of class A redeemable common stock if such holders are
entitled to receive additional shares in the reallocation. Each right is
transferable only with the applicable shares of class A redeemable and class B
convertible common stock, expires or terminates upon completion of the final
reallocation described below and is not redeemable except together with the
redemption of a share of class A redeemable or class B convertible common stock.
In addition, at the end of the three year transition period, most of the class B
convertible shares will be converted into class A redeemable shares. The class B
convertible shares not converted into class A redeemable shares will by their
terms become non-voting, and after an additional two-year period will convert to
class A redeemable shares and be subject to reallocation. Shareholders receiving
additional shares in this subsequent reallocation will do so pursuant to the
right described above.

     As a result of these provisions, the equity percentage of non-European
members of MasterCard International in MasterCard Incorporated will be
significantly diluted when compared to their current equity percentage in
MasterCard International.

     For more information, see "Share Allocation and the Global Proxy."

STRUCTURE OF MASTERCARD BEFORE AND AFTER THE CONVERSION AND INTEGRATION

     MasterCard International is currently a Delaware membership corporation
owned by over 1,500 principal members that participate directly in the
MasterCard business. Each principal member owns a membership interest that gives
it rights to vote for the election of directors and to receive distributions
upon the liquidation of MasterCard International, as well as rights to use
MasterCard's brands, programs and services under license. Each principal member
is entitled to a number of votes determined in accordance with the historic
global proxy calculation. For a description of the historic global proxy
calculation, see "Share Allocation and the Global Proxy -- Introduction." For a
description of the allocation of voting rights to principal members under the
existing bylaws of MasterCard International, see "The Special Meeting -- Record
Date; Votes Required for Approval." MasterCard International also has
approximately 13,500 affiliate members that participate indirectly in our
business through their affiliation with one or more principal members. Affiliate
members do not have voting rights and will not receive shares in connection with
the conversion and integration.

     The diagrams below show the approximate ownership structure of MasterCard
and Europay before and after the conversion and integration. MasterCard
International currently owns 12 1/4% of Europay and 15% of EPSS, Europay's
transaction processing subsidiary, of which Europay owns the remainder. Based on
the relative values of Europay and EPSS, this is equivalent to an approximate
15% ownership interest in Europay on a consolidated basis, as shown in the first
diagram below.

                       BEFORE CONVERSION AND INTEGRATION
[Diagram showing (1) Non-European Members owning 66 2/3% of MasterCard
Incorporated and class A membership interests in MasterCard International, (2)
European Members owning 33 1/3% of MasterCard Incorporated and class A
membership interests in MasterCard International and (3) MasterCard Incorporated
owning 100% of Europay International and the class B membership interest in
MasterCard International.]

                                        10


            IMMEDIATELY AFTER CLOSING OF CONVERSION AND INTEGRATION

[Diagram showing (1) Non-European Members owning 93% of MasterCard
International, (2) European Members owning 7% of MasterCard International and
87 3/4% of Europay International and (3) MasterCard International owning 12 1/4%
of Europay International.]

            THREE YEARS AFTER CLOSING OF CONVERSION AND INTEGRATION

[Diagram showing (1) Non-European Members owning 56%-74% of MasterCard
Incorporated and class A membership interests in MasterCard International, (2)
European Members owning 26%-44% of MasterCard Incorporated and class A
membership interests in MasterCard International and (3) MasterCard Incorporated
owning 100% of Europay International and the class B membership interest in
MasterCard International.]

* Assumes each Europay shareholder agrees to exchange its shares of Europay, and
  each shareholder of MEPUK agrees to exchange its shares of MEPUK, for common
  stock of MasterCard Incorporated as described in this proxy
  statement-prospectus. MasterCard Incorporated will own Europay shares directly
  and indirectly through MasterCard International and MEPUK.

                                        11



TRANSFER RESTRICTIONS (PAGE 144)


     No stockholder of MasterCard Incorporated, together with its affiliates,
may own more than 15% of MasterCard Incorporated's outstanding voting stock. For
three years after completion of the conversion and integration, no transfer of
class A redeemable or class B convertible common stock will be permitted except
in the limited circumstances described under the heading "Description of Capital
Stock of MasterCard Incorporated -- Transfer Restrictions." After three years,
transfers are permitted among stockholders who also own a class A membership
interest in MasterCard International, subject to the requirement that each
stockholder maintain an ownership percentage of outstanding class A redeemable
and class B convertible (if any) common stock not less than 75% nor more than
125% of that stockholder's most recent global proxy calculation. Stockholders
may be required to purchase or sell shares of MasterCard Incorporated in order
to satisfy these requirements. Any sale of MasterCard Incorporated shares would
ordinarily constitute a taxable transaction. Stockholders who need to sell
shares in order to satisfy the 125% requirement are obligated under the bylaws
of MasterCard Incorporated to accept the highest price offered to them for the
shares that are required to be sold. Class C shares, which will be authorized
but unissued at the closing of the conversion and integration, may or may not be
subject to transfer restrictions. In addition, affiliates of MasterCard
International may not sell their shares of MasterCard Incorporated common stock
acquired in the conversion and integration except pursuant to an effective
registration statement under the Securities Act or an applicable exemption from
the requirements of the Securities Act, including Rules 144 and 145 issued by
the SEC under the Securities Act. See "Description of Capital Stock of
MasterCard Incorporated -- Transfer Restrictions."


BOARDS OF DIRECTORS FOLLOWING THE CONVERSION AND INTEGRATION (PAGE 36)


     The directors and executive officers of MasterCard Incorporated after the
conversion and integration will be the same as the directors and executive
officers of MasterCard International before the conversion and integration
except for the addition of two voting directors who will be affiliated with
European members and the addition of Dr. Peter Hoch, currently Chief Executive
Officer of Europay, who will be President of MasterCard's Europe region (an
officer of MasterCard Incorporated) and a non-voting director. The board of
directors of MasterCard Incorporated will initially consist of 18 voting
members -- six from the U.S., six from Europe, three from Asia/ Pacific, one
from Canada, one from Latin America and the Caribbean and the President and
Chief Executive Officer of MasterCard Incorporated. The directors will be
elected by the stockholders subject to a voting cap and a limit on the number of
representatives that may come from any single region.

     The certificate of incorporation of MasterCard International requires that
MasterCard Incorporated, as the sole class B member, elect its directors to
serve as the directors of MasterCard International.

     In addition to the board of directors, there will be a regional board for
each of MasterCard's six operating regions. For a discussion of the regional
boards and their governance rights, see "The Conversion -- Effects of the
Conversion."

BOARD OF DIRECTORS' AND PRINCIPAL MEMBERS' APPROVAL OF THE CONVERSION AND THE
INTEGRATION (PAGE 38)

     On February 8, 2001, the board of directors of MasterCard International
approved resolutions recommending the conversion and integration to MasterCard
International's principal members. Approval at a special meeting of principal
members at which a quorum is present of at least a majority of the votes cast is
required to complete the plan of conversion. On February 12, 2001, the board of
directors of Europay also approved resolutions recommending the integration to
Europay's shareholders. However, approval by the principal members of MasterCard
International is not required to complete the integration. If the plan of
conversion is approved and the conditions to the integration are satisfied or
waived, we will proceed with the conversion and integration.

THE BOARD OF DIRECTORS OF MASTERCARD INTERNATIONAL RECOMMENDS THAT MEMBERS VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION.

     Principal members of MasterCard International who are represented on
MasterCard International's board of directors are entitled to exercise votes
representing approximately 32% of the votes entitled to be cast on the proposal
regarding the plan of conversion.

                                        12


ABSENCE OF APPRAISAL OR DISSENTERS' RIGHTS

     Members who object to the conversion will have no appraisal or dissenters'
rights under applicable law.

OVERVIEW OF THE MERGER AGREEMENT EFFECTING THE CONVERSION (PAGE 38)

     The conversion will be effected pursuant to the Agreement and Plan of
Merger to be entered into among MasterCard Incorporated, MasterCard
International and MasterCard Merger Sub, Inc., which we refer to as the merger
agreement. Under the merger agreement, each issued and outstanding principal
membership interest in MasterCard International will be automatically converted
by virtue of the merger into a class A membership interest of MasterCard
International and a specified number of shares of class A redeemable common
stock and class B convertible common stock of MasterCard Incorporated. The
number of shares of class A redeemable and class B convertible common stock of
MasterCard Incorporated that a principal member receives in the merger will be
proportional to the percentage of the total voting power of MasterCard
International that such member held in accordance with the historic global proxy
formula in effect for the period ended September 30, 2000.

     Shares of class A redeemable and class B convertible common stock are fully
paid, non-assessable voting equity interests in MasterCard Incorporated and vote
together as a single class on all matters. Class A membership interests in
MasterCard International represent the members' continued rights to use
MasterCard's brands, programs and services under the members' current MasterCard
license. In addition, under the merger agreement, MasterCard Incorporated will
receive one class B membership interest in MasterCard International and become
the sole principal member of MasterCard International for most matters subject
to a vote of members.

     The merger will not close, and your membership interest will not be
exchanged as described above, unless a majority of the votes cast at the special
meeting at which a quorum is present approve the plan of conversion. For more
information, see "The Conversion -- The Merger Agreement Effecting the
Conversion."

OVERVIEW OF THE INTEGRATION AGREEMENT (PAGE 47)

     The acquisition of Europay, which we refer to as the integration, will be
accomplished pursuant to the Share Exchange and Integration Agreement to be
entered into by MasterCard Incorporated, MasterCard International and Europay
International. We refer to this agreement as the integration agreement. The
integration agreement provides for the following:

     - the exchange of shares of Europay and MEPUK for specified numbers of
       shares of class A redeemable common stock and class B convertible common
       stock of MasterCard Incorporated. The common stock of MasterCard
       Incorporated will be issued to the shareholders of Europay and MEPUK,
       which will be principal members of MasterCard International in Europe at
       the time of closing. Accordingly, the shares issued in the integration
       will increase the aggregate shareholding of European members of
       MasterCard International to 33 1/3% of the outstanding shares;

     - as an integral component of the conversion and integration, the
       reallocation of the shares of class A redeemable and class B convertible
       common stock of MasterCard Incorporated issued in the conversion and
       integration within each of the European and non-European
       member-stockholder groups in accordance with the new global proxy formula
       based on the 12 month period ended December 31, 2000;

     - three years following the closing of the integration, the conversion of
       the class B convertible common stock, other than a limited number of
       shares relating to ec Pictogram (if any), into class A redeemable common
       stock, and the reallocation of the class A redeemable common stock among
       the stockholders; and

     - restrictions on the conduct of business of each of MasterCard
       International and Europay prior to the closing of the integration.

                                        13


     For more information on the allocation of shares, see "Share Allocation and
the Global Proxy." See also "The Integration -- The Integration Agreement."

     As a result of the reallocation of shares three years following the closing
of the integration, European members will own between 26% and 44% of the total
common stock then outstanding, based in part on the aggregate new global proxy
calculation of European members at that time, and the remaining shares will be
owned by the non-European members. Certain shares of class B convertible common
stock relating to ec Pictogram will be subject to reallocation after an
additional two year period. As a result of these reallocations,
member-stockholders may ultimately receive more or fewer shares than initially
allocated to them, depending on the relative performance of the Europe region
and their individual global proxy calculations at the time. If a member's
revenue contribution, GDV and/or gross acquiring volume ("GAV") during the
period prior to reallocation grows more slowly than the membership as a whole,
if any of these amounts decline for a member relative to other members, or if a
member with ec Pictogram volumes fails to convert these to Maestro as required,
the member may be entitled to fewer shares upon reallocation than at the
closing.


     In the Europay share exchange, stockholders of Europay and MEPUK, other
than MasterCard International, will exchange their shares of Europay and MEPUK
for 23.76 million shares of MasterCard Incorporated. The value of each
MasterCard Incorporated share, immediately before the exchange, is estimated to
be $15.21 based on an independent appraisal, resulting in a total purchase price
of $361.4 million.


REGULATORY MATTERS (PAGE 52)

     Neither MasterCard International nor Europay is required to make filings
with the European Commission or United States antitrust authorities in
connection with the conversion and integration. As of the date of this proxy
statement-prospectus, the transaction has been cleared by the national
competition authorities in the four countries within the European
Union -- Germany, Finland, Spain and Greece -- in which the conversion and
integration required prior notification and regulatory approval in connection
with national competition laws and rules.

     Some members of MasterCard International and some shareholders of Europay
that receive shares of MasterCard Incorporated may be required to make filings
with the United States antitrust authorities under the HSR Act if the fair
market value of their MasterCard Incorporated shares exceeds $50 million and
they do not intend to hold those shares solely for investment purposes. The
conversion and the integration would be subject to the expiration or termination
of all of these filings.

     For a description of the potential application of federal and state banking
regulations to the shares received in the conversion and integration, see "Risk
Factors -- Risks Related to the Conversion -- U.S. banking regulations may
impact our principal members' ownership of the common stock of MasterCard
Incorporated." There are no other federal or state regulatory requirements or
approvals that must be obtained or satisfied to complete the conversion and
integration. For more information, see "The Integration -- Regulatory Matters
Relating to the Integration."

FORWARD-LOOKING STATEMENTS (PAGE 31)

     Statements in this proxy statement-prospectus include forward-looking
statements that involve risks and uncertainties. Actual results may differ
materially from those expressed in forward-looking statements, depending on a
variety of factors discussed more fully in this proxy statement-prospectus. You
should carefully review all information, including the financial statements and
the notes to the financial statements included in this proxy
statement-prospectus.

RISK FACTORS (PAGE 18)

     You should carefully consider all of the information provided in this proxy
statement-prospectus and, in particular, you should evaluate the specific
factors described under "Risk Factors" on page 18 for a description of the risks
associated with the conversion and integration.

                                        14


        MASTERCARD SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION

     The following table sets forth summary consolidated financial and other
information for MasterCard for each of the three years in the period ended
December 31, 2000 and as of the end of each such fiscal year, and as of and for
the nine months ended September 30, 2001 and September 30, 2000, and selected
unaudited pro forma financial data for the year ended December 31, 2000 and as
of and for the nine months ended September 30, 2001. The summary consolidated
financial data as of December 31, 2000 and December 31, 1999 and for the fiscal
years ended December 31, 2000, December 31, 1999 and December 31, 1998 have been
derived from the audited consolidated financial statements of MasterCard
International included elsewhere in this proxy statement-prospectus. The summary
consolidated financial data as of December 31, 1998 has been derived from the
audited consolidated financial statements of MasterCard International that have
not been included in this proxy statement-prospectus. The summary consolidated
financial data for the nine months ended September 30, 2001 and September 30,
2000 and as of September 30, 2001 and September 30, 2000 have been derived from
the unaudited consolidated financial statements of MasterCard International,
which in the opinion of management include all adjustments, consisting only of
normal recurring adjustments, that are necessary for a fair statement of the
results of operations and financial position of MasterCard International for the
periods and at the dates presented. The results of operations for the nine
months ended September 30, 2001 are not necessarily indicative of the results to
be expected for the full year. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable. The information set forth below should be read in conjunction with
"MasterCard Management's Discussion and Analysis of Financial Condition and
Results of Operations," the Consolidated Financial Statements of MasterCard
International and the notes thereto, and other financial information, including
the pro forma combined financial information, included in this proxy
statement-prospectus.



                                     NINE MONTHS
                                 ENDED SEPTEMBER 30,              YEAR ENDED DECEMBER 31,
                               ------------------------    --------------------------------------
                                  2001          2000          2000          1999          1998
                               ----------    ----------    ----------    ----------    ----------
                                              (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                                        
MASTERCARD INTERNATIONAL

INCOME STATEMENT DATA:
  Revenue....................  $1,308,630    $1,142,361    $1,571,215    $1,389,155    $1,205,968
  Operating Income...........     228,211       245,119       172,472       115,053        18,254
  Net Income.................     145,768       155,646       118,149        86,255        24,183

BALANCE SHEET DATA:
  Total Assets...............  $1,350,115    $1,235,009    $1,181,787    $  972,477    $  871,643
  Long-Term Debt.............      82,525        82,894        82,992        82,682        82,419
  Members' Equity............     613,183       497,980       462,408       341,520       257,248

MASTERCARD INCORPORATED

PRO FORMA DATA:
  Earnings per share, basic
     and diluted.............  $     1.60           N/A    $     1.16           N/A           N/A
  Book value per share.......        9.80           N/A          8.26           N/A           N/A


                                        15


             EUROPAY SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

     The summary historical consolidated financial data set forth below for
Europay for the year ended December 31, 2000 and as of December 31, 2000 has
been derived from Europay's audited consolidated financial statements and
related notes which were prepared in accordance with accounting principles
generally accepted in Belgium ("Belgian GAAP"). The consolidated financial
statements have been audited by PricewaterhouseCoopers Reviseurs d'Entreprises,
independent accountants, as stated in their report included elsewhere in this
proxy statement-prospectus and should be read in conjunction with their report.
The summary historical consolidated financial data set forth below for Europay
for the two years ended December 31, 1999 and 1998 and as of December 31, 1999
have been derived from Europay's unaudited consolidated financial statements and
related notes which were prepared in accordance with Belgian GAAP and are
included elsewhere in this proxy statement-prospectus. The summary consolidated
financial information as of June 30, 2001 and 2000 and for the six months then
ended has been derived from Europay's unaudited consolidated interim financial
statements prepared in accordance with Belgian GAAP, which are included
elsewhere in this proxy statement-prospectus. In the opinion of Europay
management the unaudited consolidated interim financial statements of Europay
have been prepared on the same basis as the audited consolidated financial
statements included herein and include all adjustments necessary for the fair
presentation of the financial position and results of operation of Europay for
these periods, which adjustments are only of a normal recurring nature for the
periods and the dates presented. The results of operations for the six months
ended June 30, 2001 and 2000 are not necessarily indicative of results that may
be expected for a full year.

     The financial data in the tables below has been derived from Europay's
audited and unaudited consolidated financial statements in accordance with
Belgian GAAP, which differs in certain significant respects from accounting
principles generally accepted in the United States of America ("U.S. GAAP").
These differences have a material effect on the net income and composition of
shareholders' equity and are summarized in Note 15 to the unaudited consolidated
interim financial statements of Europay as of June 30, 2001 and for the six
months ended June 30, 2001 and 2000, and Note 22 to the Consolidated Financial
Statements of Europay as of December 31, 2000 and December 31, 1999 and for the
years ended December 31, 2000, 1999 and 1998 included elsewhere in this proxy
statement-prospectus.

     This table should be read in conjunction with the "Europay Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of Europay and the related notes included
elsewhere in this proxy statement-prospectus.

     Since its inception, Europay has not declared or paid any dividends.


                                            SIX MONTHS ENDED JUNE 30,
                              -----------------------------------------------------
                                 2001          2001          2000          2000
                              -----------   -----------   -----------   -----------
                                  (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                              BELGIAN                     BELGIAN
                                US GAAP        GAAP         US GAAP        GAAP
                              -----------   -----------   -----------   -----------
                              (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
                                                            
INCOME STATEMENT DATA(1):
 Revenue(2).................    131,518       191,095       114,859       168,003
 Operating Profit...........        497         1,511         1,399         3,119
 Cumulative effect of
   changes in accounting
   principle, net of tax....       (547)           --        (3,100)           --
 Net Income/(Loss)..........      4,902         4,644        (2,537)          710
 Earnings/(Loss) per
   share....................         49            --           (25)           --
BALANCE SHEET DATA(1):
 Total Assets...............    300,392       276,432           N/A           N/A
 Long-Term Debt.............      3,217            --           N/A           N/A
 Shareholders' Equity.......     52,253        46,557           N/A           N/A


                                                  YEAR ENDED DECEMBER 31,
                              ---------------------------------------------------------------
                                2000        2000         1999          1999          1998
                              ---------   ---------   -----------   -----------   -----------
                                       (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                           BELGIAN                    BELGIAN       BELGIAN
                               US GAAP      GAAP        US GAAP        GAAP          GAAP
                              ---------   ---------   -----------   -----------   -----------
                              (AUDITED)   (AUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
                                                                   
INCOME STATEMENT DATA(1):
 Revenue(2).................   260,093     364,806      215,034       298,206       245,506
 Operating Profit...........    16,241      18,223        8,249         7,321         5,038
 Cumulative effect of
   changes in accounting
   principle, net of tax....    (3,100)         --           --            --            --
 Net Income/(Loss)..........     5,657       9,253        8,546         7,641           278
 Earnings/(Loss) per
   share....................        57          --           85            --            --
BALANCE SHEET DATA(1):
 Total Assets...............   275,625     254,169      156,125       138,896       125,897
 Long-Term Debt.............     3,449          --        5,572         2,533         2,533
 Shareholders' Equity.......    44,930      41,857       39,258        31,986        24,345


---------------
(1) Prior year balances have been translated from Belgian francs into euros
    using the fixed exchange rate on January 1, 1999 of BEF 40.3399 per euro.

                                        16


(2) Europay acts as an agent on behalf of MasterCard for the billing and
    collection of inter-regional transactions with members. Europay does not
    bear risk and rewards of ownership related to these transactions and
    therefore, revenue is reported net under U.S. GAAP. See Note 15 to the
    unaudited consolidated interim financial statements of Europay as of June
    30, 2001 and for the six months ended June 30, 2001 and 2000, and Note 22 to
    Consolidated Financial Statements of Europay as of December 31, 2000 and
    December 31, 1999 and for the years ended December 31, 2000, 1999 and 1998
    included elsewhere in this proxy statement-prospectus.

                                        17


                                  RISK FACTORS

     You should carefully consider the following risk factors, as well as the
other information contained in this proxy statement-prospectus, regarding our
business, the conversion and the integration before deciding whether to vote on
the conversion, if you are a MasterCard member, or execute the applicable share
exchange agreement, if you are also a Europay or MEPUK shareholder.

RISKS RELATED TO OUR BUSINESS GENERALLY

IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH OUR MEMBERS, OR IF OUR
MEMBERS ARE UNABLE TO MAINTAIN THEIR RELATIONSHIPS WITH CARDHOLDERS OR THE
MERCHANTS WHO ACCEPT OUR CARDS FOR PAYMENT, OUR BUSINESS MAY BE ADVERSELY
AFFECTED.

     We are and will continue to be significantly dependent on a number of third
party relationships, principally our relationships with our issuing and
acquiring members and their further relationships with cardholders and
merchants, to support our programs and services. Most of our relationships with
our members are not exclusive and may be terminated at the convenience of our
members. We cannot assure you that our members will not reassess their
commitments to us at any time in the future or that they will not develop their
own competitive services. In particular, the payments industry is currently
undergoing significant consolidations and the merger of one or more of our
members with financial institutions aligned with our competitors could have a
material adverse impact on our business and prospects.

     Our business strategy calls for us to increase our share by, among other
things, entering into customized agreements with members around the globe. Like
our other member relationships, these agreements are terminable by our members
in a variety of circumstances. Examples of provisions appearing in various
agreements currently in effect that may permit a member to terminate its
agreement include:

     - certain members receiving more than one seat on a board of directors
       while others do not;

     - increasing the limit on voting rights of a member to more than 25%; or

     - failing to elect certain persons to MasterCard's board (e.g., a
       member-stockholder holding more than 5% of MasterCard Incorporated common
       stock is entitled to cancel its agreement if one of its employees does
       not have a board seat).


     A number of our key members are represented on our board of directors. If
any of these members were to lose its representation on the board, this could
have a detrimental effect on our business relationship with that member.


     In addition, we may be required to permit issuers with which we have
entered into member business agreements to terminate those agreements without
penalty as a result of the current antitrust litigation being brought against us
by the United States Department of Justice, which is described in a separate
risk factor below. Accordingly, we cannot assure you that the customized
agreements contemplated by our business strategy will reduce the risk inherent
in our business that members may terminate their relationships with us in favor
of our competitors, or for other reasons.

     We may not be able to maintain or form new relationships with card issuers,
card acquirers, technology providers, transaction processors, merchants or
others who provide products and services that are important to our success.
Accordingly, we cannot assure you that our existing or prospective relationships
will result in sustained business relationships or the generation of significant
revenues.

     We do not issue cards, set fees or determine the interest rates (if
applicable) charged to cardholders carrying MasterCard-branded cards. Each
MasterCard issuing member is responsible for determining these and most other
competitive card features. In addition, we do not solicit merchants or establish
the discount rate that merchants are charged for card acceptance, which are
responsibilities of our acquiring members. As a result, much of our business
depends on the continued success and competitiveness of our members. In turn,
our members' success is dependent upon a variety of factors over which we have
little or no influence. In

                                        18


addition, if our members become financially unstable, we may lose the revenue
that we generate by charging them operations fees and assessments.

     We rely on the continuing expansion of merchant acceptance of our brands of
cards. Although it is our business strategy to invest in strengthening our
brands and aggressively expanding our acceptance network, there can be no
guarantee that our efforts in these areas will continue to be successful. If the
rate of merchant acceptance growth slows or reverses itself, our business could
suffer.

A DOWNTURN IN GENERAL ECONOMIC CONDITIONS, PARTICULARLY IN LIGHT OF THE EVENTS
OF SEPTEMBER 11, 2001 MAY ADVERSELY AFFECT OUR REVENUES SIGNIFICANTLY.

     The payment card industry is heavily dependent upon the overall level of
consumer spending. Any substantial deterioration in general economic conditions,
particularly in the United States, or increases in interest rates in key
countries in which we operate, may adversely affect our financial performance.
In the short term, the slowdown in the U.S. economy reported in the second half
of 2001, together with the events of September 11, 2001 are likely to reduce the
rates at which our transaction volumes and revenues will grow compared to recent
years.

OUR OPERATING RESULTS MAY SUFFER BECAUSE OF SUBSTANTIAL AND INCREASINGLY INTENSE
COMPETITION WORLDWIDE IN THE GLOBAL PAYMENTS INDUSTRY.

     The global payments industry is highly competitive. We compete with all
forms of payment including cash, checks and electronic forms of payment. Among
general purpose payment cards, we encounter constant and intense competition
from systems such as Visa and its related brands (including Plus, Electron and
Interlink), American Express, and JCB. In specific countries, we face
significant competition from other competitors such as Discover/Novus, Interac,
Bancard and EFTPOS. We also encounter competition from businesses such as retail
stores and petroleum (gasoline) companies that issue their own private-label
cards, as well as from regional Automated Teller Machine ("ATM") networks such
as NYCE, Concord/EFS and others. We also compete against new entrants that have
developed alternative payment systems that can reduce the dollar value charged
on our cards or the number of transactions for which our cards are used.

     Some of our competitors have, or may develop, substantially greater
financial and other resources than we have, may offer a wider range of programs
and services than we offer or may use more effective advertising and marketing
strategies to achieve broader brand recognition or merchant acceptance than we
have. Within the global general purpose card industry, we believe that Visa may
have approximately twice our purchase volume. In addition, American Express,
Discover/Novus and others control proprietary end-to-end payments systems in
which they extend credit and charge privileges to consumers and businesses and
establish relationships directly with merchants (in our case, both of these
functions are the responsibility of our members). These end-to-end systems
provide our competitors with certain competitive advantages that we do not
enjoy. We may not continue to be able to compete effectively against these
threats, and, as a result, our revenues or income may decline. One or more of
our members could also seek to merge with, or acquire, one of our competitors,
and any such transaction could have a material adverse impact on our business
and prospects.

     In addition, our business and revenues could be adversely impacted by any
tendency among U.S. consumers or financial institutions to migrate from
off-line, signature based debit transactions to on-line, PIN-based transactions,
because the latter types of transactions are more likely to be processed by
regional ATM networks as opposed to ourselves.

IF WE ARE NOT ABLE TO KEEP UP WITH THE RAPID TECHNOLOGICAL DEVELOPMENTS IN OUR
INDUSTRY TO PROVIDE MEMBERS, MERCHANTS AND CARDHOLDERS WITH NEW AND INNOVATIVE
PAYMENT PROGRAMS AND SERVICES, THE USE OF MASTERCARD-BRANDED CARDS COULD
DECLINE, WHICH WOULD REDUCE OUR REVENUES AND INCOME.

     The payment card industry is subject to rapid and significant technological
changes, such as continuing developments of alternative technologies in the
areas of smart cards, electronic 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
                                        19


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 programs and services. Our future success will
depend, in part, on our ability to adapt to, or develop, technological changes
and evolving industry standards and to provide end to end payment solutions for
our members. We may be unable to obtain access to new technologies on acceptable
terms or at all, and this may cause us to be unable to offer card programs and
services competitively.

     In many circumstances we believe that the payment card industry should
create, and we are working to forge, industry standards to allow for the
compatibility of various card programs and technologies. The industry, however,
may not set standards on a timely basis or at all, or we may develop a program
or technology that is not adapted as an industry standard. These risks could
have a material adverse effect on our revenues and income.

IF OUR TRANSACTION PROCESSING SYSTEMS ARE DISRUPTED OR WE ARE UNABLE TO PROCESS
TRANSACTIONS EFFECTIVELY OR EFFICIENTLY OR AT ALL, OUR REVENUES OR INCOME WOULD
BE MATERIALLY REDUCED.

     Our transaction authorization, clearing and settlement systems may
experience service interruptions as a result of fire, natural disasters, power
loss, disruptions in long distance or local telecommunications access, or the
accidental or intentional actions of others. Nearly all of our transaction
processing systems are operated out of a single facility, supported by a
separate back-up facility. A natural disaster or other problem at our primary
and/or back-up facilities or our other owned or leased facilities could
interrupt our services. Additionally, we rely on third party service providers,
such as AT&T, for the timely transmission of information across our global data
transportation network. If a service provider fails to provide the
communications capacity or services we require, as a result of natural disaster,
operational disruption or any other reason, the failure could interrupt our
services and adversely affect our revenues and income.

A BREACH OF OUR SYSTEMS' SECURITY COULD ADVERSELY IMPACT OUR BUSINESS.

     Our security protection measures, including the security of transaction
information processed on our systems, may not be sufficient to prevent a
disruption of our computer systems as a result of fraud or for other reasons.
Unauthorized use of our network could potentially jeopardize the security of
confidential information stored in our computer systems or transmitted by our
members. These factors may result in liabilities for us or our members, and
could reduce our revenues and income.

IN EVERY MASTERCARD CARD TRANSACTION, THERE IS A RISK THAT THE ISSUING OR
ACQUIRING MEMBER WILL DEFAULT IN ITS PAYMENT OBLIGATIONS. BECAUSE WE GUARANTEE
THE SETTLEMENT OBLIGATIONS OF OUR PRINCIPAL MEMBERS, ONE OR MORE DEFAULTS COULD
EXPOSE US TO SIGNIFICANT LOSSES.

     As a secondary obligor for certain card obligations among principal
members, we are exposed to settlement risk from our members. Settlement exposure
materializes when an issuer or acquirer fails to fund daily settlement
obligations due to technical reasons, liquidity shortfall or other reasons. For
any member, our settlement exposure is comprised of the estimated dollar value
of issuing and chargeback transactions that we would need to fund in order to
satisfy the member's MasterCard related obligations to other members. If a
principal member is unable to fulfill its settlement obligations to other
members, we may bear the loss, even if we do not otherwise process the
transaction. In addition, although we are not contractually obligated to do so,
we may elect to pay merchants for transactions in the event that an acquiring
member defaults on its obligations to the merchants, in order to maintain the
integrity and guaranteed acceptance of our brands. Accordingly, one or more
member defaults could expose us to significant losses and reduce our revenues
and income. See "Business of MasterCard International -- Payment
Services -- Transaction Processing -- Member Risk Management."

COMPETITION FOR HIGHLY SKILLED PERSONNEL IS INTENSE AND THE SUCCESS OF OUR
BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND MOTIVATE KEY PERSONNEL.

     Our future success depends on our continuing ability to attract, retain and
motivate highly skilled employees in a competitive labor market. In the past,
our inability to provide stock-based compensation has complicated our efforts to
attract and retain highly qualified employees, and we may not be successful in
doing

                                        20


so in the future. If we do not succeed in attracting sufficient new personnel or
retaining and motivating our current personnel, our ability to provide our
programs and services in a competitive manner could diminish, which could have a
material adverse effect on our business.

MASTERCARD CANNOT PREDICT THE OUTCOME OR IMPACT OF ANTITRUST CLAIMS BY THE U.S.
DEPARTMENT OF JUSTICE.

     In October 1998, the United States Department of Justice (the "DOJ") filed
suit against MasterCard International, Visa U.S.A., Inc. and Visa International
Corp. in the U.S. District Court for the Southern District of New York alleging
that both MasterCard's and Visa's governance structure and policies violated
U.S. federal antitrust laws. First, the DOJ claimed that "dual
governance" -- the situation where a financial institution has a representative
on the board of directors of MasterCard or Visa while a portion of its card
portfolio is issued under the brand of the other association -- was
anti-competitive and acted to limit innovation within the payment card industry.
At the same time, the DOJ conceded that "dual issuance" -- a term describing the
structure of the bank card industry in the United States in which a single
financial institution can issue both MasterCard and Visa-branded cards -- was
pro-competitive. Second, the DOJ challenged MasterCard's Competitive Programs
Policy ("CPP") and a Visa bylaw provision that prohibit financial institutions
participating in the respective associations from issuing competing proprietary
payment cards (such as American Express or Discover). The DOJ alleged that
MasterCard's CPP and Visa's bylaw provision acted to restrain competition. A
bench trial concerning the DOJ's allegations was concluded on August 22, 2000.
On October 9, 2001, the district court judge issued an opinion upholding the
legality and pro-competitive nature of dual governance. In so doing, the judge
specifically found that MasterCard and Visa have competed vigorously over the
years, that prices to consumers have dropped dramatically, and that MasterCard
has fostered rapid innovations in systems, product offerings and services.

     However, the judge also held that MasterCard's CPP and the Visa bylaw
constitute unlawful restraints of trade under the federal antitrust laws. The
judge found that the CPP and Visa bylaw weakened competition and harmed
consumers by preventing competing proprietary payment card networks such as
American Express and Discover from entering into agreements with banks to issue
cards on their networks. In reaching this decision, the judge found that two
distinct markets -- a credit and charge card issuing market and a network
services market -- existed in the United States, and that both MasterCard and
Visa had market power in the network market. MasterCard strongly disputes these
findings and believes that the DOJ failed, among other things, to demonstrate
that U.S. consumers have been harmed by the CPP.

     On November 26, 2001, the judge issued a final judgment that orders
MasterCard to repeal the CPP insofar as it applies to issuers and enjoins
MasterCard from enacting or enforcing any bylaw, rule, policy or practice that
prohibits its issuers from issuing general purpose or debit cards in the United
States on any other general purpose card network. The judge also concluded that
during the period in which the CPP was in effect, MasterCard was able to "lock
up" certain members by entering into long-term agreements with them pursuant to
which the members committed to maintain a certain percentage of their general
purpose card volume, new card issuance or total number of cards in force in the
United States on MasterCard's network. Accordingly, the final judgment provides
that there will be a period (commencing on the effective date of the judgment
and ending on the later of two years from that date or two years from the
resolution of any final appeal) during which MasterCard will be required to
permit any issuer with which it entered into such an agreement prior to the
effective date of the final judgment to terminate that agreement without
penalty, provided that the reason for the termination is to permit the issuer to
enter into an agreement with American Express or Discover. MasterCard would be
free to apply to the district court to recover funds paid but not yet earned
under any terminated agreement. The final judgment imposes parallel requirements
on Visa. The judge explicitly provided that MasterCard and Visa would be free to
enter into new partnership or member business agreements in the future.

     MasterCard believes that it has a strong legal basis to challenge the
judge's ruling with respect to the CPP, and presently intends to appeal the
decision on that count. On February 6, 2002, the judge issued an order granting
MasterCard's and Visa's motion to stay the final judgment pending appeal. The
DOJ is also free to appeal the judge's ruling with respect to dual governance.

     MasterCard cannot predict the impact that the ultimate resolution of the
DOJ litigation will have on our results of operations, financial position or
cash flows, although an adverse result of the appeal could have a
                                        21


material adverse effect on our business, prospects and financial condition. If
the repeal of the CPP is upheld on appeal, American Express, Discover and
potentially other networks are expected to seek to enter into issuing
relationships with our members, which may have an adverse impact on our
competitive position. In particular, we are concerned that the repeal of the CPP
will allow American Express to "cherry pick" select MasterCard members and
funnel high-value transactions through American Express' proprietary network,
negatively affecting our ability to support thousands of members that are not
targeted by American Express, including many smaller community banks. If the
judge's order to permit members to terminate their MasterCard member business
agreements is upheld on appeal, our strategy of entering into customized
agreements with members to increase our share may be negatively impacted. If one
or more members actually terminates its member business agreement, we may lose
share or not be able to grow share as aggressively as anticipated, which would
adversely impact our financial and competitive position. Finally, if the
district court's judgment on dual governance is appealed by the DOJ and dual
governance is ultimately eliminated, it is possible that some of our largest
members may withdraw from MasterCard governance. Any withdrawal of this nature
could have an adverse impact on our business and prospects. See "Business of
MasterCard International -- Legal Proceedings -- Department of Justice Antitrust
Litigation."

MASTERCARD CANNOT PREDICT THE OUTCOME OR IMPACT OF A PUTATIVE CLASS ACTION
LAWSUIT BY U.S. MERCHANTS AGAINST MASTERCARD.

     Commencing in October 1996, several putative class action suits were
brought by a number of U.S. merchants -- including Wal-Mart Stores, Inc., Sears
Roebuck & Co., Inc., The Limited Inc. and Safeway, Inc. -- against MasterCard
International and Visa U.S.A., Inc. challenging certain aspects of the payment
card industry under U.S. federal antitrust law. Those suits where later
consolidated in the U.S. District Court for the Eastern District of New York.
The plaintiffs challenge MasterCard's "Honor All Cards" rule (and a similar Visa
rule), which ensures universal acceptance for consumers by requiring merchants
who accept MasterCard cards to accept for payment every validly presented
MasterCard card. Plaintiffs claim that MasterCard and Visa unlawfully have tied
acceptance of debit cards to acceptance of credit cards. In essence, the
merchants desire the ability to reject off-line, signature-based debit
transactions (for example, MasterCard card transactions) in favor of other
payment forms, including on-line, PIN-based debit transactions (for example,
Maestro or regional ATM network transactions) which generally impose lower
transaction costs for merchants. The plaintiffs also claim that MasterCard and
Visa have conspired to monopolize what they characterize as the point-of-sale
debit card market, thereby suppressing the growth of regional networks such as
ATM payment systems. Plaintiffs allege that the plaintiff class has been forced
to pay unlawfully high prices for debit and credit card transactions as a result
of the alleged tying arrangement and monopolization practices. There are related
consumer class actions pending in two state courts that have been stayed pending
developments in this matter.

     On February 22, 2000, the district court granted the plaintiffs' motion for
class certification. MasterCard and Visa subsequently appealed the decision to
the Second Circuit Court of Appeals. On October 17, 2001, a three-judge panel
affirmed the lower court decision by a two-to-one majority. MasterCard intends
to file a petition for a writ of certiorari to the U.S. Supreme Court by early
March 2002. Motions seeking summary judgment have been filed by both sides and
fully briefed in the district court. As of the date of this proxy
statement-prospectus, no argument date for summary judgment and no trial date
has been set.

     Based upon publicly available information, the plaintiffs previously have
asserted damage claims in this litigation of approximately $8 billion, before
any trebling under U.S. federal antitrust law. More recent public estimates
(including estimates set forth in the opinion of the Second Circuit panel) place
the plaintiffs' estimated damage claims at approximately $50 billion to $100
billion, depending on the source. In addition, the plaintiffs' damage claims
could be materially higher than these amounts as a result of the passage of time
and substantive changes in the theory of damages presented by the plaintiffs.

     MasterCard believes that it is not currently possible to estimate the
impact, if any, that the ultimate resolution of this matter will have on
MasterCard's results of operations, financial position or cash flows. However,
an adverse result could have a material adverse effect on our business,
prospects and financial

                                        22


condition. See "Business of MasterCard International -- Legal
Proceedings -- Merchant Antitrust Litigation."

BECAUSE WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS, WE FACE ADDITIONAL RISKS
RELATED TO GLOBAL POLITICAL AND ECONOMIC CONDITIONS.

     We operate in and intend to expand our business further in countries
throughout the world, including through our integration with Europay. We cannot
be sure that we will be able to broaden our global operations in a
cost-effective manner or compete effectively in all of our targeted countries.
There are risks inherent in conducting business internationally, any of which
could adversely affect our operations, including:

     - unexpected changes in regulatory requirements;

     - challenges in staffing and managing foreign operations;

     - reliance on foreign third party service providers;

     - differing technology standards;

     - employment laws and practices in foreign countries;

     - weaker intellectual property protections in certain countries;

     - political, social and economic instability;

     - foreign exchange restrictions and price controls;

     - costs of services tailored to specific markets; and

     - potentially adverse tax consequences.

     If these risks materialize, they could have a material adverse effect on
our business. We cannot assure you that we will continue to develop and
implement effective policies and strategies in each location where we do
business.

ADVERSE CURRENCY FLUCTUATIONS AND FOREIGN EXCHANGE CONTROLS COULD DECREASE
REVENUES WE RECEIVE FROM OUR INTERNATIONAL OPERATIONS.

     During 2000, approximately 33% of our revenues were generated from
activities outside the United States. The U.S. dollar is the functional currency
of MasterCard's business. Some of the revenues we generate outside the United
States are therefore subject to unpredictable and indeterminate fluctuations if
the values of international currencies change relative to the U.S. dollar.
Resulting exchange gains and losses are included in our net income. Our risk
management activities provide protection with respect to adverse changes in the
value of only a limited number of currencies. Furthermore, we may become subject
to exchange control regulations that might restrict or prohibit the conversion
of our revenue currencies into U.S. dollars. The occurrence of any of these
factors could have a material adverse effect on our business.

RISKS RELATED TO EUROPAY

EUROPAY'S BUSINESS MAY BE ADVERSELY IMPACTED BY THE EUROPEAN UNION'S RECENT
ADOPTION OF REGULATION ON CROSS-BORDER PAYMENTS DENOMINATED IN EUROS.

     On December 19, 2001, the European Parliament and the Council of the
European Union adopted a new regulation requiring that bank charges for
cross-border payments denominated in euros be the same as for similar
transactions within a single member state. Under the terms of the regulation,
charges for withdrawals from cash machines and the use of bank cards for amounts
of up to E12,500 must be the same for both national and cross-border
transactions beginning on July 1, 2002. Similarly, charges for credit transfers
of up to E12,500 between bank accounts must be the same for both national and
cross-border transactions beginning on July 1, 2003. The regulation will be
extended to transactions involving amounts of up to E50,000 beginning on January
1, 2006. Payments in non-euro currencies will also be subject to the regulation
if the members states where those currencies are used notify the European
Commission that they want the rules to apply. Because a reduction in
cross-border transaction fees will reduce the profitability of certain services
offered by Europay's members, it may cause them to modify or withdraw these
services. If such changes result in an overall decline in transaction volumes,
Europay's revenues may decline.

                                        23


EUROPAY'S BUSINESS MAY BE ADVERSELY IMPACTED IF THE MULTILATERAL INTERCHANGE
FEES OR MULTILATERAL SERVICE FEES APPLIED BY ITS MEMBERS ARE REQUIRED TO BE
CHANGED IN RESPONSE TO CHALLENGES BY THE COMPETITION AUTHORITIES OF THE EUROPEAN
UNION AND THE UNITED KINGDOM.

     In September 2000, the European Commission issued a "Statement of
Objections" challenging Visa International's multilateral interchange fee
("MIF") under European Community competition rules. The MIF is a fee that is
paid by the merchant bank, or the "acquirer", to the cardholder bank, or the
"issuer", when a payment is made to a merchant using a payment card. The amount
of the MIF is set by the payment card system as a default fee that will only
apply where the issuer and the acquirer have not agreed on a bilateral
interchange fee. Interchange fees represent a sharing of payment system costs
between issuers and acquirers. Although Europay is not an addressee of the
Statement of Objections, its rules also contain a MIF scheme.

     The European Commission announced on August 10, 2001 its intention to take
a favorable view of Visa's MIF in light of certain changes proposed by Visa,
most notably the adoption of a methodology for calculating interchange fees
similar to that employed by Europay (and MasterCard) and a reduction in the
level of fees. On August 11, 2001, the European Commission published a notice
containing the details of these changes and invited interested third parties to
submit their views to the European Commission, after which it will issue a
formal decision. Assuming the European Commission does not change its position,
the decision would exempt Visa's modified MIF.

     The European Commission's decision in the Visa case would be addressed only
to Visa and would not cover Europay's MIF. Europay has submitted comments to the
European Commission challenging the proposed changes to Visa's MIF contained in
its notice, and is currently involved in separate discussions with the European
Commission in order to determine under what conditions it would grant a formal
exemption or comfort letter for Europay's MIF.

     In connection with a separate inquiry, the Office of Fair Trading of the
United Kingdom ("OFT") issued on September 25, 2001 a press release proposing a
decision that the establishment of the MIF by MEPUK, which is owned by Europay's
and MasterCard's members in the U.K., infringes U.K. competition law and does
not qualify for an exemption. The OFT considers that the MEPUK MIF and the MEPUK
multilateral service fee ("MSF"), the fee paid by issuing banks to acquiring
banks when a customer uses a MasterCard branded card either at an ATM or over
the counter to obtain a cash advance, are anti-competitive and increase retail
costs and consumer prices. On February 5, 2002, Europay and MEPUK made oral and
written representations to the OFT in response to its proposed decision on
behalf of MasterCard and Europay members in the U.K., in which they sought to
demonstrate that these fees constitute necessary and efficient mechanisms for
allocating the costs of a multi-party card payment system between issuers and
acquirers.

     Because the MIF and MSF constitute essential elements of Europay's payment
scheme, changes to them could significantly impact Europay's members. At this
time, it is not possible to determine what actions these competition authorities
will take with respect to the MIF and MSF, and therefore the financial impact
that any changes would have on Europay and its members cannot be estimated. See
"Business of Europay International -- Legal Proceedings -- Multilateral
Interchange Fee."

EUROPAY'S TAX RETURNS FOR 1997 AND 1998 ARE CURRENTLY BEING INVESTIGATED BY THE
BELGIAN TAX AUTHORITIES, WHICH MAY RESULT IN SIGNIFICANT ADDITIONAL TAX
LIABILITIES AND PENALTIES.

     In April 1999, the Belgian tax authorities initiated an investigation of
Europay's tax returns for 1997 and 1998. In June 2001, Europay received a notice
from the Belgian tax authorities challenging Europay's deduction of certain
card-based incentive program costs. Although Europay challenged these findings
in its response to the notice, the Belgian tax authorities reaffirmed their
position in a recent letter to Europay and, on December 21, 2001, Europay
received a formal notice of assessment imposing an additional tax liability of
approximately E16.9 million, including penalties and interest in connection with
Europay's tax returns for 1997 and 1998. If Europay's deduction of such costs in
1999 and 2000 is similarly challenged, this could result in a further additional
tax liability of up to approximately E9.5 million, including possible penalties.
Europay intends to appeal this matter further with the regional tax director in
accordance with applicable administra-
                                        24


tive procedures. Although Europay believes that it has reasonable and
meritorious arguments in favor of its characterization of these deductions,
Europay cannot predict the outcome of this matter or any additional matters
raised by the Belgian tax authorities in their investigation.

RISKS RELATED TO THE CONVERSION

THERE IS NO EXISTING MARKET FOR OUR COMMON STOCK AND WE DO NOT KNOW IF ONE WILL
DEVELOP TO PROVIDE YOU WITH ADEQUATE LIQUIDITY.

     There is currently no existing market for our class A redeemable or class B
convertible common stock, and we do not anticipate that our class A redeemable
or class B convertible common stock will be listed on any securities exchange or
quoted on any automated quotation systems or electronic communications network.
In addition, due to the significant restrictions on transfer to which our common
stock will be subject, we anticipate that only a limited trading market for our
common stock will exist following the three year transition period. The lack of
a liquid market for our common stock could adversely affect its price. For
example, the price of our common stock as determined by our board of directors
could be different from the price that might otherwise exist in a more liquid
trading market.

THE COMMON STOCK WILL BE SUBJECT TO SIGNIFICANT RESTRICTIONS ON TRANSFER AND
OWNERSHIP.

     The shares of class A redeemable and class B convertible common stock that
will be issued in connection with the conversion and integration are subject to
significant ownership and transfer restrictions. Following the conversion and
integration, only holders of class A membership interests in MasterCard
International may own or purchase shares of class A redeemable and class B
convertible common stock of MasterCard Incorporated. No stockholder, together
with its affiliates, may own more than 15% of MasterCard Incorporated's
outstanding voting stock. In addition, you will not be permitted to transfer any
of your shares for a period of three years after the conversion and integration
except in the limited circumstances described under the heading "Description of
Capital Stock of MasterCard Incorporated -- Transfer Restrictions."

     If your status as a principal member terminates for any reason (other than
in connection with a permitted transfer of shares) within three years of the
conversion and integration, MasterCard Incorporated will redeem your shares for
their par value of $0.01 per share. If your principal membership terminates more
than three years after the conversion, MasterCard Incorporated will have the
right to redeem your shares for their book value based on MasterCard
Incorporated's financial statements most recently filed with the Securities and
Exchange Commission. If MasterCard Incorporated does not redeem your shares, you
will be required to offer the unpurchased shares to other stockholders in
accordance with procedures to be established by the board of directors.

STOCKHOLDERS MAY BE REQUIRED TO PURCHASE OR SELL SHARES OF MASTERCARD
INCORPORATED IN ORDER TO SATISFY CERTAIN REQUIREMENTS.

     Three years after the conversion and integration, no stockholder may own
common stock representing more than 125% or less than 75% of that stockholder's
most recent global proxy calculation. Stockholders may be required to purchase
or sell shares of MasterCard Incorporated in order to satisfy these requirements
within 12 months of receipt of notice from MasterCard Incorporated that such
purchase or sale is required. Any sales of shares would ordinarily constitute
taxable transactions. Stockholders who need to sell shares in order to satisfy
the 125% requirement are obligated under the bylaws of MasterCard Incorporated
to accept the highest price offered to them for the shares that are required to
be sold.

THE VOTING POWER REPRESENTED BY YOUR SHARES OF MASTERCARD INCORPORATED COMMON
STOCK MAY BE LIMITED BECAUSE OWNERSHIP OF A SIGNIFICANT PERCENTAGE OF OUR COMMON
STOCK WILL BE CONCENTRATED IN A FEW OF OUR LARGEST STOCKHOLDERS.

     Upon completion of the conversion and integration with Europay, we expect
that five of our member-stockholders will own over 5% of our outstanding common
stock. Although our certificate of incorporation and bylaws contain ownership
and voting restrictions and require a supermajority vote on a number of matters

                                        25


voted upon by stockholders or directors, our largest member-stockholders will
continue to have a significant influence over our business.

EACH STOCKHOLDER, TOGETHER WITH ITS AFFILIATES, WILL BE SUBJECT TO A 7% VOTING
CAP IN THE ELECTION OF DIRECTORS REGARDLESS OF THE NUMBER OF SHARES OWNED.

     Regardless of the number of shares owned by a stockholder, in any vote for
the election of directors, no stockholder, together with its affiliates, will be
entitled to vote more than 7% of the shares that are entitled to be voted in
that election. As a result, stockholders owning more than 7% of MasterCard
Incorporated's outstanding shares will have disproportionately less influence in
electing directors.

MOST OF OUR DIRECTORS ARE AFFILIATED WITH OUR MEMBERS AND, THEREFORE, MAY HAVE
INTERESTS DIFFERENT FROM THOSE OF MASTERCARD OR OTHER MEMBERS.

     Other than Mr. Selander, our President and Chief Executive Officer, each of
our voting directors is affiliated with one of our members. Those directors who
are affiliated with our members will have fiduciary duties to MasterCard and its
stockholders, but will also have obligations to the companies with which they
are affiliated. This may result in a greater likelihood of directors having an
interest in matters under consideration and may make decision-making more
difficult.

OUR ORGANIZATIONAL DOCUMENTS AND APPLICABLE LAW CONTAIN PROVISIONS THAT MAY MAKE
A CHANGE OF CONTROL MORE DIFFICULT.

     There are a number of provisions, including the limitations on stock
transfer, the 15% cap on ownership of MasterCard Incorporated voting stock by
any single stockholder together with its affiliates, supermajority voting
requirements and limitations on the ability of stockholders to call a special
meeting in our certificate of incorporation and bylaws that may prevent or
discourage takeovers or business combinations that our stockholders might
otherwise consider to be in their best interests.

THE BOARD OF DIRECTORS OF MASTERCARD INCORPORATED WILL BE REQUIRED TO ACT ON
BEHALF OF THE STOCKHOLDERS OF MASTERCARD INCORPORATED.

     The board of directors of MasterCard Incorporated will be required under
Delaware law to make decisions and take actions designed to maximize profits and
stockholder value. Initially, the members of MasterCard International and the
stockholders of MasterCard Incorporated will be the same. It is possible that,
in the future, shares of common stock could be issued to persons who are not
members of MasterCard International. If that were to happen, then the
stockholder and member groups would diverge and the board of MasterCard
Incorporated would be required by its fiduciary duties to act in the best
interest of the stockholders. These interests may not always be consistent with
the interests of members of MasterCard International.

THE INTERNAL REVENUE SERVICE MAY TREAT A PORTION OF THE MASTERCARD INCORPORATED
SHARES RECEIVED BY A PRINCIPAL MEMBER OF MASTERCARD INTERNATIONAL OR A
SHAREHOLDER OF EUROPAY OR MEPUK AS TAXABLE INCOME.

     Based on the opinion of our special tax counsel, we believe that we, our
principal members and the Europay and MEPUK shareholders will not recognize any
gain or loss for U.S. federal income tax purposes in the conversion or
integration, except that, as to a portion of any MasterCard Incorporated stock
received at the end of the three year transition period or thereafter pursuant
to the integration agreement, a principal member or shareholder otherwise
subject to U.S. federal income taxation will recognize imputed interest income.


     Notwithstanding the foregoing, the opinion of our special tax counsel does
not apply to the extent that the percentage interest in MasterCard Incorporated
ultimately allocated to a principal member of MasterCard International or to a
shareholder of Europay or MEPUK pursuant to the integration agreement exceeds
the percentage interest of the member or shareholder immediately after the
closing of the conversion and the integration (in each case, without taking into
account any allocation of MasterCard Incorporated shares based on the new global
proxy formula). Our special tax counsel is unable to opine as to such excess
because the

                                        26



IRS generally assumes that when shareholders of a corporation transfer a single
class of stock to an acquiring corporation, the stock they receive in exchange
will be allocated in proportion to their relative ownership interests
immediately before the exchange. The IRS might therefore take the position that
the excess, whether received on the date of the closing or thereafter, should
not be treated for U.S. federal income tax purposes as having been received in
exchange for property. In that event, a principal member of MasterCard
International or a shareholder of Europay or MEPUK could be required to
recognize ordinary income, but only to the extent of the excess. For more
information, see "Federal Income Tax Consequences of the Conversion and the
Integration."


THE INTERNAL REVENUE SERVICE COULD CHALLENGE OUR CHARACTERIZATION OF THE
CONVERSION AND INTEGRATION AND DETERMINE THAT THEY ARE TAXABLE TRANSACTIONS FOR
U.S. FEDERAL INCOME TAX PURPOSES.

     We have requested that the Internal Revenue Service issue a ruling on key
aspects of the conversion and integration, and we expect to receive a response
during the first quarter of 2002. An IRS ruling is generally binding on the IRS,
but may, under certain circumstances, be revoked or retroactively modified.

     The IRS may decline to issue a ruling in the form requested, and there can
be no assurance that the IRS will not successfully challenge our
characterization of the conversion and integration and determine that they are
taxable transactions for U.S. federal income tax purposes. Receipt of an IRS
ruling is not a condition to the closing of the conversion or the integration.

     Principal members and Europay and MEPUK shareholders should consult their
own tax advisors regarding the U.S. federal, as well as any state, local or
non-U.S., tax consequences to them of the conversion and integration. For more
information, see "Federal Income Tax Consequences of the Conversion and the
Integration."

MEMBERS AND SHAREHOLDERS MAY INCUR TAX LIABILITIES IN JURISDICTIONS OUTSIDE THE
UNITED STATES IN CONNECTION WITH THE CONVERSION AND INTEGRATION.

     Principal members and Europay and MEPUK shareholders may be required to
recognize gain or loss in connection with the conversion and integration in
jurisdictions outside the United States. Members and shareholders should consult
their local tax advisors regarding the potential non-U.S. tax consequences of
the conversion and integration.

THE CONVERSION MAY IN THE FUTURE FACILITATE STRATEGIC TRANSACTIONS WHICH MAY
REDUCE THE INFLUENCE OF MEMBERS.

     As a result of the conversion, MasterCard Incorporated will be better
positioned to engage in future capital raising activities and strategic
transactions such as mergers and acquisitions. Transactions of this type would
likely involve issuing or selling equity interests in MasterCard Incorporated to
non-members. While the bylaws of MasterCard Incorporated provide that class A
redeemable and class B convertible common stock may be held only by class A
members of MasterCard International, the certificate of incorporation of
MasterCard Incorporated also provides that class C common stock may be issued to
non-members, provided that the approval of two-thirds or 75% of the board of
directors is obtained, depending on the circumstances. If these approvals are
granted, MasterCard Incorporated may issue voting shares of class C common stock
to persons who are not members of MasterCard International. In this case, the
influence of members over the affairs of MasterCard Incorporated would be
reduced.

U.S. BANKING REGULATIONS MAY IMPACT OUR PRINCIPAL MEMBERS' OWNERSHIP OF THE
COMMON STOCK OF MASTERCARD INCORPORATED.

     Banking regulations in the United States govern, among other things, the
types of equity investments that regulated institutions are permitted to make.
MasterCard believes that principal members which are regulated as banking
organizations by the federal government, including bank holding companies,
financial holding companies, savings and loan holding companies ("SLHCs"),
grandfathered "unitary" SLHCs, national banks and federal savings associations,
should be permitted to hold the common stock of MasterCard Incorporated
following the conversion. With respect to federal credit unions, the common
stock may need to be held
                                        27


through a credit union service organization established by one or more federal
credit unions. If this is not possible for a federal credit union, the federal
credit union would need to consult with the National Credit Union
Administration. Principal members that are regulated as banking organizations by
the federal government should consult their own advisors regarding any notice or
application that is required to be made, or any consent that is required to be
obtained, from any applicable federal regulatory agency regarding the shares
received in the conversion. In addition, principal members that are federal
savings associations should consult their own advisors regarding the application
to the shares received in the conversion of certain Office of Thrift Supervision
rules that limit "pass through investments" to a percentage of an institution's
total capital.

     MasterCard believes that there are no federal laws or regulations that
would prohibit principal members which are regulated as banking organizations by
the states - including state-chartered banks, state savings associations and
state-chartered credit unions - from holding the common stock of MasterCard
Incorporated following the conversion. While most states permit state-chartered
banks and state savings associations to make the same equity investments as
federally regulated institutions, MasterCard has not independently investigated
the effect of state banking laws or regulations on the issuance of the common
stock of MasterCard Incorporated in the conversion. Principal members that are
state-chartered banks, state savings associations and state-chartered credit
unions should consult their own advisors regarding any notice or application
that is required to be made, or any consent that is required to be obtained,
from any applicable state regulatory agency regarding the shares received in the
conversion. In particular, MasterCard expects that state-chartered credit unions
may be required to seek the approval of their relevant state regulators in order
to hold the common stock of MasterCard Incorporated following the conversion.

     Principal members requiring assistance from MasterCard in connection with
any review of the conversion or integration by applicable regulatory agencies
are urged to contact the Corporate Secretary of MasterCard International at the
address set forth under the heading "The Special Meeting -- Solicitation of
Proxies."

RISKS RELATED TO THE INTEGRATION

MASTERCARD MAY FAIL TO COMPLETE THE CONVERSION AND INTEGRATION WITH EUROPAY OR,
IF THE CONVERSION AND INTEGRATION ARE COMPLETED, MAY FAIL TO REALIZE THE
ANTICIPATED BENEFITS OF THE CONVERSION AND INTEGRATION WITH EUROPAY.

     Contemporaneous with the completion of the conversion, we expect to acquire
all of the outstanding Europay capital stock that we do not currently own in a
transaction that we refer to in this proxy statement-prospectus as the
integration. The completion of the acquisition of Europay by MasterCard is
conditioned upon the satisfaction of several conditions contained in the
integration agreement, including that each Europay shareholder other than
MasterCard International and MEPUK agrees to exchange its Europay shares for
shares of MasterCard Incorporated. If any of the conditions is not satisfied or
waived, we will be unable to complete the integration.

     Furthermore, even if we do complete the conversion and integration, our
success will depend, in part, on the ability of MasterCard and Europay to
coordinate and integrate our operations and business enterprises and realize the
anticipated growth opportunities and synergies from combining the two companies.
We cannot assure you that we will be able to integrate these businesses in an
efficient and timely manner to realize the growth opportunities and synergies we
currently expect.

THE INTEGRATION MAY BE SUBJECT TO ADVERSE REGULATORY CONDITIONS.

     Before the integration may be completed, various approvals must be obtained
from, or notifications submitted to, competition, antitrust and other regulatory
authorities. The governmental entities from which approvals are required may
impose conditions on the completion of the integration or require changes to the
terms of the integration. These conditions or changes could have the effect of
delaying or preventing completion of the integration or imposing additional
costs on or limiting the revenues of MasterCard Incorporated, any of which may
have a material adverse effect on our business and prospects following the
integration.

                                        28


THE SUPERMAJORITY VOTING PROVISIONS RESULTING FROM THE INTEGRATION MAY MAKE THE
GOVERNANCE OF MASTERCARD INCORPORATED MORE COMPLICATED.

     As a result of the integration, a variety of supermajority voting
requirements with respect to actions to be taken by directors and shareholders
will be incorporated into the certificate of incorporation and bylaws of
MasterCard Incorporated and MasterCard International. See "The
Integration -- The Integration Agreement -- Supermajority Voting Provisions" and
"Comparison of Rights of MasterCard International Members Before and After the
Conversion and Integration -- Vote on Extraordinary Transactions/Supermajority
Voting Provisions." As a result of these supermajority voting requirements, it
may be more difficult for the board of directors or shareholders of MasterCard
Incorporated to take action in certain circumstances, which may prevent
MasterCard Incorporated from pursuing strategic opportunities that would
otherwise be available.

EUROPEAN MEMBER-STOCKHOLDERS WILL BE ALLOCATED AN INCREASED PERCENTAGE OF
MASTERCARD INCORPORATED'S COMMON STOCK IN CONNECTION WITH THE CONVERSION AND
INTEGRATION.

     Currently, European members of MasterCard International control
approximately 7% of the total equity rights in MasterCard International.
Immediately following the conversion and integration, the European members of
MasterCard International will be allocated one-third of MasterCard
Incorporated's common stock, even if those members would be entitled to less
voting stock if calculated solely in accordance with the new global proxy. See
"Share Allocation and The Global Proxy -- The Global Proxy" and "-- The Initial
Allocation of Shares." In addition, at the end of the three year transition
period when the shares of common stock of MasterCard Incorporated are
reallocated, European members are entitled to receive at least 26% of the
outstanding class A redeemable and class B convertible common stock of
MasterCard Incorporated, even if in accordance with the new global proxy they
would have been entitled to a smaller percentage of the outstanding common
stock. Under other circumstances, European members could receive up to 44% of
the outstanding common stock of MasterCard Incorporated at the end of the
transition period. See "Share Allocation and the Global Proxy -- Reallocation of
Shares at the Conclusion of the Transition Period." As a result of these
provisions, the equity percentage of non-European members of MasterCard
International in MasterCard Incorporated will be significantly diluted when
compared to their current equity percentage in MasterCard International.

EUROPEAN MEMBER-STOCKHOLDERS WILL INITIALLY BE ALLOCATED AN AGGREGATE PERCENTAGE
OF MASTERCARD INCORPORATED'S COMMON STOCK THAT EXCEEDS THE ALLOCATION OF COMMON
STOCK TO EUROPEAN MEMBER-STOCKHOLDERS SUPPORTED BY MASTERCARD'S VALUATION
ANALYSIS.

     At the closing of the conversion and integration, European
member-stockholders will be allocated 33 1/3% of MasterCard Incorporated's
common stock. In voting to approve the conversion and integration, the board of
directors of MasterCard International received an opinion from CSFB indicating
that the range of possible share allocations to European member-stockholders
(26%-44%) was fair to MasterCard International from a financial point of view,
depending on the financial projections employed. See "Opinion of Financial
Advisor to MasterCard International." In addition, MasterCard International's
management provided the board of directors with a valuation analysis prepared in
conjunction with CSFB that supported European member-stockholders owning 26% of
MasterCard Incorporated after the conversion and integration. See "The
Integration -- Background of the Integration." Management viewed the financial
projections underlying this valuation as more conservative than the other
possible cases for the allocation of shares, and these projections support the
guaranteed allocation of shares to European member-stockholders at the end of
the transition period. The initial allocation of 33 1/3% is supported by Europay
management's projections, along with MasterCard management's projections for
MasterCard International for the Europe region.

     Accordingly, the initial allocation of 33 1/3% of MasterCard Incorporated's
shares to European member stockholders exceeds, by 7 1/3 percentage points, the
26% allocation supported by the valuation analysis of MasterCard's management.
The board of directors of MasterCard International voted to endorse the initial
33 1/3% allocation because, among other things: (i) the 26% allocation is the
only allocation of common stock to European members that is guaranteed at the
conclusion of the transition period, and this allocation is

                                        29


supported by the projections of MasterCard management that are considered
achievable; and (ii) any final allocation above 26% would occur only if the
Europe region's performance is above that estimated in the 26% case using the
new global proxy formula. Because the ultimate allocation of shares is tied
directly to the relative performance of the Europe region under the new global
proxy formula, any allocation of shares to European member-stockholders within
the 26%-44% range would be fair to MasterCard International from a financial
point of view, as reflected in the CSFB opinion.

SOME MEMBER-STOCKHOLDERS MAY BE ADVERSELY IMPACTED BY THE INTRODUCTION OF THE
NEW GLOBAL PROXY FORMULA.

     The historic global proxy formula used by MasterCard International to
allocate equity rights at annual meetings of members was based solely on revenue
received by MasterCard International on MasterCard transactions. In connection
with the conversion and integration, MasterCard Incorporated will migrate to a
new global proxy formula that will measure each member-stockholder's
contribution to gross dollar volume (GDV) and gross acquiring volume (GAV) in
addition to revenue. Moreover, the new global proxy formula will account for
revenues and volumes earned in connection with Maestro- and Cirrus-branded
cards, in addition to MasterCard cards. Accordingly, the migration to the new
global proxy formula may reduce the number of shares some members are entitled
to receive as compared to their historic voting entitlement, particularly if
such members (1) contribute a disproportionately large amount to MasterCard
revenues for a given level of transaction volume, or (2) have a
disproportionately large amount of their transaction volumes associated with
cards carrying the MasterCard brand. In addition, the new global proxy
calculation includes a collar with respect to the U.S. dollar/euro exchange
rate, and to the extent that these currencies trade significantly outside the
range of the collar, members with volumes denominated in either currency could
be entitled to fewer shares than the global proxy formula would otherwise
require, depending on the circumstances.

THE CLASS A REDEEMABLE AND CLASS B CONVERTIBLE COMMON STOCK IS SUBJECT TO
REALLOCATION.

     The integration agreement provides that, as an integral component of the
conversion and integration, the class A redeemable and class B convertible
common stock is subject to reallocation at the conclusion of the three year
transition period, at which time most class B convertible common stock will
automatically convert to class A redeemable common stock and be reallocated.
Thereafter, the only shares of class B convertible common stock will be those
relating to ec Pictogram, which will automatically convert to class A redeemable
common stock at the conclusion of an additional two year period and may be
reallocated. As a result of these reallocations, member-stockholders may
ultimately receive more or fewer shares than their initial allocation, depending
on the relative performance of the Europe region and their individual global
proxy calculations at the time. If a member's revenue contribution, GDV and/or
GAV during the period prior to reallocation grows more slowly than the
membership as a whole, if any of these amounts decline for a member relative to
other members, or if a member with ec Pictogram volumes fails to convert these
to Maestro as required, the member may be entitled to fewer shares upon
reallocation than at the closing. Accordingly, in either reallocation,
member-stockholders may be required to return shares previously allocated to
them.

IN PERFORMING ITS ANALYSES, CSFB RELIED ON PROJECTIONS OF MASTERCARD'S AND
EUROPAY'S MANAGEMENT AND DID NOT INDEPENDENTLY VERIFY THESE PROJECTIONS.

     MasterCard International provided CSFB with projections that CSFB relied
upon in performing its analyses. With respect to financial projections of
MasterCard and Europay provided to CSFB, CSFB assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of MasterCard's and Europay's management and did not independently
verify them. CSFB further assumed that the net present value of the projections
regarding the expected cost savings and synergies resulting from the integration
would be achieved. Actual performance may differ materially from the projections
relied upon by CSFB in performing its analyses.

                                        30


           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     This proxy statement-prospectus contains forward-looking statements, which
may be identified by the words "believe," "expect," "anticipate," "intend,"
"aim," "will" and similar words. These statements are contained throughout this
proxy statement-prospectus including in the sections titled "Questions and
Answers About the Conversion," "Questions and Answers About the Integration,"
"Summary," "The Conversion," "The Integration," "Business of MasterCard
International," "MasterCard Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business of Europay International" and
"Europay Management's Discussion and Analysis of Financial Conditions and
Results of Operations." These statements relate to our future prospects,
developments and business strategies. Many factors and uncertainties relating to
our operations and business environment, all of which are difficult to predict
and many of which are outside of our control, influence whether any
forward-looking statements can or will be achieved. Any one of those factors
could cause our actual results to differ materially from those expressed or
implied in writing in any forward-looking statements made by us or on our
behalf.

     We list below the principal factors we believe are important to our
business, the conversion and the integration and that could cause actual results
to differ from our expectations. We caution you that although these factors are
important, this list should not be considered as exhaustive or as an admission
regarding the adequacy of the disclosure:

     - our relationships with our member financial institutions;

     - substantial and increasingly intense competition worldwide in the current
       or future global payments industry and consolidation in the payments
       industry;

     - general global economic conditions, which may be adversely affected by
       the events of September 11 and their aftermath;

     - technological developments in the global payment card industry;

     - potential disruptions of our transaction processing computer systems by
       natural disaster or otherwise;

     - potential breach of our systems' security;

     - risk of settlement default by our members;

     - our ability to attract, retain and motivate key personnel;

     - general economic conditions, especially interest rates and business
       cycles;

     - the outcome or impact of antitrust claims by the U.S. Department of
       Justice;

     - the outcome or impact of a putative antitrust class action lawsuit by
       U.S. merchants;

     - risks related to global political and economic conditions;

     - currency fluctuations and foreign exchange controls;

     - the outcome or impact of European Commission proceedings against Visa's
       multilateral interchange fee;

     - the outcome or impact of proceedings against MEPUK's multilateral
       interchange and service fees by the United Kingdom's Office of Fair
       Trading;

     - the consequences of the investigation of Europay's 1997 and 1998 tax
       returns by the Belgian tax authorities;

     - lack of an existing market for our common stock, particularly given the
       significant restrictions on transfer and ownership to which the common
       stock will be subject and the requirement that ownership of common stock
       be maintained at a certain level;

     - concentration of ownership of our common stock in a few of our largest
       stockholders;

     - the 7% voting cap in the election of directors;

     - affiliation of most of our directors with our members;

     - restrictions on a change of control contained in our organizational
       documents and applicable law;

                                        31


     - the potential for divergence of interests between the members and
       stockholders;

     - the potential for reduced influence of members in the future;

     - adverse tax consequences;

     - the impact of U.S. banking regulations on our principal members'
       ownership of common stock of MasterCard Incorporated;

     - failure to complete the integration with Europay or failure to realize
       the anticipated benefits of the integration with Europay;

     - regulatory conditions adverse to the integration;

     - allocation of an increased percentage of common stock to European
       member-stockholders; and

     - the introduction of a new global proxy formula.

                                        32


                              THE SPECIAL MEETING

PROXY STATEMENT-PROSPECTUS

     This proxy statement-prospectus is being furnished to principal members of
MasterCard International in connection with the solicitation of proxies by
MasterCard International's board of directors in connection with the proposed
plan of conversion.

     This proxy statement-prospectus is first being furnished to principal
members of MasterCard International on or about             , 2002.

DATE, TIME AND PLACE OF THE SPECIAL MEETING

     The special meeting is scheduled to be held as follows:

                                           , 2002
                             9:00 a.m., local time
                     MasterCard International Incorporated
                              2000 Purchase Street
                            Purchase, New York 10577

PURPOSES OF THE SPECIAL MEETING

     At the MasterCard International special meeting, the principal members of
MasterCard International will be asked to approve a plan of conversion that will
convert MasterCard International into a non-stock corporation that is a
subsidiary of a stock holding company, MasterCard Incorporated. Under the plan,
MasterCard Merger Sub, Inc., a wholly-owned subsidiary of MasterCard
Incorporated, will merge with and into MasterCard International according to the
terms of the merger agreement and each MasterCard International principal member
will receive shares of class A redeemable common stock and class B convertible
common stock of MasterCard Incorporated, a Delaware stock holding company, and a
class A membership interest in MasterCard International, a Delaware non-stock
corporation and subsidiary of MasterCard Incorporated. The shares of class A
redeemable common stock and class B convertible common stock will represent your
equity interest in MasterCard Incorporated. The class A membership interest will
represent your continued rights as a licensee to use MasterCard's brands,
programs and services. For a description of the impact of the approval of the
plan of conversion on the election of directors of MasterCard Incorporated and
MasterCard International in 2002, see "The Conversion -- Effects of the
Conversion."

     We will not transact any other business at the special meeting.

RECORD DATE; VOTES REQUIRED FOR APPROVAL

     The MasterCard International board of directors has fixed the close of
business on             , 2002, as the record date for the determination of the
MasterCard International principal members entitled to notice of and to vote at
the MasterCard International special meeting. On             , 2002, there were
     principal members entitled to notice of and to vote at the special meeting.
Each principal member is entitled to vote that number of votes determined by the
historical global proxy calculation as of September 30, 2001, which number of
votes is set forth on the accompanying proxy card. In particular, each principal
member that is considered a principal or association member under MasterCard
International's existing bylaws is entitled to cast a number of votes equal to
the total U.S. dollar amount of assessments and fees, payable as budgeted
revenues, due from, and paid by, that member to MasterCard International for the
member's MasterCard card program activity for the 12 month period ended
September 30, 2001. Each principal member that is considered a travelers cheque
member under MasterCard International's existing bylaws is entitled to cast a
number of votes determined by dividing $1,000 into the aggregate amount in U.S.
dollars of all MasterCard travelers cheques sold by that member and its sales
agents during calendar year 2001. The minimum number of votes for any member is
1,200. Each member's vote is limited to 15% of the total votes eligible to be
cast at the meeting. If all members vote in person or by proxy at the special
meeting, 1,563,073,437 votes will be cast

                                        33


at the meeting. Principal members affiliated with MasterCard International
directors are entitled to exercise votes representing approximately 32% of the
votes entitled to be cast on the conversion. The conversion requires the
affirmative vote of a majority of the votes cast at the MasterCard International
special meeting at which a quorum is present. Under the MasterCard International
bylaws, the presence, either in person or by proxy, of principal members
representing a majority of the votes eligible to be cast constitutes a quorum.

VOTING PROCEDURES

     If a principal member attends the MasterCard International special meeting
in person or sends a representative to the meeting with a signed and notarized
proxy, that member may vote or its representative may vote on its behalf.
However, since many principal members may be unable to attend the MasterCard
International special meeting, those members can ensure that their votes are
cast at the meeting by signing and dating the enclosed proxy card and returning
it in the envelope provided or by authorizing the individuals named on its proxy
card to vote its interests by calling the toll-free telephone number or by using
the Internet as described in the instructions included with its proxy card. When
a proxy card is returned properly signed and dated or a member's vote is
authorized by telephone or Internet, the vote of the MasterCard International
principal member will be cast in accordance with the instructions on the proxy
card or authorized by telephone or Internet. If a principal member does not
return a signed proxy card, authorize its vote by telephone or Internet or
attend the meeting in person or by representative and vote, no vote will be cast
on behalf of that member.

     Principal members are urged to mark the box on the proxy card to indicate
how their vote is to be cast. If a member returns a signed proxy card but does
not indicate on the proxy card how it wishes to vote, the vote represented by
the proxy card will be cast "FOR" the proposed conversion.

     Pursuant to Section 212(c) of the Delaware General Corporation Law, members
may validly grant proxies over the Internet. Your Internet vote authorizes the
named proxies on the proxy card to vote your interests in the same manner as if
you had returned your proxy card. In order to vote over the Internet, visit our
Internet voting website at  and, when prompted,
enter the "Company Number" and "Control Number" that have been assigned to you
and indicated on your proxy card. By then following the instructions on your
computer screen you will be able to complete the voting process.

     Any MasterCard International principal member who executes and returns a
proxy card or authorizes its vote by telephone or by Internet may revoke the
proxy at any time before it is voted by:

     - notifying in writing Noah J. Hanft, Secretary of MasterCard
       International, at 2000 Purchase Street, Purchase, New York, 10577;

     - executing and returning a subsequent proxy;

     - subsequently authorizing the individuals named on its proxy card to vote
       its interests by calling the toll-free telephone number or by using the
       Internet as described in the instructions included with its proxy card;
       or

     - appearing in person or by representative with a signed proxy and voting
       at the MasterCard International special meeting.

     Attendance in person or by representative at the MasterCard International
special meeting will not in and of itself constitute revocation of a proxy.

SOLICITATION OF PROXIES

     MasterCard International will bear the costs of solicitation of proxies,
including the cost of preparing, printing and mailing this proxy
statement-prospectus. In addition to the solicitation of proxies by use of the
mails, proxies may be solicited from MasterCard International members by
directors, officers, employees and agents of MasterCard International in person
or by telephone, facsimile or other appropriate means of communication. We have
engaged Georgeson Shareholder Communications Inc. to solicit proxies on behalf
of MasterCard International. The anticipated cost of Georgeson Shareholder's
services is estimated to be
                                        34


approximately $120,000. No additional compensation, except for reimbursement of
reasonable out-of-pocket expenses, will be paid to directors, officers and
employees of MasterCard International in connection with the solicitation. Any
questions or requests for assistance regarding this proxy statement-prospectus
and related proxy materials, including any question relating to the number of
shares of MasterCard Incorporated common stock to be received in the conversion
and integration, may be directed to:

     MasterCard International Incorporated
     Attention: Office of the Corporate Secretary
     2000 Purchase Street
     Purchase, New York 10577
     Attention: Noah J. Hanft
     Telephone: (914) 249-2000
     Facsimile: (914) 249-4262

or   Georgeson Shareholder Communications Inc.
     17 State Street
     10th Floor
     New York, New York 10004
     Telephone: (212) 440-9800
     Facsimile: (212) 440-9009

OTHER MATTERS

     Pursuant to the current bylaws of MasterCard International, no other
business or matter other than the conversion transaction indicated above may be
properly presented at the special meeting. Copies of MasterCard International's
bylaws are available to members free of charge upon request to the Secretary of
MasterCard International at the address given above.

                                        35


                                 THE CONVERSION

OVERVIEW OF THE CONVERSION

     The conversion refers to the process by which MasterCard International will
merge with a subsidiary of MasterCard Incorporated, a newly formed stock holding
company. After the conversion, MasterCard International will continue as a
non-stock corporation and the principal operating subsidiary of MasterCard
Incorporated, which will own the sole class B membership interest of MasterCard
International. In the conversion, each principal member of MasterCard
International will receive shares of class A redeemable common stock and class B
convertible common stock of MasterCard Incorporated representing that member's
equity interest in MasterCard Incorporated, and a class A membership interest in
MasterCard International representing that member's continued rights as a
licensee to use MasterCard's brands, programs and services. MasterCard
International's rules and standards will not be affected by the conversion and
integration.

     We expect that the conversion will be completed as soon as practicable
after the conditions to conversion are satisfied, including approval of the
conversion by the members, the expiration or termination of any waiting period
under the HSR Act and approval of European antitrust authorities. We anticipate
that these conditions will be satisfied and that the conversion will be
completed in the first half of 2002.

EFFECTS OF THE CONVERSION

     As a stockholder of MasterCard Incorporated, you will have the right to
vote on all matters submitted to the stockholders for a vote, including the
election of the board of directors, and extraordinary transactions, such as a
merger, consolidation, or sale of all or substantially all of the assets or
dissolution of MasterCard Incorporated. In any vote for the election of
directors, no stockholder, together with its affiliates, will be entitled to
vote more than 7% of the outstanding shares that are entitled to vote in that
election.

     The board of directors of MasterCard International is required to be the
same as the board of directors of MasterCard Incorporated. You will have the
right to vote on proposed changes to Article I (Membership) of the bylaws of
MasterCard International, but you will no longer be entitled to vote with
respect to any other amendments of the charter or bylaws of MasterCard
International. The rules for the qualification of members of MasterCard
International will be the same as the current rules for the qualification of
members of MasterCard International.

     The directors and executive officers of MasterCard Incorporated after the
conversion and integration will be the same as the directors and executive
officers of MasterCard International before the conversion except for the
addition of two voting directors who will be affiliated with European members
and the addition of Dr. Peter Hoch, currently Chief Executive Officer of
Europay, who will be President of MasterCard's Europe region (an officer of
MasterCard Incorporated) and a non-voting director. In particular, if the
conversion is approved, the current directors of MasterCard International will
serve as the directors of MasterCard Incorporated and MasterCard International
until the annual meeting of MasterCard Incorporated shareholders in 2003. In
addition, the boards of directors of each company, acting pursuant to authority
granted to them in their respective certificates of incorporation and/or bylaws,
will appoint two additional voting directors affiliated with European members
and Dr. Peter Hoch as a non-voting director, in each case to serve until the
annual meeting of MasterCard Incorporated shareholders in 2003. The board of
directors of MasterCard Incorporated will be subject to reelection in 2003. If
the conversion does not occur, the current directors of MasterCard International
will continue in that capacity until an annual meeting of MasterCard
International principal members is held in 2003.

     The bylaws of MasterCard Incorporated provide that during the three year
transition period following the closing of the conversion and integration:

     - one-third of the members of MasterCard Incorporated's board of directors
       will be representatives of MasterCard Incorporated's European
       stockholders;

     - one-third of the members of MasterCard Incorporated's board of directors
       will be representatives of MasterCard Incorporated's U.S. stockholders;

     - the President and Chief Executive Officer of MasterCard Incorporated will
       be a director; and

                                        36


     - the remaining directors will be apportioned among the other regions in
       accordance with the percentage of common stock owned by the stockholders
       of those regions.

     After the three-year transition period, the President and Chief Executive
Officer will continue to be a director and all other directors will be
apportioned among the regions according to each region's respective share of the
aggregate vote. The integration agreement provides that the allocation of
one-third of the board seats to Europe during the transition period may not be
altered.

     The board of directors of MasterCard Incorporated will initially consist of
18 voting members -- six from the U.S., six from Europe, three from
Asia/Pacific, one from Canada, one from Latin America and the Caribbean and the
President and Chief Executive Officer of MasterCard Incorporated. The directors
will be elected by the class A and class B stockholders, voting together as a
single class (so long as the class B convertible shares are entitled to vote),
with each share entitled to one vote, subject to the following limitations:

     - no more than two representatives from any member (including its
       affiliates and affiliate members) may sit on the board of directors;

     - no single stockholder, together with its affiliates, may exercise more
       than 7% of the voting power in any election of directors; and

     - no more than one-third of the board of directors may be representatives
       from a single region.

     In addition to the MasterCard Incorporated board of directors, there will
be a regional board for each of MasterCard's six operating regions:
Asia/Pacific, Canada, Europe, Latin America and the Caribbean, Middle
East/Africa and the United States. Each of the regional boards will be elected
by the members from that region. Decisions to establish or eliminate a regional
board or overrule one of its decisions must be approved by a two-thirds majority
vote of the board of directors. In addition, all of the regions will have a
regional president, who will be selected by the President and Chief Executive
Officer of MasterCard Incorporated in concurrence with the regional board (or
otherwise with a two-thirds majority of the global board of directors).
MasterCard Incorporated will also establish a Debit Advisory Board to provide
guidance with respect to the ongoing development of MasterCard's debit programs.
The powers and responsibilities of the regional boards following the conversion
and integration are expected to be substantially similar to the powers and
responsibilities of those boards before the conversion and integration.

     For a description of the supermajority requirements necessary to revise
these governance arrangements, see "Comparison of Rights of MasterCard
International Members Before and After the Conversion and Integration -- Vote on
Extraordinary Transactions/Supermajority Voting Provisions."

CONSIDERATIONS RELATING TO THE CONVERSION

     In approving the conversion and recommending that you approve the
conversion, our board of directors considered a number of advantages of the new
structure. By creating a new holding company, MasterCard Incorporated, which
will own MasterCard International, we expect to realize many of the advantages
of a stock corporation at the holding company level, while maintaining the
flexibility of a membership association in governing the operations of our
global payments programs at the subsidiary level. As is typical of a holding
company structure, the holding company, MasterCard Incorporated, will control
the voting power of its operating subsidiary, MasterCard International, with
regard to all items that require a vote of MasterCard International's members,
except for amendments to Article I (Membership) of the bylaws.

     We believe that the conversion will enhance the value of our business and
our future opportunities by providing us some of the benefits of being a public
company. Specifically, we believe that the conversion will:

     - permit member-stockholders to realize the value of their investment in
       MasterCard as an asset and, subject to certain restrictions, trade
       MasterCard Incorporated shares among themselves;

     - align more closely the interests of MasterCard and our
       member-stockholders. As member-stockholders increase their MasterCard
       business, their relative shareholdings in MasterCard Incorporated may
       increase;

                                        37


     - provide a more flexible structure to respond to opportunities in the
       marketplace, for example, by permitting us to complete the integration
       with Europay more efficiently since Europay already has capital stock
       outstanding or by permitting us to use our class C common stock as
       acquisition currency in future acquisitions;

     - result in greater financial transparency for our member-stockholders,
       since after the conversion MasterCard Incorporated will report financial
       and business information on a quarterly basis in accordance with
       Securities and Exchange Commission rules and regulations; and

     - make it easier, if desired, for MasterCard Incorporated to raise
       financing in the public securities markets to fund technological
       innovations and other projects since MasterCard Incorporated will be a
       public reporting company.

     In approving the conversion and recommending that you approve the
conversion, our board of directors also considered potential disadvantages of
the new structure. Specifically, it is possible that:

     - a market for MasterCard Incorporated common stock may not develop
       sufficiently to provide member-stockholders with enough liquidity in
       trading their shares;

     - stockholders may be required to purchase or sell shares of MasterCard
       Incorporated in order to satisfy certain requirements, which may be
       disadvantageous to them;

     - the conversion will facilitate future strategic transactions that could
       reduce the influence of current MasterCard International members;

     - MasterCard Incorporated and certain member-stockholders will be subject
       to additional regulatory burdens, including Securities and Exchange
       Commission regulations, as a result of the conversion; and

     - the conversion could subject some members to tax liabilities.

     No director or officer or any of their affiliates has a substantial
interest, direct or indirect, in the conversion.

BOARD OF DIRECTORS' AND PRINCIPAL MEMBERS' APPROVAL

     On February 8, 2001, the board of directors of MasterCard International
approved resolutions recommending the conversion to MasterCard International's
members. Approval at the special meeting of at least a majority of votes cast is
required to complete the plan of conversion; the quorum for the special meeting
is the presence in person or by proxy of members representing a majority of the
votes eligible to be cast. Notwithstanding member approval, however, the plan of
conversion will not be completed if the integration will not also be completed.

     THE BOARD OF DIRECTORS OF MASTERCARD INTERNATIONAL RECOMMENDS THAT MEMBERS
VOTE FOR APPROVAL OF THE PLAN OF CONVERSION.

THE MERGER AGREEMENT EFFECTING THE CONVERSION

     We summarize below the material terms and other provisions of the merger
agreement. The description is not complete, and we refer you to the merger
agreement, which is contained in Annex A of this proxy statement-prospectus and
which we have filed as an exhibit to the registration statement of which this
proxy statement-prospectus is a part.

CONVERSION OF MEMBERSHIP INTERESTS

     The conversion will be effected pursuant to the Agreement and Plan of
Merger to be entered into among MasterCard Incorporated, MasterCard
International and MasterCard Merger Sub, Inc., which we refer to as the merger
agreement. The merger agreement provides for the merger of MasterCard
International and MasterCard Merger Sub, Inc. under Delaware law, with
MasterCard International being the surviving entity. Under the merger agreement,
each issued and outstanding principal membership interest in MasterCard
International will be automatically converted by virtue of the merger into a
class A membership interest of MasterCard International and a specified number
of shares of class A redeemable common stock and class B convertible common
stock of MasterCard Incorporated. The number of shares of class A redeemable and

                                        38


class B convertible common stock of MasterCard Incorporated that a principal
member receives in the merger will be proportional to the percentage of the
total voting power of MasterCard International that such member held in
accordance with the historic global proxy formula in effect for the period ended
September 30, 2000. Upon completion of the conversion and integration and as an
integral component thereof, the shares of class A redeemable common stock and
class B convertible common stock of MasterCard Incorporated will initially be
reallocated within each of the European and non-European member-stockholder
groups in accordance with the new global proxy formula based on the 12 month
period ended December 31, 2000. Accordingly, the new global proxy formula,
applied on a regional basis, will determine the number of shares that members
actually receive in the conversion and integration.

     Class A redeemable and class B convertible common stock are fully paid,
non-assessable voting equity interests in MasterCard Incorporated. The class A
membership interest in MasterCard International represents the member's
continued rights as a licensee to use MasterCard's brands, programs and services
and participate in the MasterCard system. For a description of the allocation of
shares resulting from the conversion and integration, see "Share Allocation and
the Global Proxy."

     Under the merger agreement, MasterCard Incorporated will receive the sole
outstanding class B membership interest in MasterCard International, which will
entitle MasterCard Incorporated to substantially all of the voting power, and
all economic rights, in MasterCard International. MasterCard Incorporated's
stockholders will participate indirectly in the voting power of, and economic
rights associated with, the class B membership interest through their ownership
of the class A redeemable and class B convertible common stock of MasterCard
Incorporated.

     The merger will not close, and your existing membership interest will not
be modified as described above, unless a majority of the votes cast at the
special meeting at which a quorum is present approve the conversion and the
merger agreement. The board of directors of each of MasterCard Incorporated,
MasterCard International and MasterCard Merger Sub, Inc. may terminate the
merger agreement at any time prior to the conversion whether before or after the
approval of the members of MasterCard International.

APPLICATION OF THE SECURITIES LAWS TO SHARES RECEIVED

     As a result of the conversion, stockholders of MasterCard Incorporated will
be subject to various provisions of the U.S. federal securities laws. Pursuant
to Rule 10b-5 under the Securities Exchange Act of 1934, as amended, which we
refer to as the Exchange Act, all stockholders will be prohibited from trading
MasterCard Incorporated shares while in possession of any material, non-public
information about MasterCard Incorporated. In addition, certain significant
stockholders of MasterCard Incorporated may be required to file public reports
with respect to their stockholdings. Other reporting obligations may also apply.
Responsibility for compliance with these laws will reside with the applicable
stockholder, not MasterCard Incorporated.

APPLICATION OF U.S. BANKING REGULATIONS TO SHARES RECEIVED

     Banking regulations in the United States govern, among other things, the
types of equity investments that regulated institutions are permitted to make.
For a description of the potential application of federal and state banking
regulations to the shares received in the conversion, see "Risk Factors -- Risks
Related to the Conversion -- U.S. banking regulations may impact our principal
members' ownership of the common stock of MasterCard Incorporated."

ACCOUNTING TREATMENT OF THE CONVERSION

     We anticipate that upon our conversion to a stock corporation, our retained
earnings will be reallocated to capital stock and additional paid-in capital on
issuance of common stock to members in exchange for their member interests. This
treatment is consistent with accounting for demutualizations in accordance with
accounting principles generally accepted in the United States.

     With respect to the manner in which they account for their equity interest
in MasterCard, members should consult their financial advisors regarding the
potential accounting implications of the conversion.

                                        39


                                THE INTEGRATION

OVERVIEW OF THE INTEGRATION

     The integration refers to the acquisition of Europay by MasterCard
Incorporated and the integration of the businesses of Europay and MasterCard
International. In the integration, Europay's shareholders other than MasterCard
International and MEPUK will exchange their Europay shares (and shareholders of
MEPUK will exchange their MEPUK shares) for shares of class A redeemable common
stock and class B convertible common stock of MasterCard Incorporated. For a
description of the allocation of shares resulting from the conversion and
integration, see "Share Allocation and the Global Proxy."

BACKGROUND OF THE INTEGRATION

     History.  MasterCard International has a long-standing relationship with
Europay, originating with Eurocard International's alliance with Interbank Card
Association, MasterCard's predecessor, in 1968. In 1996, MasterCard
International and Europay entered into an alliance agreement under which
MasterCard International delegated to Europay the authority to manage the
MasterCard brand in Europe and to process the licensing of MasterCard's brands
to European financial institutions. MasterCard International and Europay
established Maestro International, a joint venture, in 1992 to oversee the
global development of the Maestro debit service, and entered into an agreement
regarding the Maestro brand in 1997 to further strengthen their cooperation in
this area. Each of MasterCard International and Europay own a 50% interest in
Maestro International Incorporated, a Delaware corporation which owns the
Maestro brand. MasterCard International currently owns approximately 12.25% of
the capital stock of Europay and 15.0% of the capital stock of European Payment
Systems Services (EPSS), Europay's transaction processing subsidiary. Together,
these interests represent an approximate 15% interest in Europay on a
consolidated basis. In addition, European members currently own approximately 7%
of the total voting power, and related economic rights, of MasterCard
International.

     Early Negotiations.  As the MasterCard-Europay relationship developed, the
managements of the organizations came to believe that they could significantly
enhance the value of their alliance if they more fully integrated their
organizations and focused their combined efforts on promoting a core set of
global brands and services. In November 1999, a subcommittee of the MasterCard
International board of directors authorized management to retain the services of
Mercer Management Consulting to advise the board on revisions to MasterCard's
corporate governance structure. Among other things, the board charged Mercer
with the task of evaluating the existing MasterCard/Europay alliance. During a
period of five months, representatives of Mercer met with members of the
management teams of both parties and members of their respective boards of
directors. The purpose of these meetings was to gather information about the
working relationship of the parties and to assess whether improvements could and
should be made.

     At a meeting of MasterCard International's board held on March 23, 2000,
representatives of Mercer reported that, while the relationship between
MasterCard International and Europay under the alliance agreement was generally
positive, the parties would be better served by combining their organizations,
aligning their interests more directly, focusing their considerable combined
resources on promoting MasterCard's core brands and eliminating duplicative
functions.

     On March 23, 2000, the MasterCard International board authorized the
formation of a committee consisting of Donald L. Boudreau, MasterCard
International's then Chairman, and Robert W. Pearce, a director, to enter into
preliminary discussions about the possibility of integrating the organizations.
On April 13, 2000, the board of directors of Europay designated a counterpart
committee consisting of Dr. Kurt Richolt, Europay's then Chairman, Dr. Wolfgang
Klein, then a director of Europay, and Baldomero Falcones Jaquotot, a director
of Europay and MasterCard International.

     The negotiating committees first met on April 14, 2000. A second meeting
was held on April 26, 2000. At these initial meetings, the committee members
discussed the framework for a possible integration, including structural
alternatives. No formal proposals regarding valuation or the type and amount of
consideration to be issued to the stockholders of Europay were discussed at
these initial meetings, although it was generally understood that the
consideration would include some form of equity, rather than cash. Further
meetings were held in May 2000 and in June 2000 (by teleconference). These
meetings focused primarily on issues of

                                        40


consideration. At the June 2000 meeting, the negotiating committees discussed
the first draft of a term sheet that had been prepared by Mercer. In particular,
the parties discussed the relative contribution that Europay's members would
make to the revenues and transaction volume of a combined organization.
Europay's view was that, based on a contribution analysis, the European members
should be entitled to 33 1/3% of the equity in the combined company. MasterCard
wanted to study further the level of contribution that Europay was likely to
make and, in particular, the likelihood that transaction volume associated with
Europay's regional ec Pictogram brand would be converted to Maestro transaction
volume in the future.

     Later Negotiations.  In July 2000, the boards of directors of MasterCard
International and Europay reviewed the progress that had been achieved by the
negotiating committees. At these meetings, representatives of Mercer presented a
report summarizing the work of the negotiating committees to date. At its July
27, 2000 meeting, the MasterCard International board authorized the MasterCard
negotiating committee to continue its work.

     Following these board meetings, the Europay negotiating team advised the
MasterCard International team that the Europay shareholders strongly favored a
stock conversion and viewed it as a critical part of the overall transaction.
MasterCard was amenable to the concept of a stock conversion, subject to review
of the potential tax, securities laws and other consequences. Each of MasterCard
International and Europay retained financial advisers to assist the negotiating
teams in analyzing the companies and to advise them with respect to valuation
matters. MasterCard retained Donaldson, Lufkin & Jenrette (subsequently Credit
Suisse First Boston or CSFB). Europay retained Merrill Lynch & Co. Mercer was
instructed to prepare and circulate a confidential term sheet.

     In September 2000, Mr. Boudreau and Dr. Richolt met by teleconference. They
primarily discussed the formula for the global proxy calculation, which would
become the benchmark for measuring the level of contribution made by the
European members to the combined company. The full negotiating teams met three
times in October 2000. Beginning with the second of these meetings, Robert
Selander, MasterCard's President and Chief Executive Officer, and Peter Hoch,
Europay's Chief Executive Officer, joined the negotiating teams. During these
meetings, the negotiating committees discussed a wide range of strategic and
operational issues, including the following:

     - the valuations of the organizations on a stand-alone and combined basis;

     - ways of measuring the relative contribution of the European members of
       MasterCard International to the business of the combined company;

     - the merits of a global proxy formula that recognized contributions to
       MasterCard International's gross dollar volume and gross acquiring volume
       compared to a formula that was strictly revenue-based;

     - the composition of the board of directors of the combined organization;

     - the level of authority that should be delegated to the regional boards
       and management;

     - the types of fundamental corporate matters that should not be changed
       without the approval of a supermajority of the board of directors or
       stockholders;

     - limitations on the assessability of memberships;

     - the benefits and detriments associated with converting MasterCard
       International to a stock corporation; and

     - the merits of a holding company structure.

     As the parties sought to reach a mutually acceptable understanding with
respect to the consideration to be received by the European members, they
concluded that it would be appropriate to implement a limited transition period
during which the projected level of contribution made to MasterCard's revenues
and transaction volume by the European members, as measured under the new global
proxy calculation, would be applied. The parties decided that the European
members would receive at the closing shares in a percentage amount that
represented what their contribution, as measured by the new global proxy
calculation, would have been if all of their volume were converted to MasterCard
and Maestro brand volumes. In its consideration of the aggregate allocation of
shares of MasterCard Incorporated between European and non-European members that

                                        41


would result from the integration, MasterCard management developed a model to
project the final relative regional distribution of shares at year-end 2003,
which was the date then expected for the completion of the share allocations
resulting from the integration. The model projected issuing volumes (GDV) and
acquiring volumes (GAV) by region, which were categorized by type for proxy
purposes. European member volumes and revenues were projected by Europay for the
same periods. The revenue figures that were shared with CSFB for use in
connection with its fairness opinion were not materially different from the
revenue figures used in the proxy analysis. Together, these projections formed
the basis for the case allocating an approximate 33.1% share of MasterCard
Incorporated common stock to European member-stockholders at the conclusion of
the transition period. MasterCard further reviewed these projections and made
adjustments to reflect lower projected revenue and lower conversion rates of ec
Pictogram cards to Maestro only cards during the transition period. MasterCard
management used these assumptions to generate a more conservative case. These
adjusted projections formed the basis for the case allocating an approximate
25.7% share of MasterCard Incorporated common stock to European
member-stockholders at the conclusion of the transition period. MasterCard
management also prepared an upside case to measure the revenue and the converted
ec Pictogram volumes that would be required for European member-stockholders to
own a 44% share of MasterCard Incorporated common stock at the conclusion of the
transition period. To support that case, European member-stockholders would have
to convert all ec Pictogram cards to Maestro and would have to pay fees on the
resulting volumes generated by the end of the three-year transition period.

     Based on the projections of GDV, GAV, and revenues described above and
deemed to be reasonable by MasterCard International and Europay, the parties
concluded that it would be appropriate to allocate 33 1/3% of the total
outstanding shares to European members at the closing. Similarly, based on
projections of the likely best and worst case for European GDV, GAV and revenue
performance during the transition period, the parties concluded that it would be
appropriate to establish a minimum aggregate European shareholding percentage of
26% and a maximum aggregate European shareholding percentage of 44%, in each
case at the conclusion of the transition period. The European members could lose
some of the shares initially allocated at closing if, at the end of the
transition period, their contribution did not fulfill expectations, which would
most likely be attributable to lower volume conversion than anticipated.
Alternatively, if the contribution as of the end of the transition period
exceeded current expectations, they could receive additional shares, subject to
the maximum ownership percentage of 44%.

     The Europay negotiating team was also concerned about the position of the
European members as minority stockholders in a combined organization. MasterCard
understood these concerns, but felt it was important to strike a balance with
the general proposition that the will of the majority should prevail in
corporate governance matters. The parties agreed that any supermajority voting
requirements should be limited to matters relating to the fundamental
organizational and ownership structure of the combined company.

     At a meeting of the MasterCard International board held in November 2000,
members of the MasterCard International negotiating team and representatives
from Mercer reported that the two sides had made substantial progress. The
Mercer representatives made a presentation to the board concerning the latest
draft of the term sheet. The board engaged in a discussion about particular
aspects of the proposed terms. The board authorized the negotiating team to
proceed with the negotiations and to engage in a formal due diligence
investigation of Europay. Europay would undertake a similar investigation of
MasterCard International.

     The parties began their respective due diligence investigations in December
2000. The parties' due diligence covered financial, accounting, operations,
legal, human resources and other areas. Diligence was performed both on-site, at
the other party's principal offices, and off-site. The diligence process
continued for approximately two months.

     The MasterCard International and Europay negotiating teams met on December
6, 2000 and December 20, 2000, where they again discussed those matters in
MasterCard Incorporated's organizational documents that should be subject to
supermajority stockholder approval. These discussions continued at
teleconference meetings on January 5 and January 11, 2001. On January 16, 2001,
January 18, 2001 and January 22, 2001, the negotiating committees held
additional teleconference meetings in order to finalize the term sheet that
would be presented to the companies' respective boards of directors.

                                        42


     The February 8, 2001 Board Meeting.  A special meeting of the MasterCard
International board was held on February 8, 2001 for the purpose of considering
and approving the term sheet. At this meeting, the board adopted resolutions
recommending the conversion and integration to MasterCard International's
members and approving the term sheet, and authorized the MasterCard
International negotiating team to seek to finalize negotiations with Europay.
The board also authorized the conversion of MasterCard International to a stock
corporation. The board considered the following matters at the February 8, 2001
meeting:

     - Representatives of Mercer made a presentation about the changes made to
      the term sheet since the November board meeting.

     - John De Lavis, the MasterCard executive in charge of the MasterCard
      International due diligence team, presented the findings of the diligence
      investigation.

     - Jerry McElhatton, MasterCard International's senior executive in charge
      of technology, made a presentation regarding plans for integrating the
      technology systems of the two companies.

     - Representatives of CSFB presented their relative allocation analysis to
      the MasterCard board and delivered their signed fairness opinion to
      MasterCard. CSFB's presentation and analyses, together with the CSFB
      fairness opinion, are described under the heading "Opinion of Financial
      Advisor to MasterCard International."

     In addition, Denise K. Fletcher, MasterCard International's Chief Financial
Officer, made a presentation at the February 8, 2001 board meeting regarding the
valuation, tax and accounting aspects of the integration and conversion. This
presentation also reviewed the text of certain prepared materials distributed to
the board relating to valuation in advance of the meeting. Mrs. Fletcher
reported on the valuation analysis by stating that management had developed
three scenarios representing the possible ownership of the combined entity by
European member-stockholders. She stated that the three scenarios were: (i) a
26% ownership case that represents the minimum guaranteed amount to the European
member-stockholders; (ii) a 33 1/3% ownership case based on projections provided
by Europay management; and (iii) a 44% ownership case that represents the
maximum amount that European member-stockholders could own of MasterCard
Incorporated regardless of performance. Mrs. Fletcher reported that, with
respect to the 26% case, MasterCard had been valued at approximately $1.6
billion and Europay at approximately $390 million using a 10.5% discount rate
and after applying a 50% reduction for both companies due to their private
ownership structure. Mrs. Fletcher also reported that MasterCard's and Europay's
management estimated that approximately $120 million in business synergies would
result from integration on an after-tax, net present value basis, using a 10.5%
discount rate and after applying the 50% private company discount. She reported
that, in the 26% case, the total value of the combined company after the
integration and including the synergies was estimated to be approximately $2.1
billion, using a 10.5% after-tax discount rate and after giving effect to the
50% private company discount. She stated that MasterCard management, in valuing
Europay, assigned 85% of the synergy savings to Europay because approximately
this portion (81%) of the synergies were expected to be derived from European
operations. She stated that under the 26% case the sum of the synergies and the
discounted cash flow value of the portion of Europay not presently owned by
MasterCard was estimated at approximately $430 million. She then said that
MasterCard management estimated that MasterCard would generate an after-tax
return on investment of 14.8%, 14.4% and 14% for the 26%, 33 1/3% and the 44%
cases, respectively, and that these returns were higher than the 10.5% cost of
capital estimated for MasterCard.

     Mrs. Fletcher then noted that the valuation analysis supported European
members owning 26% of MasterCard Incorporated after the conversion and
integration. She further noted that the initial allocation of 33 1/3% was
supported by the model reported by MasterCard management (with projections
regarding the Europe region coming from Europay management) referred to above.
According to the deal ultimately negotiated between the parties, European
member-stockholders would initially be allocated 33 1/3% of the common stock of
MasterCard Incorporated with a reallocation at the end of the three-year
transition period that adjusts European member-stockholder ownership to a level
between 26% and 44%, depending on actual performance of the Europe region.

                                        43


     The information presented to the MasterCard International board on February
8, 2001 by CSFB and Mrs. Fletcher was supported by projections provided to CSFB
by MasterCard management that reflected management's best estimates for 2000
earnings and the 2001 budget. The projections also related to revenue and
operating income for the periods 2000 through 2004. The revenue projections
reflected the assumption that the economy could not continue to grow as it had
in the late 1990s and that revenue growth would slow as the global economy
decelerated. However, margins were expected to expand gradually reflecting
productivity gains, especially in transaction processing.

     Europay management also provided revenue, operating expense and operating
income projections regarding the Europe region to CSFB. These projections, along
with MasterCard management's projections for MasterCard International, formed
the basis for the case for allocating 33 1/3% of the common stock of MasterCard
Incorporated to European member-stockholders at the conclusion of the three-year
transition period. MasterCard management reviewed Europay's projections and
provided CSFB with adjusted projections, which reflected reduced revenue and
operating income estimates. This more conservative case formed the basis for the
case for allocating 26% of the common stock of MasterCard Incorporated to
European member-stockholders at the conclusion of the transition period.
MasterCard management also developed projections that would form the basis for
an upside case, which would allocate 44% of the common stock of MasterCard
Incorporated to European member-stockholders at the conclusion of the transition
period. MasterCard and Europay management also worked together to develop a
synergy plan which projected 81% of the savings being derived from European
operations, predominantly from staff savings and system integration synergies.

     In the fourth quarter of 2001, in connection with its delivery of the
fairness opinion dated January 16, 2002, MasterCard management provided CSFB
with updated projections for the periods from 2001 through 2004, and added 2005.
The updated projections reflected the following adjustments:

     - the most recent 2001 forecast was employed;

     - the most recent 2002 budget projections for Europay and MasterCard,
      reflecting the impact of the slowdown in the economy in general and the
      particular consequences of the events of September 11, 2001 were employed;

     - an assumption was made that, by the beginning of 2003, MasterCard and
      Europay would function at the same level that they would have functioned
      had the events of September 11, 2001 not occurred;

     - MasterCard management's projected 2005 Europay revenues, operating
      expenses, pre-tax income and EBITDA (earnings before interest, taxes,
      depreciation and amortization) were provided; and

     - MasterCard management's projected 2005 revenues, operating expenses,
      pre-tax income and EBITDA for MasterCard International were provided.

     MasterCard management also updated the synergy analysis based on the
integration planning and implementation that had taken place since CSFB's
fairness opinion of January 30, 2001.

     The Europay Board Meeting; Implementation Efforts.  On February 12, 2001,
the board of directors of Europay approved resolutions recommending the
integration to Europay's shareholders.

     During the months of February through May 2001, counsel for MasterCard
International and Europay prepared definitive documentation to effect the
conversion and integration. Numerous telephone conversations and meetings were
held among representatives of MasterCard International and Europay and their
legal advisors for the purpose of negotiating the definitive agreements.

     Forms of agreements were provided to the MasterCard International and
MasterCard Incorporated boards in advance of a special meeting called for May
16, 2001. At this meeting, the MasterCard International and MasterCard
Incorporated boards approved the forms of agreements and authorized management
to file the registration statement of which this proxy statement-prospectus
forms a part with the Securities and Exchange Commission. Subsequently, the
managements of MasterCard and Europay finalized the definitive agreements and
prepared the registration statement for filing.

                                        44


     Statement Regarding Projections.  The preceding discussion under the
heading "The Integration -- Background of the Integration" contains certain
projections and forward-looking statements. MasterCard and Europay do not, as a
matter of course, make public projections as to future sales, earnings or other
results. The projections set forth above were not prepared with a view to public
disclosure or compliance with published guidelines of the Securities and
Exchange Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections. Neither MasterCard's nor
Europay's independent auditors, nor any other independent accountants, have
compiled, examined or performed any procedures with respect to these
projections, nor have they expressed any opinion or other form of assurance with
respect to these projections or their achieveability, and assume no
responsibility for them. The inclusion of these projections in this document
should not be regarded as a representation by MasterCard or Europay or any of
their advisors, agents or representatives that these projections are or will
prove to be correct. Projections of this type are based on a number of
significant uncertainties and contingencies, all of which are difficult to
predict and most of which are beyond MasterCard's and Europay's control. As a
result, there can be no assurance that any of these projections will be
realized.

     The projections are or involve forward-looking statements, assume that the
conversion and integration have occurred and are based upon a variety of
assumptions, including MasterCard's and Europay's ability to achieve strategic
goals, objectives, and targets over the applicable period. These assumptions
involve judgments with respect to future economic, competitive and regulatory
conditions, financial market conditions and future business decisions, all of
which are difficult or impossible to predict accurately and many of which are
beyond MasterCard's and Europay's control. Many important factors, in addition
to those discussed elsewhere in this proxy statement-prospectus, could cause
MasterCard's and Europay's results to differ materially from those expressed or
implied by the forward-looking statements. Accordingly, there can be no
assurance that the projections are indicative of MasterCard's or Europay's
future performance or that actual results will not differ materially from those
in the projections set forth above. See "Cautionary Statement Regarding Forward
Looking Statements."

CONSIDERATIONS RELATING TO THE INTEGRATION

     In approving the integration, our board of directors considered a number of
advantages associated with the acquisition of Europay by MasterCard
Incorporated. The integration represents the opportunity for MasterCard to
enhance its global scope and payment programs by acquiring an important company
that operates in a desirable region of the world and has demonstrated success in
several key business functions. Specifically:

     - In 2000, the Europe region represented approximately 22.5% of
       MasterCard's worldwide gross dollar volume, not including Maestro and
       Cirrus transactions.

     - European countries are among the largest and most sophisticated payments
       markets in the world and represent a significant portion of the global
       payments industry.

     - Europay has demonstrated expertise in chip and debit programs and
       services, and in the ongoing development of new mobile commerce payment
       applications.

     The integration will also give MasterCard the opportunity to:

     - Establish a more consistent global marketing message, particularly in
       Europe, that is intended to increase MasterCard's presence in Europe and
       thereby make the Europe region more attractive to all MasterCard
       members.  Following completion of the integration, MasterCard will be
       better able to coordinate European marketing programs, enabling us to
       build our brands in Europe in concert with our global brand-building
       efforts. We expect that this increased coordination, combined with
       improved productivity, faster time to market and greater emphasis on
       customized solutions for members, should strengthen the presence of the
       MasterCard family of brands both in Europe and around the world.

     - Take advantage of Europay's expertise in debit and chip cards and mobile
       commerce.  Europay and Maestro have established in Europe a significant
       leadership in the debit and chip card arenas as well as in mobile
       commerce. Given the increasing use by cardholders globally of these
       applications, the skills

                                        45


       and knowledge already present at Europay in these areas will represent a
       key strength for MasterCard, permitting the development of new business
       solutions.

     The integration represents the opportunity for Europay to merge with a
well-capitalized industry leader and, as a result, to leverage its own strengths
based on the broader resources of the MasterCard brand and organization. For
European members of the combined company, integration with MasterCard provides
additional opportunities to succeed in an increasingly competitive global
business, in which size, an existing network of members, and the ability to
develop quickly new and profitable products and services will likely
differentiate successful competitors.

     In particular, the integration with MasterCard provides European members
with the opportunity to:

     - Participate in the MasterCard system on a much more significant scale
       than they currently do.  After the conversion and integration, the
       European members will participate in MasterCard Incorporated as holders
       initially of 33 1/3% of its outstanding common stock, subject to change
       after the transition period, as more fully described in "Share Allocation
       and the Global Proxy."

     - Utilize MasterCard's expertise in brand building and customer-centered
       service.  Following completion of the integration, MasterCard's marketing
       team will coordinate with members and staff in the new Europe region to
       enhance brand-building efforts in that region. This is expected to result
       in increased brand awareness and higher usage and acceptance levels,
       making the European region stronger for all MasterCard members.
       Furthermore, European members will benefit from the reallocation of
       MasterCard's resources to deliver more customized relationship management
       and professional services.

     - Utilize MasterCard's expertise in marketing consulting, Internet and
       corporate expertise.  The integration will permit Europay to take
       advantage of MasterCard's marketing consulting expertise to further
       advance the European credit business. In addition, joining MasterCard's
       Internet experience with Europay's strengths in chip and mobile commerce
       should lead to the development of more electronic business solutions.
       Finally, Europay will be able to draw on the corporate resources of the
       larger MasterCard organization.

     To both MasterCard and Europay, the integration represents the opportunity
to merge separate businesses into one organization, with the resulting
opportunity to develop a stronger, combined operation and to:

     - Establish a global management team and governance structure.  The
       integration of the companies will provide an opportunity for a more
       cohesive and consistent global governance and management structure, which
       is currently divided among the MasterCard, Europay and Maestro
       organizations, each of which has separate governance requirements.
       Integrating MasterCard and Europay is also expected to result in a more
       rapid time to market for products due to enhanced decision-making and
       coordinated product development and management.

     - Establish improved delivery of customized relationship management and
       professional services.  As a result of the integration, we hope that the
       combined company will be in a position to deliver to European members
       more customized relationship management and professional services, such
       as marketing and operations consulting, to foster the growth and
       profitability of existing businesses and to facilitate the establishment
       of new payments programs and applications. In addition, we expect to join
       the technology operations of MasterCard and Europay to improve the
       flexibility, speed of change, interoperability and productivity of
       services provided to members, as well as to reduce costs. Finally,
       standardizing MasterCard's and Europay's programs and services should
       improve and make more consistent the quality of services delivered to
       members.

     - Achieve personnel and system synergies.  By combining the two companies,
       a greater pool of key personnel resources should be available to maintain
       and enhance our competitive advantages, including a wider array of
       customer, product and regional knowledge; technologies; marketing support
       and research; and stronger financial resources. In addition, we expect
       that, by integrating the two companies, we will be able to realize cost
       savings from integrating our transaction processing systems, eliminating
       overlapping staff functions and programs and by taking advantages of
       economies of scale.

                                        46


     In approving the integration, our board of directors and the Europay board
of directors also considered the disadvantages of integration. The integration
may:

     - Create expected synergies that never materialize.  We may be unable to
       reduce costs, merge effectively our management structures or improve
       programs and professional services to our members in a timely or
       efficient manner. It may also prove difficult to streamline our
       technology or other operations, increase the customization and management
       of our member relationships and standardize our combined programs and
       services. Finally, we may not successfully combine personnel or systems
       resources or achieve economies of scale.

     - Cause significant dilution in the ownership of non-European members of
       MasterCard International. The integration will cause the ownership of the
       non-European members of MasterCard International in MasterCard
       Incorporated to be significantly diluted as compared to those members'
       current percentage of the total equity rights in MasterCard
       International.

     - Adversely impact some members through the introduction of the new global
       proxy formula.  Because the new global proxy formula considers additional
       factors (including GDV, GAV and revenues and volumes associated with
       Maestro and Cirrus cards) in allocating equity rights, it will dilute the
       ownership percentage of member-stockholders who are comparatively
       underweighted in such factors.

     No director or officer or any of their affiliates has a substantial
interest, direct or indirect, in the integration.

THE INTEGRATION AGREEMENT

     We summarize below the material terms and other provisions of the
integration agreement. The description is not complete, and we refer you to the
integration agreement, which is contained in Annex B of this proxy
statement-prospectus and which we have filed as an exhibit to the registration
statement of which this proxy statement-prospectus is a part.

EXCHANGE AND ALLOCATION OF SHARES

     The acquisition of Europay will be made pursuant to the Share Exchange and
Integration Agreement to be entered into by MasterCard Incorporated, MasterCard
International and Europay International, which we refer to as the integration
agreement. In connection with the integration agreement, each shareholder of
Europay (other than MasterCard International and MEPUK) will enter into the
separate share exchange agreement with MasterCard Incorporated and MasterCard
International, pursuant to which it will exchange its Europay shares for a
specified number of shares of class A redeemable common stock and class B
convertible common stock of MasterCard Incorporated. In addition, the
shareholders of MEPUK will enter into the MEPUK agreement with MasterCard
Incorporated and MasterCard International as described under the heading
"-- MEPUK" below, pursuant to which they will exchange their MEPUK shares for a
specified number of shares of class A redeemable common stock and class B
convertible common stock of MasterCard Incorporated. The integration agreement
also provides, as an integral component of the conversion and integration, that
the shares of class A redeemable and class B convertible common stock of
MasterCard Incorporated issued to the principal members of MasterCard
International and the shareholders of Europay and MEPUK will initially be
reallocated within each of the European and non-European member-stockholder
groups in accordance with the new global proxy calculation described herein.

     The integration agreement defines how the European members of MasterCard,
including those members that are not shareholders of Europay, and the
non-European members of MasterCard, will be treated in the conversion and the
integration. For a description of the allocation of shares resulting from the
conversion and integration, see "Share Allocation and the Global Proxy."

CONDUCT OF BUSINESS PRIOR TO CLOSING OF INTEGRATION

     From the date of the integration agreement until the closing of the
integration, each of MasterCard Incorporated, MasterCard International and
Europay have agreed to conduct their respective businesses in the
                                        47


ordinary course, consistent with past practice, and, among other things, to take
all commercially reasonable steps and to act in good faith in cooperation with
the other party to obtain all necessary government approvals. The parties also
have agreed to the restrictions summarized below.

     Europay has agreed that, except as may be required by law, unless
previously disclosed to MasterCard International or agreed to by MasterCard
Incorporated, it and its subsidiaries will not, and will not enter into an
agreement to, among other things:

     - increase the compensation of its officers, employees or consultants whose
       compensation is, or after giving effect to any change, would be, $100,000
       or more;

     - issue or sell any shares of its capital stock or its other equity
       interests;

     - declare or pay any dividend or other distribution on its capital stock or
       its other equity interests or redeem or purchase any of its capital stock
       or its other equity interests;

     - incur net new debt exceeding E15 million or prepaying any existing debt;

     - make capital expenditures or commitments exceeding E15 million.

     MasterCard Incorporated and MasterCard International have agreed that they
and their subsidiaries will not:

     - liquidate or dissolve themselves;

     - declare or pay any dividend or other distribution on its capital stock or
       other equity interests or redeem or purchase any capital stock or other
       equity interests; or

     - engage in a material business combination transaction unless it has been
       disclosed in this proxy statement-prospectus.

CONDITIONS TO CLOSING OF THE INTEGRATION

     MasterCard Incorporated's and MasterCard International's obligations, on
the one hand, and Europay's obligations, on the other hand, to complete the
integration are subject to satisfaction, or waiver by the other side, of the
following conditions:

     - each party's representations and warranties must be true on the date of
       the closing of the integration;

     - each party must have performed or complied with each of its respective
       agreements contained in the integration agreement;

     - there must not be, on the date of closing of the integration, any order
       or law prohibiting the closing of the integration or conversion or any
       action or proceeding to prohibit the integration before any governmental
       and regulatory authority, and all required consents and approvals with
       any governmental or regulatory authorities, in form and substance
       reasonably satisfactory to the other party, must have been obtained;

     - all consents or waivers to the performance by the parties to the
       integration agreement of their respective obligations under the
       integration agreement and all consents or waivers relating to contracts
       of the parties must be obtained in form and substance reasonably
       satisfactory to the other party;

     - the registration statement of which this proxy statement-prospectus forms
       a part must have been declared effective by the Securities and Exchange
       Commission and must not be subject to any stop order or proceeding by the
       Securities and Exchange Commission relating to a stop order; and

     - each party must have had delivered to the other opinions of counsel,
       officer's certificates, revised charter and bylaws and tax rulings from
       relevant tax authorities or related opinions of tax counsel, in each
       case, as specified in the integration agreement.

                                        48


     In addition, MasterCard Incorporated's and MasterCard International's
obligations to complete the integration are subject to the satisfaction by
Europay, or the waiver by MasterCard Incorporated and MasterCard International,
of the following additional conditions:

     - the board of directors of Europay must have resigned, effective as of the
       date of the closing of the integration;

     - certain of the European members must have entered into an intellectual
       property assignment agreement, as specified in the integration agreement,
       confirming that Europay is the sole owner of the intellectual property
       rights associated with its brands;

     - each shareholder of Europay (other than MEPUK) must have entered into the
       share exchange agreement with MasterCard Incorporated and MasterCard
       International, as specified in the integration agreement, to transfer its
       shares of Europay capital stock to MasterCard Incorporated in exchange
       for class A redeemable common stock and class B convertible common stock
       of MasterCard Incorporated, as summarized above, and the MEPUK agreement
       described under the caption "-- MEPUK" below must have been entered into;

     - all Europay and MEPUK shareholders receiving shares in the integration
       must be principal members of MasterCard International prior to the
       closing of the integration; and

     - a satisfactory U.S. tax opinion from counsel or Internal Revenue Service
       ruling must have been received by MasterCard Incorporated.

     Finally, Europay's obligation to complete the integration is subject to the
satisfaction or waiver of the following additional conditions:

     - the merger agreement must have been executed; and

     - satisfactory tax opinions or rulings from applicable taxing authorities
       with respect to the tax consequences of the conversion and integration in
       certain non-U.S. jurisdictions must have been received.

     Any of the closing conditions to the integration, as described above, may
be waived by the parties to the integration agreement. Since the completion of
the integration is a condition to the conversion, if a material condition to the
integration is waived, MasterCard International will resolicit approval for the
conversion from its principal members.

     The form of the share exchange agreement referred to above is an exhibit to
the integration agreement, which is contained in Annex B to this proxy
statement-prospectus. We have also separately filed the form of share exchange
agreement as Annex C to this proxy statement-prospectus.

POST-CLOSING COVENANTS

     After the closing of the integration, the parties to the integration
agreement agree that:

     - MasterCard Incorporated will initiate and maintain a Global Center of
       Excellence in Waterloo, Belgium as the primary focus of global debit
       activities for three years, so long as it is commercially reasonable to
       do so;

     - MasterCard Incorporated will initiate a Global Center of Excellence for
       mobile commerce and chip products in Waterloo, Belgium for three years,
       so long as it is commercially reasonable to do so;

     - MasterCard will not prohibit the use of Eurocard as a program name so
       long as it is used in a manner consistent with any rules of MasterCard
       concerning the use of program names;

     - subject to the approval of the appropriate internal divisions, the
       parties intend that members will not experience any adverse impact on
       pricing or service levels as a result of a technical convergence; and

     - marketing support to the Eurocard brand in connection with its
       sponsorship of European football will continue until the European
       Football Championships in 2004.
                                        49


TERMINATION

     The parties to the integration agreement may terminate it on any of the
following bases:

     - by mutual agreement of the parties for any reason;

     - in the event of a material breach by Europay, on the one hand, or
       MasterCard Incorporated and MasterCard International, on the other hand,
       that is not cured within five business days following notice of the
       breach or on notice by one party that the satisfaction of its obligations
       under the integration agreement has become impossible or impracticable
       despite the use of commercially reasonable efforts; and

     - at any time after June 30, 2002 if the closing of the integration has not
       occurred and this failure is not a result of a breach of the integration
       agreement by the terminating party.

ALLOCATION OF LIABILITY FOR BREACH

     The bylaws of MasterCard International provide that losses and liabilities
resulting from a breach of the representations and warranties of MasterCard
Incorporated, MasterCard International or Europay contained in the integration
agreement will be distributed equitably among MasterCard's six regions as an
expense. However, losses and liabilities related to a breach by either of
MasterCard Incorporated or MasterCard International of its representations and
warranties in the integration agreement exceeding $21 million in the aggregate
will be allocated solely to regions other than Europe. Conversely, losses and
liabilities related to a breach by Europay of its representations and warranties
in the integration agreement exceeding $7 million in the aggregate will be
allocated solely to Europe.

SUPERMAJORITY VOTING PROVISIONS

     After completion of the conversion and integration, approval of at least
75% of the directors present at a meeting at which a quorum is present and, in
certain cases, the holders of a majority of the outstanding class A redeemable
common stock and class B convertible common stock voting together as a single
class (so long as the class B convertible common stock has voting rights) will
be required to, among other things:

     - alter MasterCard Incorporated's status as a stock corporation;

     - amend the certificate of incorporation of MasterCard Incorporated to
       authorize MasterCard Incorporated to issue stock other than the class A
       redeemable, B convertible or C common stock;

     - sell, lease or exchange all or substantially all of MasterCard
       Incorporated's assets;

     - approve the sale, lease or exchange of all or substantially all of the
       assets of MasterCard International;

     - engage in a business combination (merger or consolidation) involving
       MasterCard Incorporated or MasterCard International;

     - undertake an initial public offering;

     - amend the MasterCard International certificate of incorporation to allow
       MasterCard International to issue capital stock, to create additional
       classes of membership interests in MasterCard International, to subject
       the property of the members of MasterCard International to the
       obligations of MasterCard International or to subject non-U.S. programs
       to the satisfaction of any liabilities arising from the current DOJ and
       merchant antitrust litigations in the United States;

     - amend the provisions of the MasterCard International bylaws relating to
       special assessments that may be imposed upon the members of MasterCard
       International;

     - make any modification to the bylaw provision stating the proportion of
       directors to come from each region;

     - alter MasterCard International's board seating methodology;

                                        50


     - change the definition of the global proxy calculation;

     - raise the limitation on voting for directors applicable to stockholders
       and their affiliates to greater than 15% of the outstanding voting stock
       entitled to be voted;

     - approve the issuance of voting class C common stock or class C common
       stock that, together with all other issuances of class C common stock
       made during the immediately preceding two years, represents greater than
       5% of the total number of shares of class A redeemable and class B
       convertible common stock outstanding prior to the issuance; and

     - modify any of these supermajority requirements.

     After completion of the conversion and integration, the following actions,
among others, will require approval of at least 66 2/3% of the directors present
at a meeting at which a quorum is present:

     - establishing or eliminating regional boards;

     - modifying MasterCard's internal regional cost allocation methodology;

     - modifying the bylaw provision setting forth the overall size of the
       MasterCard Incorporated board of directors;

     - approving the issuance of shares of class C common stock;

     - permitting a stockholder's ownership level to exceed 15%;

     - permitting the issuance of shares of class A redeemable or class B
       convertible common stock of MasterCard Incorporated in excess of the
       number of shares to which a stockholder would be entitled under the
       global proxy;

     - deciding to overrule a decision taken by a regional board that was
       permitted to be taken in accordance with the bylaws;

     - deciding to overrule a recommendation made by the Debit Advisory Board
       that was permitted to be taken in accordance with the bylaws; and

     - modifying any of these supermajority requirements.

     More detailed supermajority voting provisions are contained in the
certificates of incorporation and bylaws of each of MasterCard Incorporated and
MasterCard International. See "Description of Capital Stock of MasterCard
Incorporated" and "Comparison of Rights of MasterCard International Members
Before and After the Conversion and Integration."

MEPUK

     One of the shareholders of Europay is MasterCard/Europay U.K. Limited
("MEPUK"), a company formed by certain financial institutions in the United
Kingdom for the purpose of holding their shares in Europay. MEPUK also manages
rules applicable to the domestic settlement of MasterCard-branded transactions
by financial institutions in the United Kingdom.

     In lieu of the share exchange procedures described elsewhere in this proxy
statement-prospectus, the shareholders of MEPUK will enter into a related share
exchange agreement with MasterCard Incorporated pursuant to which they will
exchange all their MEPUK shares for shares of common stock of MasterCard
Incorporated. As a result of this transaction, MEPUK will become a wholly-owned
subsidiary of MasterCard Incorporated and will continue to hold shares of
Europay. Currently, each shareholder of MEPUK is a shareholder in Europay
through its ownership in MEPUK. In addition, at the time of the closing of the
conversion and integration, all of the shareholders of MEPUK will be principal
members of MasterCard International.

     On or before the closing of the integration, MEPUK will distribute to its
shareholders or otherwise cause to be discharged any and all assets and
liabilities of MEPUK, other than its shares in Europay. In addition, the

                                        51


existing MEPUK shareholders will transfer MEPUK's responsibilities for the U.K.
domestic rules and other operations to a new entity that is not affiliated with
MasterCard Incorporated. Accordingly, at the time of the closing of the
conversion and integration, MEPUK will have no operations and its sole purpose
will be to hold Europay shares.

     In the MEPUK agreement, the MEPUK shareholders will agree to indemnify
MasterCard Incorporated and MasterCard International for any liability of MEPUK
that relates to the period up to and including the closing of the integration.
MasterCard Incorporated will also agree to distribute to the MEPUK shareholders,
net of any taxes or liabilities, any assets of MEPUK (other than the Europay
shares) not distributed prior to the closing of the integration. The MEPUK
agreement is filed as an exhibit to the registration statement of which this
proxy statement-prospectus forms a part.

BRAND MIGRATION

     MasterCard Incorporated, MasterCard International and/or Europay intend to
enter into one or more brand migration agreements with principal members in
Europe, including EKS in Germany, pursuant to which, among other things,
MasterCard and Europay will provide support for marketing initiatives designed
to migrate all uses of the Eurocard-MasterCard brand mark on cards, acceptance
decals, advertising and other materials to the MasterCard brand mark.

ACCOUNTING TREATMENT OF THE INTEGRATION

     We anticipate that the integration will be accounted for under the purchase
method of accounting in accordance with accounting principles generally accepted
in the United States. The excess of purchase price over the fair value of
tangible and identifiable intangible assets less liabilities will be recorded as
goodwill. Goodwill and other intangible assets resulting from the integration
that have indefinite useful lives will not be amortized, but will be tested for
impairment at least annually.


     In the Europay share exchange, stockholders of Europay and MEPUK, other
than MasterCard International, will exchange their shares of Europay and MEPUK
for 23.76 million shares of MasterCard Incorporated. The value of each
MasterCard Incorporated share, immediately before the exchange, is estimated to
be $15.21 based on an independent appraisal, resulting in a total purchase price
of $361.4 million.



     The transaction provides that the number of shares allocated to former
shareholders of Europay will increase or decrease at the end of the transition
period as a result of the application of the global proxy calculation, as
described under the heading "Share Allocation and The Global Proxy". MasterCard
Incorporated is currently considering whether these share reallocations give
rise to contingent consideration at the end of the transition period. If these
share reallocations are considered to be contingent consideration, MasterCard
Incorporated will record an appropriate adjustment to the purchase price and
correspondingly, goodwill and stockholders' equity, based on the fair value of
the stock of MasterCard Incorporated. Any fair value ascribed would be based on
an independent appraisal of MasterCard Incorporated. As any contingency will not
be resolved until the end of the three-year transition period, MasterCard
Incorporated is presently unable to determine the resolution of any potential
contingent consideration. Accordingly, the unaudited pro forma combined
financial information does not give effect to any potential contingent
consideration.


     With respect to the manner in which they account for their equity interest
in MasterCard, members should consult their financial advisors regarding the
potential accounting implications of the integration.

REGULATORY MATTERS RELATING TO THE INTEGRATION

     Within the European Union, transactions falling under the European
Commission's merger regulations require prior notification and regulatory
approval. The proposed integration amounts to a concentration within the meaning
of the European Commission merger regulations because it will entail a change of
control of Europay. However, because the consolidated worldwide revenue of
MasterCard and Europay is below the threshold stipulated by the regulations,
prior notification and regulatory approval will not be required at the

                                        52


European Commission level. Notwithstanding this, Europay has informed the
European Commission of the integration for informational purposes.

     A number of countries within the European Union require notification and
prior regulatory approval depending upon whether the national merger control
thresholds are met or not. National merger control thresholds can relate to the
national and worldwide revenues of the parties and/or to their market share in
the country in question, with thresholds for market share ranging from 20% to
35%. National notification was necessary in Germany and Finland on the basis of
revenue and in Spain and Greece on the basis of national market share. As of the
date of this proxy statement-prospectus, the transaction has been cleared by the
national competition authorities in each of these countries.

     Certain members of MasterCard International and certain shareholders of
Europay that receive shares of MasterCard Incorporated in the transactions may
be required to make filings under the HSR Act if the fair market value of their
MasterCard Incorporated shares exceeds $50 million and they do not intend to
hold those shares solely for investment purposes. Members should consult their
advisors to determine whether they are required to make any filings under the
HSR Act. The completion of both the conversion and the integration would be
subject to the expiration or termination of all waiting periods for which
filings will be made with the U.S. antitrust agencies under the HSR Act, in
connection with both transactions.

                                        53


            OPINION OF FINANCIAL ADVISOR TO MASTERCARD INTERNATIONAL

     MasterCard International retained Credit Suisse First Boston Corporation,
which we refer to as CSFB, as its financial advisor in connection with the
proposed integration of MasterCard International and Europay. On January 30,
2001, CSFB delivered its written opinion to the board of directors of MasterCard
International that, as of that date and subject to the assumptions,
considerations and limitations set forth in the written opinion, the percentage
of the total number of outstanding shares of MasterCard Incorporated common
stock, as adjusted, that will be held, as a group, by the European members of
MasterCard International as a result of the integration, giving effect to the
conversion and in each case as set forth in a confidential term sheet dated
January 22, 2001, was fair to MasterCard International from a financial point of
view.

     CSFB has delivered a written opinion to the MasterCard International board,
dated as of January 16, 2002 that, as of that date and subject to the
assumptions, considerations and limitations set forth in the written opinion,
the percentage of the total number of outstanding shares of MasterCard
Incorporated common stock, as adjusted, that will be held, as a group, by the
European members of MasterCard International as a result of the integration,
giving effect to the conversion and as set forth in the form of integration
agreement annexed to this proxy statement-prospectus, was fair to MasterCard
International from a financial point of view. In connection with its written
opinion dated as of January 16, 2002, CSFB confirmed the appropriateness of its
reliance on the analyses used to render its earlier opinion and reviewed the
assumptions used in its analyses and the factors considered in connection with
its earlier opinion and did not perform analyses in addition to those performed
in connection with its opinion dated January 30, 2001.

     The full text of the written opinion of CSFB dated as of January 16, 2002
is set forth as Annex H to this proxy statement-prospectus and describes the
assumptions made, general procedures followed, matters considered and limits on
the review undertaken. The summary of CSFB's opinion dated as of January 16,
2002 set forth below, which describes the material provisions of the opinion, is
qualified in its entirety by reference to the full text of that opinion. CSFB
was not asked to opine on, and expressed no opinion with respect to, any matter
other than the fairness to MasterCard International of the percentage of the
total number of outstanding shares of MasterCard Incorporated common stock, as
adjusted, that will be held, as a group, by the European members of MasterCard
International as a result of the integration, giving effect to the conversion
and pursuant to the integration agreement. CSFB's opinion does not address
MasterCard International's underlying business decision to effect the conversion
and integration nor does it constitute a recommendation to any MasterCard
International principal member or to any other person as to how it should vote
or act on any matter relating to the conversion and integration. In addition,
CSFB did not make, and was not requested to make, any independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of Europay or
MasterCard International, nor was it furnished with any evaluations or
appraisals. MasterCard International did not impose any limitations upon CSFB
with respect to the investigations made or procedures followed by CSFB in
rendering its opinion. WE URGE THE PRINCIPAL MEMBERS OF MASTERCARD INTERNATIONAL
TO READ CSFB'S OPINION DATED AS OF THE DATE OF THIS PROXY STATEMENT-PROSPECTUS
CAREFULLY AND IN ITS ENTIRETY.

     In connection with rendering its opinion dated as of January 16, 2002,
CSFB, among other things:

     - reviewed certain business and financial information relating to Europay
       and MasterCard International, the forms of integration agreement and
       share exchange agreement annexed to this proxy statement-prospectus and
       the registration statement on Form S-4 of which this proxy
       statement-prospectus is a part;

     - reviewed other information, including financial forecasts, relating to
       Europay and MasterCard International provided to or discussed with CSFB
       by Europay and MasterCard International;

     - met with Europay's and MasterCard International's management to discuss
       the business and prospects of Europay and MasterCard International;

     - considered certain financial data of Europay and MasterCard International
       and compared it with similar data for publicly held companies in
       businesses similar to those of Europay and MasterCard International;
                                        54


     - considered the financial terms of certain other business combinations and
       other transactions which have recently been effected;

     - considered other information, financial studies, analyses and
       investigations and financial, economic and market criteria that CSFB
       deemed relevant; and

     - in connection with its analyses, relied upon the views of Europay's and
       MasterCard International's management concerning the business,
       operational and strategic benefits and implications of the integration,
       including financial forecasts provided to CSFB by Europay and MasterCard
       International relating to the synergistic values and operating cost
       savings expected to be achieved through a combination of the operations
       of Europay and MasterCard International.

     With MasterCard International's consent, CSFB assumed that the forms of
agreements described in and annexed to this proxy statement-prospectus will be
executed and delivered by the proposed parties to those agreements in the form
in which they are set forth or described in this proxy statement-prospectus and
that the transactions provided for by those agreements will be consummated in
the manner in which they are set forth in those agreements without amendment,
waiver or modification of any material term, condition or agreement contained in
those agreements.

     In connection with its analyses and opinions, CSFB did not assume any
responsibility for independently verifying the accuracy and completeness of the
information reviewed by CSFB and relied on its being complete and accurate in
all material respects. With respect to the financial forecasts of Europay and
MasterCard International that were provided to CSFB, CSFB assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of Europay's and MasterCard International's management as to the
future financial performance of Europay and MasterCard International and as to
the cost savings and other potential synergies anticipated to result from the
integration and assumed that the financial results, cost savings and synergies
set forth in those forecasts will be achieved in the amounts and at the times
specified. MasterCard International advised CSFB, and CSFB assumed, that the
financial forecasts of Europay and MasterCard International provided to CSFB
reflected the best currently available estimates and judgments of MasterCard
International's management as to the manner in which the factors, based on which
shares of common stock of MasterCard Incorporated will be allocated between the
European members of MasterCard International and the other members of MasterCard
International (as described under "Share Allocation and the Global
Proxy -- Reallocation of Shares at the Conclusion of the Transition Period"),
will impact the future financial operating results of New MasterCard. In its
analyses, CSFB made assumptions with respect to MasterCard International,
Europay, industry performance and regulatory, general business, economic, market
and financial conditions and other matters, many of which are beyond the control
of MasterCard International and Europay.

     CSFB's opinions were necessarily based upon information available to CSFB
and financial, economic, market and other conditions as they existed and could
be evaluated on the dates of those opinions. CSFB did not express any opinion as
to the actual value of the securities to be issued in the integration when
issued in the integration or the prices at which those securities may trade at
any time. CSFB did not consider the comparative book value, liquidation value or
fair market value of MasterCard International in preparing its opinions. CSFB's
opinions do not in any manner address the conversion or the merits of MasterCard
International's underlying business decision to engage in the integration, and
CSFB assumed no responsibility to update or revise its opinions based on
circumstances or events occurring after the dates of those opinions. CSFB
assumed that the integration would be accounted for as a purchase transaction.

     The summary of CSFB's analyses described below that were performed in
connection with its opinions, while summarizing the material portions of those
analyses, should not be taken as a complete description of the analyses
underlying CSFB's opinions. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances. Therefore, a fairness opinion is not readily
susceptible to summary description. In arriving at its opinions, CSFB made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, CSFB believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without
                                        55


considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying its analyses and the CSFB opinions. In
addition, CSFB did not derive any value solely from or draw any conclusion with
respect to fairness based solely upon any particular analysis. Moreover, an
evaluation of the results of these analyses is not entirely mathematical;
rather, these analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
transaction and values of the companies, business segments or transactions being
analyzed.

     CSFB's opinion dated as of January 30, 2001 was only one of the many
factors taken into consideration by the MasterCard International board of
directors in making its determination to approve the proposed integration and
the terms of the integration agreement. See "The Integration -- Reasons for the
Integration." The terms of the integration were determined through negotiations
between MasterCard International and Europay and were approved by the MasterCard
International board of directors. The decision to approve the terms of the
integration agreement and the proposed integration, including the percentage of
the total outstanding shares of common stock of MasterCard Incorporated to be
owned by the European members of MasterCard International as a result of the
integration, was solely that of the MasterCard International board of directors
and not that of CSFB.

     In connection with its opinion to the MasterCard International board of
directors dated January 30, 2001, CSFB performed a variety of financial
analyses. The material portions of the analyses performed by CSFB in connection
with rendering its opinions are summarized below. Certain of these summaries
include information presented in tabular format. In order to obtain a better
understanding of the financial analyses used by CSFB, these tables must be read
together with the accompanying narratives. The tables alone do not constitute a
complete description of the applicable financial analysis.

     Discounted Cash Flow/Discounted Future Value Apportionment Analysis.  CSFB
performed discounted cash flow and discounted future value analyses, both
including and excluding synergies expected to result from the integration. In
these analyses, CSFB determined the aggregate Europay shareholder ownership
percentages in the pro forma combined company implied by the relative cash flow
and future value contributions of MasterCard and Europay to the pro forma
combined company for each of three scenarios (in each case reflecting financial
projections relating to MasterCard International and Europay provided to or
discussed with CSFB by MasterCard International and Europay management): a "base
case," a "downside case" reflecting possible results if the base case
projections were not fully achieved, and an "upside case" reflecting possible
results if the base case projections were exceeded. CSFB did not make, and was
not requested to make, any independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of Europay or MasterCard International,
nor was it furnished with any evaluations or appraisals. To calculate the
ownership percentages for the European shareholders implied by the analyses,
CSFB took into account the existing cross-ownership interests between MasterCard
and Europay and MasterCard's existing 15% direct ownership interest in European
Payment Systems Services, Europay's transaction processing subsidiary.

     For the "base case" (for which MasterCard International management informed
CSFB that the reallocation formula would result in an aggregate European
shareholder common stock ownership in MasterCard Incorporated of approximately
33 1/3%), the following implied ownership percentages were indicated by the CSFB
analyses:

     - Discounted cash flow analysis without taking projected synergies into
       account: 27.6% to 35.9%.

     - Discounted cash flow analysis taking projected synergies into account:
       29.9% to 38.6%.

     - Discounted future value analysis without taking projected synergies into
       account: 29.8% to 35.4%.

     - Discounted future value analysis taking projected synergies into account:
       32.2% to 38.2%.

     For the "downside case" (for which MasterCard International management
informed CSFB that the reallocation formula would result in an aggregate
European shareholder common stock ownership in

                                        56


MasterCard Incorporated of approximately 26%), the following implied ownership
percentages were indicated by the CSFB analyses:

     - Discounted cash flow analysis without taking projected synergies into
       account: 19.8% to 26.0%.

     - Discounted cash flow analysis taking projected synergies into account:
       22.9% to 29.8%.

     - Discounted future value analysis without taking projected synergies into
       account: 20.7% to 24.7%.

     - Discounted future value analysis taking projected synergies into account:
       24.0% to 28.8%.

     For the "upside case" (for which MasterCard International management
informed CSFB that the reallocation formula would result in an aggregate
European shareholder common stock ownership in MasterCard Incorporated of
approximately 44%), the following implied ownership percentages were indicated
by the CSFB analyses:

     - Discounted cash flow analysis without taking projected synergies into
       account: 37.7% to 47.3%.

     - Discounted cash flow analysis taking projected synergies into account:
       39.3% to 48.9%.

     - Discounted future value analysis without taking projected synergies into
       account: 41.3% to 47.6%.

     - Discounted future value analysis taking projected synergies into account:
       42.8% to 49.2%.

     Contribution Analysis.  CSFB performed a relative contribution analysis to
determine the average of the percentage of the Europay contribution of projected
2004 revenues, earnings before interest, taxes, depreciation and amortization
(EBITDA), earnings before interest and taxes (EBIT) and net income to MasterCard
Incorporated for each of the base case, downside case and upside case described
above under "-- Discounted Cash Flow/Discounted Future Value Analysis." In
determining Europay's contribution to the pro forma combined entity, CSFB took
into account the existing cross-ownership interests between MasterCard
International and Europay and MasterCard International's existing 15% direct
ownership interest in EPSS, Europay's processing subsidiary.

     The results of this analysis are summarized in the table below:



                                   BASE CASE                          DOWNSIDE CASE                         UPSIDE CASE
                       ----------------------------------   ----------------------------------   ----------------------------------
FINANCIAL METRIC       WITH SYNERGIES   WITHOUT SYNERGIES   WITH SYNERGIES   WITHOUT SYNERGIES   WITH SYNERGIES   WITHOUT SYNERGIES
----------------       --------------   -----------------   --------------   -----------------   --------------   -----------------
                                                                                                
Revenues.............       25.4%             25.4%              23.4%             23.4%              37.7%             37.7%
EBITDA...............       35.8              32.8               28.1              24.0               45.8              43.9
EBIT.................       37.1              33.7               28.3              23.5               47.8              45.8
Net Income...........       35.8              32.5               27.2              22.6               46.4              44.4
Average..............       33.5%             31.1%              26.8%             23.4%              44.5%             43.0%


     In addition to the contribution analysis of projected 2004 financial
results described above, based on the same assumptions and projections CSFB
reviewed with the MasterCard International Board the projected Europay
contribution to the average of revenues, EBITDA, EBIT and net income of
MasterCard Incorporated for the years leading up to 2004:



                                                             2001   2002   2003   2004
                                                             ----   ----   ----   ----
                                                                      
Base Case
  Average with synergies...................................  18.9%  25.2%  30.0%  33.5%
  Average without synergies................................  22.0   24.8   28.4   31.1
Downside Case
  Average with synergies...................................  12.6   19.2   23.5   26.8
  Average without synergies................................  16.6   18.7   21.4   23.4
Upside Case
  Average with synergies...................................  31.5   39.1   42.5   44.5
  Average without synergies................................  33.6   38.8   41.6   43.0


                                        57



     Engagement of CSFB.  Under the terms of CSFB's engagement, for its
financial advisory services under its engagement letter CSFB (a) received
$750,000 upon the commencement of its engagement, (b) was entitled to receive
during its engagement up to four additional fees in quarterly installments of
$375,000 each, unless definitive agreements covering the conversion and
integration were earlier executed (CSFB has received a total of $1.5 million
under this provision of its engagement letter), (c) is entitled to receive a fee
of $250,000 in connection with the delivery of its opinion dated as of January
16, 2002 and (d) is entitled to receive a fee of $2 million, less one third of
the $1.5 million paid by MasterCard pursuant to clause (b) and the amounts paid
pursuant to clause (c), upon completion of the integration. MasterCard has also
agreed to indemnify CSFB and related persons and entities against various
liabilities, including liabilities under the federal securities laws, arising
out of CSFB's engagement and to reimburse CSFB for its reasonable out of pocket
expenses, including reasonable fees and expenses of its legal counsel, incurred
by CSFB in connection with its engagement.


     CSFB is a nationally recognized investment banking firm that is regularly
engaged in the valuation of businesses and their securities. MasterCard
International retained CSFB based on these qualifications. CSFB, in the ordinary
course of business has provided, and in the future may provide investment
banking and financial advisory services to MasterCard Incorporated or MasterCard
International for which it has received or expects to receive fees.

                                        58


                     SHARE ALLOCATION AND THE GLOBAL PROXY

INTRODUCTION

     Since the mid 1990s, the global proxy formula used by MasterCard
International to allocate equity rights at annual meetings of members has been
based solely on revenue received by MasterCard International on MasterCard
transactions. In connection with the conversion and integration, MasterCard
Incorporated will migrate to a new global proxy formula designed to take a more
comprehensive, balanced account of the contributions of member-stockholders to
MasterCard's business. In particular, the new global proxy calculation will
measure each member-stockholder's contribution to three key elements of
MasterCard's business -- gross dollar volume ("GDV"), gross acquiring volume
("GAV") and revenue -- and will also account for revenue and volume earned
principally in connection with MasterCard, Maestro and Cirrus-branded cards.
Revenue will account for one half, and GDV and GAV will each account for one
fourth, of the new global proxy calculation.

     The new global proxy calculation will be used for three purposes. First, in
conjunction with the apportionment of MasterCard Incorporated shares between
members within Europe and members outside of Europe described below, it will be
used to determine the initial allocation of shares to member-stockholders upon
the closing of the conversion and integration. Second, the new global proxy
calculation will be used to determine the reallocation of MasterCard
Incorporated shares among member-stockholders at the end of the three-year
transition period following the closing of the conversion and integration, also
in conjunction with the apportionment of shares between Europe and non-Europe
described below. Finally, it will be used on an ongoing basis to determine the
maximum number of shares of MasterCard Incorporated that a member-stockholder
may own and the minimum number of shares of MasterCard Incorporated that a
member-stockholder will be required to own. MasterCard Incorporated's
calculation of the global proxy for each member-stockholder will be considered
final and binding unless the board of directors determines that an error was
made in the computation, in which case the computation will be corrected in
accordance with directions of the board.

     In connection with the initial allocation of shares, the relevant period
for calculating the new global proxy will be the 12 month period ended December
31, 2000. (In contrast, the last global proxy using the historical, revenue-only
formula was calculated for the 12 month period ended September 30, 2001.) All
subsequent calculations of the new global proxy will be made on the basis of
each successive 12 month period beginning on the first business day of the
fiscal quarter following the closing of the conversion and integration. All
global proxy calculations will be made on an accrual basis of accounting. (In
contrast, the historical global proxy formula was calculated on a cash basis of
accounting). The board of directors of MasterCard Incorporated is empowered to
establish a record date in connection with each global proxy calculation for
purposes of determining the stockholders of record whose GDV, GAV and revenue
will be included in determining the relevant global proxy. For the initial
allocation of shares, the record date will be the closing date of the conversion
and integration.

     The new global proxy formula and the regional apportionment of shares are
described in the integration agreement and in the by-laws of MasterCard
Incorporated. Matters relating to the ec Pictogram shares are described
principally in the integration agreement.

     THE NEW GLOBAL PROXY FORMULA WILL ONLY TAKE ACCOUNT OF REVENUES AND VOLUMES
CONTRIBUTED BY PRINCIPAL MEMBERS OF MASTERCARD INTERNATIONAL, INCLUDING
AFFILIATE MEMBERS WHO PARTICIPATE INDIRECTLY IN THE MASTERCARD BUSINESS THROUGH
PRINCIPAL MEMBERS, CONSISTENT WITH THE HISTORICAL GLOBAL PROXY CALCULATION.
AFFILIATE MEMBERS WILL NOT RECEIVE ANY SHARES IN THE CONVERSION AND INTEGRATION,
BUT PRINCIPAL MEMBERS OF MASTERCARD INTERNATIONAL WILL RECEIVE SHARES BASED ON
THE NEW GLOBAL PROXY FORMULA THAT REFLECTS REVENUES AND VOLUMES CONTRIBUTED BY
THEIR RESPECTIVE AFFILIATES. FINANCIAL INSTITUTIONS THAT ARE MEMBERS OF MAESTRO
INTERNATIONAL INCORPORATED OR CIRRUS SYSTEMS, INC. BUT ARE NOT ALSO PRINCIPAL
MEMBERS OR AFFILIATES OF PRINCIPAL MEMBERS OF MASTERCARD INTERNATIONAL WILL NOT
RECEIVE ANY SHARES IN THE CONVERSION AND INTEGRATION BUT WILL BE ELIGIBLE TO
RECEIVE SHARES AT THE CONCLUSION OF THE TRANSITION PERIOD IF THEY APPLY FOR, AND
ARE GRANTED, PRINCIPAL MEMBERSHIP IN MASTERCARD INTERNATIONAL DURING THE
TRANSITION PERIOD.

                                        59


THE GLOBAL PROXY

     The Formula.  For each member-stockholder, the global proxy calculation
will be equal to the sum obtained by adding (A) .25 multiplied by a fraction,
the numerator of which is the member-stockholder's GDV and the denominator of
which is MasterCard Incorporated's total GDV attributable to all member-
stockholders, plus (B) .25 multiplied by a fraction, the numerator of which is
the member-stockholder's GAV and the denominator of which is MasterCard
Incorporated's total GAV attributable to all member-stockholders, plus (C) .50
multiplied by a fraction, the numerator of which is the sum of (1) all
non-travelers cheque revenues paid by the member-stockholder to MasterCard
Incorporated and its subsidiaries and (2) two times the travelers cheque
revenues paid by the member-stockholder to MasterCard Incorporated and its
subsidiaries, and the denominator of which is the sum of (1) all non-travelers
cheque revenues paid by all member-stockholders to MasterCard Incorporated and
its subsidiaries and (2) two times the travelers cheque revenues paid by all
member-stockholders to MasterCard Incorporated and its subsidiaries, in each
case for the applicable period. Travelers cheque programs shall be deemed to
have no GDV or GAV for purposes of the global proxy calculation. Only actual, as
opposed to estimated, GDV, GAV and revenues paid will be considered for purposes
of the global proxy calculation. In addition, for purposes of the global proxy
calculation:

     - GDV.  GDV means processed and non-processed issued volumes (including
       domestic and international retail purchases, cash transactions,
       convenience checks, on-us transactions, intra-processor transactions,
       local use only transactions and balance and commercial funds transfers)
       that occur as a result of one or more of (A) a transaction involving any
       one of MasterCard Incorporated's brands (e.g., MasterCard, Eurocard,
       Maestro, Cirrus and ec Pictogram) or (B) a non-MasterCard branded
       transaction involving a card that includes any one of MasterCard
       Incorporated's brand logos as well as other payment brand logos, provided
       that such other payment brands are not in direct competition with any
       MasterCard brands as determined by MasterCard Incorporated.

     - GAV.  GAV means processed and non-processed acquired volumes (including
       domestic and international retail purchases, cash transactions, on-us
       transactions, intra-processor transactions and local use only
       transactions) that occur as a result of one or more of (A) a transaction
       involving any one of MasterCard Incorporated's brands (e.g., MasterCard,
       Eurocard, Maestro, Cirrus and ec Pictogram) or (B) a non-MasterCard
       branded transaction involving a card that includes any one of MasterCard
       Incorporated's brand logos as well as other payment brand logos, provided
       that such other payment brands are not in direct competition with any
       MasterCard brands as determined by MasterCard Incorporated.

     - Revenue.  Revenues paid for a particular member-stockholder are, for any
       period, all revenues of MasterCard Incorporated on a consolidated basis,
       calculated in accordance with U.S. GAAP, that are generated by the
       activities of that member-stockholder, other than (1) any fees or other
       charges associated with the termination of that member-stockholder's
       membership in MasterCard International, (2) integration-related
       assessments paid by that member-stockholder, (3) other assessments, fees
       and charges paid by that member-stockholder in its capacity as a member
       of MasterCard International if those assessments, fees and charges were
       imposed on less than all of the members of MasterCard International
       (except for assessments, fees and charges pertaining to business
       development, ordinary course of business and other matters deemed to be
       includable by the management of MasterCard International in management's
       sole discretion) and (4) fines and penalties paid by that
       member-stockholder (except as determined includable in the sole
       discretion of the management of MasterCard International). For purposes
       of the initial allocation of shares associated with the closing of the
       conversion and integration, MasterCard intends generally to include fines
       and penalties in the calculation of revenues paid, except for termination
       fees.

     - Card Fee Assessment.  A card fee assessment means a bona fide, non de
       minimis fee expressed as a fixed amount in connection with a card.

                                        60


     - Volume-based Assessment.  A volume-based assessment means a bona fide,
       non de minimis assessment typically expressed as a percentage of the GDV
       or GAV associated with a particular type of transaction.

     GDV and GAV Volume Weightings.  In calculating GDV and GAV, each
member-stockholder's volume must be broken into four categories, each of which
is weighted differently for purposes of the calculation, as described below. The
weighted categories are designed to reflect the relative value of different
activities to MasterCard's overall business, and provide the highest recognition
to transactions that are fully assessed by MasterCard based on volume. Volumes
attributable to transactions involving only card-based assessments are accorded
relatively lower weight. Volumes are included in the global proxy calculation
whether they are assessed directly or the cards to which they relate are subject
to card fee assessments of the type contemplated by the applicable category of
volume. In addition, for each global proxy calculation performed prior to the
expiration of the transition period, volumes in the following categories will be
included even if they are not subject to volume-based or card fee assessments.
Finally, the volume weightings give significant credit to ec Pictogram-branded
volumes (a regional debit brand owned by Europay) and other similar debit
volumes, provided they have been converted to the Maestro brand or are the
subject of binding written commitments to convert to Maestro. Ordinarily, the
global proxy formula accounts only for volumes associated with MasterCard's
principal brands -- MasterCard, Maestro and Cirrus. As a result of negotiations
with Europay, proxy weightings have been extended to ec Pictogram and similar
regional debit volumes to give credit for the significant business currently
done under those brands in Europe. The conversion commitment has also been
implemented to encourage members to consistently migrate those volumes to
MasterCard's principal brands in the future. The ec Pictogram brand will be
owned by MasterCard Incorporated following the conversion and integration.

     - Volumes Weighted at 100%.  All of the following volumes are weighted at
       100% of actual volume: (1) volumes on cards that include a MasterCard
       brand logo and that are subject to volume-based assessments or card fee
       assessments, (2) Maestro and Cirrus processed debit volumes and (3)
       Maestro and Cirrus debit volumes that are subject to volume-based
       assessments, so long as Maestro, a brand representing a stored value
       application that is permitted to be used by members of MasterCard
       International and/or Cirrus is the sole acceptance brand on the card.

     - Volumes Weighted at 75%.  The following volumes are weighted at 75% of
       actual volume: ec Pictogram volumes and other similar debit volumes that
       in each case have been converted to Maestro volumes so long as Maestro, a
       brand representing a stored value application that is permitted to be
       used by members of MasterCard International and/or Cirrus is the sole
       acceptance brand on the card and the card is subject to card fee
       assessments.

     - Sliding Scale of Weightings for Certain Regional Debit Volumes.  Volumes
       for regional debit brands owned (or in the case of the initial allocation
       of shares to be owned) solely by MasterCard Incorporated on cards that
       include a Maestro and/or Cirrus logo are weighted at the following
       percentages for the period indicated; provided that such cards are
       subject to volume-based assessments or card fee assessments; and
       provided, further, that for calculations for the last year of the
       transition period through the year ending on the second anniversary of
       the end of the transition period, there is a binding written commitment
       to remove all acceptance brand logos other than the Maestro brand logo,
       the Cirrus brand logo or the logo of a brand representing a stored value
       application that is permitted to be used by members of MasterCard
       International, on the cards not later than the fifth anniversary of the
       first fiscal quarter beginning after the fiscal quarter in which the
       closing of the conversion and integration occurs:

      - 10% of such volumes for all calculations until the last year of the
        transition period;

      - 40% of such volumes for the last year of the transition period;

      - 30% of such volumes for the year ending on the one-year anniversary of
        the end of the transition period;

                                        61


      - 20% of such volumes for the year ending on the two-year anniversary of
        the end of the transition period; and

      - 10% of such volumes for subsequent years.

     - Volumes Weighted at 1%.  Volumes for (i) regional debit brands not owned
       by MasterCard Incorporated on cards that include a Maestro and/or Cirrus
       brand logo and are subject to volume-based assessments or card fee
       assessments and (ii) balance and commercial funds transfers relating to
       cards that are subject to volume-based or card fee assessments are
       weighted at 1%.

     Currency Conversion.  In performing the global proxy calculation, the
conversion of euros to U.S. dollars, to the extent necessary, will be based on
the average exchange rate during the twenty-day period ending on the day prior
to the applicable measurement date, which we refer to as the average currency
conversion rate, provided that during the transition period and for the two
years thereafter the average currency conversion rate shall be $.9565 U.S. = 1
euro for so long as 1 euro is not less than $.9065 U.S. and not greater than
$1.0065 U.S. In the event that the average currency conversion rate does not
fall within this range, the rate to convert euros to U.S. dollars will be $.9565
U.S. = 1 euro adjusted by the difference between such average currency
conversion rate and the upper or lower limit of the range, as applicable.


     For purposes of determining the global proxy calculation during the
transition period and for the two years thereafter, amounts denominated in the
currency of a country within the Europe region other than the euro will first be
converted into euros and subsequently converted into U.S. dollars in accordance
with the previous paragraph.


     Travelers Cheques.  The revenue component of the global proxy formula
provides that MasterCard International's travelers cheque members will calculate
their respective global proxies using 100% of revenues paid by them to
MasterCard Incorporated and its subsidiaries in connection with their travelers
cheque programs (in other words, revenues for travelers cheque members are
doubled before being discounted by the 50% factor set forth in the global proxy
formula). However, travelers cheque members will not receive credit for GDV or
GAV in connection with their global proxy calculations, as the integration
agreement provides that GDV and GAV will be deemed to be zero for travelers
cheque programs.

THE INITIAL ALLOCATION OF SHARES

     The allocation of shares of MasterCard Incorporated to each
member-stockholder upon the closing of the conversion and integration will be
determined in accordance with the detailed procedures described in the merger
agreement, the integration agreement and the by-laws of MasterCard Incorporated.
The new global proxy formula based on the 12 month period ended December 31,
2000, applied on a regional basis to Europe and non-Europe, will determine the
number of shares that members receive initially in the conversion and
integration. However, this outcome is the result of an integrated series of
transaction steps in the conversion and integration, as described more fully
below.

     Shares Issued in the Conversion.  In the conversion, each principal member
of MasterCard International, including each MasterCard principal member in
Europe, will receive a number of shares of class A redeemable and class B
convertible common stock of MasterCard Incorporated that is proportional to the
percentage of the total equity rights in MasterCard International that such
member held in accordance with the historic proxy formula in effect for the
period ended September 30, 2000. The historic global proxy calculation will be
used to determine the shares allocated in the conversion step only and will have
no further bearing on the outcome of the transaction.

     Shares Issued in the Integration.  In the integration, each shareholder of
Europay and MEPUK will receive a number of shares of class A redeemable and
class B convertible common stock of MasterCard Incorporated in exchange for its
shares of Europay or MEPUK, as the case may be, as specified in the share
exchange agreement and MEPUK agreement, respectively. To the extent practicable,
the shares issued in the integration step will be proportional to each
shareholder's direct (in the case of Europay shareholders) or indirect (in the
case of MEPUK shareholders) prior interest in Europay. Because all Europay and
MEPUK shareholders will be principal members of MasterCard International at the
closing of the conversion and
                                        62


integration, the issuance of additional shares in the integration will have the
effect, when taken together with the shares issued in the conversion, of
allocating 33 1/3% of the total shares of class A redeemable and class B
convertible common stock then outstanding to European members. Accordingly, the
shares issued in the integration will have the result of diluting current
non-European members' ownership from approximately 93% of MasterCard
International before the conversion and integration to 66 2/3% of MasterCard
Incorporated after the conversion and integration.

     Initial Reallocation of Shares Pursuant to the Global Proxy
Calculation.  At the closing of the conversion and integration, the shareholders
of Europay and MEPUK will be principal members of MasterCard in Europe.
Accordingly, the share issuances described above in connection with the
conversion and integration will produce in the aggregate two pools of shares,
one for European member-stockholders and the other for non-European
member-stockholders. The integration agreement provides that the shares of class
A redeemable and class B convertible common stock will then initially be
reallocated within each of the European and non-European pools of shares in
accordance with the new global proxy formula. This reallocation will occur as an
integral component of, and contemporaneously with, the closing of the conversion
and integration. Accordingly, the new global proxy formula will determine the
number of shares that members ultimately receive in the conversion and
integration; the number of shares received by European members may vary across
members compared to the number of Europay and/or MEPUK shares exchanged. Based
on the new global proxy calculation, each member-stockholder in Europe will be
entitled to a percentage of the European shares equivalent to the percentage
that its aggregate GDV, GAV and revenue represents of the total GDV, GAV and
revenue for Europe, using the methodology of the new global proxy. Similarly,
outside of Europe, each member-stockholder will be entitled to a percentage of
the non-European shares equivalent to the percentage that its aggregate GDV, GAV
and revenue represents of the total GDV, GAV and revenue outside of Europe,
using the methodology of the new global proxy.

     The accompanying proxy card sets forth the number of class A redeemable and
class B convertible shares of MasterCard Incorporated common stock that you, as
a current principal member of MasterCard International, will receive upon the
closing of the conversion and integration (including in connection with the
initial reallocation of shares described above). For principal members that are
also shareholders of Europay or MEPUK, the number of shares reported on the
proxy card includes all shares issued in connection with the acquisition of
their Europay or MEPUK stock in the integration. Principal members should note
that the number of shares set forth on the proxy card may be adjusted to reflect
changes in the attribution of ICA numbers between the date of the proxy card and
the closing date of the conversion and integration. ICA numbers are the primary
method used by MasterCard International to attribute revenues and volumes
associated with card activity to members for proxy and other purposes. For
example, if a principal member acquires ownership of an ICA number from another
principal member prior to the closing date but after the record date for the
proxy card, the shares to be issued in respect of the revenues and volumes
related to that principal ICA number will be distributed to the purchasing
member on the closing date, and the selling member will receive a corresponding
fewer number of shares as compared to the information printed on its proxy card.

     Member-stockholders other than travelers cheque members can also estimate
the aggregate number of class A redeemable and class B convertible shares of
MasterCard Incorporated to be allocated to them at the closing of the conversion
and integration using their own revenue and weighted GDV and GAV data and the
following figures:

     For the 12 months ended December 31, 2000:


                                                                       
            Aggregate Weighted European GDV (gross euro issuing volume):  E304.047 billion
            Aggregate Weighted European GAV (gross euro acquiring
              volume):                                                    E303.614 billion
            Aggregate European Revenue:                                   E351.6 million
            Aggregate Weighted non-European GDV:                          $546.786 billion
            Aggregate Weighted non-European GAV:                          $530.615 billion
            Aggregate non-European Revenue:                               $1,365.2 million


                                        63


     The formula to be applied with these figures is as follows:


                                                              
     (0.5)(Revenue paid by Member)        (0.25)(Member Weighted GDV)        (0.25)(Member Weighted GAV)
                                      +                                  +
     -----------------------------        ---------------------------        ---------------------------
           Aggregate Revenue                Aggregate Weighted GDV             Aggregate Weighted GAV


For purposes of this calculation, European members should use the aggregate
European figures and non-European members should use the aggregate non-European
figures. For ease of calculation, this formula does not account for travelers
cheque revenues and, as such, produces an estimated result only. However,
travelers cheque revenues do not have a material impact on the proxy calculation
for principal and association members that are not also travelers cheque
members. Travelers cheque members should consult the formula described under the
caption "The Global Proxy -- The Formula" and set forth in the integration
agreement to prepare an estimate of the aggregate number of shares of class A
redeemable and class B convertible common stock of MasterCard Incorporated to be
allocated to them.

     The foregoing formula produces a percentage that can be multiplied by the
number of shares in the applicable pool of shares to derive an estimate of the
number of shares to be received in the conversion and integration. A description
of the total number of shares allocated to each pool is provided below.

     For all members, 84% of the shares received will be in the form of class A
redeemable common stock and 16% of the shares received will be in the form of
class B convertible common stock. In addition, as discussed above, the shares
issued upon the closing of the conversion and integration will result in
European member-stockholders receiving shares of class A redeemable and class B
convertible common stock that together represent 33 1/3% of all of the shares of
class A redeemable common stock and class B convertible common stock together
outstanding. The shares of class A redeemable common stock issued to the
European member-stockholders will represent 28%, and the shares of class B
convertible common stock issued to the European member-stockholders will
represent 5 1/3%, of the respective total number of shares of class A redeemable
common stock and class B convertible common stock together outstanding
immediately after the closing of the conversion and integration. The remaining
class A redeemable and class B convertible common stock, representing in the
aggregate 66 2/3% of the class A redeemable and class B convertible common stock
together outstanding, will be held by the non-European member-stockholders of
MasterCard. The shares of class A redeemable common stock issued to the
non-European member-stockholders will represent 56%, and the shares of class B
convertible common stock issued to the non-European member-stockholders will
represent 10 2/3%, of the total number of shares of class A redeemable common
stock and class B convertible common stock together outstanding immediately
after the closing of the conversion and integration.

     Accordingly, immediately after the closing of the conversion and
integration, shares of MasterCard Incorporated class A redeemable and class B
convertible common stock will be allocated as follows:



                                                 EUROPEAN      NON-EUROPEAN
                                                  MEMBER          MEMBER       TOTAL SHARE
                                               STOCKHOLDERS    STOCKHOLDERS    DISTRIBUTION
                                               ------------    ------------    ------------
                                                                      
class A redeemable...........................   28,000,000      56,000,000      84,000,000
class B convertible..........................    5,333,333      10,666,667      16,000,000
                                                ----------      ----------     -----------
          Total..............................   33,333,333      66,666,667     100,000,000
                                                ==========      ==========     ===========


     For the purposes of the global proxy calculation, European
member-stockholders constitute those member-stockholders whose revenue and
volume is generated from activity from and in Europe. Europe is defined to
include the following countries: Albania, Andorra, Armenia, Austria, Azerbaijan,
Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Channel Islands, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany,
Gibraltar, Greece, Hungary, Iceland, Ireland, Israel, Italy, Kazakhstan,
Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia (former
Yugoslav Republic), Malta, Moldova, Monaco, Netherlands, Norway, Poland,
Portugal, Romania, Russian Federation, San Marino, Slovakia, Slovenia, Spain,
Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom,
Uzbekistan, Vatican City and Yugoslavia (Serbia and Montenegro).

                                        64


REALLOCATION OF SHARES AT THE CONCLUSION OF THE TRANSITION PERIOD

     During the three year transition period after the closing of the conversion
and integration, the member-stockholders will be entitled to the class A
redeemable and class B convertible common stock that they held as of the closing
of the transaction, regardless of changes in the respective global proxy
calculations of those member-stockholders during the transition period, provided
that they remain as principal members of MasterCard International and do not
sell all or substantially all of their MasterCard card portfolios. Financial
institutions that become principal members of MasterCard International after the
period of the global proxy calculation used in connection with the initial
allocation of shares will be eligible to be allocated shares at the end of the
transition period in accordance with procedures to be determined by the board of
directors. Until shares are allocated, those financial institutions will not be
entitled to vote at any meetings of stockholders of MasterCard Incorporated.

     The reallocation of shares of MasterCard Incorporated at the conclusion of
the three year transition period will be determined according to a multi-step
process. First, the number of class B convertible shares that constitute ec
Pictogram shares will be determined in accordance with the process described
below. Second, the class B convertible shares (other than ec Pictogram shares)
will be converted into class A redeemable shares on a one-for-one basis. Third,
all class A redeemable shares will be reapportioned between Europe and
non-Europe using the procedures described below. Fourth, each member-stockholder
will be allocated class A redeemable shares according to the new global proxy,
again calculated on both a European and non-European basis, as described in more
detail below.

     As a result of this reallocation (and the subsequent reallocation involving
ec Pictogram shares), member-stockholders may ultimately receive more or fewer
shares than initially allocated to them, depending on the relative performance
of the Europe region and their individual global proxy calculations at the time.
If a member's revenue contribution, GDV and/or GAV during the period prior to
reallocation grows more slowly than the membership as a whole, if any of these
amounts decline for a member relative to other members, or if a member with ec
Pictogram volumes fails to convert these to Maestro as required, the member may
be entitled to fewer shares upon reallocation than at the closing of the
conversion and integration. Members receiving additional shares upon
reallocation will do so pursuant to rights initially granted with all shares of
class A redeemable and class B convertible common stock of MasterCard
Incorporated.

     ec Pictogram Shares.  ec Pictogram shares are class B convertible shares
that do not convert to class A redeemable shares at the conclusion of the
transition period. Instead, ec Pictogram shares will convert to class A
redeemable shares on the second anniversary of the end of the transition period.
This additional two-year holding period is designed to recognize that additional
time may be needed before the transaction volumes associated with ec Pictogram,
a regional debit program owned by Europay, can be converted to Maestro volumes.
All class B convertible shares representing ec Pictogram shares become
non-voting at the end of the transition period when the other class B
convertible shares convert to class A redeemable shares.

     The number of ec Pictogram shares will be calculated at the end of the
transition period according to the following procedures:

     - The aggregate global proxy calculation of Europe during the third year of
       the transition period will be determined.

     - Then, a simulated global proxy will be calculated assuming that certain
       ec Pictogram transactions are converted to Maestro transactions as of the
       beginning of the third year of the transition period. Because Maestro
       transactions are accorded a higher GDV and GAV weighting than ec
       Pictogram transactions, the simulated result is likely to be higher than
       the actual European aggregate global proxy calculation. ec Pictogram
       transactions will be accorded a higher weighting in the simulated proxy
       if they are associated with binding contracts to convert to Maestro
       within a two-year period following the end of the transition period.

     - The difference between the actual global proxy and the simulated global
       proxy results described above, measured in terms of a percentage of the
       outstanding class A redeemable common stock and class B convertible
       common stock of MasterCard Incorporated, will determine the number of
       shares of class B
                                        65


       convertible common stock that constitutes the ec Pictogram shares. If the
       simulated global proxy is equal to or less than the actual global proxy
       (as measured), there will be no ec Pictogram shares.

     - Notwithstanding the preceding paragraph, ec Pictogram shares cannot
       exceed 5 1/3% of the total shares of MasterCard Incorporated then
       outstanding. In addition, ec Pictogram shares will be reduced by a
       percentage equal to the percentage of any over-apportionment of shares to
       Europe in connection with the thresholds described below under the
       heading "-- Reapportionment of class A redeemable Shares Between Europe
       and Non-Europe."

     Reapportionment of Class A Redeemable Shares Between Europe and
Non-Europe.  At the end of the three-year transition period, MasterCard
Incorporated will determine the global proxy calculation of all
member-stockholders (calculated on a single worldwide basis) for the last 12
months of the transition period. The European member-stockholders will be
entitled to more or fewer class A redeemable shares depending upon their
aggregate global proxy calculation, and the non-European member-stockholders
will be entitled to the remaining class A redeemable shares. The purpose of the
reapportionment is to permit the final allocation of shares of MasterCard
Incorporated to be based on the relative aggregate global proxy calculations of
the European and non-European areas during the last year of the transition
period. Specifically:

     - Europe Less than or Equal to 26%.  If the global proxy calculation
       indicates that European member-stockholders in the aggregate represent
       26% or less of the worldwide global proxy calculation for the last year
       of the transition period, then the European member-stockholders will be
       entitled to an allocation of shares of class A redeemable common stock
       that represents 26% of the number of shares of outstanding class A
       redeemable common stock and class B convertible common stock.

     - Europe Greater than 26% but Less than or Equal to 28%.  If the global
       proxy calculation indicates that European member-stockholders in the
       aggregate represent greater than 26% but less than or equal to 28% of the
       worldwide global proxy calculation for the last year of the transition
       period, then the European member-stockholders will be entitled to an
       allocation of shares of class A redeemable common stock that represents
       28% of the number of shares of outstanding class A redeemable common
       stock and class B convertible common stock.

     - Europe Greater than 28%.  If the global proxy calculation indicates that
       European member-stockholders in the aggregate represent greater than 28%
       of the worldwide global proxy calculation for the last year of the
       transition period, then the European member-stockholders will be entitled
       to an allocation of shares of class A redeemable common stock that is
       equal in percentage terms to their aggregate global proxy calculation for
       the last year of the transition period, up to a maximum amount, when
       taken together with any ec Pictogram shares, of 44% of the number of
       shares of outstanding class A redeemable common stock and class B
       convertible common stock.

Because of the conversion of the class B convertible common stock at the end of
the transition period, the only class B convertible common stock outstanding at
the time of this calculation will be the ec Pictogram shares, if any. In the
reapportionment, stockholders of MasterCard Incorporated whose initial share
allocations decrease will return shares initially allocated to them to
MasterCard Incorporated, which will deliver shares to stockholders whose initial
share allocations increase.

     Each Member-Stockholder's Global Proxy Calculation.  As in the case of the
allocation of shares at the closing, the apportionment of class A redeemable
shares between Europe and non-Europe described above will produce two pools of
class A redeemable shares, one for European member-stockholders and the other
for non-European member-stockholders. The allocation of class A redeemable
shares within each pool will be determined according to the new global proxy
calculated on a regional basis for the last year of the transition period, as
described above under the heading "-- The Initial Allocation of
Shares -- Initial Reallocation of Shares Pursuant to the Global Proxy
Calculation."

CONVERSION AND REALLOCATION OF EC PICTOGRAM SHARES

     At the end of the additional two-year holding period, all ec Pictogram
shares will be converted to class A redeemable shares, and the class A
redeemable shares will then be subject to reallocation. European member-

                                        66


stockholders with ec Pictogram volumes that have converted to Maestro volumes
will be entitled to some or all of those class A redeemable shares depending
upon the percentage of ec Pictogram volumes that have actually been converted to
Maestro by that time. Non-European member-stockholders will be entitled to the
balance, which will be distributed to those member-stockholders in accordance
with the new global proxy formula based on the 12 month period ending at the end
of the additional two-year holding period. Any reallocation of class A
redeemable shares resulting from the conversion of ec Pictogram shares will be
effected by a return of shares to MasterCard Incorporated and delivery of shares
by MasterCard Incorporated. Members receiving additional shares upon
reallocation will do so pursuant to rights initially granted with all shares of
class A redeemable and class B convertible common stock of MasterCard
Incorporated.

GLOBAL PROXY CALCULATION FOLLOWING THE TRANSITION PERIOD AND CONVERSION OF THE
EC PICTOGRAM SHARES

     Following the transition period and the conversion of the ec Pictogram
shares to class A redeemable voting shares, the global proxy calculation will be
performed on an individual member-stockholder basis according to the procedures
described above under the heading "-- The Global Proxy." The European and
non-European areas will cease to have any significance in connection with the
determination of the global proxy. After the transition period,
member-stockholders will be required to maintain an ownership percentage of
MasterCard's outstanding common stock of not less than 75% nor more than 125% of
that member-stockholder's most recent global proxy calculation. Stockholders may
be required to purchase or sell shares of MasterCard Incorporated in order to
satisfy these requirements within 12 months of receipt of notice from MasterCard
Incorporated that such purchase or sale is required. Any sales of shares would
ordinarily constitute taxable transactions. Stockholders who need to sell shares
in order to satisfy the 125% requirement are obligated under the bylaws of
MasterCard Incorporated to accept the highest price offered to them for the
shares that are required to be sold.

     To the extent that member-stockholders are required to purchase shares in
order to satisfy the 75% minimum ownership requirement, shares will be available
either directly from MasterCard Incorporated or from other member-stockholders
that either are required to sell shares in order to satisfy the 125% maximum
ownership requirement or otherwise desire to sell shares. The board of directors
of MasterCard Incorporated is authorized to establish procedures by which shares
of MasterCard Incorporated common stock will be traded among member-stockholders
or purchased or sold by MasterCard. Methods for the purchase and disposition of
shares may include some or all of the following: an on-line bulletin board that
matches buyers and sellers of shares; a periodic auction conducted on behalf of
MasterCard Incorporated for buyers and sellers of shares; and directly
negotiated purchases and sales of shares. The price at which shares may be
purchased or sold will be determined through these methods. MasterCard
Incorporated will not charge member-stockholders any commissions for
facilitating trading in its shares.

     MasterCard Incorporated will purchase or sell its common stock subject to
its having sufficient capital available to effect each purchase transaction, and
only if each purchase or sale transaction is permitted under the laws, rules and
regulations applicable to MasterCard Incorporated at the time (including
securities laws). In particular, to the extent any offer by MasterCard
Incorporated to purchase its shares constitutes a tender offer under the
Exchange Act, MasterCard Incorporated will comply with the applicable tender
offer rules and regulations. In addition, MasterCard Incorporated will undertake
activities to facilitate trading of its common stock among member-stockholders
only to the extent such activities are permitted under the federal and state
securities laws of the United States and related rules and regulations. Any
shares subsequently sold by MasterCard Incorporated may not be registered under
the Securities Act of 1933, as amended, and accordingly may be subject to resale
restrictions under the Securities Act.

                                        67


               UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets and statements of income of
MasterCard International and Europay and give pro forma effect to the conversion
and integration.

     We are providing the following information to aid you in your analysis of
the financial aspects of the conversion and integration. We derived this
information from the separate audited financial statements of MasterCard
International for the year ended December 31, 2000, the audited financial
statements of Europay for the year ended December 31, 2000, and the unaudited
consolidated interim financial statements of each of MasterCard International
and Europay for the nine months ended September 30, 2001. The historical
financial information provided for Europay was prepared in accordance with U.S.
GAAP. Refer to Note 15 to the unaudited consolidated interim financial
statements of Europay as of June 30, 2001 and for the six months ended June 30,
2001 and 2000, and Note 22 to the Consolidated Financial Statements of Europay
as of December 31, 2000 and December 31, 1999 and for the years ended December
31, 2000, 1999 and 1998, for reconciliations in euros of the historical Europay
financial information prepared in accordance with Belgian GAAP to the
information prepared in accordance with U.S. GAAP. The information is only a
summary and you should read it in conjunction with our historical financial
statements and related notes contained elsewhere in this proxy
statement-prospectus.

     MasterCard International's acquisition of Europay will be accounted for
using the purchase method of accounting based upon the estimated value of the
shares of MasterCard Incorporated being given in exchange for the shares of
Europay on the initial allocation date. The pro forma allocation of the purchase
price to the tangible and identifiable intangible assets acquired and
liabilities assumed is based upon management's estimates, after consultation
with its advisors, of the respective fair values of Europay assets and
liabilities as of September 30, 2001. However, such allocation is preliminary
and is subject to the completion of the conversion and integration. Accordingly,
the final allocation of the purchase price could differ materially from the pro
forma amounts. Identifiable intangible assets other than goodwill were estimated
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations". The purchase price in excess of tangible and
identifiable intangible assets acquired and liabilities assumed has been
allocated to goodwill. In accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets," goodwill and other intangible assets resulting from the
integration that have indefinite useful lives will not be amortized.

     At the end of the three-year transition period and on the second
anniversary thereof shares of MasterCard Incorporated will be reallocated among
member-stockholders. See "Share Allocation and the Global Proxy." Certain
member-stockholders of MasterCard Incorporated whose initial share allocations
decrease will return shares to MasterCard Incorporated, which will deliver
shares to member-stockholders whose initial share allocations increase.
MasterCard Incorporated will not receive any net consideration for the
reallocated shares, nor will there be any increase or decrease in the total
amount of shares outstanding. There will be no change in the stockholders'
equity of MasterCard Incorporated as a result of the reallocations.


     The transaction provides that the number of shares allocated to former
shareholders of Europay will increase or decrease at the end of the transition
period as a result of the application of the global proxy calculation, as
described under the heading "Share Allocation and The Global Proxy". MasterCard
Incorporated is currently considering whether these share reallocations give
rise to contingent consideration at the end of the transition period. If these
share reallocations are considered to be contingent consideration, MasterCard
Incorporated will record an appropriate adjustment to the purchase price and
correspondingly, goodwill and stockholders' equity, based on the fair value of
the stock of MasterCard Incorporated. Any fair value ascribed would be based on
an independent appraisal of MasterCard Incorporated. As any contingency will not
be resolved until the end of the three-year transition period, MasterCard
Incorporated is presently unable to determine the resolution of any potential
contingent consideration. Accordingly, the unaudited pro forma combined
financial information does not give effect to any potential contingent
consideration.


                                        68


     The unaudited pro forma condensed combined statements of income assume that
the conversion and integration were effected on January 1, 2000. The unaudited
pro forma condensed combined balance sheet assumes that the conversion and
integration were effected on September 30, 2001.

     The unaudited pro forma combined financial information is presented for
illustrative purposes only. No separate pro forma adjustment is required for the
integration of MEPUK as it will have no assets or liabilities other than shares
in Europay at the close of the transaction. You should not rely on the pro forma
combined financial information as being indicative of the historical results
that would have been achieved had the companies always been consolidated or the
future results that the combined company will achieve after the conversion and
integration.

                                        69


                            MASTERCARD INCORPORATED

                 UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)



                                                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                                      ------------------------------------------------------------------
                                                                                             PRO FORMA
                                       MASTERCARD                         PRO FORMA          MASTERCARD
                                      INTERNATIONAL    EUROPAY(1)(2)    ADJUSTMENTS(3)      INCORPORATED
                                      -------------    -------------    --------------      ------------
                                                                                
REVENUE.............................   $1,308,630        $193,747          $(9,963)(A)       $1,489,476
                                                                            (2,938)(F)

OPERATING EXPENSES
General & administrative............      589,453          95,673           (9,963)(A)          672,001
                                                                            (3,162)(F)

Advertising & market development....      438,772          53,389              228(F)           492,389
Depreciation........................       27,970           9,102           (1,249)(B)           35,823
Amortization........................       24,224           2,910            7,534(C)            34,668
                                       ----------        --------          -------           ----------
          Total Operating
            Expenses................    1,080,419         161,074           (6,612)           1,234,881

Other Income and Expense............        8,300          (2,158)             706(E)             6,848
                                       ----------        --------          -------           ----------

INCOME BEFORE INCOME TAXES..........      236,511          30,515           (5,583)             261,443
Income Tax..........................       90,743          13,043           (3,239)(D)          100,547
Cumulative effect of change in
  accounting principle, net of
  tax...............................           --            (489)              --                 (489)
                                       ----------        --------          -------           ----------
NET INCOME..........................   $  145,768        $ 16,983          $(2,344)          $  160,407
                                       ==========        ========          =======           ==========

NUMBER OF SHARES....................                                                            100,000(G)
BASIC AND DILUTED EARNINGS PER
  SHARE.............................          N/A                                            $     1.60(H)




                                                    FOR THE YEAR ENDED DECEMBER 31, 2000
                                    ---------------------------------------------------------------------
                                                                                              PRO FORMA
                                     MASTERCARD                           PRO FORMA           MASTERCARD
                                    INTERNATIONAL    EUROPAY(1)(2)     ADJUSTMENTS(3)        INCORPORATED
                                    -------------    -------------    -----------------      ------------
                                                                                 
REVENUE...........................   $1,571,215        $237,673           $   (297)(A)        $1,803,041
                                                                            (5,550)(F)

OPERATING EXPENSES
General & administrative..........      742,807         147,084               (297)(A)           882,901
                                                                            (6,693)(F)

Advertising & market
  development.....................      596,539          64,731                542(F)            661,812
Depreciation......................       34,728          10,869               (236)(B)            45,361
Amortization......................       24,669           2,977             13,406(C)             41,052
                                     ----------        --------           --------            ----------
          Total Operating
            Expenses..............    1,398,743         225,661              6,722             1,631,126

Other Income and Expense..........       27,759           1,899                229(E)             29,887
                                     ----------        --------           --------            ----------

INCOME BEFORE INCOME TAXES........      200,231          13,911            (12,340)              201,802
Income Tax........................       82,082           6,002             (4,935)(D)(F)         83,149
Cumulative effect of change in
  accounting principle, net of
  tax.............................           --          (2,800)                --                (2,800)
                                     ----------        --------           --------            ----------
NET INCOME........................   $  118,149        $  5,109           $ (7,405)           $  115,853
                                     ==========        ========           ========            ==========

NUMBER OF SHARES..................                                                               100,000(G)
BASIC AND DILUTED EARNINGS PER
  SHARE...........................          N/A                                               $     1.16(H)


          See notes to unaudited pro forma combined income statements.
                                        70


NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS (IN THOUSANDS)

(1) Euro amounts are translated into U.S. dollars based on a conversion rate of
    1.1193 and 1.1071 euros per U.S. dollar, the average exchange rates between
    U.S. dollars and euros for the nine month period ended September 30, 2001
    and the year ended December 31, 2000, respectively.

(2) (A) A reconciliation of the Europay pro forma income statement for the nine
        months ended September 30, 2001 prepared in accordance with Belgian GAAP
        to the Europay pro forma income statement for the nine months ended
        September 30, 2001 prepared in accordance with U.S. GAAP as presented is
        provided below.



                                            BELGIAN    RECONCILING        U.S.
                                              GAAP        ITEMS           GAAP
                                            --------   -----------      --------
                                                               
REVENUE...................................  $275,954    $(82,207)(a)    $193,747
OPERATING EXPENSES
General & administrative..................   182,319     (86,646)(b)      95,673
Advertising & market development..........    53,389          --          53,389
Depreciation..............................     5,158       3,944(c)        9,102
Amortization..............................     2,648         262(d)        2,910
                                            --------    --------        --------
     Total Operating Expenses.............   243,514     (82,440)        161,074
Other Income and Expense..................    (1,975)       (183)(e)      (2,158)
                                            --------    --------        --------
INCOME BEFORE INCOME TAXES................    30,465          50          30,515
Income Tax................................    13,134         (91)(f)      13,043
Cumulative effect of changes in accounting
  principle, net of tax...................        --        (489)(g)        (489)
                                            --------    --------        --------
NET INCOME................................  $ 17,331    $   (348)       $ 16,983
                                            ========    ========        ========


Adjustments between Belgian GAAP and U.S. GAAP relate to the following:


     (a)  REVENUE


          Reconciling items totaling $82,207 that decrease revenue recorded
          under Belgian GAAP to conform with U.S. GAAP include: the elimination
          of revenue relating to transactions under the alliance agreement
          between MasterCard International and Europay, as Europay acts as
          MasterCard's agent rather than a principle in these transactions, of
          $81,128; and the deferral and amortization of licensing fee revenue
          required under U.S. GAAP over the term of the agreement or expected
          period of performance of $1,079.


     (b)  GENERAL & ADMINISTRATIVE


          Reconciling items totaling $86,646 that decrease general &
          administrative expense recorded under Belgian GAAP to conform with
          U.S. GAAP include: the elimination of expense relating to transactions
          under the alliance agreement between MasterCard International and
          Europay of $81,128; adjustments required to record derivative
          financial instruments at fair value, relating to qualifying hedges
          under Belgian GAAP which are recorded under the accrual method, that
          do not meet the hedge documentation or effectiveness criteria under
          U.S. GAAP of $1,701; the reversal of rental expense due to the
          capitalization of leases under U.S. GAAP of $3,540; and increased
          expense relating to the difference between cost treatment required
          under U.S. GAAP and the fair value method used under Belgian GAAP for
          "know-how" contributed as part of initial investment equity of $277.


     (c)  DEPRECIATION


          Reconciling items totaling $3,944 that increase depreciation expense
          recorded under Belgian GAAP to conform with U.S. GAAP include:
          depreciation of capitalized interest on borrowings and

                                        71



          other obligations for assets under U.S. GAAP of $65; differences in
          depreciation methods including application of the half-year convention
          method under U.S. GAAP resulting in reduced depreciation expense of
          $914; and increased depreciation expense of $2,965 related to lease
          agreements that are recorded as capital leases under U.S. GAAP and as
          operating leases under Belgian GAAP.



     (d)  AMORTIZATION


          Reconciling items of $262 that increase amortization expense recorded
          under Belgian GAAP to conform with U.S. GAAP consist of increased
          amortization expense as a result of internally developed software
          costs that are capitalized under U.S. GAAP.


     (e)  OTHER INCOME AND EXPENSE


          Reconciling items totaling $183 that reduce other income and expense
          under Belgian GAAP to conform with U.S. GAAP include: decreased
          interest expense of $34 due to the capitalization of interest on
          borrowings and other obligations for assets under U.S. GAAP; and
          increased interest expense on leases required to be recorded as
          capital leases under U.S. GAAP, net of gains recorded on the
          termination of capital leases under U.S. GAAP due to the revision of
          lease terms of $217.


     (f)  INCOME TAX


          Reconciling item of $91 that reduces income tax expense under Belgian
          GAAP to conform with U.S. GAAP relates to the tax impact of
          reconciling items.


     (g)  CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE, NET OF TAX


          Reconciling item of $489 represents a cumulative effect adjustment to
          net income to recognize at fair value all derivative instruments that
          were designated as cash flow hedging instruments upon adoption of
          Statement of Financial Accounting Standard ("SFAS") No. 133/138,
          "Accounting for Derivative Instruments and Hedging Activities".

     (B)  A reconciliation of the Europay pro forma income statement for the
          year ended December 31, 2000 prepared in accordance with Belgian GAAP
          to the Europay pro forma income statement for the year ended December
          31, 2000 prepared in accordance with U.S. GAAP as presented is
          provided below.



                                            BELGIAN    RECONCILING        U.S.
                                              GAAP        ITEMS           GAAP
                                            --------   -----------      --------
                                                               
REVENUE...................................  $332,250    $(94,577)(a)    $237,673
OPERATING EXPENSES
General & administrative..................   243,764     (96,680)(b)     147,084
Advertising & market development..........    64,731          --          64,731
Depreciation..............................     7,292       3,577(c)       10,869
Amortization..............................     2,772         205(d)        2,977
                                            --------    --------        --------
     Total Operating Expenses.............   318,559     (92,898)        225,661
Other Income and Expense..................     1,393         506(e)        1,899
                                            --------    --------        --------
INCOME BEFORE INCOME TAXES................    15,084      (1,173)         13,911
Income Tax................................     6,726        (724)(f)       6,002
Cumulative effect of changes in accounting
  principle, net of tax...................        --      (2,800)(g)      (2,800)
                                            --------    --------        --------
NET INCOME................................  $  8,358    $ (3,249)       $  5,109
                                            ========    ========        ========


                                        72


Adjustments between Belgian GAAP and U.S. GAAP relate to the following:

     (a)  REVENUE

          Reconciling items totaling $94,577 that decrease revenue recorded
          under Belgian GAAP to conform with U.S. GAAP include: the elimination
          of revenue relating to transactions under the alliance agreement
          between MasterCard International and Europay, as Europay acts as
          MasterCard's agent rather than a principle in these transactions, of
          $93,814; and the deferral and amortization of licensing fee revenue
          required under U.S. GAAP over the term of the agreement or expected
          period of performance of $763.

     (b)  GENERAL & ADMINISTRATIVE


          Reconciling items totaling $96,680 that decrease general &
          administrative expense recorded under Belgian GAAP to conform with
          U.S. GAAP include: the elimination of expense relating to transactions
          under the alliance agreement between MasterCard International and
          Europay of $93,814; increased expenses of net $1,445 representing
          adjustments for certain contracts accounted for by Europay as hedges
          that do not meet the criteria for hedge accounting under U.S. GAAP and
          premiums paid for hedge contracts that are carried at cost by Europay,
          whereas they are amortized over the life of the derivative contract
          under U.S. GAAP; the reversal of rental expense due to capitalization
          of leases under U.S. GAAP of $4,828; increased expense relating to the
          difference between cost treatment required under U.S. GAAP and the
          fair value method used under Belgian GAAP for "know-how" contributed
          as part of initial investment equity of $243; increased expense of
          $504 relating to the change during 2000 in pension benefit cost
          recorded in accordance with SFAS No. 87; and an increase to the
          carrying value of investments under the equity method of $230.


     (c)  DEPRECIATION


          Reconciling items totaling $3,577 that increase depreciation expense
          recorded under Belgian GAAP to conform with U.S. GAAP include:
          depreciation of capitalized interest on borrowings and other
          obligations for assets under U.S. GAAP of $86; differences in
          depreciation methods including application of the half-year convention
          method under U.S. GAAP resulting in reduced depreciation expense of
          $459; and increased depreciation expense of $3,950 related to lease
          agreements that are recorded as capital leases under U.S. GAAP and as
          operating leases under Belgian GAAP.


     (d)  AMORTIZATION

          Reconciling items of $205 that increase amortization expense recorded
          under Belgian GAAP to conform with U.S. GAAP consist of increased
          amortization expense as a result of internally developed software
          costs that are capitalized under U.S. GAAP.

     (e)  OTHER INCOME AND EXPENSE

          Reconciling items totaling $506 that increase other income and expense
          under Belgian GAAP to conform with U.S. GAAP include: decreased
          interest expense of $54 due to the capitalization of interest on
          borrowings and other obligations for assets under U.S. GAAP; increased
          interest expense on leases required to be recorded as capital leases
          under U.S. GAAP of $254; and income of $706 resulting from the
          difference between cost treatment under U.S. GAAP and the fair value
          method used under Belgian GAAP of "know-how" contributed as part of
          initial investment equity included in capitalized intangible assets.

     (f)  INCOME TAX

          Reconciling item of $724 that reduces income tax expense under Belgian
          GAAP to conform with U.S. GAAP relate to the tax impact of reconciling
          items.

                                        73


     (g)  CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE, NET OF TAX

          Reconciling item of $2,800 represent a cumulative effect adjustment to
          net income relating to the deferral of licensing fee revenue.

     For a more detailed explanation of the nature of the Belgian GAAP to U.S.
     GAAP reconciling items see Note 15 to the unaudited consolidated interim
     financial statements of Europay as of June 30, 2001 and December 31, 2000
     and for the six months ended June 30, 2001 and 2000 included elsewhere in
     this proxy statement-prospectus.

(3) The pro forma financial statements have been prepared to reflect the
    conversion of MasterCard International from a member-based organization to a
    stock company and the integration of Europay, MEPUK and MasterCard. No
    separate pro forma adjustment is required for the integration of MEPUK as it
    will have no assets or liabilities other than shares in Europay at the close
    of the transaction. Pro forma adjustments are made to reflect:

     (A) the elimination of inter-company revenues and expenses between
         MasterCard and Europay.

     (B)  the change in annual depreciation resulting from adjustments made to
          the estimated useful lives of property acquired (ranging from three to
          thirty years).

     (C) additional annual amortization of certain intangible assets resulting
         from the acquisition consisting primarily of software and other
         technology-related intangibles and trademarks, which are being
         amortized over their estimated useful lives ranging from three to five
         years. Amortization for the year ended December 31, 2000 was calculated
         in accordance with current accounting principles generally accepted in
         the United States of America. In accordance with SFAS No. 142, goodwill
         and other intangible assets resulting from the integration that have
         indefinite useful lives will not be amortized.

     (D) the income tax effect of the pro forma adjustments. This is calculated
         using a 40% tax rate.

     (E)  the elimination of the reduction on Europay's income statement of the
          minority interest in EPSS held by MasterCard.

     (F)  the consolidation of Maestro and EMV Co., entities to be under the
          control of the combined company. Previously, Maestro and EMV Co. were
          accounted for under the equity method. Europay and MasterCard each
          owned 50% and 33 1/3% of Maestro and EMV Co., respectively. As neither
          MasterCard nor Europay exercised control over Maestro or EMV Co.,
          these investments were not consolidated prior to the integration.

     (G) the issuance of stock by MasterCard to its members.

                                        74


     (H) net income attributable to European and non-European
         member-stockholders before and after integration with Europay (dollars
         in millions):



                                                                         POST-
                                                                    INTEGRATION(D)
                                                 PRE-INTEGRATION      AT 33 1/3%          CHANGE
                                                 ---------------    ---------------    -------------
                                                                               
     NET INCOME FOR THE NINE MONTH PERIOD ENDED
       SEPTEMBER 30, 2001 ATTRIBUTABLE TO:
       Non-European members-stockholders of
          MasterCard(a)........................   $138       85%     $107       67%    $(31)     (22)%
       European members-stockholders(b)........     25       15%       53       33%      28      112%
                                                  ----      ---      ----      ---     ----
                                                  $163      100%     $160      100%    $ (3)
                                                  ====      ===      ====      ===     ====
     NET INCOME FOR THE YEAR ENDED DECEMBER 31,
       2000 ATTRIBUTABLE TO:
       Non-European members-stockholders of
          MasterCard(a)........................   $111       90%     $ 78       67%    $(33)     (30)%
       European members-stockholders(b)........     12       10%       38       33%      26      217%
                                                  ----      ---      ----      ---     ----
                                                  $123      100%     $116      100%    $ (7)(c)
                                                  ====      ===      ====      ===     ====


     --------------------
     (a) The net income (pre-integration) attributable to non-European members
         of MasterCard is approximately 93% of MasterCard's net income and
         approximately 15% of Europay's net income.

     (b) The net income (pre-integration) attributable to European members of
         MasterCard is approximately 7% of MasterCard's net income and
         approximately 85% of Europay's net income.

     (c) Decreased consolidated net income is primarily due to additional
         amortization of intangible assets.

     (d) Net income attributable to European and non-European
         member-stockholders after the integration with Europay, giving effect
         to possible maximum and minimum share reallocation at the end of the
         transition period:



                                                         POST-           CHANGE          POST-           CHANGE
                                                      INTEGRATION      FROM PRE-      INTEGRATION      FROM PRE-
                                                         AT 26%       INTEGRATION        AT 44%       INTEGRATION
                                                      ------------    ------------    ------------    ------------
                                                                                      
        NET INCOME FOR THE NINE MONTH PERIOD ENDED
          SEPTEMBER 30, 2001 ATTRIBUTABLE TO:
        Non-European member-stockholders of
          MasterCard(a).............................  $118     74%    $(20)   (14)%   $ 90     56%    $(48)   (35)%
        European member-stockholders(b).............    42     26%      17     68%      70     44%      45    180%
                                                      ----    ---     ----            ----    ---     ----
                                                      $160    100%    $ (3)           $160    100%    $ (3)
                                                      ====    ===     ====            ====    ===     ====
        NET INCOME FOR THE YEAR ENDED DECEMBER 31,
          2000 ATTRIBUTABLE TO:
        Non-European member-stockholders of
          MasterCard(a).............................  $ 86     74%    $(25)   (23)%   $ 65     56%    $(46)   (41)%
        European member-stockholders(b).............    30     26%      18    150%      51     44%      39    325%
                                                      ----    ---     ----            ----    ---     ----
                                                      $116    100%    $ (7)           $116    100%    $ (7)
                                                      ====    ===     ====            ====    ===     ====


                                        75


                            MASTERCARD INCORPORATED

                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET
                            AS OF SEPTEMBER 30, 2001
                                 (IN THOUSANDS)



                                                                                             PRO FORMA
                                          MASTERCARD                       PRO FORMA         MASTERCARD
                                         INTERNATIONAL   EUROPAY(1)(2)   ADJUSTMENTS(3)     INCORPORATED
                                         -------------   -------------   --------------     ------------
                                                                                
ASSETS
Cash and cash equivalents..............   $  239,389       $131,739        $   2,974(D)      $  374,102
Investment securities..................      469,069             --               --            469,069
Property, plant & equipment............      249,323         58,519            8,377(A)         316,875
                                                                                 656(D)

Other assets...........................      374,246        100,014          (16,063)(A)        439,877
                                                                              (4,652)(B)
                                                                              (4,407)(C)
                                                                              (9,261)(D)

Intangible assets......................       18,088             --          395,165(A)         413,253
                                          ----------       --------        ---------         ----------
          TOTAL ASSETS.................   $1,350,115       $290,272        $ 372,789         $2,013,176
                                          ==========       ========        =========         ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities....................   $  515,870       $211,668        $  (4,652)(B)     $  754,653
                                                                              (5,970)(D)
                                                                              37,737(E)

Long-term liabilities..................      221,056         16,448           41,161(E)         278,665
                                          ----------       --------        ---------         ----------
          TOTAL LIABILITIES............      736,926        228,116           68,276          1,033,318
Minority interest......................            6          3,094              339(D)             345
                                                                              (3,094)(F)
STOCKHOLDERS' EQUITY
Common stock...........................           --             --            1,000(G)           1,000
Paid-in-capital........................           --         17,832          343,582(A)         971,761
                                                                             605,431(G)
                                                                               4,916(I)

Retained earnings......................      606,431         44,459         (606,431)(G)             --
                                                                             (44,459)(H)

Accumulated other comprehensive income
  (loss)...............................        6,752         (3,229)           3,229(H)           6,752
                                          ----------       --------        ---------         ----------
          TOTAL STOCKHOLDERS' EQUITY...      613,183         59,062          307,268            979,513
                                          ----------       --------        ---------         ----------
          TOTAL LIABILITIES &
            STOCKHOLDERS' EQUITY.......   $1,350,115       $290,272        $ 372,789         $2,013,176
                                          ==========       ========        =========         ==========


            See notes to unaudited pro forma combined balance sheet.
                                        76


NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (IN THOUSANDS EXCEPT PER
SHARE DATA)

(1) Euro amounts are translated into U.S. dollars based on a conversion rate of
    1.1001 euros per U.S. dollar, the period end exchange rate between U.S.
    dollars and euros as of September 30, 2001.

(2) A reconciliation of the Europay pro forma balance sheet as of September 30,
    2001 prepared in accordance with Belgian GAAP to the Europay pro forma
    balance sheet as of September 30, 2001 prepared in accordance with U.S. GAAP
    as presented is provided below.



                                            BELGIAN     RECONCILING       U.S.
                                              GAAP         ITEMS          GAAP
                                            --------    -----------     --------
                                                               
ASSETS
Cash and cash equivalents.................  $131,739           --       $131,739
Investment securities.....................        --           --             --
Property, plant & equipment...............    41,730       16,789(a)      58,519
Other assets..............................    97,940        2,074(b)     100,014
Intangible assets.........................        --           --             --
                                            --------      -------       --------
     TOTAL ASSETS.........................  $271,409      $18,863       $290,272
                                            ========      =======       ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities.......................  $208,658      $ 3,010(c)    $211,668
Long-term liabilities.....................     3,959       12,489(d)      16,448
                                            --------      -------       --------
     TOTAL LIABILITIES....................   212,617       15,499        228,116
                                            --------      -------       --------
Minority interest.........................     3,094           --          3,094
STOCKHOLDERS' EQUITY
Common stock..............................        --           --             --
Paid-in-capital...........................    17,832           --         17,832
Retained earnings.........................    37,866        6,593         44,459
Accumulated other comprehensive income
  (loss)..................................        --             (3,229)(e)   (3,229)
                                            --------      -------       --------
     TOTAL STOCKHOLDERS' EQUITY...........    55,698        3,364         59,062
                                            --------      -------       --------
     TOTAL LIABILITIES & STOCKHOLDERS'
       EQUITY.............................  $271,409      $18,863       $290,272
                                            ========      =======       ========


Adjustments between Belgian GAAP and U.S. GAAP relate to the following:


     (a) PROPERTY, PLANT AND EQUIPMENT



     Reconciling items totaling $16,789 that increase property, plant and
     equipment recorded under Belgian GAAP to conform with U.S. GAAP include:
     the capitalization of borrowing costs of $2,163; differences in
     depreciation methods including application of the half-year convention
     method under U.S. GAAP totaling $5,040; capitalization of internally
     developed software costs of $603; and the capitalization of capital leases
     of $8,983.



     (b) OTHER ASSETS


     Reconciling items totaling $2,074 that increase other assets recorded under
     Belgian GAAP to conform with U.S. GAAP include: prepaid pension assets of
     $270; deferred tax assets of $2,641; adjustments to record derivative
     financial instruments at fair value ($424); the difference between cost
     treatment required under U.S. GAAP and fair value used under Belgian GAAP
     of "know-how" contributed as initial investment equity of ($515); and $102
     related to a loss in value on an investment accounted for under the equity
     method that was deemed other than temporary.

                                        77



     (c) CURRENT LIABILITIES


     Reconciling items totaling $3,010 that increase current liabilities
     recorded under Belgian GAAP to conform with U.S. GAAP include: adjustments
     to record derivative financial instruments at fair value of ($804), net
     present value of minimum lease obligations under capital leases of $2,817;
     and deferred licensing fee revenue of $997.


     (d) LONG-TERM LIABILITIES


     Reconciling items totaling $12,489 that increase long-term liabilities
     recorded under Belgian GAAP to conform with U.S. GAAP include: deferred tax
     liabilities of $4,590; net present value of minimum lease obligations under
     capital leases of $2,321; and deferred licensing fee revenue of $5,578.


     (e) OTHER COMPREHENSIVE INCOME


     Reconciling items totaling ($3,229) include the effective portion of fair
     value changes on derivative financial instruments designated as a cash flow
     hedge of $937; and the impact of foreign currency translation of ($4,166).

    For a more detailed explanation of the nature of the Belgian GAAP to U.S.
    GAAP reconciling items see Note 15 to the unaudited consolidated interim
    financial statements of Europay as of June 30, 2001 and December 31, 2000
    and for the six months ended June 30, 2001 and 2000 included elsewhere in
    this proxy statement-prospectus. There have been no substantive changes to
    these reconciling items since June 30, 2000.

(3) The pro forma financial statements have been prepared to reflect the
    conversion of MasterCard from a member-based organization to a stock company
    and the integration of Europay, MEPUK and MasterCard. No separate pro forma
    adjustment is required for the integration of MEPUK as it will have no
    assets or liabilities other than shares in Europay at the close of the
    transaction. Pro forma adjustments are made to reflect:

     (A) intangible assets arising out of the preliminary allocation of purchase
price as follows:



                                                                            
         Purchase price (see Note 3(J)).......................................    $361,414
         Allocated as follows:
           Historical book value of 85% of Europay's assets and
              liabilities............................................  $52,833
           Step-up of the fair value of assets:
              Software and other technology-related intangibles......   29,878
              Trademarks, tradenames and brand names.................   11,900
              Property, plant and equipment..........................    8,377
           Deferred income taxes.....................................  (16,063)
           Liabilities and acquisition related costs (see Note
              3(E))..................................................  (78,898)
         Excess of purchase price over identifiable assets and liabilities
           (goodwill and customer relationships)..............................    $353,387
                                                                                  ========




          Total intangible assets amount to $395,165 and consist of customer
          relationships of $176,928; goodwill of $176,459; software and other
          technology-related intangibles of $29,878; and trademarks, tradenames
          and brand names of $11,900. See Note 3(C) to the Notes to the
          Unaudited Pro Forma Combined Income Statements for amortization
          period.


     (B) the elimination of inter-company balances between MasterCard and
         Europay.

     (C) the elimination of MasterCard's historical investment of $4,407 for
         12.25% of Europay and 15% of EPSS (representing 15% of Europay on a
         consolidated basis).

     (D) the consolidation of Maestro International and EMV Co., entities under
         the control of the combined company.

                                        78


     (E) acquisition related costs including the costs of acquiring and
         eliminating certain Europay brands and logos totaling $39,700;
         professional fees relating to the transaction totaling $12,200;
         severance costs for Europay employees totaling $10,000; costs of
         eliminating redundant European computer systems totaling $6,400; $8,000
         relating to certain other acquisition liabilities; and other
         miscellaneous costs totaling approximately $2,600. (see Note 3(A)).

     (F) the elimination of the reduction on Europay's balance sheet of the
         minority interest in EPSS held by MasterCard.

     (G) the conversion of MasterCard International from a member-based
         institution to a stock corporation and the issuance of 100 million
         shares of class A redeemable and class B convertible common stock of
         MasterCard Incorporated at a par value of $.01 per share to the
         MasterCard International members and the Europay and MEPUK
         shareholders.

     (H) the elimination of Europay's pre-acquisition retained earnings and
         paid-in-capital.

     (I) the equity pick-up resulting from the change of MasterCard
         International's method of accounting for the Europay investment from
         historical cost to consolidation. Amount was reclassified from
         MasterCard International's retained earnings upon conversion.

     (J) an independent appraisal valued the shares of MasterCard Incorporated
         at $1.091 billion before the transaction. In the transaction, 66.67
         million shares will be issued to non-European members and 33.33 million
         shares will be issued to European members. As a result of negotiations
         between the parties, approximately 27.96 million shares will be issued
         to Europay stockholders and 5.37 million shares will be issued to
         European members who are not Europay stockholders. Europay stockholders
         will receive 4.2 million shares for the conversion of their membership
         interests and the remaining 23.76 million shares are attributable to
         the exchange of their Europay shares. Immediately before the
         integration, the value of each MasterCard share will be approximately
         $15.21 ($1.091 billion divided by 71.71 million shares). Therefore,
         MasterCard's purchase price for the shares of Europay is estimated to
         be $361.4 million ($15.21 per share multiplied by 23.76 million
         shares).

                                        79


                                 CAPITALIZATION

     The following table sets forth the capitalization of MasterCard
Incorporated as of September 30, 2001 on:

     - an actual basis for MasterCard International; and

     - a pro forma basis for MasterCard Incorporated giving effect to the
       proposed conversion and integration with Europay International.

     The table should be read in conjunction with "Unaudited Pro Forma Combined
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for each of MasterCard International and
Europay included elsewhere in this proxy statement-prospectus. There has been no
change to our capitalization since September 30, 2001, other than the impact of
current earnings subsequent to September 30, 2001, that would result in a
material change to the pro forma capitalization set forth below.



                                                               AS OF SEPTEMBER 30, 2001
                                                              --------------------------
                                                                          PRO FORMA FOR
                                                                          THE CONVERSION
                                                                               AND
                                                               ACTUAL     INTEGRATION(1)
                                                              --------    --------------
                                                                    (IN THOUSANDS
                                                                  EXCEPT SHARE DATA)
                                                                    
Long term debt..............................................  $ 82,525      $   82,525
Members'/Stockholders' Equity:
  Retained Earnings.........................................   606,431              --
  Common Stock:
  Class A redeemable common stock, $.01 par value,
     275,000,000 shares authorized and 84,000,000 issued....        --             840
  Class B convertible common stock, $.01 par value,
     25,000,000 shares authorized and 16,000,000 issued.....        --             160
  Class C common stock, $.01 par value, 75,000,000 shares
     authorized and none issued.............................        --              --
  Additional paid-in capital................................        --         971,761
  Accumulated other comprehensive income....................     6,752           6,752
                                                              --------      ----------
Total members'-stockholders' equity.........................   613,183         979,513
                                                              --------      ----------
Total capitalization........................................  $695,708      $1,062,038
                                                              ========      ==========


---------------
(1) The pro forma data reflects such adjustments as are necessary, in the
    opinion of management, for a fair presentation of the results of operations
    and stockholders' equity of MasterCard Incorporated on a pro forma basis.
    For further detail, see "Unaudited Pro Forma Combined Financial Statements."

                                        80


                    OVERVIEW OF THE GLOBAL PAYMENTS INDUSTRY

     The global payments industry consists of all forms of payment including:

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

     - Cards -- credit cards, charge cards, debit cards (including ATM cards),
       stored value cards and other types of cards; and

     - Other Electronic -- wire transfers, electronic benefits transfers and
       preauthorized payments such as Automated Clearing House ("ACH") payments,
       among others.

     The market for global payments is vast. Worldwide private consumption,
which measures the market value of goods and services purchased by households
and includes certain housing, public sector and non-profit expenditures, was
approximately $18.2 trillion in 1999, according to the World Development
Indicators Book 2001. Within the United States, Nilson Reports estimates that
the U.S payments industry completed nearly 112.3 billion transactions valued at
nearly $5,226 billion in 2000. According to Nilson, there were 80.4 billion
paper transactions, 29.9 billion card transactions and 2.1 billion electronic
transactions in the U.S. in 2000, valued at approximately $3,409 billion, $1,598
billion and $219 billion, respectively.

     We believe that the percentage of overall payment transactions conducted
with cards has increased in recent years compared to paper forms of payment such
as cash and checks. We expect this trend to continue. The relative growth of
card-based forms of payment is the result of a number of factors, including:

     - the expansion of card acceptance networks (including MasterCard's);

     - the development of new channels for conducting commercial transactions,
       such as the Internet and mobile commerce applications, that favor
       card-based forms of payment;

     - the introduction of globally accepted debit cards usable at the point of
       sale, and the growth in popularity of debit cards generally;

     - the development of rewards programs to encourage card usage in certain
       countries; and

     - the growing use of cards by corporations and small businesses for travel,
       purchasing, fleet management and other functions.

     The most common card-based forms of payment are general purpose cards,
which are payment cards carrying logos that permit widespread usage of the cards
within countries, regions or around the world. The primary general purpose card
brands include the MasterCard family of brands (MasterCard, Maestro and Cirrus);
Eurocard; Visa and its related brands (including Plus, Electron and Interlink);
American Express; JCB; Diner's Club; and Discover/Novus. In 2000, general
purpose cards were used worldwide in approximately 38.5 billion transactions
with a GDV of nearly $3,177 billion, an increase of 17.8% and 21.5%,
respectively, over the number of transactions and GDV recorded in 1999. GDV is
the dollar value of all spending on cards during a given period and is
calculated by adding purchase and cash disbursement volume (including, in each
case, balance transfers and convenience checks). In addition, the total number
of general purpose cards in circulation in 2000 was approximately 1.36 billion,
an increase of 12.0% over the number of cards in circulation in 1999. The
preceding figures exclude on-line debit programs such as Maestro, which are
general purpose cards that typically access a deposit account (as opposed to a
line of credit) and use a Personal Identification Number ("PIN") as the primary
method for verifying cardholders. In addition, regional or country-specific
debit programs or ATM networks, such as NYCE, Concord/EFS and others in the
United States, Interac in Canada or EFTPOS in Australia, are properly included
in the general purpose card category, although the preceding figures also
exclude these programs.

     In addition to general purpose cards, private label cards comprise a
significant portion of all card-based forms of payment. Typically, private label
cards are issued by a merchant (such as a department store or gasoline
(petroleum) retailer) and can be used only at the issuing merchant's locations.

                                        81


     A number of MasterCard's competitors -- including American Express, JCB and
Discover/Novus -- operate proprietary systems in which they generally issue the
cards bearing their brands and "acquire" transactions from the merchants who
accept their cards for payment. These competitors set their own credit policies
and practices and the competitive terms of the cards they issue. In contrast,
MasterCard is an open bankcard association, as is Visa. MasterCard is owned by
financial institutions that issue cards with global acceptance and/or acquire
transactions on behalf of merchants who accept those cards for payment.
MasterCard is not a financial institution that issues cards or contracts with
merchants to accept cards for payment.

     In most countries throughout the world, including the United States,
financial institutions typically issue both MasterCard- and Visa-branded payment
cards. This structure is known as "duality." In some countries, however,
particularly Canada, card issuers are "non-dual," meaning that they issue either
MasterCard or Visa payment cards, but not both. Issuance of MasterCard and Visa
debit cards is generally non-dual in the United States as well because of a Visa
rule mandating debit exclusivity.

     As the result of consolidation in the banking industry, we expect that the
number of financial institutions that issue MasterCard cards will decline,
resulting in fewer active member financial institutions for MasterCard. However,
MasterCard's remaining members are expected to become correspondingly larger and
more global in scope.

                                        82


                      BUSINESS OF MASTERCARD INTERNATIONAL

     After the conversion, MasterCard International will be a subsidiary of
MasterCard Incorporated and the principal members of MasterCard International
will own the common stock of MasterCard Incorporated. The following discussion
of the business of MasterCard International describes the business that will be
conducted by MasterCard Incorporated through MasterCard International after the
conversion.

     MasterCard International is a leading global payment solutions company
owned by over 1,500 financial institutions worldwide, which are principal
members that participate directly in the business of MasterCard International.
We manage a family of well-known, widely accepted payment card brands including
MasterCard, Maestro and Cirrus on behalf of these members and approximately
13,500 affiliate members that participate indirectly in our business. We license
our brands to members, provide a sophisticated set of information and
transaction processing services to members and establish and enforce rules and
standards surrounding the use of cards carrying our brands. We also undertake a
variety of marketing activities designed to maintain and enhance the value of
our brands. As an industry leader in technological innovation, we are developing
highly secure, efficient payment programs for electronic and mobile commerce
applications and helping members launch chip-based card programs in countries
throughout the world.


     On a global scale, we process transactions denominated in more than 180
currencies. In 2000, our GDV, which represents gross spending (purchases and
cash disbursements) on MasterCard-branded cards for goods and services,
including balance transfers and convenience checks, increased 21.6% to $857.7
billion from $725.7 billion in 1999. In 2001, our GDV was $986.0 billion, a
17.6% increase over the GDV generated in 2000. At December 31, 2001, the total
number of MasterCard cards in circulation worldwide as reported by our members
was 519.9 million, an 18.8% increase from 2000, reflecting strong performance in
a number of countries. In addition, our members estimate that cards carrying
MasterCard brands were accepted at over 22 million locations around the world as
of December 31, 2001.


     Our revenue is comprised of operations fees and member assessments.
Operations fees represent user fees for authorization, clearing, settlement and
other member services that facilitate transaction and information management
among our members on a global basis. Member assessments are based principally
upon the GDV of transactions generated by MasterCard-branded cards. We refer to
the financial institutions that issue our cards as "issuers" and those that
enroll merchants into programs to accept our cards as "acquirers." We refer to
these institutions collectively as "MasterCard licensed financial institutions"
or "members." The term "members" includes both principal and affiliate members
of MasterCard International. We use the terms "MasterCard-branded cards,"
"MasterCard brands" and similar terms to refer to all cards carrying our brands,
including MasterCard, Maestro, Cirrus and Mondex, unless the context requires
otherwise.

     We provide the following services to our members:

     - Payment Services.  We provide transaction processing (primarily
       authorization, clearing and settlement) services for our members via a
       sophisticated, proprietary, worldwide computer and telecommunications
       network. Using our transaction processing services, MasterCard members
       facilitate payment transactions between cardholders and merchants
       throughout the world, providing merchants with an efficient and secure
       payment option and consumers with a convenient payment vehicle accepted
       worldwide. We also provide a growing set of marketing and technology
       consulting, card enhancement and loyalty rewards support, and
       information-based performance analysis services to our members. We do not
       issue cards, set fees or determine the interest rates that cardholders
       are charged for use of their cards. Issuers have the responsibility for
       determining these and most other competitive card features. In addition,
       we do not solicit merchants or establish the discount rate that merchants
       are charged for card acceptance, which are responsibilities of acquirers.

     - Brand Building.  We manage and promote our global brands for the benefit
       of all MasterCard members through umbrella advertising, promotional and
       sponsorship initiatives. We also promote our global brands by encouraging
       affinity and co-branded cards and merchant acceptance initiatives.

                                        83


     - Rulemaking and Enforcement.  We adopt and enforce rules applicable to all
       MasterCard members relating to a variety of topics where common
       procedures and standards are needed to ensure the smooth, equitable and
       secure functioning of our system.

     We were established in 1966 when a group of banks with proprietary or
regional card systems formed the Interbank Card Association ("ICA"). In 1968,
ICA began to develop a global network by forming associations and alliances with
banks outside the United States. In 1969, ICA acquired exclusive rights to the
"MasterCharge" name and the interlocking circles device for its members. After
over a decade of expansion, ICA changed its name and the name of its trademarks
to MasterCard to reflect its growth into a broad payment services company. We
acquired Cirrus in 1988. We acquired an interest in Europay's predecessor,
EuroCard, in 1985, and together with Europay launched Maestro as the world's
first global, on-line, point-of-sale debit network in 1992. Today, we continue
to develop the presence of our brands around the world.

     Because our business is global in scope, we have structured our
organization to be sensitive to the requirements of the regions and countries in
which we operate. Our global board of directors has delegated authority over a
variety of matters, including certain rulemaking, enforcement and fee-setting
decisions and advertising and marketing activities, to regional boards of
directors covering each of the United States, Canada, Latin America and the
Caribbean, Middle East/Africa, and Asia/Pacific. We also provide member services
on a regional basis. In Europe, our business is currently operated through
alliance agreements with Europay, which manages licensing and marketing for the
MasterCard family of brands. Following the conversion and integration, our
business in Europe will be operated through a European regional board of
directors with authority like other regional boards of directors.

BUSINESS STRATEGY

     MasterCard's mission is to add value to our members by working to ensure
that we become the global payments leader. To this end, we seek to build
superior brands that provide high quality, technologically sophisticated, widely
accessible payment solutions for consumers and businesses worldwide. We have
adopted the following corporate strategy to fulfill our mission.

WE INTEND TO FOCUS ON KEY FINANCIAL INSTITUTIONS AND COUNTRIES TO INCREASE OUR
SHARE, WHILE OFFERING BEST-IN-CLASS SERVICES TO ALL OF OUR MEMBERS.

     Our strategy is to be a global payment solutions company focused strongly
on our customers -- our members. We believe that we can profitably grow share by
focusing increased, customized attention on the financial institutions that are
the largest participants in the MasterCard business and on countries that are
vital to our continued success because of their size or growth prospects. To
this end, we have entered into customized agreements with members around the
globe, which allow us to support the individual needs of these members in
exchange for significant business commitments to MasterCard. We intend to focus
on entering into further customized agreements with our key members globally. At
the same time, our strategy is to continue to provide best-in-class service to
all our members, irrespective of their size. To this end, we have established
dedicated account management teams for key members and teams for other members
on a regional basis. We are also redeploying significant cost savings achieved
as a result of our corporate "process change" initiative into higher
value-added, customer-focused activities. From a regional perspective, we have
identified key countries in which to target our brand-building and program
development efforts, and will continue to make significant marketing,
promotional and program development investments in these countries.

WE WILL CONTINUE TO WORK TO STRENGTHEN MASTERCARD'S BRANDS, TECHNOLOGY AND
ACCEPTANCE NETWORK.

     In light of strong competition in the payments industry, our strategy is to
continually invest in strengthening our brands, technology and acceptance
network. We will continue to leverage our popular "Priceless" advertising
campaign, as well as our sponsorship of major sporting events such as World Cup
2002, the Professional Golf Association Tour, Major League Baseball and the
Jordan Grand Prix Formula One racing team, to increase awareness of our brands
in countries throughout the world. For consumers, we have positioned the
MasterCard brand as "The Best Way to Pay for Everything that Matters"(TM), and
our global

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advertising and marketing activities will continue to stress this message to
drive activation, usage and retention of cards carrying our brands. We also will
seek increasingly to integrate our brand building efforts with our development
of payment solutions in specific countries. With respect to our technical
infrastructure, we are three years into the implementation of our "Systems
Enhancement Strategy," which is designed to substantially upgrade our core
authorization, clearing and settlement systems to enhance their reliability,
functionality and flexibility, and to reduce transaction processing costs. We
also will continue aggressively to expand the number of merchant locations that
accept our brands, in order to maintain the unsurpassed acceptance of
MasterCard-branded cards. Finally, we will focus on acceptance initiatives
within merchant categories that have not traditionally accepted cards for
payment, and on expanding participation in our successful recurring payments
programs.

WE INTEND TO CONTINUE TO DIFFERENTIATE MASTERCARD FROM OUR COMPETITION BY
DEVELOPING INNOVATIVE PAYMENT SOLUTIONS AND CUSTOMIZED PROFESSIONAL SERVICES.

     Our strategy is to provide a full range of innovative payment solutions in
a rapidly evolving industry. To this end, we are continuing to make significant
investments to support our members' initiatives in the areas of electronic and
mobile commerce, and we will continue to expand our capabilities in connection
with corporate and pre-paid programs. We also seek continually to use technology
to enhance our members' satisfaction with our core transaction processing
services. We intend to continue our significant efforts to facilitate the
introduction of chip-based or "smart" cards in countries throughout the world.
Smart cards can offer greater security and are more open to customization than
existing magnetic stripe cards, allowing our members to keep pace with changes
in technology. As of the third quarter of 2001, more than 100 million smart
cards bearing MasterCard's or Europay's brands were issued worldwide. In
addition, we provide a growing set of marketing, operations and technology
consulting, card enhancement and loyalty rewards support, and information-based
performance analysis services to our members on an optional, fee-for-services
basis. We intend to focus on expanding the range and scope of these professional
services in order to enhance our ability to provide customized services to
members.

WE INTEND TO INTEGRATE WITH EUROPAY TO FORM A SINGLE GLOBAL COMPANY THAT
COMBINES THE SEPARATE STRENGTHS OF MASTERCARD AND EUROPAY AND ALLOWS OUR BRANDS
TO BE MANAGED MORE EFFECTIVELY.

     In 2002, our plan is to conclude the integration of MasterCard and Europay
to create a single, cohesive, global organization that will manage the continued
growth of our brands. In a rapidly evolving marketplace, we need to position
ourselves to respond better to competitive and technological trends and to
increase our responsiveness to the unique requirements of our members in Europe.
We expect the integration with Europay to allow us to improve efficiency,
eliminate duplication and costs associated with a two company structure, and
coordinate marketing and brand-building initiatives more closely. We also expect
that integration will provide us with greater access to a global pool of talent,
permit us to benefit fully from Europay's expertise in chip-based cards, debit
programs and mobile commerce, and allow us to expand MasterCard's professional
services and Internet-related businesses in Europe.

PAYMENT SERVICES

     We provide payment card transaction processing services to our members
through a sophisticated, proprietary, worldwide computer and telecommunications
system.

TRANSACTION PROCESSING

     Authorization, Clearing and Settlement.  The objective of the
authorization, clearing and settlement process is to facilitate the movement of
transaction data and funds among members on a global basis in a timely and
efficient manner. Together, the clearing and settlement processes are often
referred to as "interchange."

     Authorization is the process by which a transaction is approved by the
issuer or, in certain circumstances, by MasterCard or others on behalf of the
issuer in accordance with the issuer's instructions. We processed over

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7 billion authorizations in 2001. The MasterCard authorization system is a
worldwide network designed to facilitate the authorization needs of MasterCard
members, and is devised for the near-instantaneous transmission of card account
data and authorization results among issuers, acquirers and other transaction
processors or networks. In a typical transaction, the merchant or acquirer
requests authorization for the transaction from the issuer and permission is
given or denied by the issuer based on cardholder account status. Depending on
the type of card and transaction value, the relevant authorization criterion may
vary. In limited instances, MasterCard will provide stand-in authorization, or
authorization on behalf of the issuer, when the issuer is not signed on to our
system or cannot be contacted within an established time frame. Typically, our
global data transport network, which we refer to as Banknet, routes the
authorization requests and responses between issuers and acquirers in less than
one fifth of one second (200 milliseconds), with a reliability rate of over
99.7% and an availability rate in excess of 99.99%. Our rules, which vary across
regions, establish the circumstances under which merchants and acquirers must
seek authorization of transactions.

     Clearing is the exchange of financial transaction information between the
issuer and the acquirer after a transaction has been completed. MasterCard
transactions are generally "cleared" through our centralized processing system,
known as the Global Clearing Management System (GCMS), and the related
information is typically routed among members via our Banknet data transport
network. Clearing involves the movement of transaction data from the acquirer to
MasterCard, where individual transactions are sorted and forwarded to the
appropriate issuer for posting to cardholder accounts. Each transaction is
valued according to our established rules. Data can be submitted 24-hours per
day, seven days a week, and there are multiple clearing cycles each day. Data
transmission is provided on every U.S. banking business day to facilitate the
member settlement process.

     Once transactions have been authorized and cleared, MasterCard provides
services in connection with the "settlement" of the transaction -- that is, the
exchange of funds along with associated fees. Settlement is provided through our
Settlement Account Management system, or SAM. Once clearing is complete, a daily
reconciliation is provided to each member, detailing the net amounts by clearing
cycle and a final settlement position. The actual exchange of funds takes place
between a clearing bank chosen by the member and approved by MasterCard and one
of MasterCard's settlement banks. If the member is in a net debit position, its
clearing bank transfers funds to MasterCard's settlement bank; the opposite
occurs if the member is in a net credit position. In most cases, member
settlement occurs in U.S. dollars in accordance with established rules, although
we offer non-U.S. dollar settlement to our members electing to receive or pay in
other selected currencies.

     We also operate the MasterCard Debit Switch ("MDS"), which supports
processing for Cirrus and most Maestro transactions. The MDS switches financial
messages between acquiring and issuing members, provides transaction and
statistical reporting and performs clearing and settlement between members and
other debit transaction processing networks. Unlike the authorization and
clearing processes described above, which involve the exchange of transaction
data in two discrete messages (once for authorization and again for clearing),
the MDS generally operates as a "single message" system in which clearing occurs
simultaneously with the initial authorization request.

     A significant portion of the transaction activity conducted with
MasterCard, Maestro and Cirrus cards is authorized, cleared and/or settled by
our members or other processors without the involvement of MasterCard's central
processing systems.

     Operations and Systems.  We provide transaction processing services through
our primary operations facility located in St. Louis, Missouri. Our services are
available 24 hours per day, 365 days per year. In the event our main facility
becomes disabled, we have a back-up system located at a separate facility in
Lake Success, New York. In 2001, we successfully relocated our primary
operations center, including operations staff, to a new state-of-the-art
transaction processing facility located in O'Fallon, Missouri. Our transaction
processing facilities have redundant power supplies to help protect against loss
of data during a power failure. In addition, our systems contain back-up
processes and redundancies to ensure continued operation in the event that a
process or operation stops unexpectedly. We consistently maintain systems
availability at a rate in excess of 99.99%.

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     Systems Enhancement Strategy.  We are three years into our five year
Systems Enhancement Strategy ("SES") program, which is designed to upgrade our
core processing systems to increase flexibility, achieve operating efficiencies,
improve time-to-market for new services and reduce transaction costs.

     As part of the SES program, we have:

     - migrated our Banknet global data transport network to a "virtual private
       network" ("VPN") in conjunction with AT&T. Our VPN enhancements have
       significantly reduced transaction processing times and costs and enhanced
       data security for members;

     - introduced GCMS to replace our prior clearing system, enhancing our
       processing flexibility and our ability to support a richer set of
       transaction data;

     - replaced computer hardware with state-of-the art systems and improved our
       stand-in authorization systems to increase capacity and improve member
       risk management; and

     - consolidated settlement functions across all MasterCard brands with
       enhanced settlement advisement and currency management systems.

     Member Risk Management.  As a secondary obligor for certain card
obligations among principal members, we are exposed to member credit risk. Our
legal exposure is limited to our approximately 1,500 principal members. These
members directly participate in MasterCard activities and are responsible for
the settlement and other activities of, and must provide a performance guarantee
with respect to, affiliate members (numbering approximately 13,500 in total).
Generally, principal members must meet minimum rating agency requirements. If
principal members are not rated, they must meet minimum credit standards to
avoid maintaining cash collateral accounts or providing financial guarantees.

     To minimize the contingent risk to MasterCard of a member failure, we
monitor members' activities, perform traditional credit risk analysis of
members' financial strength, evaluate members' economic operating environments
and monitor compliance with our rules and standards. If the financial condition
of a member or the state of a national economy in which a member operates
indicates that a member may not be able to satisfy its settlement obligations to
other members, we may require the member to post collateral and provide
guarantees sufficient to cover our potential exposure in event of such member's
failure. When collateral is required, the amount is generally equal to the
member's credit risk exposure. If an issuing bank is potentially unable to meet
its obligations to us, we can block authorization of transactions and ultimately
terminate membership.

     Our principal member credit risk is settlement exposure, which materializes
when an issuer or acquirer fails to fund settlement (including chargeback)
obligations. For liquidity protection in the event of member settlement failure,
we have established a $1.2 billion committed credit facility, which is subject
to annual renewal. In addition, we have the right to assess all or a portion of
our members for reimbursement for settlement losses, member credit losses or any
other operating losses. For a description of our assessment rights following the
conversion and integration, see "Comparison of Rights of MasterCard
International Members Before and After the Conversion and Integration -- Fees,
Expenses and Assessments."

     For a description of the settlement and other risks attributable to our
travelers' cheque business, see Note 9 to the audited Consolidated Financial
Statements of MasterCard International.

     Anti-Fraud Initiatives.  We are continually developing programs and systems
to aid our members and merchants in detecting and preventing the fraudulent use
of cards carrying our brands. Our most basic anti-fraud initiative is a "warning
bulletin" that we prepare, sell and distribute to members showing invalid and
other recently terminated account numbers. This bulletin is sold and distributed
electronically to members in the United States and is produced in both paper and
electronic format for members outside the United States. In addition, our Member
Protection Program provides, among other things, a daily report to all card
issuers identifying accounts with unusual activity based on the number or size
of transactions.

     We have a number of other sophisticated prevention initiatives targeted at
fraudulent cardholder activity. As one example, our System to Avoid Fraud
Effectively (SAFE) program compiles member-submitted data

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regarding fraudulent transactions into reports designed to help issuers and
acquirers improve fraud detection and prevention. In addition, our Risk Finder
system helps members to predict fraud and reduce losses by evaluating
transactions using a number of variables. Through our MasterCard Alerts on-line
program, we facilitate communications among members and law enforcement
officials with respect to fraudulent activities on a worldwide basis.

     We also target fraudulent activity at the merchant level. Through our
Merchant Profiles program, we identify high risk merchants with significant
fraud-related transaction activity and encourage these merchants to implement
fraud control procedures. Our Member Alert to Control High-Risk
Merchants -- MATCH(TM) program is a tool designed to assist acquirers to assess
risk before signing a merchant into their MasterCard acceptance programs. MATCH
contains an updated file of merchants terminated for cause by members or
otherwise classified as a special risk. In addition, our Merchant Audit Program
audits merchants worldwide once per month, assessing each merchant's fraud to
sales ratio. When the ratio exceeds 4% for two consecutive months in a six-month
period, the merchant is placed on a special watch. When the ratio exceeds 8% for
the same period, acquiring members have the option to terminate the relevant
merchant agreement or process all fraudulent activity chargebacks against the
merchant for a minimum period of one year. We have also implemented the Common
Points of Purchase Program, which helps identify merchants that knowingly or
unknowingly may have facilitated the compromise of cardholder account data.

     One of the strongest barriers to increasing electronic commerce is consumer
fear for the security of Internet-based transactions. To address this concern,
we have developed the Secure Electronic Transaction ("SET") protocol for
safeguarding personal information contained on consumers' payment cards. SET
uses a digital certificate and encryption software to store account and
transaction information as a means of securing Internet transactions. MasterCard
is a founding member of SET Co., a consortium of leading companies established
to encourage the widespread adoption of the SET security specifications. SET has
been adopted in many countries outside of the United States. In addition to SET,
MasterCard is developing the Secure Payment Application (SPA) to protect account
numbers and authenticate cardholders in electronic and mobile commerce
transactions.

     MasterCard RPPS.  MasterCard's Remote Payment and Presentment Service
("RPPS"), launched in 1987, is an electronic payment processing service for
remote banking services in the United States and Canada. RPPS provides routing,
clearing and settlement services between service providers supporting consumer
bill payment services (for example, in connection with personal computer-based
home banking) and billers. RPPS transmits over 12 million payments valued at
approximately $6 billion per month, and represents one of the largest networks
for the processing of consumer-to-business electronic payments in the United
States.

OTHER PAYMENT SERVICES

     In addition, our MasterCard Advisors unit provides a growing set of
marketing and technology consulting, card enhancement and loyalty rewards
support, and information-based performance analysis services to our members.
These services are generally provided on an optional, fee-for-services basis, or
may be provided to members in connection with customized support agreements.

     Marketing Consulting.  Our global marketing consulting group provides
customized consulting to members in the area of cardholder marketing, including
acquisition, portfolio management and loyalty consulting designed to help expand
our members' businesses. Among other things, we undertake strategic reviews of
our members' marketing activities, help members to launch new programs and enter
new regional markets, develop strategic plans, assist members to build
relationships with selected business partners and undertake extensive research.
We also develop innovative marketing communications programs (such as direct
mail packages, telephone scripts and Internet and television advertisements) to
improve our members' ability to acquire card accounts and to stimulate
activation of these accounts. In addition, we undertake a range of portfolio
segmentation, database marketing and loyalty consulting projects that assist
members to better target their cardholders' unique characteristics and
requirements, helping to improve acquisition and retention of accounts. We
consult with respect to all MasterCard card programs and in all regions of the
world.

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     Operations Consulting.  We have leveraged our significant technical
expertise to provide technology-based consulting services to members. Through
these services, our experienced operations staff assist members to analyze key
operations trends and best industry practices to improve their overall service
levels and business performance. Our operations consultants provide advice
principally in connection with testing practices, program management and change
management activities. We also provide consulting services to members regarding
risk management and security issues.

     Card Enhancement Services.  Our worldwide cardholder services group
develops, manages and markets a range of services to members globally to support
the features that are offered in connection with certain of our card programs.
These services include lost and stolen card reporting, emergency card
replacement, emergency cash advance, concierge and travel assistance services.
In conjunction with a licensed insurance company, we also support our members'
purchase assurance, extended warranty, collision/damage waiver and other
insurance-based enhancements.

     Loyalty Rewards Program Services.  Our loyalty rewards services group
provides members with comprehensive support of their card-based loyalty rewards
programs. We have developed a proprietary software program, which we use to
track, accumulate and redeem points for cardholders participating in member
rewards programs that use our services. Through arrangements with leading travel
service providers and rewards vendors, we have established a dedicated call
center in St. Louis that accepts cardholder calls to redeem points, answer
customer service inquiries, and book travel arrangements.

     Information/Performance Analysis Services.  We provide a sophisticated set
of software and online decision-support tools to our members and others. These
tools rely on aggregated transaction information captured in our clearing and
settlement systems to permit members to analyze the performance of their card
portfolios and to take action to improve the revenue potential of their
businesses. We also provide decision-support tools that allow members to
identify, track and evaluate their performance in areas such as authorizations,
fraud detection and response, quality and chargeback processing. These tools are
principally available in the United States, although we intend to increasingly
offer them to members on a global basis where possible.

     Many of our decision support tools are provided to members through
MasterCard OnLiNE(TM) , our online messaging system that allows members to
conduct a wide range of business with MasterCard through Internet, dial-up, VPN
or other connections. In addition to accessing some of the tools described
above, members can use MasterCard OnLiNE to obtain new card program approvals,
submit periodic statistical performance information, assist in processing
chargebacks and receive alerts about fraudulent transaction activity and related
information. MasterCard's recently launched on-line information initiative,
called MasterCard eService, provides members with access through MasterCard
OnLiNE to most MasterCard publications, manuals and bulletins as well as
operations forms, information releases and on-line research tools.

BRAND BUILDING

MARKETING ACTIVITIES

     For cardholders, the MasterCard brand stands for "The Best Way to Pay for
Everything that Matters(TM)." Our approach to marketing activities combines
advertising, sponsorships and promotions as part of an integrated package
designed to increase consumer awareness of MasterCard and to drive activation,
usage and retention of cards carrying our brands. We also seek to tailor our
global marketing messages so that they are optimized for use in individual
countries, while maintaining a common global theme.

     Advertising.  Our advertising plays a critical role in building brand
visibility, usage and loyalty among cardholders globally. Our award-winning
"Priceless" advertising campaign launched in the United States in 1997 and has
run in more than 40 languages across 80 countries. We believe the "Priceless"
campaign represents one of the most successful and flexible global advertising
campaigns in use today. The campaign promotes MasterCard's universal acceptance
and usage benefits that permit cardholders to pay for what they need, when they
need it, and provides MasterCard with a consistent, recognizable message that
supports our brand positioning.

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     Sponsorships.  We seek to increase brand awareness and preference, and to
encourage card usage and loyalty, by sponsoring a variety of sports properties
that support the "Priceless" campaign and MasterCard brand positioning. Our
sports sponsorships constitute unique assets that help build the MasterCard
brand, while supporting the business of our members and relationships with key
customers. In soccer, MasterCard is the exclusive payment system sponsor of the
FIFA World Cup, which we believe is the single largest sporting event in the
world. We also sponsor other leading soccer events, such as the FIFA Women's
World Cup and the FIFA World Youth Championship, as well as both the regional
and club championships of Copa America and Copa Libertadores in Latin America,
and, through Europay, the European Championship and UEFA Champions League in
Europe.

     Our ten year global investment in soccer is complemented by other global
and regional sports sponsorships. Globally, we sponsor the Jordan Grand Prix
Formula One racing team, part of the prestigious Formula One auto racing
circuit. In golf, we are an international sponsor and the preferred card of the
PGA Tour, the Senior PGA Tour, the PGA of America, the British Open, the
MasterCard Championship Tournament held in Hawaii, and the MasterCard Colonial
Tournament held in Texas.

     In North America, we have made major sponsorship investments in baseball,
ice hockey and figure skating. In baseball, we are the preferred card of Major
League Baseball and a sponsor of both the All-Star Game and the World Series. We
have also established separate marketing and sponsorship agreements with nine
major league baseball teams. In hockey, we are the preferred card and a sponsor
of the National Hockey League, the National Hockey League Players Association
and the Canadian Hockey League. We also sponsor a number of specific
hockey-related events including the NHL All-Star Weekend, the Stanley Cup
Finals, the MasterCard Memorial Cup and the MasterCard Quebec Major Junior
Hockey League All-Star Game. In figure skating, we sponsored the 2001 World
Figure Skating Championships and other events, including the Skate Canada
Organization and the MasterCard Skate Canada International Competition.

     Promotions.  In order to increase usage of our cards, we sponsor frequent
promotions on a regional and national basis. These promotions typically provide
cardholders with a discount, rebate or other special offer, or an entry into a
sweepstakes or contest, in connection with the use of a MasterCard-branded card.
In the United States, we sponsor MasterCard Exclusives(TM), a collection of
promotional programs and select merchant offers that members can insert into
their cardholder statements to drive card usage; MasterCard Exclusives
Online(TM), a permission-based email and Internet web site program providing
cardholders with access to exclusive merchant offers; and periodic national
sweepstakes promotions, which typically coincide with peak spending periods such
as Christmas or the summer travel season. These promotions are prominently
featured on our Internet site, mastercard.com, which contains a variety of
materials targeted to consumers.

MERCHANT ACCEPTANCE INITIATIVES

     At December 31, 2001, our members estimate that cards carrying MasterCard
brands were accepted at over 22 million locations around the world. These
results were part of a longer-term trend of substantially increasing MasterCard
card acceptance. In the last five years, our members estimate that the number of
MasterCard acceptance locations worldwide increased by over 50%.

     Our acceptance strategy is to maintain the unsurpassed acceptance of
MasterCard-branded cards by continuing our aggressive efforts to expand the
number of merchant locations worldwide where cardholders can use our cards. Our
acceptance efforts are focused on three core initiatives. First, we seek to
increase the number of payment channels where MasterCard cards are accepted,
such as by introducing MasterCard card acceptance in connection with Internet,
mobile commerce and interactive television payment applications. Second, we seek
to increase the categories of merchants that accept our cards. In recent years,
payment card acceptance has increased in a number of merchant categories that
were previously averse to accepting payment cards, such as utilities, doctors
offices and supermarkets. In the United States, we are focused presently on
expanding acceptance in fast food restaurants and in connection with public
sector payments (including in connection with taxes, fees, fines and tolls),
among other categories. Outside the United States, where payment card acceptance
is growing more rapidly than inside the U.S., we are working to support enhanced
card acceptance for electronic commerce, public sector and recurring payments.
Third, we seek to

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increase usage of our cards at selected merchants by sponsoring a range of
special offers, sweepstakes, contests and other promotional programs from time
to time. We also enter into brand preference agreements with merchants, in
connection with which merchants commit to expressing their preference for
MasterCard-branded cards when accepting payments from consumers.

     Our acceptance initiatives are primarily designed to educate merchants
about the benefits and features of accepting MasterCard-branded cards for
payment. We also support technical initiatives designed to make card acceptance
more attractive for specific merchants, such as our Quick Payment Service, which
reduces authorization times and enhances the availability of MasterCard card
acceptance for fast food restaurants and other merchants where rapid
transactions are required. We are presently working on efforts to support radio
frequency identification devices, which are designed to facilitate card
acceptance at merchants with dispersed points of interaction with consumers,
such as food delivery outlets.

     Finally, we view recurring payments as a significant opportunity to expand
MasterCard card acceptance in the United States, and are sponsoring initiatives
to encourage consumers to make recurring bill payments in a variety of
categories -- including telephone, cable, utilities and insurance -- on their
MasterCard-branded cards.

CO-BRANDED/AFFINITY CARDS

     We provide research, marketing support and financial assistance to our
members and their partners in connection with the launch and marketing of
co-branded and affinity card programs. Co-branded cards are payment cards
bearing the logos or other insignia of an issuer and a marketing partner, often
a retail merchant. Affinity cards are similar to co-branded cards except that
the issuer's marketing partner is typically a charity or similar organization,
and a portion of consumer spending on the affinity card is generally allocated
to support the charity. MasterCard has supported a number of leading co-branded
and affinity card programs in the automobile, mass merchandise retailing and
other segments.

RULE MAKING AND ENFORCEMENT

     Membership in MasterCard is open to banks and other regulated and
supervised financial institutions. Applicants for membership must be approved by
a regional MasterCard board of directors. In general, MasterCard staff grant
licenses by territory. To be approved as a member, an applicant must be able to
perform all obligations required of members. Credit reviews are conducted on all
new members prior to admission, and are updated periodically.

     In exchange for licenses to use our brands, members agree to comply with
our by-laws, policies, rules and operating regulations ("Standards"). We are the
governing body that establishes and enforces the Standards. The Standards relate
to such matters as:

     - membership eligibility and financial soundness criteria;

     - the design and features of cards;

     - the use of MasterCard trademarks;

     - the standards and features applicable to certain card programs;

     - transaction and other reporting requirements;

     - transaction processing obligations and the use of third-party service
       providers;

     - merchant acquiring activities, including acceptance standards applicable
       to merchants;

     - cash disbursements;

     - fees;

     - guaranteed settlement, member failures and allocation of losses; and

     - termination of membership.

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     To ensure that members conform to the Standards, we run an extensive range
of compliance and other programs including reviewing all card programs proposed
to be issued by members and requiring members to undergo an annual audit by an
independent certified public accountant (or similar examination by a regulatory
authority). Except as specifically described in this proxy statement-prospectus,
the Standards will not be effected by the conversion or integration.

     In connection with enforcement of the Standards, MasterCard regulates
disputes between members relating to specific transactions. For example, after a
transaction is presented to an issuer, the issuer may determine that the
transaction may be invalid for a variety of reasons, including fraud. If the
issuer believes there is a defect in a transaction, the issuer may return, or
chargeback, the transaction to the acquirer. MasterCard enforces rules relating
to chargebacks and acts as an arbitrator of last resort with respect to
chargeback disputes.

MASTERCARD PAYMENT PROGRAMS

     MasterCard supports a wide range of payment solutions to enable our members
to design, package and implement programs targeted to the specific needs of
their consumer and corporate customers. While we permit regional variations in
the characteristics and features of our payment programs, all MasterCard cards
benefit from MasterCard's worldwide acceptance network and can be used to make
purchases or obtain cash wherever the relevant brand logos are displayed
indicating acceptance of our cards. The MasterCard acceptance network, together
with our Standards and the transaction processing services we provide, ensure
that all MasterCard payment programs are integrated into a network that
facilitates payments across the globe.

     Our principal payment programs, which are facilitated through our
brands -- MasterCard, Maestro, Cirrus and Mondex -- are listed below:



CATEGORY                 PROGRAM
--------                 -------
                      
Consumer Programs        - Standard MasterCard
                         - Gold MasterCard
                         - Platinum MasterCard
                         - World MasterCard
                         - MasterCard debit
                         - Gold MasterCard debit
                         - Platinum MasterCard debit
                         - Maestro (online debit cards)
                         - MasterCard/Cirrus/Maestro ATM Network

Corporate Payment        - MasterCard Corporate
  Solutions              - MasterCard Corporate Executive
                         - MasterCard Corporate Purchasing
                         - MasterCard Corporate Fleet
                         - MasterCard Corporate Multi Card
                         - MasterCard BusinessCard
                         - MasterCard Executive BusinessCard
                         - MasterCard BusinessCard debit

Stored Value Programs    - Pre-paid programs
                         - Mondex (stored value cards)
                         - MasterCard Travelers Cheques


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CONSUMER PROGRAMS

     MasterCard administers a number of consumer credit programs that are
designed to meet the needs of our members for tailored, customized programs
addressed to specific consumer segments. Standard MasterCard cards are general
purpose credit cards targeted to consumers with basic needs for a credit card.
Gold MasterCard cards are targeted to consumers typically requiring a higher
line of credit or spending limit and one or more card enhancement services
associated with a card. Platinum MasterCard cards are generally targeted to more
upscale consumers and are offered with still higher minimum credit lines or
spending limits. Platinum MasterCard cards also provide a full range of card
enhancement services. World MasterCard cards are a highly flexible payment
program that combines the absence of a preset spending limit with the option to
revolve a designated portion of the charges made. These cards are targeted
principally for travel and entertainment use and are accompanied by
best-in-class enhancement services and loyalty rewards programs. All MasterCard
cards, including business/corporate cards discussed below, permit cardholders to
obtain cash from bank branches or through the MasterCard/Cirrus/Maestro ATM
network, as well as to make purchases at the point of sale.

     The services provided in connection with all MasterCard credit cards
include lost/stolen card reporting, emergency card replacement and emergency
cash advance. MasterAssist(TM) enhancement services are provided in connection
with most Gold, Platinum and World MasterCard cards, as well as certain Standard
MasterCard cards, and include emergency travel assistance and referral services,
as well as retail-related insurance such as purchase protection and extended
warranty coverage. MasterRental(TM) vehicle rental insurance is also provided in
the United States in connection with all Gold, Platinum and World MasterCard
cards (MasterRental(TM) is a required benefit in Canada, but members can use
independent vendors to provide the service). In addition, concierge services and
airport lounge access are required benefits for World MasterCard cards in the
United States, and are typical features associated with most Platinum and World
MasterCard cards. Cardholders can access these and other services through
MasterCard Global Service(TM), a worldwide customer service program delivered
through a call center operated by MasterCard and accessible via a network of
country-specific, toll-free or collect telephone numbers.

     MasterCard's rules also permit our members to issue "secured" MasterCard
cards, in which all or a portion of the cardholder's line of credit is secured
by collateral, typically a cash deposit made by the cardholder.

     In addition, MasterCard supports a range of payment solutions that allow
our members to provide consumers with convenient access to funds on deposit in
checking, demand deposit and other accounts. Transactions processed on a debit
card generally withdraw available funds directly from a cardholder's account in
accordance with terms established by the issuer of the card, and in some cases
involve an extension of credit. MasterCard's debit programs may be branded with
the MasterCard, Maestro and/or Cirrus marks, and can be used to obtain cash in
bank branches or at ATMs. In addition, MasterCard- and Maestro-branded debit
cards may be used to make purchases at the point of sale. All MasterCard debit
programs are designed to enhance our members' programs and services by providing
consumers with greater access to their funds by leveraging the strengths of
MasterCard's extensive global acceptance network and the MasterCard/Cirrus/
Maestro ATM Network. Debit cards carrying the MasterCard brand allow cardholders
to validate transactions at the point of sale either by signing a sales receipt
or, if the relevant card also bears a Maestro or regional ATM network mark and
the merchant has the necessary equipment, by entering a PIN at a terminal. Like
our consumer credit programs, we support Gold MasterCard debit cards and
Platinum MasterCard debit cards that members can offer as premium services to
cardholders. Members can also provide enhancement services and loyalty rewards
programs in connection with debit cards carrying our brands; in the United
States, all MasterCard debit cards benefit from the same core enhancements
available on MasterCard credit cards.

     Maestro is MasterCard's leading online debit program, with more
participating issuers, cards and acceptance locations in more countries than any
other on-line debit brand. Typically, Maestro cards allow cardholders to verify
themselves by entering a PIN, although in certain countries, cardholders are
required to sign a sales receipt. Maestro cards are issued, and Maestro
transactions are processed, pursuant to a set of rules and procedures that are
separate from the rules applicable to MasterCard credit and debit transactions.

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International travel services including emergency cash disbursement, lost and
stolen card reporting as well as access to card issuers are available on an
optional basis to Maestro cardholders through Maestro Global Service from
MasterCard(TM).

     We believe that the MasterCard/Cirrus/Maestro ATM Network is the world's
largest global ATM network, with more than 600,000 participating cash dispensing
locations around the globe. Any cardholder with a card bearing the MasterCard,
Maestro or Cirrus logo may use a network ATM to access funds on deposit in his
or her account or to take a cash advance (if a MasterCard credit card is used).
The network is available twenty four hours a day, seven days a week, 365 days a
year.

     We make the Cirrus brand available to members to provide global cash access
through the MasterCard/ Cirrus/Maestro ATM Network for our members' proprietary
ATM cards. Cirrus transactions are validated by entering a PIN. As with Maestro
cards, Cirrus cards are issued and processed pursuant to a set of rules and
procedures that are separate from the rules applicable either to MasterCard or
Maestro transactions.

CORPORATE PAYMENT SOLUTIONS

     MasterCard's corporate payment solutions assist corporations, mid-sized
companies, small businesses and public sector organizations to streamline their
payment processes, manage information and reduce administrative costs. We have a
long history of innovation in the corporate segment, having developed the first
business card issued by a financial institution, the first fleet card platform
and the first multi-purpose card.

     Inherent in each corporate payment solution is a combination of rich
transaction data, purchasing controls and sophisticated reporting alternatives
that are customizable to the needs of the user. The MasterCard Corporate card is
designed to allow organizations to manage employee travel and entertainment
expenses. MasterCard Corporate Executive cards, marketed in such countries as
the United States, Canada, Chile and France, are targeted at senior executives
and offer increased spending limits, concierge services and worldwide, 24-hour
customer service. MasterCard Corporate Purchasing cards, marketed globally, are
designed to assist in the reengineering of the corporate purchasing process,
enhancing companies' financial controls while reducing administrative costs.
MasterCard Corporate Fleet cards provide companies with a way to manage the
expenses of a commercial fleet. Finally, the MasterCard Corporate Multi Card
provides customers with an integrated card that combines the functionality of
one or more of our MasterCard corporate programs -- travel, purchasing or
fleet -- into a single card or account, thereby reducing the costs of managing
multiple card programs. We also administer a variety of payment programs for
public sector entities that are similar to the travel, purchasing, fleet and
Multi cards offered to corporations.

     The MasterCard BusinessCard and Executive BusinessCard, marketed globally,
are targeted at the small-business segment, offering cardholders the ability to
extend payments and separate business expenses from personal expenses.
MasterCard's Small Business Connections, currently offered in the United States,
Canada, and the United Kingdom, is a web-based community for small businesses.
It includes the Business Savings Club that offers discounts on products and
services, Business Bonuses, a rewards program, as well as Market Access, a
marketplace site where small businesses are able to buy and sell over the web.

     A key driver of growth in corporate payment solutions, particularly outside
of the United States, is Smart Data Online, our web-based reporting tool.
Implemented in all regions of the world, Smart Data Online is a state-of-the-art
software product developed and supported by MasterCard. It is available in ten
languages and requires only a web browser to access. It allows organizations
ranging from small businesses to large corporations to display cardholder
statements, prepare management reports and integrate charge data into their
financial systems.

     Recognizing the rapid growth in business-to-business electronic commerce,
MasterCard's Corporate Payment Solutions group has a team dedicated to the
development and deployment of an overall electronic business-to-business
strategy. Core to the strategy will be leveraging MasterCard's infrastructure
and ubiquitous brand to become the payment method of choice for both buyers and
sellers in electronic business-to-business transactions. As an example, we
recently launched the MasterCard Global Trading Program(TM),

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which expands the functionality of the MasterCard Purchasing card to become a
payment vehicle for cross border trade.

STORED VALUE PROGRAMS

     Unlike debit, charge or credit programs -- where the consumer or
business/corporate customer is obligated to pay at the same time as, or later
than, the relevant transaction -- "stored value" programs involve a balance
account that is funded with monetary value prior to use. For MasterCard pre-paid
cards, this balance account is maintained on the issuer's or MasterCard's host
computer, and the account is accessed through a MasterCard-branded plastic
payment card using magnetic stripe technology. For travelers cheques, the
balance account is reflected in the value of the paper cheques "purchased" by a
consumer prior to use. For Mondex cards, the balance account is maintained in an
electronic "purse" application contained on a computer chip embedded into the
payment card itself.

     Pre-paid.  MasterCard's pre-paid card platform is a flexible tool that
permits our members to develop, launch and manage host-based, magnetic
stripe-enabled pre-paid card programs customized to the needs of unique consumer
segments. Pre-paid cards can be issued in connection with our MasterCard,
Maestro and/or Cirrus brands according to the issuing member's requirements, and
are accepted anywhere the relevant brand is accepted. There are a variety of
MasterCard-branded pre-paid card programs in operation in the United States,
Asia/Pacific and other regions. In the United States, we launched a MasterCard
gift card program in 2000 using our pre-paid card platform, which allows
consumers to purchase and replenish MasterCard-branded gift cards over the
Internet.

     Travelers Cheques.  Travelers cheques are a paper-based, prepaid form of
payment for use at the point of sale. MasterCard-branded travelers cheques,
which are available in a number of international currencies including the euro,
are refundable worldwide and can be replaced if lost or stolen.
MasterCard-branded travelers cheques are issued by a number of members around
the world. For a description of MasterCard's guarantee obligations relating to
travelers cheques, see Note 13 to the Consolidated Financial Statements of
MasterCard International.

     Mondex.  The Mondex electronic cash program, a chip-based, stored value
payment application, allows monetary value to be stored in an electronic "purse"
directly on Mondex-branded payment cards. Up to five currencies can be loaded on
a Mondex card at any one time. The value stored on a Mondex card can be used as
payment for goods or services at retailers who accept Mondex cards, or
transferred to other Mondex cards, using specialized card readers. Mondex cards
permit the immediate transfer of value to a merchant or between cards without
the transaction being authorized, cleared or settled through a central computer
system. Mondex cards are primarily marketed to consumers as a convenient,
technologically advanced and secure alternative to payment by cash or check,
principally in connection with low-value purchases. For merchants and banks,
Mondex cards can also reduce the risks and costs associated with processing cash
and check payments.

     The Mondex purse application is commercialized through a franchise system
operated by Mondex International Limited ("MXI"). All MasterCard members have
the right to obtain licenses from franchisees of MXI to issue Mondex cards in
the countries in which they operate. To date, the Mondex purse application has
been franchised or directly licensed to financial institutions in most major
national markets. Full scale Mondex electronic cash programs have been
implemented in Hong Kong and in connection with a number of universities and an
Internet retailer in the United Kingdom and Venezuela. In addition, Mondex cards
are currently in pilot trials in Canada and New Zealand.

     For a description of our investment in MXI, the owner and licensor of the
Mondex electronic cash program, see Note 11 to the Consolidated Financial
Statements of MasterCard International.

     On June 29, 2001, MasterCard International acquired all of the outstanding
stock of MXI that it did not previously own. As a result of assuming full
ownership of MXI, MasterCard International now directly controls all of MXI's
operations and management. This transaction did not have a material impact on
the financial statements of MasterCard International. Through MXI, MasterCard
International presently expects to continue providing support to Mondex
franchisees and licensees, providing services to the MULTOS

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consortium (described below), and managing the Mondex electronic cash, security
and certificate authority applications.

GLOBAL e-BUSINESS AND EMERGING TECHNOLOGIES

     Through our Global e-Business and Emerging Technologies group, MasterCard
is supporting innovation in the payments industry with a number of initiatives,
including developments in the areas of electronic commerce, mobile commerce and
smart cards. We seek to ensure that MasterCard-branded payment cards play an
important role in payment channels that are developing as a result of new
technologies (including the Internet, wireless channels and cable). We also seek
to develop payment programs that utilize these technologies (including, among
others, person-to-person payments, micropayments and payments via television
set-top boxes).

     Electronic and Mobile Commerce.  Our Global e-Business group seeks to
ensure that MasterCard cards can be securely and conveniently used for all kinds
of payments involving new or developing technologies, such as the Internet,
wireless devices, digital wallets, interactive television and personal digital
assistants. We are planning or developing MasterCard payment solutions in each
of these areas through alliances with electronic commerce vendors and service
providers. We are also participating in the establishment of industry standards
for both electronic and mobile commerce.

     We are also working to develop mobile commerce standards and programs that
will allow consumers to securely conduct their financial transactions using a
variety of wireless devices. Mobile commerce is the term applied to online
financial transactions -- shopping or the electronic transfer of funds -- using
a mobile device. Our global mobile commerce team works with standards
organizations such as WAP, the Global Mobile Commerce Interoperability Group
(GMCIG), ETSI and others to establish wireless payment standards, and has
entered into alliances with Motorola, 724 Solutions, Sonera Smart Trust,
MobileWay and other members of the mobile commerce chain to develop secure
wireless payment solutions.

     Smart Cards.  We are working with our members to help them replace
traditional payment cards relying solely on magnetic stripe technology with
smart, or chip-enabled, payment cards. Smart cards provide for more secure
transactions and offer members the opportunity to provide their cardholders with
value-added, customized relationship services associated with the card. Smart
cards can perform many different functions, such as storing cardholders'
personal and purchasing information and allowing banks to provide individualized
rewards programs and merchants to offer personalized incentives. Additionally,
smart cards may offer greater security protections in certain circumstances than
magnetic stripe cards because electronic proof of a cardholder's identity is
carried on the smart card and encrypted before transmission to the issuer,
allowing secure purchases.

     We provide an end-to-end strategy for helping our members migrate from
magnetic stripe cards to smart cards in a manner and timeframe that works best
for them. Our chip migratory strategy is based on two fundamental principles:

     - ensuring that our chip programs work the same way around the globe; and

     - providing choice in terms of which applications and operating systems are
       available to our members.

     To support the movement to chip-based cards, we have developed The Complete
Chip Solution(TM), a turnkey strategy for helping our members migrate their
MasterCard cards to a chip platform. The Complete Chip Solution is a support
program offering members a suite of payment applications for smart cards,
including debit, credit, stored value and digital identification, which can
operate on MULTOS(TM), Java(TM) and other smart card operating platforms. In
addition, we have developed M/Chip(TM), an integrated credit/debit application
that allows our members to issue chip-based MasterCard, Maestro, and
Cirrus-branded cards that are fully compatible with the EMV
(Europay-MasterCard-Visa) standard. We offer an M/Chip application specifically
designed for the MULTOS platform, and a platform neutral version of M/Chip for
JavaCard and proprietary chip operating systems. We also manage the Chip Vendor
Services Program, through which we coordinate MasterCard's chip strategies with
leading smart card vendors and assist members in implementing chip-based
programs.
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     While our strategy is to allow members to choose their own operating system
for their chip programs, we (together with our Mondex affiliate) have played a
leading role in the development of MULTOS, an open, industry-controlled,
high-security, multi-application operating system for smart cards. With MULTOS,
members issuing smart cards are able to combine payment applications from any
service provider (such as credit, debit, stored value and loyalty programs) with
applications from outside the financial services industry (such as security or
storage of personal information). MULTOS is actively promoted by MAOSCO, a
consortium in which we play a significant role. We have also joined with Europay
and Visa to establish EMVCo, a joint working group created to facilitate the
introduction of chip technology in a global payments environment.

     As of the third quarter of 2001, more than 100 million smart cards bearing
MasterCard's or Europay's brands were issued worldwide. MYCAL, the fourth
largest retailer in Japan, successfully launched the first MasterCard smart card
program using the MULTOS operating system and M/Chip in 1998, and over one
million cards were issued in connection with this program in 1999. Significant
chip migration activities are now occurring in Brazil, the United Kingdom and
other countries, and M/Chip implementations are taking place in Japan, Korea and
South Africa.

INTELLECTUAL PROPERTY

     We own a number of valuable trademarks that are essential to our business,
including MasterCard and Cirrus. We own the Maestro trademark through our joint
venture with Europay. MXI owns the Mondex wordmark and we license the
interlocking circles device that, together with the wordmark, make up the Mondex
logo. Through license agreements with our member financial institutions, we
authorize the use of our trademarks in connection with our members' card issuing
and merchant acquiring businesses. Trademarks remain valid so long as they are
used properly for identification purposes, and we emphasize the correct use of
our trademarks both within our company and by our members. In addition, we own a
number of patents relating to payments solutions, transaction processing, smart
cards, security systems and other matters. None of our patents are material to
our business operations.

COMPETITION

     MasterCard programs compete against all forms of payment, including
paper-based transactions (principally cash and checks) and electronic
transactions such as wire transfers and ACH payments. While we believe we have
gained share versus cash and checks in recent years, these forms of payment
still capture the largest overall percentage of worldwide transaction volume.

     Within the general purpose payment card industry, we face substantial and
increasingly intense competition worldwide from systems such as Visa, American
Express and JCB, among others. In specific countries, we face significant
competition from other competitors such as Discover/Novus (United States),
Interac (Canada) and Bancard and EFTPOS (Australia). We also encounter
competition from businesses such as retail stores and petroleum (gasoline)
companies that issue their own payment cards, as well as from regional ATM
networks such as NYCE, Concord/EFS and others. Some of our competitors have
substantially greater capital and resources than we have.

     In addition, we compete against new entrants that have developed
alternative payment systems, such as PayPal Inc., PayBox, Billpoint and others.
Among other things, these competitors provide Internet currencies that can be
used to buy and sell goods on-line, "virtual checking" programs that permit the
direct debit of consumer checking accounts for on-line payments, and services
that support payments to and from proprietary accounts for Internet, mobile
commerce and other applications. A number of these new entrants rely principally
on the Internet to support their services, and may enjoy lower costs than we do
as a result of our fixed transaction processing and data transport networks.

     We also face competition from transaction processors such as First Data
Corporation, some of whom are seeking to build networks that link issuers
directly with point-of-sale devices for payment card transaction authorization
and processing services. These networks may threaten to disintermediate our own
transaction processing functions.
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     We believe that the principal factors affecting our competitive position in
the global payments industry are:

     - our relationships with our members;

     - the relative prices of services and products offered;

     - the acceptance base, reputation and brand recognition of the payment
       cards;

     - the quality of transaction processing;

     - the number of issued cards and the extent of consumer and business
       spending with the cards;

     - the success of marketing and promotional campaigns;

     - the integrity of our transaction processing systems and our guarantee of
       our principal members' settlement obligations; and

     - the ability to develop and implement new card programs, systems and
       technologies in both physical and virtual environments.

     For additional information on our competitive position, see "Overview of
the Global Payments Industry."

EMPLOYEES

     As of September 30, 2001, we employed approximately 3,300 persons, of which
approximately 545 were employed outside the United States. We consider our
relationship with our employees to be good.

PROPERTIES

     As of September 30, 2001, MasterCard and its subsidiaries owned or leased
44 properties. These facilities primarily consist of corporate and regional
headquarters offices, as well as our operations centers.

     Our corporate headquarters is a three story, 472,600 square foot building
located at 2000 Purchase Street in Purchase, New York. We own the building and
there is no outstanding debt on the facility. In addition, we operate a 528,000
square foot global technology and operations center located in O'Fallon,
Missouri, known as "Winghaven," construction of which is substantially complete.
The term of the lease on this new facility is 10 years commencing on August 31,
1999.

     In addition to our corporate headquarters and operations center noted
above, MasterCard leases a total of 36 other facilities. These facilities
include the following: 32 regional or country offices, 3 operations centers, 1
public affairs office and 2 storage facilities. Included in these totals are 25
facilities outside of the United States. See Note 9 to the audited Consolidated
Financial Statements of MasterCard International.

     We believe that our facilities are suitable and adequate for the business
that we currently conduct. However, we periodically review our space
requirements and may acquire new space to meet the needs of our business, or
consolidate and dispose of facilities that are no longer required.

LEGAL PROCEEDINGS

     MasterCard is a party to litigation with respect to a variety of matters in
the ordinary course of business. Except as described below, MasterCard does not
believe that any litigation to which it is a party may have a material adverse
impact on our business or prospects.

DEPARTMENT OF JUSTICE ANTITRUST LITIGATION

     In October 1998, the DOJ filed suit against MasterCard International, Visa
U.S.A., Inc. and Visa International Corp. in the U.S. District Court for the
Southern District of New York alleging that both MasterCard's and Visa's
governance structure and policies violated U.S. federal antitrust laws. First,
the DOJ claimed that "dual governance" -- the situation where a financial
institution has a representative on the board of directors of MasterCard or Visa
while a portion of its card portfolio is issued under the brand of the other
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association -- was anti-competitive and acted to limit innovation within the
payment card industry. At the same time, the DOJ conceded that "dual
issuance" -- a term describing the structure of the bank card industry in the
United States in which a single financial institution can issue both MasterCard
and Visa-branded cards -- was pro-competitive. Second, the DOJ challenged
MasterCard's CPP and a Visa bylaw provision that prohibit financial institutions
participating in the respective associations from issuing competing proprietary
payment cards (such as American Express or Discover). The DOJ alleged that
MasterCard's CPP and Visa's bylaw provision acted to restrain competition.

     MasterCard denied the DOJ's allegations. MasterCard believes that both
"dual governance" and the CPP are pro-competitive and fully consistent with U.S.
federal antitrust law.

     A bench trial concerning the DOJ's allegations was concluded on August 22,
2000. On October 9, 2001, the district court judge issued an opinion upholding
the legality and pro-competitive nature of dual governance. In so doing, the
judge specifically found that MasterCard and Visa have competed vigorously over
the years, that prices to consumers have dropped dramatically, and that
MasterCard has fostered rapid innovations in systems, product offerings and
services.

     However, the judge also held that MasterCard's CPP and the Visa bylaw
constitute unlawful restraints of trade under the federal antitrust laws. The
judge found that the CPP and Visa bylaw weakened competition and harmed
consumers by preventing competing proprietary payment card networks such as
American Express and Discover from entering into agreements with banks to issue
cards on their networks. In reaching this decision, the judge found that two
distinct markets -- a credit and charge card issuing market and a network
services market -- existed in the United States, and that both MasterCard and
Visa had market power in the network market. MasterCard strongly disputes these
findings and believes that the DOJ failed, among other things, to demonstrate
that U.S. consumers have been harmed by the CPP.

     On November 26, 2001, the judge issued a final judgment that orders
MasterCard to repeal the CPP insofar as it applies to issuers and enjoins
MasterCard from enacting or enforcing any bylaw, rule, policy or practice that
prohibits its issuers from issuing general purpose or debit cards in the United
States on any other general purpose card network. The judge also concluded that
during the period in which the CPP was in effect, MasterCard was able to "lock
up" certain members by entering into long-term agreements with them pursuant to
which the members committed to maintain a certain percentage of their general
purpose card volume, new card issuance or total number of cards in force in the
United States on MasterCard's network. Accordingly, the final judgment provides
that there will be a period (commencing on the effective date of the judgment
and ending on the later of two years from that date or two years from the
resolution of any final appeal) during which MasterCard will be required to
permit any issuer with which it entered into such an agreement prior to the
effective date of the final judgment to terminate that agreement without
penalty, provided that the reason for the termination is to permit the issuer to
enter into an agreement with American Express or Discover. MasterCard would be
free to apply to the district court to recover funds paid but not yet earned
under any terminated agreement. The final judgment imposes parallel requirements
on Visa. The judge explicitly provided that MasterCard and Visa would be free to
enter into new partnership or member business agreements in the future.

     MasterCard believes that is has a strong legal basis to challenge the
judge's ruling with respect to the CPP, and presently intends to appeal the
decision on that count. On February 6, 2002, the judge issued an order granting
MasterCard's and Visa's motion to stay the final judgment pending appeal. The
DOJ is also free to appeal the judge's ruling with respect to dual governance.

MERCHANT ANTITRUST LITIGATION

     Commencing in October 1996, several putative class action suits were
brought by a number of U.S. merchants -- including Wal-Mart Stores, Inc., Sears
Roebuck & Co., Inc., The Limited Inc. and Safeway, Inc. -- against MasterCard
International and Visa U.S.A., Inc. challenging certain aspects of the payment
card industry under U.S. federal antitrust law. Those suits were later
consolidated in the U.S. District Court for the Eastern District of New York.
The plaintiffs challenge MasterCard's "Honor All Cards" rule (and a similar Visa
rule), which ensures universal acceptance for consumers by requiring merchants
who accept MasterCard cards to accept for payment every validly presented
MasterCard card. Plaintiffs claim that
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MasterCard and Visa unlawfully have tied acceptance of debit cards to acceptance
of credit cards. In essence, the merchants desire the ability to reject
off-line, signature-based debit transactions (for example, MasterCard card
transactions) in favor of other payment forms, including on-line, PIN-based
debit transactions (for example, Maestro or regional ATM network transactions)
which generally impose lower transaction costs for merchants. The plaintiffs
also claim that MasterCard and Visa have conspired to monopolize what they
characterize as the point-of-sale debit card market, thereby suppressing the
growth of regional networks such as ATM payment systems. Plaintiffs allege that
the plaintiff class has been forced to pay unlawfully high prices for debit and
credit card transactions as a result of the alleged tying arrangement and
monopolization practices. There are related consumer class actions pending in
two state courts that have been stayed pending developments in this matter.

     MasterCard denies the merchant allegations and believes that the "Honor All
Cards" rule and MasterCard practices with respect to debit card programs in the
United States are pro-competitive and fully consistent with U.S. federal
antitrust law.

     On February 22, 2000, the district court granted the plaintiffs' motion for
class certification. MasterCard and Visa subsequently appealed the decision to
the Second Circuit Court of Appeals. On October 17, 2001, a three-judge panel
affirmed the lower court decision by a two-to-one majority. MasterCard intends
to file a petition for a writ of certiorari to the U.S. Supreme Court by early
March 2002. Motions seeking summary judgment have been filed by both sides and
fully briefed in the district court. As of the date of this proxy
statement-prospectus, no argument date for summary judgment and no trial date
has been set.

     Based upon publicly available information, the plaintiffs previously have
asserted damage claims in this litigation of approximately $8 billion, before
any trebling under U.S. federal antitrust law. More recent public estimates
(including estimates set forth in the opinion of the Second Circuit panel) place
the plaintiffs' estimated damage claims at approximately $50 billion to $100
billion, depending on the source. In addition, the plaintiffs' damage claims
could be materially higher than these amounts as a result of the passage of time
and substantive changes in the theory of damages presented by the plaintiffs.
These figures reflect claims asserted and should not be construed as an
acknowledgement of the reliability of the figures presented. MasterCard believes
that it is not currently possible to estimate the impact, if any, that the
ultimate resolution of this matter will have on MasterCard's results of
operations, financial position or cash flows.

CURRENCY CONVERSION LITIGATION

     MasterCard, together with Visa U.S.A., Inc. and Visa International Corp.,
are defendants in two lawsuits that allege that MasterCard and Visa wrongfully
imposed an asserted one percent currency conversion "fee" on every credit card
transaction by U.S. MasterCard and Visa cardholders involving the purchase of
goods or services in a foreign country, and that such alleged "fee" is unlawful.
The first of these actions, Schwartz v. Visa Int'l Corp., et al., was brought in
the Superior Court of California in February 2000, purportedly on behalf of the
general public. The second action, Senequier v. Visa Int'l Corp., et al. was
commenced in January 2001 in the Supreme Court of the State of New York and is a
purported class action. A trial date of April 29, 2002 has been set for the
Schwartz matter. No trial date has been set for the Senequier matter, which
defendants removed to federal court in January 2002. Both actions claim that the
alleged "fee" grossly exceeds any costs the defendants might incur in connection
with currency conversions relating to credit card purchase transactions made in
foreign countries and is not properly disclosed to cardholders. Plaintiffs seek
to prevent defendants from continuing to engage in, use or employ the alleged
practice of charging and collecting the asserted one percent currency conversion
"fee" and from charging any type of purported currency conversion "fee" without
providing a clear, obvious and comprehensive notice that a fee will be charged.
Plaintiffs also request an order (1) requiring defendants to fund a corrective
advertising campaign; and (2) awarding restitution of the monies allegedly
wrongfully acquired by imposing the purported currency conversion "fee". The
complaints assert that, during the four-year period that preceded the respective
lawsuits, MasterCard collected approximately $200 million as a result of
allegedly imposing the claimed one percent currency conversion "fee." MasterCard
denies these allegations.

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     MasterCard, Visa U.S.A., Inc., Visa International Corp., several member
banks including Citibank (South Dakota), N.A., Citibank (Nevada), N.A., Chase
Manhattan Bank USA, N.A. and Bank of America, N.A. (USA), and Diners Club are
defendants in a number of federal putative class actions that allege, among
other things, violations of federal antitrust laws based on the asserted one
percent currency conversion "fee." MBNA Corporation and MBNA America Bank, N.A.
were named as defendants in late January 2002. The complaints also allege
violations of the Truth-In-Lending Act against the member banks. Seven of the
purported class actions, Ross, et al. v. Visa U.S.A., Inc., et al., Kune v. Visa
U.S.A., Inc., et al., Chatham v. Visa U.S.A., Inc., et al., Steinlauf v. Visa
U.S.A., Inc., et al., Finkelman v. Visa U.S.A., Inc., et al., La Marca v. Visa
U.S.A., Inc., et al. and Lipner v. Visa U.S.A., Inc., et al., were brought in
the United States District Court for the Eastern District of Pennsylvania in
2001. Five other purported class actions, Cooper v. Visa U.S.A., Inc., et al.,
Ramsey v. Visa U.S.A., Inc., et al., La Place v. Visa U.S.A., Inc., et al.,
Salvagio v. Visa U.S.A., Inc., et al., and Javier, et al. v. Visa U.S.A., Inc.
et al., were brought in the United States District Court for the Northern
District of California in 2001. Five other purported class actions, Wood v. Visa
U.S.A., Inc., et al., Oshry v. Visa U.S.A., Inc., et al., Inducon Park Assocs.
Inc. v. Visa U.S.A., Inc., et al., Matthews v. Visa U.S.A., Inc., et al. and
Silberman et al. v. Visa U.S.A., Inc. were brought in the United States District
Court for the Southern District of New York. As against MasterCard, the
plaintiffs seek treble damages for an alleged conspiracy to fix and maintain
prices in violation of the Sherman Antitrust Act. The complaints allege that
MasterCard's and Visa's system of dual governance inhibits competition between
them and provides each with the ability and incentive to collude and fix the
asserted currency conversion "fee" in violation of antitrust laws. Two of the
complaints, Silberman and Ramsey, also allege violations of the Truth-in-Lending
Act against MasterCard. MasterCard denies these allegations.

     Pursuant to motions to the Judicial Panel on Multidistrict Litigation and
subsequent notices of tag-along rights, these actions were centralized in the
United States District Court for the Southern District of New York (Pauley, J.)
for coordinated or consolidated pretrial proceedings. Plaintiffs filed a
consolidated amended complaint on January 22, 2002. Defendant's response to that
complaint is due on March 21, 2002.

     MasterCard believes that it is not currently possible to estimate the
impact, if any, that the ultimate resolution of theses matters will have on its
results of operations, financial position or cash flows.

GOVERNMENT REGULATION

     MasterCard is subject to a variety of employment, health and safety,
environmental and other forms of government regulation in the ordinary course of
its business. MasterCard members are subject to numerous regulations applicable
to banks and other financial institutions in the United States and elsewhere,
and as a consequence MasterCard is at times impacted by such regulations.
Certain of MasterCard's operations are subject to periodic audits by the Federal
Financial Institutions Examination Council. In addition, aspects of our
operations or business may be subject to privacy regulation in the United States
and abroad, as well as regulations imposed by the U.S. Office of Foreign Asset
Control. Government regulation did not have a material impact on MasterCard in
2001, and MasterCard does not expect that government regulation will have a
material impact on its business or financial condition in 2002.

MARKET INFORMATION

     There is no established public trading market for our common stock, and we
do not currently anticipate that our common stock will be listed on any
securities exchange or quoted on any automated quotations system or electronic
communications network.

                                       101


        MASTERCARD SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

     The following table sets forth selected consolidated financial and other
information for MasterCard for each of the five years in the period ended
December 31, 2000 and as of the end of each such fiscal year, and as of and for
the nine months ended September 30, 2001 and September 30, 2000 and selected
unaudited pro forma financial data for the year ended December 31, 2000 and as
of and for the nine months ended September 30, 2001. The selected consolidated
financial data as of December 31, 2000 and December 31, 1999 and for the fiscal
years ended December 31, 2000, December 31, 1999 and December 31, 1998 have been
derived from the audited consolidated financial statements of MasterCard
International included elsewhere in this proxy statement-prospectus. The
selected consolidated financial data as of December 31, 1998, December 31, 1997
and December 31, 1996 and for the fiscal years ended December 31, 1997 and
December 31, 1996 have been derived from the audited consolidated financial
statements of MasterCard International that have not been included in this proxy
statement-prospectus. The selected consolidated financial data for the nine
months ended September 30, 2001 and September 30, 2000 and as of September 30,
2001 and September 30, 2000 have been derived from the unaudited consolidated
financial statements of MasterCard International, which in the opinion of
management, include all adjustments, consisting of only normal recurring
adjustments, that are necessary for a fair statement of the results of
operations and financial position of MasterCard International for the periods
and at the dates presented. The results of operations for the nine months ended
September 30, 2001 are not necessarily indicative of the results to be expected
for the full year. The pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable. The
information set forth below should be read in conjunction with "MasterCard
Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of MasterCard International
and the notes thereto, and other financial information, including the pro forma
consolidated financial information, included elsewhere in this proxy
statement-prospectus.



                            NINE MONTHS ENDED
                              SEPTEMBER 30,                            YEAR ENDED DECEMBER 31,
                        -------------------------   -------------------------------------------------------------
                           2001           2000         2000         1999         1998         1997         1996
                        ----------     ----------   ----------   ----------   ----------   ----------    --------
                                                  (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                                                    
MASTERCARD
  INTERNATIONAL

INCOME STATEMENT DATA:
  Revenue.............  $1,308,630     $1,142,361   $1,571,215   $1,389,155   $1,205,968   $1,077,099    $949,684
  Operating Income....     228,211        245,119      172,472      115,053       18,254       36,253      52,564
  Net Income..........     145,768        155,646      118,149       86,255       24,183       44,283(a)   78,781(b)

BALANCE SHEET DATA:
  Total Assets........  $1,350,115     $1,235,009   $1,181,787   $  972,477   $  871,643   $  715,986    $638,228
  Long-Term Debt......      82,525         82,894       82,992       82,682       82,419       11,467          --
  Members' Equity.....     613,183        497,980      462,408      341,520      257,248      232,396     189,799

MASTERCARD
  INCORPORATED

PRO FORMA DATA:
  Earnings per share,
    basic and
    diluted...........  $     1.60            N/A   $     1.16          N/A          N/A          N/A         N/A
  Book value per
    share.............        9.80            N/A         8.26          N/A          N/A          N/A         N/A


---------------
(a) Includes a net gain of $8,162 recognized in conjunction with the sale of
    MasterCard International's wholly owned subsidiary, Monetary Transfer
    Systems L.L.C. ("MTS"), to Honor Technologies, Inc. and Honor Services, Inc.
    in October 1997. MTS owned and operated the Bankmate(R) ATM and
    point-of-sale debit network.

(b) Includes a net gain of $66,836 recognized in conjunction with MasterCard
    International's sale of MasterCard Automated Point-of-Sale Processing
    ("MAPP") to National Data Corporation ("NDC") in April 1996. This agreement
    included the formation of a new payment processing company called Global
    Payments Systems L.L.C. ("GPS") which consisted of MAPP and NDC's payment
    services, point-of-sale, and back-office services. Also included in net
    income is $27,000 in net expense associated with an agreement with Access
    Brand Ltd. to acquire the Access(R) brand and to collaboratively market the
    MasterCard brand in the United Kingdom.
                                       102


                  MASTERCARD SELECTED STATISTICAL INFORMATION

     The tables below set forth, for the years ended December 31, 2000 and 2001,
our GDV, purchase volume and cash volume and the number of purchase
transactions, cash transactions, accounts and cards on a regional basis. For
purposes of the tables: GDV represents purchase volume plus cash volume and
includes the impact of balance transfers and convenience checks; purchase volume
means the aggregate dollar amount of purchases made with MasterCard-branded
cards for the relevant period; and cash volume means the aggregate dollar amount
of cash disbursements obtained with MasterCard-branded cards for the relevant
period. Maestro, Cirrus and Mondex transactions are not included in the
following tables. Information in the tables is adjusted to eliminate the impact
of changes in the value of foreign currencies against the U.S. dollar.

     The data set forth in the GDV, Purchase Volume, Purchase Transactions, Cash
Volume and Cash Transactions columns below are derived from information provided
by the members of MasterCard International that is subject to logical and
statistical verification by MasterCard's Global Statistics Unit and
cross-checking against information provided by MasterCard's transaction
processing systems. The data set forth in the Accounts and Cards columns below
are derived from information provided by the members of MasterCard International
and certain limited logical and statistical verification by MasterCard's Global
Statistics Unit.

     A portion of the data set forth in the tables below is estimated. In
addition, the information in the tables below has been restated to reflect a
revision to MasterCard's methodology for estimating the dollar volume of cash
transactions for off-line debit programs in the United States, which went into
effect in January 2002. MasterCard revised this estimation methodology to
utilize the actual performance of its members in order to improve the precision
of the estimates employed for members who are unable to report this data.



                                                              FOR THE YEAR ENDED DECEMBER 31, 2000
                                  --------------------------------------------------------------------------------------------
                                                PURCHASE      PURCHASE        CASH          CASH
                                     GDV         VOLUME     TRANSACTIONS     VOLUME     TRANSACTIONS    ACCOUNTS      CARDS
                                  (BILLIONS)   (BILLIONS)    (MILLIONS)    (BILLIONS)    (MILLIONS)    (MILLIONS)   (MILLIONS)
                                  ----------   ----------   ------------   ----------   ------------   ----------   ----------
                                                                                               
ALL PROGRAMS EXCEPT ON-LINE
  DEBIT PROGRAMS
Middle East/Africa..............    $  6.4       $  4.4          95.3        $  2.0          17.3          2.2          2.5
Asia/Pacific....................     182.1        110.3         894.8          71.8         164.4         75.4         85.1
Europe..........................     191.4        147.4       2,469.1          44.0         544.5         60.9         68.3
Latin America and Caribbean.....      27.5         22.6         474.6           4.9          57.7         24.5         29.6
Canada..........................      25.0         20.8         366.3           4.2          16.4         12.7         16.9
United States...................     432.2        328.1       4,515.8         104.1         365.8        187.2        235.3
Worldwide.......................    $864.6       $633.5       8,815.8        $231.1       1,166.0        362.9        437.8




                                                              FOR THE YEAR ENDED DECEMBER 31, 2001
                                  --------------------------------------------------------------------------------------------
                                                PURCHASE      PURCHASE        CASH          CASH
                                     GDV         VOLUME     TRANSACTIONS     VOLUME     TRANSACTIONS    ACCOUNTS      CARDS
                                  (BILLIONS)   (BILLIONS)    (MILLIONS)    (BILLIONS)    (MILLIONS)    (MILLIONS)   (MILLIONS)
                                  ----------   ----------   ------------   ----------   ------------   ----------   ----------
                                                                                               
ALL PROGRAMS EXCEPT ON-LINE
  DEBIT PROGRAMS
Middle East/Africa..............    $  6.5       $  4.4          103.5       $  2.1          20.5          2.5          2.8
Asia/Pacific....................     199.8        113.1        1,128.2         86.6         197.2         95.6        104.9
Europe..........................     202.2        154.0        2,690.8         48.2         597.2         70.2         78.5
Latin America and Caribbean.....      31.9         23.4          537.9          8.5          96.9         33.2         38.3
Canada..........................      27.7         23.0          406.4          4.7          16.0         15.3         20.7
United States...................     517.9        383.1        5,389.8        134.8         511.5        219.2        274.7
Worldwide.......................    $986.0       $700.9       10,256.6       $285.1       1,439.3        436.1        519.9


                                       103


               MASTERCARD MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
MasterCard's Consolidated Financial Statements and the accompanying notes
included elsewhere in this proxy statement-prospectus.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000

     Revenue was $1,309 million for the nine months ended September 30, 2001
compared to $1,142 million for the nine months ended September 30, 2000, an
increase of $166 million or 15%. Our revenue is composed of operations fees and
member assessments.

     Operations fees represent user fees for authorization, clearing, settlement
and other member products and services that facilitate transaction and
information management among our members on a global basis. Operations fees were
$799 million for the nine months ended September 30, 2001 compared to $698
million for the nine months ended September 30, 2000, an increase of $101
million or 14%. The increase in operations fees was attributable partially to a
16% increase in the number of transactions processed, offset by lower average
pricing based on our pricing structure, which rewards members with lower prices
for incremental volume.

     Member assessments were $509 million for the nine months ended September
30, 2001 compared to $444 million for the nine months ended September 30, 2000,
an increase of $65 million or 15%. The increase in member assessments was
attributable primarily to a 12% increase in gross dollar volume ("GDV") between
the periods, which represents gross spending on MasterCard cards for goods and
services as well as cash disbursements. The growth in GDV was driven primarily
by a 20% increase in the number of MasterCard cards issued by members between
the periods (without adjusting for the impact of changes in the value of foreign
currencies against the U.S. dollar). For the nine months ended September 30,
2001, member assessments revenue growth exceeded GDV growth due to a greater
percentage of international volume growth, which is assessed at higher rates.
Furthermore, revenues increased as a result of a shift in prior quarter balance
transfer volume to retail sales volume, for which we receive higher assessable
revenues. Balance transfers represent the movement of credit card balances by a
cardholder from one account to another account, held by a different institution.
Increases in member assessments in the first nine months of 2001 were partially
offset by lower average pricing based on our pricing structure, which rewards
members with reduced prices for incremental volume.

     Operating expenses were $1,080 million for the nine months ended September
30, 2001 compared to $897 million for the nine months ended September 30, 2000,
an increase of $183 million or 20%. Our operating expenses are comprised of
general and administrative, advertising and market development, depreciation and
amortization expenses.

     General and administrative expenses consist primarily of personnel,
telecommunications, data processing, travel and professional fees. General and
administrative expenses were $589 million for the nine months ended September
30, 2001 compared to $535 million for the nine months ended September 30, 2000,
an increase of $55 million or 10%. This increase was primarily attributable to
increases in personnel costs of $38 million resulting from increases in
headcount and compensation. As a percentage of revenue, general and
administrative expenses declined from 47% to 45% for the nine months ended
September 30, 2000 and 2001, respectively.

     In the nine months ended September 30, 2001, we made significant
investments in advertising and market development to support and build value in
the MasterCard family of brands, and to develop new and distinct programs to
differentiate ourselves from our competition. Advertising and market development
expenses were $439 million for the nine months ended September 30, 2001 compared
to $321 million for the nine months ended September 30, 2000, an increase of
$118 million or 37%. This increase was attributable primarily to additional
costs of $60 million in market development associated with strong performance in
card-based and other long-term member incentive programs as well incremental
merchant acceptance initiatives.

                                       104


The increase was also attributable to increases in network television costs of
$19 million associated with new media buys during the SuperBowl and the Grammy
Awards as well as the targeting of new markets. Finally, our promotions and
sponsorship fees increased $34 million primarily as a result of incremental
promotions in the nine months ended September 30, 2001, such as the National
Hockey League Celebrity Cup Face-off, as well as increased contractual
sponsorship fees associated with the World Cup, Copa America, the National
Hockey League, Major League Baseball and PGA Golf organizations.

     Depreciation expense was $28 million for the nine months ended September
30, 2001 compared to $25 million for the nine months ended September 30, 2000,
an increase of $3 million or 11%, primarily due to purchases of equipment in
2001.

     Amortization expense was $24 million for the nine months ended September
30, 2001 compared to $17 million for the nine months ended September 30, 2000,
an increase of $7 million or 45%. This increase was primarily the result of
additional amortization of capitalized computer software, partially offset by a
decrease in the amortization of franchise rights in 2001 due to the write-down
of Mondex China Pte., Ltd., Mondex India Pte., Ltd. and Mondex Asia Pte., Ltd.
franchise rights to their estimated fair value in 2000.

     Other income and expense was $8 million for the nine months ended September
30, 2001 compared to $20 million for the nine months ended September 30, 2000, a
decrease of $11 million or 58%. Other income and expense comprises primarily
interest, dividend and other investment income related to the portfolio of
investments held, as well as interest expense and minority interest. The
decrease in other income and expense was primarily the result of a devaluation
of the trading securities portfolio.

     The effective tax rates for the nine months ended September 30, 2001 and
September 30, 2000 were 38.4% and 41.2%, respectively. The lower rate for the
nine month period ended September 30, 2001 was primarily due to a larger amount
of tax-exempt interest income as a percentage of pre-tax income than in the nine
months ended September 30, 2000, from the utilization for income tax purposes of
a realized capital loss that occurred during the nine months ended September 30,
2001 and from lower state and local income taxes.

     As a result of the foregoing, our net income was $146 million for the nine
months ended September 30, 2001 compared to $156 million for the nine months
ended September 30, 2000, a decrease of $10 million or 6%.

     In addition, EBITDA, which we define as operating earnings before interest,
taxes, depreciation and amortization, was $280 million for the nine months ended
September 30, 2001 compared to $287 million for the nine months ended September
30, 2000, a decrease of $7 million or 2%. EBITDA, as defined, is not intended to
replace generally accepted accounting principles, including such measures as net
income, operating income and cash flow. We believe that EBITDA enhances
management's ability to evaluate and direct its business.

     On June 29, 2001, MasterCard International acquired all of the outstanding
stock of Mondex International Ltd. ("MXI") that it did not previously own. As a
result of assuming full ownership of MXI, MasterCard International now directly
controls all of MXI's operations and management. This transaction did not have a
material impact on the financial statements of MasterCard International.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Revenue was $1.571 billion for the year ended December 31, 2000 compared to
$1.389 billion for the year ended December 31, 1999, an increase of $182 million
or 13%.

     Operations fees were $969 million for the year ended December 31, 2000
compared to $851 million for the year ended December 31, 1999, an increase of
$118 million or 14%. The increase in operations fees was attributable primarily
to an 18% increase in the number of transactions processed, which increased to
10 billion in 2000 compared to 8.5 billion in 1999. The increase in operations
fees was also the result of the introduction of new services and acceptance
programs, including the implementation of merchant investment fees that are
reinvested in acceptance initiatives. These fees generated $31 million in
additional revenue for the year ended December 31, 2000. Increases in operations
fees in 2000 were partially offset by lower average

                                       105


pricing based on our pricing structure, which rewards members with lower prices
for incremental volume. Operations fee rebates provided to our members also
increased $23 million from 1999 to 2000.

     Member assessments were $602 million for the year ended December 31, 2000
compared to $538 million for the year ended December 31, 1999, an increase of
$64 million or 12%. The increase in member assessments was attributable
primarily to an increase in GDV between the periods. GDV (prior to the January
2002 methodology change) was $858 billion for the year ended December 31, 2000
compared to $726 billion for the year ended December 31, 1999, an increase of
$131 billion or 18%. The growth in GDV was driven by many factors, one of which
was an increase in the number of MasterCard cards issued by members. At December
31, 2000, there were 438 million MasterCard cards in circulation worldwide
compared to 379 million at December 31, 1999, an increase of 59 million or 16%.
In addition, the average spending per card increased 3% between 1999 and 2000.
The increase in GDV was also a result of an increase in balance transfer volume,
for which we do not receive tiered member assessment revenue. Increases in
member assessments in 2000 were partially offset by lower average pricing based
on our pricing structure, which rewards members with lower prices for
incremental volume. Member assessment rebates provided to our members also
increased $29 million from 1999 to 2000.

     Operating expenses were $1.399 billion for the year ended December 31, 2000
compared to $1.274 billion for the year ended December 31, 1999, an increase of
$125 million or 10%.

     General and administrative expenses were $743 million for the year ended
December 31, 2000 compared to $730 million for the year ended December 31, 1999,
an increase of $13 million or 2%. This increase was primarily attributable to
increases in personnel costs of $43 million resulting from increased headcount
and compensation increases between 1999 and 2000, offset by reduced professional
fees of $30 million resulting primarily from the delay in the merchant antitrust
litigation over the same period. In addition, asset impairments of approximately
$19 million and $18 million at December 31, 2000 and 1999, respectively, were
recorded to write-down certain investments. These write-downs were determined by
an impairment analysis prepared by management based on recoverability, primarily
of Mondex Asia Pte., Ltd. in 2000, and Mondex China Pte., Ltd. and Mondex India
Pte., Ltd. in 1999. As a percentage of revenue, general and administrative
expenses declined from 53% to 47% for the years ended December 31, 1999 and
2000, respectively.

     In 2000, we made significant expenditures in advertising and market
development to support and build value in the MasterCard family of brands, and
to develop new and distinct programs to differentiate ourselves from our
competition. Advertising and market development expenses were $597 million for
the year ended December 31, 2000 compared to $491 million for the year ended
December 31, 1999, an increase of $106 million or 21%. This increase was
attributable primarily to additional costs of $59 million associated with card-
based and other long-term member incentive programs used to support and develop
customized card programs and other acceptance programs. The increase was also
attributable to increases in network television and print costs of $46 million,
which were associated with the expansion of our global advertising campaign in
many countries and in support of new payment channels, such as e-commerce and
pre-paid programs. Finally, the comparability between 2000 and 1999 was affected
by a $21 million reduction in member incentive accruals in 1999.

     Depreciation expense was $35 million for the year ended December 31, 2000
compared to $32 million for the year ended December 31, 1999, an increase of $3
million or 10%. This increase was primarily attributable to depreciation
associated with our corporate headquarters building, which was purchased in
January 2000 for $70 million.

     Amortization expense was $25 million for the year ended December 31, 2000
compared to $22 million for the year ended December 31, 1999, an increase of $3
million or 14%. This increase was primarily the result of additional
amortization of capitalized computer software, partially offset by decreases in
the amortization of franchise rights in 2000 due to the write-down of Mondex
China Pte., Ltd. and Mondex India Pte., Ltd. franchise rights to their estimated
fair value in 1999.

     Other income and expense was $28 million for the year ended December 31,
2000 compared to $34 million for the year ended December 31, 1999, a decrease of
$6 million or 18%. The decrease in other income

                                       106


and expense was primarily the result of minority interest, which reflects a
decrease in the net loss associated with Mondex Asia Pte., Ltd., a consolidated
MasterCard subsidiary. This decrease was partially offset by interest expense.
Interest expense largely comprises interest related to our $80 million
subordinated debt issuance that has been outstanding since 1998. See Note 9 of
the audited Consolidated Financial Statements of MasterCard International for
additional information.

     The effective tax rates for 2000 and 1999 were 41% and 42%, respectively.
The lower rate in 2000 was principally due to the effects of foreign taxes,
income and losses. In 2000 compared to 1999, we had greater taxable income
effectively taxed at a rate lower than the United States statutory rate.

     As a result of the foregoing, our net income was $118 million for the year
ended December 31, 2000 compared to $86 million for the year ended December 31,
1999, an increase of $32 million or 37%.

     In addition, EBITDA was $232 million for the year ended December 31, 2000
compared to $168 million for the year ended December 31, 1999, an increase of
$64 million or 38%. The EBITDA margin percentage was 15% in 2000 compared to 12%
in 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Revenue was $1.389 billion for the year ended December 31, 1999 compared to
$1.206 billion for the year ended December 31, 1998, an increase of $183 million
or 15%.

     Operations fees were $851 million for the year ended December 31, 1999
compared to $737 million for the year ended December 31, 1998, an increase of
$114 million or 15%. The increase in operations fees was attributable primarily
to a 14% increase in the number of transactions processed, which increased to
8.5 billion in 1999 compared to 7.4 billion in 1998. Increases in operations
fees in 1999 were partially offset by lower average pricing based on our pricing
structure, which rewards members with lower prices for incremental volume.
Operations fee rebates provided to our members increased $13 million from 1998
to 1999.

     Member assessments were $538 million for the year ended December 31, 1999
compared to $469 million for the year ended December 31, 1998, an increase of
$69 million or 15%. The increase in member assessments was attributable
primarily to an increase in GDV between the periods. GDV was $726 billion for
the year ended December 31, 1999 compared to $650 billion for the year ended
December 31, 1998, an increase of $75 billion or 12%. The growth in GDV was
driven by many factors, one of which was an increase in the number of MasterCard
cards issued by members. At December 31, 1999, there were 379 million MasterCard
cards in circulation worldwide compared to 357 million at December 31, 1998, an
increase of $22 million or 6%. In addition, the average spending per card
increased 5% between 1998 and 1999. The increase in GDV was also the result of
stronger financial performance in the Asia/Pacific region, which began to
recover from its economic crisis in 1998. In 1999, larger international volume
growth resulted in increased pricing and member assessment revenue which
exceeded the growth rate of GDV as compared to the prior year. The increases in
volume growth, and accordingly in member assessment revenue, were partially
offset by a lower domestic pricing structure, which rewards members with lower
prices for incremental volume. Member assessment rebates provided to our members
increased $12 million from 1998 to 1999.

     Operating expenses were $1.274 billion for the year ended December 31, 1999
compared to $1.188 billion for the year ended December 31, 1998, an increase of
$86 million or 7%. This increase was primarily due to additional expenditures
for global brand building and member support, as well as investments in
personnel and technology.

     General and administrative expenses were $730 million for the year ended
December 31, 1999 compared to $665 million for the year ended December 31, 1998,
an increase of $65 million or 10%. This increase was primarily attributable to
increases in personnel costs of $62 million resulting from increased headcount
and compensation increases and professional fees of $25 million resulting from
increased litigation expenses over the period primarily in connection with
developments in the DOJ and merchant antitrust litigations. These increases were
partially offset by other operating costs of $43 million primarily associated
with decreased costs related to the purchase of the MasterCard Debit Switch,
additional settlement reserves recorded in 1998 primarily due to the Asian
financial crisis and reduced costs related to publications. In addition, asset
                                       107


impairments of $18 million at December 31, 1999, were recorded to write-down
investments primarily in Mondex China Pte., Ltd. and Mondex India Pte., Ltd. As
a percentage of revenue, general and administrative expenses declined from 55%
to 53% for the years ended December 31, 1998 and 1999, respectively.

     Advertising and market development expenses were $491 million for the year
ended December 31, 1999 compared to $477 million for the year ended December 31,
1998, an increase of $14 million or 3%. The increase was attributable primarily
to additional advertising expense of $49 million associated with the expansion
of our global advertising campaign, which was launched in 1997. These increases
were partially offset by decreased expenditures from the prior year largely due
to a $21 million reduction in member incentive accruals in 1999.

     Depreciation expense was $32 million for the year ended December 31, 1999
compared to $31 million for the year ended December 31, 1998, an increase of $1
million or 3%. This increase was attributable primarily to our continued
investment in new technology.

     Amortization expense was $22 million for the year ended December 31, 1999
compared to $15 million for the year ended December 31, 1998, an increase of $6
million or 40%. This increase was primarily the result of additional
amortization expense associated with the capitalization of computer software in
accordance with Statement of Position ("SOP") 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" which was adopted in
1998. This increase was partially offset by decreased amortization expense in
1999 versus 1998 due to the write-down of Mondex China Pte., Ltd. and Mondex
India Pte., Ltd. franchise rights to their estimated fair value in 1999.

     Other income and expense was $34 million for the year ended December 31,
1999 compared to $22 million for the year ended December 31, 1998, an increase
of $12 million or 54%. This increase was primarily the result of increases in
investment income and unrealized gains and losses on the portfolio of
investments held, as well as higher minority interest which reflects an increase
in the net loss associated with Mondex China Pte., Ltd. and Mondex India Pte.,
Ltd., consolidated MasterCard subsidiaries. These increases were partially
offset by increased interest expense in 1999 associated with our subordinated
debt issuance in 1998. The 1998 interest expense reflected a partial year of
expense for the subordinated debt issue versus a full year in 1999.

     The effective tax rates for 1999 and 1998 were 42% and 40%, respectively.
The higher 1999 rate was principally due to substantially higher pretax income,
resulting in less tax-exempt income as a percentage of pretax income.

     As a result of the foregoing, our net income was $86 million for the year
ended December 31, 1999 compared to $24 million for the year ended December 31,
1998, an increase of $62 million or 257%.

     In addition, EBITDA was $168 million for the year ended December 31, 1999
compared to $64 million for the year ended December 31, 1998, an increase of
$104 million or 162%. The EBITDA margin percentage was 12% in 1999 compared to
5% in 1998.

LIQUIDITY AND CAPITAL RESOURCES

     We need substantial capital resources and liquidity to fund our global
developments, to finance our capital expenditures and any future acquisitions
and to service the payments of principal and interest on our outstanding debt.
We expect that the cash generated from operations, working capital and our
borrowing capacity will be sufficient to meet our operating and capital needs in
2001. These resources are also sufficient to meet the estimated costs of the
integration of EPI.

     For the nine months ended September 30, 2001, net cash provided by
operating activities was $208 million compared to $271 million for the nine
months ended September 30, 2000. A lower amount of operating cash was generated
primarily due to a decrease in accrued expenses. During the first nine months of
2000, MasterCard temporarily delayed payments in connection with the
implementation of a new financial accounting system. Consequently, the accrued
expenses balance at September 30, 2000 was substantially larger than the balance
at September 30, 2001.

                                       108


     Net cash used in investing activities was $162 million and $300 million for
the nine months ended September 30, 2001 and 2000, respectively. The decrease
between periods was primarily the result of reduced cash outlays for capital
expenditures and investment securities available-for-sale. The decrease in
capital expenditures was due principally to the purchase of our corporate
headquarters building located in Purchase, New York during the first quarter of
2000 for $70 million. Purchases of investment securities available-for-sale
decreased as a result of decreased funds from operating activities between
periods.

     At December 31, 2000, net cash provided by operating activities was $250
million compared to $77 million and $130 million for the years ended December
31, 1999 and 1998, respectively. The significant increase in 2000 primarily
reflects an increase in net income and a larger increase in accounts payable and
accrued expenses, which was partially offset by increases in accounts
receivable. The increase in accounts payable and accrued expenses were primarily
driven by an increase in accrued expenses related to long-term member incentive
agreements and other expenses, primarily advertising. The increase in accounts
receivable was primarily due to increases in settlement and other member
receivables. The decrease from 1998 to 1999 reflects the impact of higher levels
of accounts receivable at year-end 1999, resulting from increased settlement
receivables and revenue, and decreased expenses related to accrued long-term
member incentive agreements and reserves.

     Net cash (used in) provided by investing activities was $(318) million, $34
million and $(204) million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in 2000 was primarily the result of cash outlays for
capital expenditures and investments in securities available-for-sale. The
increase in capital expenditures was due principally to the purchase of our
corporate headquarters building located in Purchase, New York during the first
quarter of 2000 for $70 million. Investment securities available-for-sale
increased as a result of investments made with excess funds. The change between
1999 and 1998 reflected reduced purchases of investment securities
available-for-sale due to decreased cash provided by operating activities in
1999.

     For the year ended December 31, 1998, net cash provided by financing
activities of $34 million was due primarily to our issuance of $80 million of
subordinated debt in June 1998, offset by loan principal and interest repayments
of $49 million associated with the borrowing from the MXI transaction. See Note
9 of the Consolidated Financial Statements of MasterCard International for
additional information.

     Our financial position continues to reflect strong liquidity. Working
capital, consisting of current assets less current liabilities, was $472 million
at September 30, 2001, $362 million at December 31, 2000, and $312 million at
December 31, 1999, a working capital ratio of 1.9 to 1 compared to 1.8 to 1 and
1.7 to 1, respectively.

     To facilitate liquidity management, we maintain a committed credit facility
from certain financial institutions, which we renew annually. Pursuant to this
facility, we have the right to borrow funds to provide liquidity for material
member settlement failures. On June 5, 2001, we renewed the facility for an
additional one year period and increased its amount to $1.2 billion, from $1.0
billion in the prior period. Facility adequacy is regularly reviewed and
increases are obtained as necessary. In addition to the committed credit
facility, we can draw upon other sources of liquidity such as emergency
borrowings from members, special assessments, and member letters of credit or
guarantees.

ECONOMIC FLUCTUATIONS

     Although we cannot precisely determine the impact of inflation on our
operations, we do not believe our operations have been significantly affected by
inflation. For the most part, we have utilized technology and operating
efficiencies to offset increased operating expenses. In addition, a portion of
our revenues is based upon a percentage of GDV processed, which partially
insulates operating margins on these revenues from the effects of inflation.

     Portions of our business are seasonal. Our revenue is favorably affected by
progressively increased card purchasing volume throughout the year, particularly
in the fourth quarter during the holiday shopping period.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the potential for economic losses to be incurred on market
risk sensitive instruments arising from adverse changes in market indices such
as interest rates and foreign currency exchange rates. We have limited exposure
to market risk from changes in both interest rates and foreign exchange rates.
Management establishes and oversees implementation of board of director approved
policies governing our funding, investments, and use of derivative financial
instruments and monitors aggregate risk exposures on an ongoing basis. There
have been no material changes in our market risk exposures at June 30, 2001 as
compared to December 31, 2000 and 1999.

     We enter into foreign exchange forward and swap contracts to minimize risk
associated with anticipated revenues and expenses and assets and liabilities
denominated in foreign currencies. This activity minimizes our exposure to
transaction gains and losses resulting from fluctuations of foreign currencies
against the U.S. dollar. The terms of the contracts are generally less than 18
months. At December 31, 2000 and 1999, foreign currency forward contracts were
both sold (with notional amounts of $43 million and $28 million, respectively)
and purchased (with notional amounts of $60 million and $67 million,
respectively) to manage a majority of anticipated cash flows in major overseas
markets for the subsequent year.

     Our settlement activities may be subject to foreign exchange risk resulting
from foreign exchange rate fluctuations. This risk is limited to the extent that
setting the timing of the foreign exchange rate for financial transactions and
the clearing of settlement positions is typically one business day and is
limited to eleven stable transaction currencies. The remaining 173 transaction
currencies are settled in U.S. dollars or require local settlement netting
arrangements that eliminate our foreign exchange exposure.

     Based on the year-end 2000 and 1999 foreign exchange positions, excluding
the currency and interest rate swap since they are no longer outstanding as of
2000, the effect of a hypothetical 10 percent strengthening of the U.S. dollar
is estimated to be a loss valued at $1 million and $3 million at December 31,
2000 and December 31, 1999, respectively.

     Our interest sensitive assets are our debt instruments rated AA or above,
which primarily consist of fixed rate short and medium-term notes. With respect
to fixed maturities, our general policy is to invest in high quality securities,
while providing adequate liquidity and maintaining diversification to avoid
significant exposure. Based on the net present value of expected future cash
flows, a 100 basis point increase in interest rates, assuming a parallel shift
of the yield curve, would result in fair value changes and a related pre-tax
loss effect of $10 million and $3 million for 2000 and 1999, respectively.

     Additionally, we own trading securities, which are composed of equity
securities held in connection with an executive compensation plan. The effect of
a hypothetical 10 percent change in market value would result in a $6 million
gain or loss for December 31, 2000 and December 31, 1999, respectively.
Offsetting gains or losses would be recorded in compensation expense.

     At December 31, 2000, we had a $1.0 billion committed credit facility from
member banks to provide liquidity for material member settlement failures. A
variable rate is applied to the borrowing based on terms and conditions set
forth in the agreement.

                                       110


                       BUSINESS OF EUROPAY INTERNATIONAL

     Europay is a leading payment solutions company in Europe. Headquartered in
Waterloo, Belgium, Europay is owned and controlled by European financial
institutions and serves approximately 1,200 principal members, who participate
directly in its card business, and approximately 2,700 affiliate members, who
participate in Europay's card business indirectly through a principal member.
Europay offers its member financial institutions a full range of payment
programs and services, including ec eurocheque, Maestro, Cirrus and
Eurocard-MasterCard, which they in turn can provide to their
customers -- cardholders and retailers.

     Europay's mission is to be its members' preferred provider of innovative
payment solutions by offering a tailored range of programs and support services
to enable its members to maximize the return on their payment system investment.
Europay's primary role is to license the above brands to its members, provide a
sophisticated set of information processing and transaction delivery services to
members and establish and enforce rules and standards surrounding the use of
payment cards carrying the brands. Europay also engages in a variety of
marketing activities designed to maintain and enhance the value of the brands,
and plays a leading role in the development of new technologies aimed at
facilitating and expanding electronic and mobile commerce.

     Europay has a long-standing strategic alliance with MasterCard, originating
with Eurocard International's alliance with Interbank Card Association,
MasterCard International's predecessor, in 1968 and enhanced by more recent
agreements. Europay has been granted exclusive licensing rights in Europe for
certain MasterCard brands and is responsible for the marketing of these brands
and transaction processing throughout Europe. MasterCard owns a 12.25% equity
interest in Europay and a 15% equity interest in European Payment Systems
Services (EPSS), Europay's transaction processing subsidiary. In addition,
Europay and MasterCard are equal partners in Maestro International, a joint
venture which oversees the global development of the Maestro debit service.

     Europay's revenue is comprised principally of operations fees and
assessment fees charged to members. Operations fees represent user fees for
authorization, clearing, settlement, and other member services that facilitate
transaction and information management for Europay members on a global basis.
Member assessment fees are based principally upon the gross volume of
international transactions processed on Europay branded cards.

     Europay provides the following services to its members:

     - Credit Programs.  Europay's credit programs include Eurocard-MasterCard
       premium, standard and corporate cards, as well as affinity, co-branded,
       and revolving credit cards. Europay recently launched the
       Eurocard-MasterCard virtual card program in response to growing consumer
       demand for payment solutions on the Internet and in other "remote"
       environments where a physical card is not required to validate a
       transaction. Europay is also playing a leading role in the migration of
       credit payment programs to chip-based technologies.

     - Debit Programs.  Europay currently manages the Maestro brand in Europe.
       Maestro is a leading online debit program with participating issuers,
       cards and acceptance locations in over 80 countries throughout the world.
       Maestro cards are accepted both at the point of sale and at ATMs.
       Europay's other debit programs include Cirrus, for use at ATMs worldwide,
       ec Pictogram, for use at ATMs within Europe, and ec eurocheque, the
       guaranteed paper cheque accepted at retailers throughout Europe and
       around the Mediterranean sea. Europay is also playing a leading role in
       the migration of debit payment programs to chip-based technologies.

     - Pre-paid Programs.  In response both to technological advances in the
       area of pre-paid payment solutions, including mobile telephony, Internet
       and pay-per-use television, and to their increasing popularity among
       young customers, Europay has developed a number of pre-paid solutions for
       use in the physical and virtual world, including Clip, a stored-value
       card or electronic "purse." Europay recently introduced the Maestro
       Pre-paid Card, a stored-value card accepted wherever Maestro cards are
       accepted. In addition, Europay supports the euro travelers/Thomas
       Cook/MasterCard travelers

                                       111


       cheque, a pre-paid, paper check distributed by Thomas Cook and available
       in pre-determined denominations in major travel destination currencies
       that can be replaced if lost or stolen.

     - e-Business.  e-Business presents Europay and its members with the
       opportunity of developing new, more convenient payment solutions and
       acceptance channels, such as mobile commerce. Europay seeks to increase
       its share of the electronic commerce and mobile commerce payments market,
       improve the profitability of members' electronic commerce and mobile
       commerce transactions and support the development and implementation of
       e-business solutions while controlling the risks of doing business in the
       virtual world. A core challenge in this area is to develop security
       solutions to address the perceived insecure nature of transactions
       carried out over the Internet or wireless networks. Europay is currently
       focused on four key areas to support its members:

       - enhancing the security of online credit transactions;

       - launching Maestro on the Internet and facilitating secure online debit
         transactions;

       - expanding existing acceptance channels and developing new acceptance
         channels for Eurocard-MasterCard and Maestro, such as wireless devices;
         and

       - developing e-trust services such as digital signatures, secure
         messaging and controlled access to on-line systems.

     - Payment Services.  Europay provides transaction processing services,
       consisting primarily of authorization, clearing and settlement, for its
       members via its own European Payment Systems Network, or EPS-Net. EPS-Net
       is a telecommunications network for data transfer which operates 194
       modules, or connection points, at 140 sites in 38 countries. EPS-Net
       interfaces with the MasterCard BankNet network for worldwide retail
       payment and ATM transaction interchange. Using Europay's transaction
       processing services, Europay members facilitate payment transactions
       between cardholders and merchants throughout Europe.

     - Licensing and Rules.  Members of Europay must enter into a license
       agreement with respect to Europay programs and services to be offered by
       the member. In addition, Europay adopts and enforces rules applicable to
       all Europay members relating to a variety of topics where common
       procedures and standards are needed to ensure the efficient, equitable
       and secure functioning of its system. To ensure that members conform to
       its rules, Europay runs an extensive range of compliance and other
       programs including reviewing all card programs proposed to be issued by
       members. Europay also approves applications for membership in MasterCard
       in Europe under authority delegated to it by MasterCard International.

     - Security.  Europay is continually developing programs and systems to aid
       its members and merchants in detecting and preventing the fraudulent use
       of Europay branded cards. These include activities such as fraud
       investigations and case management, information gathering, analysis and
       dissemination, cooperation with domestic and international law
       enforcement agencies, and compliance and audit programs for members and
       merchants. In order to more effectively assess and respond to fraud
       risks, Europay has risk services managers located in each of its regional
       offices who promote and support these programs and services. In addition
       to its anti-fraud initiatives, Europay provides its members with a
       variety of risk management products and services, including security risk
       management advice and training for members and law enforcement officials,
       the dissemination of information to members relating to potential risks
       to the Europay payment system, risk analysis in connection with the
       development of new Europay programs and services, and the enforcement of
       member compliance with minimum security standards through a mandated Risk
       Assessment Management Program (RAMP). Europay also cooperates with other
       payment schemes in identifying and addressing common fraud and security
       threats.

     - Brand Marketing and Sponsorship.  Europay offers a fully integrated and
       wide ranging marketing package to its member financial institutions.
       Sponsorship of the Union of European Football Association (UEFA)
       Champions League(TM) and the UEFA EURO 2000(TM) European soccer champion-

                                       112


       ships along with the Eurocard-MasterCard and Maestro communications
       campaigns are designed to transcend regional boundaries and increase the
       attractiveness of, and loyalty to, Europay brands. These campaigns also
       provide platforms for members to exploit their targeted sales strategies
       and increase card acquisition and use.

     Europay's origins stem from the mid-1960s, when Europe's modern payments
system began to take shape with the emergence of two principal payment solution
providers: ec eurocheque, a cheque guarantee and paper clearing system, and
Eurocard, a credit card-based payments system. Each of eurocheque and Eurocard
were owned by a separate consortium of European financial institutions, although
both groups included many of the same financial institutions.

     By the mid-1980s, the development of magnetic stripe technology, enabling
the portable storage of bank and account information, service codes and security
measures, and the growing demand for an electronic infrastructure to support
magnetic stripe usage signaled the need for a more integrated payments solution.
In 1984, eurocheque began to engage in cross-border ATM transactions. In 1985,
Eurocard created its own electronic authorization and data clearing system. In
1989, eurocheque acquired a 15% equity interest in a new technology company
created to run the Eurocard electronic network, EPSS. By the late 1980s, the
maturing of the card industry and increasing demand for more sophisticated
products and programs convinced European member financial institutions to
combine eurocheque and Eurocard, including EPSS, into a single organization. In
1992, Europay International S.A., a Belgian corporation, was established
following the merger of eurocheque International S.C., eurocheque International
Holdings S.A. and Eurocard International S.A.

     As of September 30, 2001, Europay employed approximately 642 persons.
Europay's owned and leased properties consist primarily of its corporate
headquarters in Waterloo, Belgium and ten regional offices located in London,
England; Frankfurt, Germany; Stockholm, Sweden; Madrid, Spain; Rome, Italy;
Budapest, Hungary; Prague, Czech Republic; Istanbul, Turkey; Warsaw, Poland; and
Moscow, Russia.

LEGAL PROCEEDINGS

     Europay is a party to litigation with respect to a variety of matters in
the ordinary course of business. Except as described below, Europay does not
believe that any litigation to which it is a party may have a material adverse
impact on its business or prospects.

MULTILATERAL INTERCHANGE FEE

     European Commission.  In September 2000, the European Commission issued a
"Statement of Objections" challenging Visa International's multilateral
interchange fee ("MIF") under European Community competition rules. The MIF is a
fee that is paid by the merchant bank (the "acquirer") to the cardholder bank
(the "issuer") when a payment is made to a merchant using a payment card. The
amount of the MIF is set by the payment card system as a default fee that will
only apply where the issuer and the acquirer have not agreed on a bilateral
interchange fee. Interchange fees represent a sharing of payment system costs
between issuers and acquirers.

     Although Europay is not an addressee of the Statement of Objections, its
rules also contain a MIF scheme. Europay has therefore requested that the
European Commission issue a Statement of Objections in its own case should the
Commission have objections to the Europay MIF. However, the European Commission
has to date elected to treat the Visa International case as the "leading"
payment card case and has not issued a separate Statement of Objections
challenging Europay's MIF.

     In its Statement of Objections, the European Commission took the view that
the MIF constitutes a "price-fixing" agreement between the banks participating
in the payment card system, and is tantamount to a "tying" arrangement since the
MIF covers both the processing costs of a payment card transaction and the costs
of the payment guarantee delivered by the issuers to the merchants, and thus
"forces" merchants to accept the payment guarantee. On this basis, the European
Commission argued that the MIF could not be exempted from European Community
competition rules and should be eliminated. Europay and MasterCard disagreed
with the European Commission's characterization of the MIF. In their written
submissions and at

                                       113


the February 2001 hearing, Europay and MasterCard sought to demonstrate that (1)
the MIF is not a restrictive price agreement but a necessary and efficient
mechanism for allocating the costs of a four-party card payment system between
issuers and acquirers, and (2) the payment guarantee is essential to ensuring
universal card usage, benefits merchants, and cannot be unbundled.

     The European Commission announced on August 10, 2001 its intention to take
a favorable view of Visa's MIF in light of certain changes proposed by Visa,
most notably the adoption of a methodology for calculating interchange fees
similar to that employed by Europay (and MasterCard) and a reduction in the
level of fees. On August 11, 2001, the European Commission published a notice
containing the details of these changes and invited interested third parties to
submit their views to the European Commission, after which it will issue a
formal decision. Assuming the European Commission does not change its position,
the decision would exempt Visa's modified MIF.

     The European Commission's decision in the Visa case would be addressed only
to Visa and would not cover Europay's MIF. Europay has submitted comments to the
European Commission challenging the proposed changes to Visa's MIF in its
notice, and is currently involved in separate discussions with the European
Commission in order to determine under what conditions the European Commission
would grant a formal exemption or comfort letter for Europay's MIF. Because the
MIF constitutes an essential element of Europay's payment scheme, changes to it
could significantly impact Europay's members. At this time, it is not possible
to determine what actions the European Commission will take with respect to
Europay's MIF, and therefore the financial impact that any changes would have on
Europay and its members cannot be estimated. In addition, even if the European
Commission does not formally challenge Europay's MIF, private parties could
attempt to use the decision in the Visa case to challenge Europay's MIF before
national courts or national competition authorities.

     United Kingdom Office of Fair Trading.  On September 25, 2001, the Office
of Fair Trading of the United Kingdom ("OFT") issued a press release proposing a
decision that the establishment of the MIF by MEPUK, which is owned by Europay's
and MasterCard's members in the U.K., infringes U.K. competition law and does
not qualify for an exemption.

     The OFT considers that the MEPUK MIF and the MEPUK multilateral service fee
("MSF"), the fee paid by issuing banks to acquiring banks when a customer uses a
MasterCard branded card either at an ATM or over the counter to obtain a cash
advance, are anti-competitive and increase retail costs and consumer prices. The
OFT invited MEPUK and members of MasterCard and Europay in the U.K. to make
written and oral representations, which will be taken into account in a final
decision, or to amend their MIF and MSF fees.

     On February 5, 2002, Europay and MEPUK made oral and written
representations to the OFT in response to its proposed decision on behalf of
MasterCard and Europay members in the U.K., in which they sought to demonstrate
that the MIF and MSF constitute necessary and efficient mechanisms for
allocating the costs of a multi-party card payment system between issuers and
acquirers. Because the MIF and MSF constitute essential elements of Europay's
payment scheme in the U.K., changes to these fees could significantly impact its
U.K. members. At this time, it is not possible to determine what action the OFT
will take with respect to the MIF and MSF, and therefore the financial impact on
Europay and its members in the U.K. cannot be estimated.

INVESTIGATION BY BELGIAN TAX AUTHORITIES

     In April 1999 the Belgian tax authorities initiated an investigation of
Europay's tax returns for 1997 and 1998. In June 2001, Europay received a notice
from the Belgian tax authorities challenging Europay's deduction of certain
card-based incentive program costs. Although Europay challenged these findings
in its response to the notice, the Belgian tax authorities reaffirmed their
position in a recent letter to Europay and, on December 21, 2001, Europay
received a formal notice of assessment imposing an additional tax liability of
approximately E16.9 million, including penalties and interest, in connection
with Europay's tax returns for 1997 and 1998. Europay intends to appeal this
matter further with the regional tax director in accordance with applicable
administrative procedures.

                                       114


     If Europay's deduction of such costs in 1999 and 2000 is similarly
challenged, this could result in a further additional tax liability of up to
approximately E9.5 million, including possible penalties. Although Europay
believes that it has reasonable and meritorious arguments in favor of its
characterization of these deductions, Europay cannot predict the outcome of this
matter or any additional matters raised by the Belgian tax authorities in their
investigation. In the event that Europay is unsuccessful in appealing the
findings of the Belgian tax authorities in their investigation, under certain
circumstances MasterCard International could, under its bylaws, levy an
assessment upon its European members for the additional tax liability to the
extent that it, together with other losses and liabilities arising out of the
representations and warranties of Europay in the draft integration agreement,
exceeds $7 million in the aggregate.

MARKET INFORMATION

     There is no established public trading market for the common stock of
Europay International. As of October 31, 2001, there were 32 holders of Europay
common stock, including MasterCard International. Europay has not paid dividends
in the past and does not anticipate paying dividends in the future.

                                       115


            EUROPAY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     The selected historical consolidated financial data set forth below for
Europay for the year ended December 31, 2000 and as of December 31, 2000 has
been derived from Europay's audited consolidated financial statements and
related notes which were prepared in accordance with Belgian GAAP. The
consolidated financial statements have been audited by PricewaterhouseCoopers
Reviseurs d'Entreprises, independent accountants, as stated in their report
included elsewhere in this proxy statement-prospectus and should be read in
conjunction with their report. The selected historical consolidated financial
data set forth below for Europay for the two years ended December 31, 1999 and
1998 and as of December 31, 1999 have been derived from Europay's unaudited
consolidated financial statements and related notes which were prepared in
accordance with Belgian GAAP and are included elsewhere in this proxy
statement-prospectus. The selected historical consolidated statement of income
data of Europay set forth below for the two years ended December 31, 1997 and
1996 and consolidated balance sheet data as of December 31, 1998, 1997 and 1996
have been derived from Europay's unaudited consolidated financial statements not
included in this proxy statement-prospectus. The summary consolidated financial
information as of June 30, 2001 and 2000 and for the six months then ended has
been derived from Europay's unaudited consolidated interim financial statements
prepared in accordance with Belgian GAAP, which are included elsewhere in this
proxy statement-prospectus. In the opinion of Europay management the unaudited
consolidated interim financial statements of Europay have been prepared on the
same basis as the audited consolidated financial statements included herein and
include all adjustments necessary for the fair presentation of the financial
position and results of operation of Europay for these periods, which
adjustments are only of a normal recurring nature for the periods and the dates
presented. The results of operations for the six months ended June 30, 2001 and
2000 are not necessarily indicative of results that may be expected for a full
year.

     The financial data in the tables below has been derived from Europay's
audited and unaudited consolidated financial statements in accordance with
Belgian GAAP, which differs in certain significant respects from U.S. GAAP.
These differences have a material effect on the net income and composition of
shareholders' equity and are summarized in Note 15 to the unaudited consolidated
interim financial statements of Europay as of June 30, 2001 and for the six
months ended June 30, 2001 and 2000, and Note 22 to the Consolidated Financial
Statements of Europay as of December 31, 2000 and December 31, 1999 and for the
years ended December 31, 2000, 1999 and 1998 included elsewhere in this proxy
statement-prospectus.

     This table should be read in conjunction with the "Europay Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of Europay and the related notes included
elsewhere in this proxy statement-prospectus.

     Since its inception, Europay has not declared or paid any dividends.


                                           SIX MONTHS ENDED JUNE 30,                         YEAR ENDED DECEMBER 31,
                             -----------------------------------------------------   ---------------------------------------
                                2001          2001          2000          2000          2000          2000          1999
                             -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                                      (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                             BELGIAN                     BELGIAN                     BELGIAN
                               US GAAP        GAAP         US GAAP        GAAP         US GAAP        GAAP         US GAAP
                             (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)    (AUDITED)     (AUDITED)    (UNAUDITED)
                             -----------   -----------   -----------   -----------    ---------     ---------    -----------
                                                                                            
INCOME STATEMENT DATA(1):

 Revenue(2)................    131,518       191,095       114,859       168,003       260,093       364,806       215,034

 Operating Profit..........        497         1,511         1,399         3,119        16,241        18,223         8,249

 Cumulative effect of
   changes in accounting
   principle, net of tax...       (547)           --        (3,100)           --        (3,100)           --            --

 Net Income/(Loss).........      4,902         4,644        (2,537)          710         5,657         9,253         8,546

 Earnings/(Loss) per
   share...................         49            --           (25)           --            57            --            85

BALANCE SHEET DATA(1):

 Total Assets..............    300,392       276,432           N/A           N/A       275,625       254,169       156,125

 Long-Term Debt............      3,217            --           N/A           N/A         3,449            --         5,572

 Shareholders' Equity......     52,253        46,557           N/A           N/A        44,930        41,857        39,258


                                            YEAR ENDED DECEMBER 31,
                             -----------------------------------------------------
                                1999          1998          1997          1996
                             -----------   -----------   -----------   -----------
                                 (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                               BELGIAN       BELGIAN       BELGIAN       BELGIAN
                                GAAP          GAAP          GAAP          GAAP
                             (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
                             -----------   -----------   -----------   -----------
                                                           
INCOME STATEMENT DATA(1):
 Revenue(2)................    298,206       245,506       153,486       123,490
 Operating Profit..........      7,321         5,038         4,350         2,696
 Cumulative effect of
   changes in accounting
   principle, net of tax...         --            --            --            --
 Net Income/(Loss).........      7,641           278         1,566           159
 Earnings/(Loss) per
   share...................         --            --            --            --
BALANCE SHEET DATA(1):
 Total Assets..............    138,896       125,897        79,914        87,905
 Long-Term Debt............      2,533         2,533         2,533         2,533
 Shareholders' Equity......     31,986        24,345        24,067        22,502


---------------
(1) Prior year balances have been translated from Belgian francs into euros
    using the fixed exchange rate on January 1, 1999 of BEF 40.3399 per euro.

                                       116


(2) Europay acts as an agent on behalf of MasterCard for the billing and
    collection of inter-regional transactions with members. Europay does not
    bear risk and rewards of ownership related to these transactions and
    therefore, revenue is reported net under U.S. GAAP. See Note 15 to the
    unaudited consolidated interim financial statements of Europay as of June
    30, 2001 and for the six months ended June 30, 2001 and 2000, and Note 22 to
    Consolidated Financial Statements of Europay as of December 31, 2000 and
    December 31, 1999 and for the years ended December 31, 2000, 1999 and 1998
    included elsewhere in this proxy statement-prospectus.

                                       117


                EUROPAY MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
Europay's financial statements and the accompanying notes included elsewhere in
this proxy statement-prospectus. Europay prepares its financial statements in
accordance with Belgian GAAP, which differs in certain significant respects from
U.S. GAAP. For an explanation of the material differences between Belgian GAAP
and U.S. GAAP, see Note 15 to the unaudited consolidated interim financial
statements of Europay as of June 30, 2001 and for the six months ended June 30,
2001 and 2000, and Note 22 to Consolidated Financial Statements of Europay as of
December 31, 2000 and December 31, 1999 and for the years ended December 31,
2000, 1999 and 1998 included elsewhere in this proxy statement-prospectus.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

     Revenue consists of operations fees and assessment fees charged to members.
Total revenue was E191.1 million for the six months ended June 30, 2001 compared
to E168.0 for the six months ended June 30, 2000, an increase of E23.1 or 14%.

     Operations fees represent user fees for authorization, clearing and
settlement and other member services. Operations fees increased E19.5 million,
or 26%, from E75.4 million for the six months ended June 30, 2000 to E94.9
million for the six months ended June 30, 2001. The increase in operations fees
was attributable primarily to a stoplist service price increase implemented in
April 2001 and increases in authorization and clearing transactions processed of
26% and 35%, respectively, from 325 million authorization and 377 million
clearing transactions for the six months ended June 30, 2000 to 409 million
authorization and 509 million clearing transactions for the six months ended
June 30, 2001.

     Assessment fees represent primarily fees charged to issuers and acquirers
based on the gross euro volume of transactions (GEV), as well as card and
currency conversion fees charged to issuers. Assessment fees increased E5.2
million, or 6%, from E92.6 million for the six months ended June 30, 2000 to
E97.8 million for the six months ended June 30, 2001. This increase was
attributable primarily to the increase in GEV associated with the increase in
clearing transactions processed noted above as well as a 13% increase in the
total number of cards issued by members, offset by a price decrease on
intra-regional assessments implemented in April 2001.

     Services and other goods consist primarily of MasterCard costs, marketing
and advertising expenses, professional fees, information technology costs, and
general administrative, occupancy and travel costs. Services and other goods
increased E21.2 million, or 16%, from E135.5 million for the six months ended
June 30, 2000 to E156.7 million for the six months ended June 30, 2001. This
increase was primarily due to increases in MasterCard costs and marketing,
advertising and sponsorship costs.

     In accordance with the terms of its alliance agreement with MasterCard,
Europay is required to fund MasterCard's costs assigned to the Europe region
plus an agreed profit contribution. MasterCard costs increased E6.6 million, or
13%, from E52.3 million for the six months ended June 30, 2000 to E58.9 million
for the six months ended June 30, 2001. A 5.5% rise in the average U.S. dollar
to euro exchange rates utilized to record MasterCard U.S. dollar charges in
Europay's books of account for the six month periods ended June 30, 2001 and
2000 accounts for E3.2 million, or 48%, of the total increase. The balance of
the increase was due primarily to an increase in the cost of global functions.

     Marketing and advertising expenses increased by E10.4 million or 26%, from
E40.5 million for the six months ended June 30, 2000 to E50.9 million for the
six months ended June 30, 2001. This increase was primarily due to additional
costs of E4.5 million for the UEFA European soccer championships and E2.6
million for brand development programs, which reflects Europay's continuing
efforts to build brand value. The costs of a European members' meeting held in
June 2001 accounted for a further E3.0 million of this increase.

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     Remuneration, social security and pension costs amounted to E31.3 million
for the six months ended June 30, 2001 compared to E29.2 million for the six
months ended June 30, 2000, an increase of E2.1 million or 7%. This increase was
primarily attributable to the introduction of a performance-based variable pay
program for all management and staff in 2001.

     Depreciation and amortization expense was E5.4 million for the six months
ended June 30, 2001 compared to E4.6 million for the six months ended June 30,
2000, an increase of E0.8 million or 17%. This increase was primarily due to
Europay's continuing investment in information technology equipment and
expansion of buildings and facilities to accommodate increases in staff and
equipment.

     The bad debt expense of E0.8 for the six months ended June 30, 2001 million
represents doubtful account provisions for two disputed invoices.

     Net financial income/(expense) increased E6.6 million, from net financial
expense of E0.5 million for the six months ended June 30, 2000 to net financial
income of E6.1 million for the six months ended June 30, 2001. This increase in
net financial income/(expense) was primarily the result of net foreign exchange
income on multi-currency settlement operations, partially offset by an increase
in interest expense resulting from the fixed-term loan used to finance Euro D0
settlement operations. For a description of Euro D0, see "Liquidity and Capital
Resources."

     The effective tax rates for the six months ended June 30, 2001 and 2000
were 40% and 52%, respectively. The variance with the statutory tax rate of 40%
for the six months ended June 30, 2000 was due to expenses that are partially or
fully non-deductible under Belgian income tax regulations, such as leased car
costs, entertainment expenses incurred in Belgium and gifts. For the six months
ended June 30, 2001 the effect of such disallowed expenses was offset by prior
year tax adjustments which represented a refund of 1999 tax overpayments.

     As a result of the foregoing, Europay's net income increased to E4.8
million for the six months ended June 30, 2001 compared to E1.3 million for the
six months ended June 30, 2000. Net income attributable to the Europay Group
(Europay and its consolidated subsidiaries), reflecting after-tax adjustments
for net income/(loss) from equity investments and minority interest, increased
to E4.6 million for the six months ended June 30, 2001 compared to E0.7 million
for the six months ended June 30, 2000.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Total revenue was E364.8 million for the year ended December 31, 2000
compared to E298.2 million for the year ended December 31, 1999, an increase of
E66.6 million or 22%.

     Operations fees increased E16.0 million, or 11%, from E142.9 million for
the year ended December 31, 1999 to E158.9 million for the year ended December
31, 2000. The increase in operations fees was attributable primarily to
increases in authorization and clearing transactions processed of 26% and 33%,
respectively, from 637 million authorization and 678 million clearing
transactions for the year ended December 31, 1999 to 802 million authorization
and 903 million clearing transactions for the year ended December 31, 2000.

     Assessment fees increased E36.8 million, or 22%, from E170.0 million for
the year ended December 31, 1999 to E206.8 million for the year ended December
31, 2000. This increase was attributable primarily to the increase in GEV
associated with the increase in clearing transactions processed mentioned above
as well as a 14% increase in the total number of cards issued by members.

     There was also a positive variance in the volume discount of E13.8 million
that offsets revenue, as in 2000 Europay began granting specific,
performance-based discounts under agreements with individual members rather than
an overall price discount to all members, which was the case in 1999. The total
of such member incentive discounts was E0.9 million in 2000.

     Capitalization of intangible assets consists primarily of the
capitalization of internally developed software amounting to E7.6 million for
the year ended December 31, 2000.

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     Services and other goods increased E55.6 million, or 25%, from E226.8
million for the year ended December 31, 1999 to E282.4 million for the year
ended December 31, 2000. This increase was primarily due to increases in
MasterCard costs and marketing, advertising and sponsorship costs.

     MasterCard costs increased E20.7 million, or 25%, from E83.2 million for
the year ended December 31, 1999 to E103.9 million for the year ended December
31, 2000. A 13.1% rise in the average U.S. dollar to euro exchange rates
utilized to record MasterCard U.S. dollar charges in Europay's books of account
from 1999 to 2000 accounted for E12.5 million, or 61%, of the total increase.
The balance of the increase was due primarily to increases in the costs of
global functions, products and services provided to European members and the
profit contribution, which were partially offset by a decrease in global
technology operation costs.

     Marketing and advertising expenses increased E27.5 million, or 47%, from
E58.5 million for the year ended December 31, 1999 to E86.0 million for the year
ended December 31, 2000. This increase was primarily due to additional costs of
E11.4 million for member card issuance and acceptance incentives and brand
development programs, which reflects Europay's continuing efforts to build
issuance, acceptance and brand value, and an increase of E8.9 million for
extended sponsorship of the UEFA European soccer championships. Increased region
and country-specific marketing and advertising efforts, consumer brand and
advertising awareness studies conducted in Europe, pan-European coordination of
regional advertising agencies for the MasterCard advertising campaign and
increased card issuance and acceptance development efforts together accounted
for a further E6.8 million of the increase.

     Remuneration, social security and pension costs amounted to E58.9 million
for the year ended December 31, 2000 compared to E50.7 million for the year
ended December 31, 1999, an increase of E8.2 million or 16%. This increase was
primarily attributable to an increase in salary expense and social security
costs related to increases in employee head count together with annual staff
performance salary increases and bonus payments made to management and staff for
meeting performance targets.

     Depreciation and amortization expense was E11.1 million for the year ended
December 31, 2000 compared to E9.3 million for the year ended December 31, 1999,
an increase of E1.8 million or 20%. The increase in 2000 versus 1999 was
primarily due to Europay's continuing investment in information technology
equipment and expansion of buildings and facilities to accommodate increases in
staff and equipment as well as the capitalization of internally developed
software.

     Financial income decreased E7.3 million, or 95%, from E7.7 million for the
year ended December 31, 1999 to E0.4 million for the year ended December 31,
2000. This decrease was primarily due to scaled back hedging activity in light
of the volatility of the euro to U.S. dollar exchange rate throughout 2000.

     The E1.4 million provision for extraordinary liabilities and charges for
the year ended December 31, 2000 represented primarily employee severance
provisions.

     The effective tax rates for 2000 and 1999 were 44% and 46%, respectively.
The variance with the statutory tax rate of 40% for both years was primarily due
to expenses that are partially or fully non-deductible under Belgian income tax
regulations, such as leased car costs, entertainment expenses incurred in
Belgium, and gifts.

     As a result of the foregoing, Europay's net income increased to E9.7
million for the year ended December 31, 2000 compared to E7.9 million for the
year ended December 31, 1999. Net income attributable to the Europay Group
(Europay and its consolidated subsidiaries), reflecting after-tax adjustments
for net income/(loss) from equity investments and minority interest, increased
to E9.3 million for the year ended December 31, 2000 compared to E7.6 million
for the year ended December 31, 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Total revenue was E298.2 million for the year ended December 31, 1999
compared to E245.5 million for the year ended December 31, 1998, an increase of
E52.7 million or 21%.

     Operations fees increased E30.1 million, or 27%, from E112.8 million for
the year ended December 31, 1998 to E142.9 million for the year ended December
31, 1999. The increase in operations fees was attributable
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primarily to increases in authorization and clearing transactions processed of
25% and 19%, respectively, from 509 million authorization and 567 million
clearing transactions for the year ended December 31, 1998 to 637 million
authorization and 678 million clearing transactions for the year ended December
31, 1999. The growth in operations fees also includes increases of E7.5 million
in user pay fees and E6.5 million in risk management fees. The increase in user
pay fees resulted primarily from the introduction of new services in 1999,
including chip card and terminal support services, upper market card services, a
risk assessment management program, and global services. The increase in risk
management fees, which represent fees charged for usage of fraud prevention
services such as stop-lists and warning bulletins used for card blockage, was
driven by increases in the number of credit cards in issue, fraud, and usage by
issuers of our stop-list and warning bulletin services.

     Assessment fees increased E37.3 million, or 28%, from E132.7 million for
the year ended December 31, 1998 to E170.0 million for the year ended December
31, 1999. This increase was attributable primarily to the increase in GEV
associated with the increase in transactions processed mentioned above, the
introduction of a new currency conversion charge in 1999 and a 12% increase in
the total number of cards issued by members.

     The increases in revenues described above were offset by a one-time volume
discount of E14.7 million granted to members in 1999 in response to competitive
pressures in the European market. There were no volume discounts granted in
1998.

     Other operating income decreased by E10.2 million, or 91%, from E11.2
million for the year ended December 31, 1998 to E1.0 million for the year ended
December 31, 1999. This decrease was primarily attributable to E9.8 million of
non-recurring revenues from MasterCard for debit switch and chip development
cost sharing and marketing program funding, exhibition and other fees from a
European members' meeting and ticket sales for the 1998 World Cup in France.

     Services and other goods increased E28.0 million, or 14%, from E198.8
million for the year ended December 31, 1998 to E226.8 million for the year
ended December 31, 1999. This increase was primarily due to increases in
MasterCard costs, marketing advertising and sponsorship expenses and
professional fees.

     MasterCard costs increased E18.1 million, or 28%, from E65.1 million for
the year ended December 31, 1998 to E83.2 million for the year ended December
31, 1999. This increase was primarily due to increases in the costs of global
functions, global technology operation costs, products and services provided to
European members and the profit contribution, coupled with a 3.7% rise in the
average U.S. dollar to euro exchange rates utilized to record MasterCard U.S.
dollar charges in Europay's books of account from 1998 to 1999.

     Marketing and advertising expenses increased E4.3 million, or 8%, from
E54.2 million for the year ended December 31, 1998 to E58.5 million for the year
ended December 31, 1999. This increase was attributable primarily to E10.8
million of additional spending for developing Maestro card activation,
acceptance, communication, PIN migration and transaction service quality,
increases in region and country-specific marketing and advertising efforts and
expanded sponsorship of the UEFA European soccer championships. These increases
were offset by E6.7 million in cost reductions due mainly to a European members'
meeting that took place in 1998 but not in 1999, and a decrease in member
conversion costs to the new Europay-MasterCard brand.

     Professional fees increased E5.8 million, or 21%, from E28.1 million for
the year ended December 31, 1998 to E33.9 million for the year ended December
31, 1999. This increase was attributable primarily to increased usage of
contractors and consultants in the areas of chip technology development and
migration, strategy, projects and member training programs.

     Remuneration, social security and pension costs increased E9.7 million, or
24%, from E41.0 million for the year ended December 31, 1998 to E50.7 million
for the year ended December 31, 1999. This increase was primarily attributable
to an increase in salary expense and social security costs related to increases
in employee head count together with annual staff performance salary increases
and retention bonuses paid to information technology staff due to market demand.

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     Depreciation and amortization expense increased E1.0 million, or 12%, from
E8.3 million to E9.3 million in 1999. The increase in 1999 versus 1998 was
primarily due to Europay's continuing investment in information technology
equipment as well as an expansion of buildings and facilities to accommodate
increases in staff and equipment.

     Financial income increased E7.6 million from E0.1 million in 1998 to E7.7
million in 1999. This increase was primarily due to a net gain of E5.5 million
on a 12-month forward exchange contract for the purchase of U.S. dollars, which
matured in December 1999. Europay bought this contract at the time of the
introduction of the euro in January 1999 to cover the currency exposure on the
U.S. dollar-based MasterCard costs noted above.

     In 1998 Europay owned but no longer occupied its former premises located in
Brussels. In 1998 an independent valuation was made of the building, based on
which Europay made an impairment provision of E3.1 million to reflect a
permanent diminution in the value of the building. In July 1999 this building
was sold at a loss of E0.1 million, which was included in the net gain/(loss) on
disposal of fixed assets in 1999.

     The effective tax rates for 1999 and 1998 were 46% and 86%, respectively.
The higher rate for 1998 and the variance with the statutory tax rate of 40% for
1999 and 1998 were primarily due to expenses that are partially or fully
non-deductible under Belgian income tax regulations, such as leased car costs,
entertainment expenses and gifts.

     As a result of the foregoing, our net income increased to E7.9 million in
1999 compared to E0.3 million in 1998. Net income attributable to the Europay
Group (Europay and its consolidated subsidiaries), reflecting after-tax
adjustments for net income from equity investments and minority interest,
increased to E7.6 million in 1999 compared to E0.3 million in 1998.

LIQUIDITY AND CAPITAL RESOURCES

     Europay expects that cash generated from operations, working capital and
its borrowing capacity will be sufficient to meet our operational and capital
needs in 2001.

     Net cash provided by/(used in) operating activities for the six months
ended June 30, 2001 was (E32.2) million, as compared to E17.6 million for the
six months ended June 30, 2000. The E49.8 million decrease between periods was
attributable primarily to a significant increase in other amounts receivable, a
smaller decrease in deferred soccer sponsorship charges, a larger decrease in
suppliers and a decrease in other amounts payable, offset by an increase in
profit for the financial period before taxation. The increase in other amounts
receivable is primarily due to member settlement receivables related to a same
day settlement service called "Euro D0" for euro-currency transactions which was
introduced in the second half of 2000. This service results in settlement
receivables and payables arising from the two-day delay in the settlement of
issued and acquired transactions between euro-currency members that settle on a
same-day basis and non-euro currency members that settle two days later. The
decrease in other amounts payable is primarily due to member settlement payables
related to the Euro D0 settlement service introduced in the second half of 2000,
partially offset by a larger increase in member settlement security deposits.

     Net cash used in investing activities was E12.7 million and E14.8 million
for the six months ended June 30, 2001 and 2000, respectively. The E2.1 million
increase between periods was principally due to a lower level of fixed asset
acquisitions and the proceeds from an investment in a foreign currency option,
offset by a net increase in investments in short-term cash deposits.

     Net cash provided by/(used in) financing activities for the six months
ended June 30, 2001 and 2000 was E40.7 million and (E0.7) million, respectively.
The E41.4 million increase between periods was primarily the result of financing
of Euro D0 activity introduced in the second half of 2000 with E30.0 million
proceeds from the fixed-term bank loan and a E10.3 million settlement bank
overdraft.

     Net cash provided by/(used in) operating activities for the year ended
December 31, 2000 was E62.1 million, as compared to E43.7 million and (E0.7)
million for the years ended December 31, 1999 and 1998, respectively. In
addition to the increase in net income before taxation, the E18.4 million
increase in 2000

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was attributable primarily to a significant increase in other amounts payable
and a larger decrease in deferred soccer sponsorship charges, offset by an
increase in trade debtors attributable to the 22% increase in revenues, an
increase in other amounts receivable and a smaller increase in suppliers versus
1999. The increase in other amounts payable was primarily due to continuing
increases in member settlement security deposits and member settlement payables
related to the introduction in 2000 of the Euro D0 settlement service. The
increase in other amounts receivable was primarily due to member settlement
receivables related to the Euro D0 settlement service introduced in 2000,
partially offset by a decrease in value added tax (VAT) receivable. The E44.4
million increase in 1999 was attributable primarily to an increase in net income
before taxation, a decrease in trade debtors and deferred soccer sponsorship
charges versus increases in both in 1998 and a larger increase in other amounts
payable, partially offset by an increase in other amounts receivable due mainly
to two quarters of recoverable VAT receivable at the end of 1999 rather than
one, as was the case in 1998, and a smaller increase in suppliers versus 1998.
The decrease in trade debtors was attributable to payments received on
receivables from MasterCard and Maestro partially offset by an increase in
receivables from trade customers arising from the 16% increase in revenues. The
increase in other amounts payable was mainly due to the increase of member
settlement security deposits.

     Net cash used in investing activities was E17.9 million, E16.8 million and
E13.2 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The E1.1 million increase from 1999 to 2000 was principally due to
the capitalization of internally developed software for E7.6 million, offset by
the redemption of a short-term cash deposit for E7.0 million. The E3.6 million
increase from 1998 to 1999 was principally due to the investment in a short-term
cash deposit for E7.0 million, partially offset by proceeds from the sale of
Europay's former premises in Brussels of E3.8 million.

     Net cash provided by/(used in) financing activities for the years ended
December 31, 2000, 1999 and 1998 was E34.8 million, (E19.4) million and E19.3
million, respectively. The E54.2 million increase from 1999 to 2000 was the
result of a E36.6 million net increase in the bank overdraft, which is primarily
attributable to Euro D0 settlement activity, and a E19.8 million payment on the
short-term bank loan that was required in 1999 with none in 2000. These
increases were partially offset by the reclassification of stockholder loans
totaling E2.5 million to other amounts payable in current liabilities as the
loans will be repaid in 2001. The (E38.7) million decrease from 1999 to 2000 was
attributable primarily to the 1999 repayment of a E19.8 million short-term bank
loan taken in 1998.

     Europay's financial position continues to reflect satisfactory liquidity.
Cash flow generated from operations provides a significant source of liquidity
to meet Europay's needs. Working capital, consisting of current assets less
current liabilities, was E8.0 million at June 30, 2001, E4.8 million at December
31, 2000 and E3.4 million at December 31, 1999. Europay has substantially no
long-term debt. In addition, Europay can draw upon other sources of liquidity,
such as a E35 million credit line for short term corporate cash requirements, a
E40 million credit line to cover day-to-day positions involved in member
settlement activity, emergency borrowings from members and special assessments.
In addition, Europay may draw on member settlement deposits, letters of credit
and guarantees in connection with certain member failures.

ECONOMIC FLUCTUATIONS

INFLATION

     Due to the worldwide shortage of information technology skills, information
technology personnel costs are increasing faster than inflation. However, these
costs are to a great extent offset by productivity gains. Otherwise, Europay
does not believe inflation has a significant impact on its operations, as both
its costs and revenues will be impacted in a similar manner.

ECONOMIC GROWTH

     Europay revenues depend heavily on cross-border transactions and volume,
which are influenced by card issuance, cardholder travel and expenditure
patterns. Cross-border travel, both business and leisure, is sensitive to the
economic context. High interest rates tend to discourage cardholder spending. A
slowdown of the economy will negatively impact cross-border traffic, and
therefore the growth of Europay's revenues.

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However, Europay has not identified a clear correlation between GDP growth and
card transactions. Europay believes the reason for this is that the overriding
drivers for transaction growth in the last ten years have been (i) the growth of
cards issued, with double digit year-on-year growth, and (ii) a steady increase
of the share of payments by card versus other payment instruments (mainly cash
and checks).

SEASONAL BUSINESS

     Two seasonal patterns are evident in Europay's business. Cross-border card
transaction traffic shows a peak in the summer holiday months, with August being
the peak month, and domestic traffic shows a peak in December, which is
attributable to Christmas shopping.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the potential for economic losses to be incurred on market
risk sensitive instruments arising from adverse changes in market indices such
as interest rates and foreign currency exchange rates. Europay has exposure to
market risk arising from fluctuations in interest rates and foreign exchange
rates. Europay management's policy is to monitor Europay's foreign exchange risk
relating to the primary transaction currencies, specifically the U.S. dollar,
Swiss franc and pound sterling, and to budget annual expenditures in these
currencies based on forecasted euro exchange rates. Derivative financial
instruments are utilized to mitigate the risk associated with variances to the
forecasted exchange rate. In accordance with management policies, the finance
department has responsibility for monitoring and mitigating the exposure to
foreign exchange risk, including the use of derivative financial instruments. As
a result of changes in international settlement procedures implemented during
2000 to reduce the processing time for the clearing and settlement of credit
card transactions, Europay has increased risk exposure relating to fluctuations
in foreign currency exchange rates for the six months ended June 30, 2001 and
the year ended December 31, 2000 as compared to December 31, 1999.

     Europay is primarily exposed to the foreign exchange risk arising from the
translation of foreign currency transactions into the euro. Based on Europay's
year end foreign exchange position, the effect of a ten percent weakening in the
value of the euro is estimated to be a loss of E20.3 million and E13.2 million
at December 31, 2000 and December 31, 1999, respectively.

     Included in the foreign exchange risk discussed above is Europay's exposure
to changes in the U.S. dollar versus euro exchange rate related to the
obligation under its alliance agreement with MasterCard. Included in the foreign
exchange risk discussed above is Europay's exposure to changes in the U.S.
dollar versus euro exchange rate related to the obligation under its alliance
agreement with MasterCard. Europay utilizes foreign currency forward and option
contracts to reduce the foreign exchange risk associated with the U.S. dollar
denominated anticipated expenses under this agreement. These transactions seek
to minimize the exposure of Europay to losses resulting from a strengthening of
the U.S. dollar against the euro. At June 30, 2001 Europay had foreign currency
forward contracts outstanding to buy U.S. dollars with a notional amount of E8.7
million and to purchase U.S. dollars with a notional amount of E33.9 to manage
the anticipated U.S. dollar denominated cash flows for the remainder of 2001. At
December 31, 2000 Europay had outstanding purchased foreign currency option
contracts with a notional amount of E53.2 million. As of December 31, 2000,
Europay's exposure with respect to these foreign currency option contracts,
assuming a ten percent increase/(decrease) in the U.S. dollar versus euro
exchange rate, was (E1.3 million) and E3.7 million, respectively. There were no
derivative contracts outstanding as of December 31, 1999.

     Europay utilizes written foreign currency option contracts to offset the
cost of hedging transactions. These instruments do not meet the requirements for
hedge accounting under U.S. GAAP and therefore are classified as trading
securities. Europay is exposed to the risk of loss on these contracts resulting
from movements in the U.S. dollar versus euro exchange rate. As of December 31,
2000, a ten percent increase in this exchange rate would result in a loss of
E4.8 million while a ten percent decrease in the exchange rate would generate a
loss of E1.9 million.

     Europay's international settlement activities are subject to foreign
exchange risk resulting from foreign exchange rate fluctuations. This risk is
limited to the extent that the timing difference between the setting of the
foreign exchange rate for financial transactions and the clearing of settlement
positions is typically one
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business day and is limited to nine foreign currencies plus the euro. The
remaining 174 transaction currencies are settled in one of these ten payment
currencies. As of December 31, 2000, a ten percent fluctuation of the exchange
rate for these foreign settlement currencies would result in a loss of E2.2
million. The majority of this exposure relates to the settlement of Swiss
francs, pound sterling and U.S. dollars. The risk of loss, assuming a ten
percent movement of the exchange rate, related to these currencies as of
December 31, 2000 was E0.5 million, E0.4 million and E1.1 million, respectively.
As of December 31, 1999, there were no timing differences between the setting of
the foreign exchange rate for transactions and the clearing of settlement
positions. As a result there was no risk exposure to fluctuations in the foreign
currency exchange rates relating to international settlement activities.

     Europay has a E35 million credit line with a bank to cover short-term cash
needs. As of June 30, 2001, December 31, 2000 and December 31, 1999, no funding
was obtained from this credit line. Europay has limited market risk related to
changes in interest rates as borrowings and deposits are for relatively small
amounts and generally have a maturity of less than one month.

     During 2001, Europay has obtained an additional E40 million in credit lines
from its principal bankers to cover the technical overdrafts created by the
introduction of same day settlement for the euro. On average, about E20 million
of these credit lines is used. A variable rate is applied to the borrowing,
based on terms and conditions set forth in the agreement. While Europay is
subject to interest rate fluctuation on this credit line, an agreement was
reached with the members that the cost of this credit line can be recovered from
the members.

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                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS


     The directors and executive officers of MasterCard Incorporated after the
conversion and integration will be the same as the directors and executive
officers of MasterCard International before the conversion and integration,
except for the addition of two voting directors affiliated with European members
and the addition of Dr. Peter Hoch, currently Chief Executive Officer of
Europay, who will be President of MasterCard's Europe region and a non-voting
director. The certificate of incorporation of MasterCard International requires
MasterCard Incorporated, as the sole class B member, to elect the directors of
MasterCard Incorporated to serve as the directors of MasterCard International.
MasterCard Incorporated will have a board comprised of 18 voting directors. One
member-stockholder of MasterCard Incorporated holding more than 5% of MasterCard
Incorporated common stock is entitled to cancel its customized member agreement
with MasterCard International if one of its employees does not have a board
seat.


     If the conversion is approved, the current directors of MasterCard
International will serve as the directors of MasterCard Incorporated and
MasterCard International until the annual meeting of MasterCard Incorporated
shareholders in 2003. In addition, the boards of directors of each company,
acting pursuant to authority granted to them in their respective certificates of
incorporation and/or bylaws, will appoint two additional voting directors
affiliated with European members and Dr. Peter Hoch as a non-voting director, in
each case to serve until the annual meeting of MasterCard Incorporated
shareholders in 2003. The board of directors of MasterCard Incorporated will be
subject to reelection in 2003. If the conversion does not occur, the current
directors of MasterCard International will continue in that capacity until an
annual meeting of MasterCard International principal members is held in 2003.


     A number of the largest members of MasterCard International that generate
significant business for MasterCard have representatives on the MasterCard
Incorporated board of directors. If any of these members were to lose its
representation on the board, this could have a detrimental effect on our
business relationship with that member.



     The bylaws of MasterCard Incorporated require that directors be officers of
a member institution of MasterCard International or an individual otherwise
uniquely qualified to provide guidance on MasterCard's affairs. For a
description of the requirements for the regional allocation of board seats
arising from the conversion and integration, see "The Conversion -- Effects of
the Conversion." In accordance with the restrictions described in that section,
the nominating committee of the MasterCard Incorporated board is charged with
nominating individuals to serve as directors, subject to election by the
stockholders. Presently, MasterCard Incorporated does not grant automatic board
seats to members that generate specified levels of revenues or transaction
volumes for MasterCard.



     Under the nominating committee's current procedures, the committee accepts
nominations from regional boards as well as individual member-stockholders, and
also considers nominees of its own volition. In selecting nominees, the
committee typically considers the following factors, among others:



     - the experience and qualifications of the individual nominee;



     - the region with which the nominee is associated;



     - whether the nominee represents an issuing or acquiring institution;



     - the size of the financial institution of which the nominee is an officer,
      the extent of such institution's business with MasterCard (in terms of
      revenues, issuing volumes and/or acquiring volumes), and the degree of
      such institution's relative dedication to the MasterCard brand; and



     - whether the financial institution of which the nominee is an officer is
      of particular strategic importance to MasterCard.



     Because the size of member-stockholders and their dedication to MasterCard
are important factors considered by the nominating committee, it is possible
that a director associated with a member-stockholder whose business with
MasterCard declines relative to others may not be proposed for reelection by the


                                       126



nominating committee. Similarly, officers of member-stockholders that make large
and growing contributions to MasterCard's revenues and volumes are more likely
to be considered by the nominating committee for nomination to the board of
directors.


     The following table sets forth certain information regarding the executive
officers and directors of MasterCard Incorporated and MasterCard International
after the conversion and integration.



NAME                                   AGE                           POSITION
----                                   ---                           --------
                                       
Lance L. Weaver......................  47    Chairman of the Board and Director
Baldomero Falcones Jaquotot..........  55    Vice Chairman and Director
Donald L. Boudreau...................  60    Chairman Emeritus and non-voting Director
Robert W. Selander...................  51    President, Chief Executive Officer and Director
William F. Aldinger..................  54    Director
Hiroshi Arai.........................  72    Director
David A. Coulter.....................  54    Director
William R.P. Dalton..................  58    Director
Augusto M. Escalante Juanes..........  52    Director
Jan A.M. Hendrikx....................  56    Director
Jean-Pierre Ledru....................  62    Director
Norman C. McLuskie...................  57    Director
John Francis Mulcahy.................  51    Director
Robert W. Pearce.....................  47    Director
Robert B. Willumstad.................  56    Director
Mark H. Wright.......................  56    Director
Ronald N. Zebeck.....................  46    Director
Denise K. Fletcher...................  53    Executive Vice President and Chief Financial Officer
Noah J. Hanft........................  49    General Counsel and Secretary
Alan J. Heuer........................  60    Senior Executive Vice President, Customer Group
Peter Hoch...........................  61    President, MasterCard Europe region and non-voting
                                             Director
Jerry McElhatton.....................  63    Senior Executive Vice President, Global Technology &
                                             Operations
Michael W. Michl.....................  56    Executive Vice President, Central Resources
Christopher D. Thom..................  53    Senior Executive Vice President, Global Development
                                             Group
Spencer Schwartz.....................  35    Senior Vice President and Controller


BOARD OF DIRECTORS

     Biographies of the directors of MasterCard Incorporated after the
conversion and integration are set forth below. All of the following persons are
currently directors or non-voting advisory directors of MasterCard
International. With the exception of Mr. Selander, the President and Chief
Executive Officer of MasterCard Incorporated, Mr. Boudreau, the Chairman
Emeritus, and Mr. Hoch, the Chief Executive Officer of Europay, all MasterCard
Incorporated directors are presently employees of members of MasterCard
International.

     Lance L. Weaver is a Senior Vice Chairman of MBNA America Bank, N.A. and
Chairman of the board of MasterCard Incorporated. Mr. Weaver was first elected
to the MasterCard International board of directors in 1997 and was elected
chairman of the board of MasterCard International in 2001. Before joining MBNA
America Bank in 1991, Mr. Weaver held various management positions with Wells
Fargo and Citicorp/ Citibank. He is director of MBNA America Bank and MBNA
Information Services. He also serves on the board of directors of the Christiana
Care Corporation and the Wilmington Renaissance Corporation. He is a member of
the Georgetown University Board of Regents and the Tower Hill School Board of
Trustees.

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     Baldomero Falcones Jaquotot is Director General of Banco Santander Central
Hispano and a member of its Executive Committee, and Vice Chairman of the board
of MasterCard International. He has been a member of the MasterCard
International board of directors since 1997. Mr. Falcones joined Banco Hispano
Industrial, a predecessor of Banco Santander Central Hispano, in 1984. Mr.
Falcones also serves as Chairman of Sistemas Espanoles de Tarjetas Inteligentes
(S.E.T.I.), Chairman of Europay Espana, Chairman of Aquanima Holding, S.A. and
Aquanima Iberica, S.A. and as a director and a member of the Executive Committee
of Europay International S.A. He is a director of Union Fenosa, S.A., La
Estrella, S.A. de Seguros, Central Hispano Vida, S.A., Central Hispano Seguros
Generales, S.A., Sistema 4B, S.A., Portal Universia, S.A. and B2BF, S.A.

     Donald L. Boudreau is Chairman Emeritus and a non-voting advisory director
of MasterCard Incorporated. Mr. Boudreau has served on the MasterCard
International board of directors since 1997 and was the Chairman of the
MasterCard International board of directors from April 1998 to March 2001. Mr.
Boudreau recently retired as a Vice Chairman of The Chase Manhattan Corporation
and The Chase Manhattan Bank, where he was a member of the Executive Committee.
Mr. Boudreau served in a variety of positions during his 40 year career at
Chase, and most recently was responsible for all of Chase's small and consumer
and middle market businesses. Mr. Boudreau is Chairman of the New York City
Blood Donor campaign, a member of the board of directors of the New York City
Blood Center, and a member of the board of trustees of the New York Presbyterian
Hospital, Pace University, the National Urban League and the United Way of
Tri-State.

     Robert W. Selander will be President and Chief Executive Officer of
MasterCard Incorporated and presently holds the same position at MasterCard
International. Mr. Selander has served on the MasterCard International board of
directors since 1997. Prior to his election as President and Chief Executive
Officer of MasterCard International, Mr. Selander was an Executive Vice
President and President of the MasterCard International Europe, Middle
East/Africa and Canada regions. He also currently serves as a director of
Hartford Financial Services Group and Europay International. Before joining
MasterCard in 1994, Mr. Selander spent two decades with Citicorp/Citibank, N.A.

     William F. Aldinger is the Chairman and Chief Executive Officer of
Household International. Mr. Aldinger was first elected to the MasterCard
International board of directors in 1998 and is a former member of MasterCard
International's U.S. region board of directors. Mr. Aldinger joined Household
International in 1994, and prior to that time served in various positions at
Wells Fargo Bank, including Vice Chairman. Mr. Aldinger is a member of the
boards of directors of Illinois Tool Works, Inc. and Evanston Northwestern
Healthcare. He is a member of the combined boards of directors of Children's
Memorial Medical Center/Children's Memorial Hospital and the Children's Memorial
Foundation located in Chicago. Mr. Aldinger is also a member of the board of
trustees of Northwestern University and the J.L. Kellogg Graduate School of
Management.

     Hiroshi Arai is the Chairman of the Board of Orient Corporation, a position
he has held since 1999. Mr. Arai has been a member of the MasterCard
International board of directors since 1999 and is currently a member of
MasterCard International's Asia/Pacific region board of directors. Prior to
joining Orient Corporation in 1993, Mr. Arai was employed for forty years with
Dai-ichi Kangyo Bank, where he held various positions including Deputy
President.

     David A. Coulter is Vice Chairman of J.P. Morgan Chase & Co. and head of
its retail and middle market business, as well as its Internet initiatives. Mr.
Coulter has been a member of MasterCard International's board of directors since
2001. Prior to the merger between J.P. Morgan and The Chase Manhattan
Corporation, Mr. Coulter was Vice Chairman of The Chase Manhattan Corporation
and The Chase Manhattan Bank. In 1999 and 2000, Mr. Coulter was a partner of The
Beacon Group. From 1996 to 1998, Mr. Coulter was Chairman and Chief Executive
Officer of BankAmerica Corporation. He is a director of PG&E Corporation and
Pacific Gas and Electric Company. Mr. Coulter also serves on the boards of
directors of the San Francisco Art Institute, the Asia Society and the National
Mentoring Partnership, and is a member of The Business Council. He is also a
trustee of Carnegie Mellon University and the Public Policy Institute of
California.

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     William R. P. Dalton is Chief Executive of HSBC Bank plc (formerly Midland
Bank plc) and a director of HSBC Holdings plc. Mr. Dalton was first elected to
the MasterCard International board of directors in 1998. Prior to joining HSBC
Bank plc in 1998, Mr. Dalton served as President and Chief Executive Officer of
HSBC Bank Canada. Mr. Dalton joined HSBC Bank Canada in 1980. Mr. Dalton is
Chairman of HSBC Asset Finance (UK) Limited and Deputy Chairman of Merrill Lynch
HSBC Limited and is also a director of HSBC Investment Bank Holdings plc and
Credit Commercial de France. He is President of the Chartered Institute of
Bankers and Chairman of Young Enterprise in the United Kingdom. In addition, Mr.
Dalton is a Fellow of the Institute of Canadian Bankers and a Fellow of the
Chartered Institute of Bankers.

     Augusto M. Escalante Juanes is Deputy President, Consumer Product and
Marketing Areas, Banco Nacional de Mexico, S.A. Mr. Escalante Juanes was elected
to the MasterCard International board of directors in 2001 after having
previously served on the board from April 1998 to March 1999, and is currently
chairman of MasterCard International's Latin America and Caribbean region board
of directors. Mr. Escalante Juanes joined Banco Nacional de Mexico in 1991. At
Banco Nacional de Mexico, Mr. Escalante Juanes is responsible for all consumer
products, both deposit and credit, and all marketing and advertising for the
Financial Group of Banco Nacional de Mexico. He was previously Deputy President,
Bank Card and Electronic Services Area, and Deputy President, Consumer Loans
Area of Banco Nacional de Mexico.

     Jan A.M. Hendrikx is Chief Executive Officer of EURO Kartensysteme. Mr.
Hendrikx was first elected to the MasterCard International board of directors in
2001. Mr. Hendrikx joined EURO Kartensysteme in 1997 as chief executive officer
and prior to that time served as a consultant for Gemini Consulting in London
and in senior positions in the European offices of Visa International and
Citibank. He has served on the Europay International board of directors since
1998.

     Jean-Pierre Ledru is Senior Executive Vice President of Credit Agricole SA.
He has served on the MasterCard International board of directors since 1991. In
addition, Mr. Ledru is Chairman of Cedicam, Chairman and C.E.O. of Europay
France, Chairman of Europay International, and Vice Chairman of the Groupement
des Cartes Bancaires. In addition, Mr. Ledru is Executive Vice Chairman of BMS
(Billetique Monetique Services) and a member of the board of directors of AROP
(Association pour le Rayonnement de l'Opera National de Paris).

     Norman C. McLuskie is a Director of The Royal Bank of Scotland Group plc,
The Royal Bank of Scotland plc and National Westminister Bank plc. Mr. McLuskie
was first elected to the MasterCard International board of directors in 2000.
Mr. McLuskie joined Royal Bank of Scotland in 1982. Following the acquisition of
Natwest by the Royal Bank of Scotland in March 2000, he was appointed Chief
Executive of Retail Direct, a division of the Royal Bank of Scotland Group
encompassing its card and consumer finance businesses, among others. Mr.
McLuskie's other directorships include: Chairman of RoyScot Financial Services
Ltd, Chairman of RBS Advanta, Chairman of RBS Cards Ltd, Chairman of the
Trustees of the RBS Pension Fund, Chairman of Virgin Direct Personal Finance
Ltd, Deputy Chairman of Tesco Personal Finance and Director of Worldpay Group
plc. Mr. McLuskie is also Vice Chairman of Europay International.

     John Francis Mulcahy is Head of Australian Financial Services Division,
Commonwealth Bank of Australia. He has served on the MasterCard International
board of directors since 1998 and is currently a member of MasterCard
International's Asia/Pacific region board of directors. Prior to joining the
Commonwealth Bank of Australia in 1995, Mr. Mulcahy was Chief Executive Officer
of Lend Lease Property Investment Services. He currently serves as a director of
IPAC Securities Limited, EDS Australia Pty. Limited and TCNZ Australia Pty
Limited.

     Robert W. Pearce is President of Distribution in the Personal & Commercial
Client Group for Bank of Montreal, where he has worked for twenty years. He has
served on the MasterCard International board of directors since 1999. He
previously served as Executive Vice-President of North American Electronic
Banking Services for Bank of Montreal and was responsible for Bank of Montreal's
MasterCard Cardholder and Merchant Services lines of business, Debit Card
business, and Electronic Banking.

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     Robert B. Willumstad is President of Citigroup and Chairman and Chief
Executive Officer of Citigroup's Consumer Group, overseeing its North American
cards businesses, Citibanking North America, CitiFinancial, Citigroup's Mortgage
Banking business and Primerica, and has product responsibility for Global Cards
and Consumer Finance. Mr. Willumstad is also responsible for, among other
things, Citigroup's e-consumer unit, which provides Internet payment solutions
and financial services offerings across all of Citigroup's consumer businesses.
Mr. Willumstad has served on the MasterCard International board of directors
since 1999. Mr. Willumstad was Chairman and CEO of Travelers Group Consumer
Finance Services prior to the merger between Citicorp and Travelers Group in
1998. Mr. Willumstad joined Commercial Credit, now CitiFinancial, in 1987. Prior
to joining Citigroup's predecessor companies, Mr. Willumstad served in various
positions with Chemical Bank for twenty years, last holding the position of
President of Chemical Technologies Corporation.

     Mark H. Wright is President and Chief Executive Officer of USAA Federal
Savings Bank, and serves as Vice Chairman of USAA Federal Savings Bank's board
of directors. He also serves as Chairman of the Board of USAA Savings Bank. Mr.
Wright joined USAA in 1993. Mr. Wright has been a member of the MasterCard
International board of directors since 1996, is chairman of the audit committee
of MasterCard International's board, and is currently a member of MasterCard
International's U.S. region board of directors. He is on the board of the Alamo
Bowl in San Antonio. Mr. Wright also serves as a trustee on the board of Our
Lady of the Lake University in San Antonio. Mr. Wright is a member and Vice
President of the Thrift Institutions Advisory Council appointed by the Federal
Reserve Bank.

     Ronald N. Zebeck is Chairman and Chief Executive Officer of Metris
Companies Inc., as well as Chief Executive Officer of Direct Merchants Credit
Card Bank. Mr. Zebeck has served on the MasterCard International board of
directors since 1997 and is currently a member of MasterCard International's
U.S. Region board of directors. Prior to joining Metris Companies Inc. in 1994,
Mr. Zebeck held various credit card related positions at Citicorp, Advanta and
General Motors.

EXECUTIVE OFFICERS

     Biographies of the executive officers of MasterCard Incorporated and
MasterCard International after the conversion and integration other than Mr.
Selander are set forth below. Each of the following officers currently hold the
same position with MasterCard International before the conversion and
integration that they will hold in MasterCard Incorporated and MasterCard
International after the conversion and integration, except for Dr. Peter Hoch,
who is currently the Chief Executive Officer of Europay International.

     Denise K. Fletcher will be Executive Vice President and Chief Financial
Officer of MasterCard Incorporated and a member of MasterCard's Executive
Management Group. Ms. Fletcher will be responsible for the corporate finance,
planning, audit, purchasing and new markets and investments functions at
MasterCard. Prior to joining MasterCard in 2000, Ms. Fletcher spent four years
as Senior Vice President and Chief Financial Officer of Bowne & Company, the
world's largest financial printer, with responsibility for finance and strategy.
She serves on the boards of directors of Girl Scouts USA and the YWCA of the
City of New York.

     Noah J. Hanft will be General Counsel and Secretary of MasterCard
Incorporated and a member of MasterCard's Executive Management Group. Mr. Hanft
has served in various increasingly senior legal positions at MasterCard since
1984, except for 1990 to 1993, when Mr. Hanft was Senior Vice President and
Assistant General Counsel at AT&T Universal Card Services. Prior to joining
MasterCard, Mr. Hanft was associated with the intellectual property law firm of
Ladas & Parry in New York.

     Alan J. Heuer will be Senior Executive Vice President of MasterCard
Incorporated and a member of MasterCard's Executive Management Group. Mr. Heuer
will be responsible for MasterCard's Customer Group, which encompasses all
member relations, global marketing and consulting/cardholder services functions,
as well as MasterCard's regional activities. Mr. Heuer joined MasterCard in
1995. Prior to that time, Mr. Heuer served as Executive Vice President, Retail
Banking, for the Bank of New York.

     Dr. Peter Hoch will be President of MasterCard's Europe region and a member
of MasterCard's Executive Management Group. Dr. Hoch will also be a non-voting,
advisory director of MasterCard Incorporated. Dr. Hoch was a Vice Chairman of
Europay International from 1992 until 2000, and became

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Europay's Chief Executive Officer in November 2000. From 1984 to 1999, Dr. Hoch
was a member of the board of management of Hypo-Bank AG, responsible for
information technology and payment systems, among other things. He helped to
oversee the merger between Hypo-Bank and Bayerische Vereinsbank to form Hypo
Vereinsbank, and served on the management board of Hypo Vereinsbank in 1998 and
1999. Dr. Hoch is currently a member of the board of directors of Giesecke &
Devrient.

     Jerry McElhatton will be Senior Executive Vice President of MasterCard
Incorporated and a member of MasterCard's Executive Management Group. Mr.
McElhatton will be responsible for MasterCard's Global Technology and Operations
group, which includes the St. Louis transaction processing facility. Before
joining MasterCard in 1994, Mr. McElhatton was President and Chief Executive
Officer of Dallas-based Payment Systems Technology & Consulting, Inc. Mr.
McElhatton currently serves on the board of directors of Ignite Sales, Inc. and
Mascon, a development firm based in India; the board of directors of St. Louis
University; the board of directors of the Regional Commerce and Growth
Association in St. Louis; the National Council for the Olin School of Business
of Washington University in St. Louis; and the boards of directors of Rainbow
Village in St. Louis and the United Way (St. Louis).

     Michael W. Michl will be Executive Vice President of MasterCard
Incorporated and will be a member of MasterCard's Executive Management Group.
Mr. Michl will be responsible for MasterCard's Central Resources unit,
encompassing the communications, global human resources and corporate services
functions. Mr. Michl joined MasterCard in 1998 from Avon Products, where he was
Vice President of Human Resources.

     Christopher D. Thom will be Senior Executive Vice President of MasterCard
Incorporated and a member of MasterCard's Executive Management Group. Mr. Thom
will be responsible for MasterCard's Global Development Group, which manages the
brand and program development functions at MasterCard, as well as MasterCard's
initiatives in the areas of electronic commerce, mobile commerce and chip-based
smart cards. Prior to joining MasterCard in 1995, Mr. Thom served in a variety
of positions at HSBC Group in the United Kingdom, including as general manager,
Strategic Development and general manager, Retail. In the latter position, Mr.
Thom was responsible for the core banking services and products delivered
through HSBC's branch network, as well as HSBC's card service, private banking
and other businesses. Mr. Thom is a director of MXI.

     Spencer Schwartz will be Senior Vice President and Controller for
MasterCard Incorporated. Mr. Schwartz will be primarily responsible for all
accounting and financial control functions at MasterCard. Prior to assuming the
Controller position for MasterCard International in 2000, Mr. Schwartz was the
Vice President of Taxation for MasterCard International. Before joining
MasterCard in 1996, Mr. Schwartz headed the tax department for Carl Zeiss, Inc.,
operated his own accounting and tax firm and held various positions with Price
Waterhouse.

COMMITTEES OF THE BOARD

     The board of MasterCard Incorporated is authorized to designate from among
its members an executive committee, which will have all the authority of the
board of directors, and other committees. The Chairman of the board will be an
ex officio member of all committees. The board of MasterCard Incorporated will
have the same committees with the same functions and members as MasterCard
International had before the conversion. In addition, the board of MasterCard
Incorporated may appoint additional regular committees of the board of
MasterCard Incorporated. The committees of the board are described below.

     EXECUTIVE.  The executive committee may exercise the authority of the board
of directors when the board is not in session, as permitted by law and the
bylaws of MasterCard Incorporated. At present, the board of MasterCard
Incorporated does not expect to appoint an executive committee.

     AUDIT.  The audit committee will assist the board of directors in
fulfilling its oversight responsibilities. Among other things, it will review
the activities, results and effectiveness of internal and external auditors,
confirm the independence of the external auditors and recommend to the board of
directors the appointment of the external auditors. The audit committee will
also review MasterCard Incorporated's key risks and
                                       131


controls and its quarterly and annual financial statements. The members of the
audit committee are expected to be Messrs. Weaver, Wright, Boudreau, McLuskie,
Pearce and Zebeck.

     COMPENSATION.  The compensation committee will establish the compensation
policies and criteria of the Chief Executive Officer and other executive
officers of MasterCard Incorporated. The members of the compensation committee
are expected to be Messrs. Weaver, Aldinger, Boudreau and Falcones.

     NOMINATING.  The nominating committee will consider and nominate
individuals to serve as directors of MasterCard Incorporated for approval by the
class A and class B stockholders at the annual meeting of stockholders, based
upon proposals made by each regional board of MasterCard Incorporated. The
members of the nominating committee are expected to be Messrs. Weaver, Aldinger,
Boudreau, Dalton, Falcones, Ledru and Willumstad.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

     The following table shows the before-tax compensation for the Chief
Executive Officer and the four next highest paid executive officers of
MasterCard International at the end of 2001, which we collectively refer to as
the named executive officers.



                                                                                  LONG-TERM
                                            ANNUAL COMPENSATION                  COMPENSATION
                              -----------------------------------------------    ------------
                                                               OTHER ANNUAL          LTIP           ALL OTHER
NAME AND PRINCIPAL POSITION   YEAR   SALARY      BONUS(1)     COMPENSATION(2)      PAYOUTS       COMPENSATION(3)
---------------------------   ----  --------    ----------    ---------------    ------------    ---------------
                                                                               
Robert W. Selander..........  2001  $783,333    $2,500,000       $205,499         $3,479,000        $451,447
  President & CEO             2000  $700,000    $2,000,000       $198,760                 --        $419,360
Alan J. Heuer...............  2001  $575,000    $  900,000       $153,971         $2,380,000        $201,341
  Senior Executive VP         2000  $575,000    $  800,000       $137,796                 --        $174,317
Jerry McElhatton............  2001  $575,000    $  825,000       $149,047         $2,047,500        $395,586
  Senior Executive VP         2000  $575,000    $  725,000       $133,849                 --        $375,758
Christopher D. Thom.........  2001  $500,000    $  700,000       $113,747         $2,072,000        $196,316
  Senior Executive VP         2000  $500,000    $  700,000       $116,470                 --        $129,283
Denise K. Fletcher(4).......  2001  $375,000    $  450,000       $ 42,182                 --        $ 44,485
  Executive VP                2000  $120,913    $  200,000             --                 --        $210,000(5)


---------------

(1) Additional bonuses for services performed in 2001 will be paid to Mr.
    Selander ($250,000 at the closing of the conversion and integration and
    $250,000 per year for each of the following three years), Mr. Thom ($200,000
    at the closing and $66,667 per year for each of the following three years)
    and Ms. Fletcher ($200,000 at the closing and $66,667 per year for each of
    the following three years), if, and only if, the conversion and integration
    is consummated.


(2) Amounts principally represent reimbursement for tax obligations in
    connection with non-qualified retirement benefits.


(3) For 2001, includes matching contributions under the MasterCard
    International's 401(k) plan (Mr. Selander -- $22,134; Mr. Heuer -- $22,134;
    Mr. McElhatton -- $22,190; Mr. Thom -- $22,190; Ms. Fletcher -- $7,378);
    MasterCard International's contributions to both a non-qualified defined
    benefit and defined contribution plan -- Annuity Bonus Plan (Mr.
    Selander -- $186,513; Mr. Heuer -- $131,087; Mr. McElhatton -- $124,871; Mr.
    Thom -- $80,314; Ms. Fletcher -- $2,107); the dollar value of the benefit of
    premiums paid for a split-dollar life insurance policy projected on an
    actuarial basis (Mr. Thom -- $47,579); the full amount of all premiums paid
    by MasterCard International for executive life insurance coverage (Mr.
    Selander -- $36,800; Mr. Heuer -- $3,120; Mr. McElhatton -- $3,524; Mr.
    Thom -- $1,232); MasterCard International's contributions to a deferred
    compensation plan -- Rabbi Trust (Mr. Selander -- $150,000; Mr.
    McElhatton -- $200,000); cash payments in lieu of executive perquisites (Mr.
    Selander -- $56,000; Mr. Heuer -- $45,000; Mr. McElhatton -- $45,000; Mr.
    Thom -- $45,000; Ms. Fletcher -- $35,000).


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(4) Ms. Fletcher joined MasterCard International in September 2000. Her salary
    and bonus amounts for fiscal 2000 reflect a partial year.

(5) Represents a one-time bonus paid upon hiring.

LONG-TERM INCENTIVE PLAN-AWARDS IN FISCAL YEAR 2001

     The following table lists grants of performance units in 2001 to the named
executive officers:



                       NUMBER OF
                         UNITS       PERFORMANCE OR OTHER
NAME                   AWARDED(1)   PERIOD UNTIL MATURATION   THRESHOLD ($)   TARGET ($)   MAXIMUM ($)
----                   ----------   -----------------------   -------------   ----------   -----------
                                                                            
Robert W. Selander...    35,225     1/1/2001 -- 12/31/2003      1,761,250      3,522,500    7,045,000
  President and CEO      19,050(2)  1/1/2001 -- 12/31/2003        952,500      1,905,000    3,810,000
Alan J. Heuer........    20,250     1/1/2001 -- 12/31/2003      1,012,500      2,025,000    4,050,000
  Senior Executive VP    11,500(2)  1/1/2001 -- 12/31/2003        575,000      1,150,000    2,300,000
Jerry McElhatton.....    15,525     1/1/2001 -- 12/31/2003        776,250      1,552,500    3,105,000
  Senior Executive VP     8,625(2)  1/1/2001 -- 12/31/2003        431,250        862,500    1,725,000
Christopher D.           17,625
  Thom...............               1/1/2001 -- 12/31/2003        881,250      1,762,500    3,525,000
  Senior Executive VP
Denise K. Fletcher...     8,800     1/1/2001 -- 12/31/2003        440,000        880,000    1,760,000
  Executive VP            1,450(2)  1/1/2001 -- 12/31/2003         72,500        145,000      290,000


---------------
(1) The performance units were granted under MasterCard International's
    Executive Incentive Plan. Each performance unit has a target value equal to
    $100. The actual value of each unit will be calculated based on MasterCard
    International's performance over a three-year period based on a combination
    of qualitative and quantitative measures that include: improving profitable
    share with key members in key markets; improving customer focused strategy;
    achieving corporate financial targets and enhancing organizational
    capabilities. Each unit will be valued at target ($100) if, on a
    weighted-average basis, target performance is achieved for all of the
    performance measures. Each unit will be valued at threshold ($50) if, on a
    weighted-average basis, threshold performance is achieved. Each unit will be
    valued at maximum ($200) if, on a weighted-average basis, maximum
    performance is achieved. For performance between threshold and target or
    target and maximum, the value of the units will be increased on a straight
    line basis. The units will have no value if performance is below threshold.

(2) Represents one-time special grants awarded pursuant to the Executive
    Incentive Plan that vests 100% after five years for Mr. Selander; three
    years for Mr. Heuer, Mr. McElhatton and Ms. Fletcher.

     The performance units described in the preceding table are subject to
vesting as described below. Performance units that relate to a three-year
performance period will vest in annual increments according to the following
schedule if the participant completes 1,000 hours of service and is employed by
MasterCard International on the last day of the respective twelve-month cycle:



                     TWELVE-MONTH CYCLE
                  ENDING ON THE FOLLOWING
                     ANNIVERSARY OF THE                       % OF PERFORMANCE
                       DATE OF GRANT                            UNITS VESTED
                  -----------------------                     ----------------
                                                           
1st Anniversary.............................................       26.67%
2nd Anniversary.............................................       26.67%
3rd Anniversary.............................................       26.67%
4th Anniversary.............................................           0%
5th Anniversary.............................................          20%


     Unvested performance units relating to the twelve-month cycle in which a
participant terminates employment with MasterCard International, and subsequent
twelve-month cycles during the vesting period for the award, will be forfeited
upon termination of employment. If a participant is rehired during a subsequent
twelve-month cycle in the vesting period for the same award of performance
units, the participant will be eligible to vest in the performance units for the
award that relate to the twelve-month cycle of rehiring and

                                       133


subsequent twelve-month cycles if the participant otherwise meets the terms and
conditions specified in the award and completes 1,000 hours of service in, and
is employed by MasterCard International on the last day of, the twelve-month
cycle.

     Upon completion of the three-year performance period, participants will
receive a payout equal to 80% of the award earned. The remaining 20% of the
award will be paid upon completion of two additional years of service, (i.e., 5
years of service in total). Participants who retire (with at least six months of
service during the performance period), die or become permanently disabled prior
to the end of the three-year performance period and/or prior to the end of the
five-year performance period are eligible for 100% vesting of their units, and
receive a payout equal to the number of units granted for the period multiplied
by the target unit value of $100. If a participant is terminated for cause, all
units will be forfeited. Upon any other termination, only unvested units will be
forfeited and vested units will be paid at target.

RETIREMENT BENEFITS

MASTERCARD ACCUMULATION PLAN (MAP)

     Any employee who participates in the MAP earns benefits under the MAP as
soon as he or she becomes an employee of MasterCard. Benefits generally vest
after four years of service. For each plan year after January 1, 2000,
participants are credited with a percentage of their compensation for the plan
year in accordance with the table below:



                                                              PAY CREDIT
                                                              FOR CURRENT
COMPLETED YEARS OF SERVICE AT DECEMBER 31 OF PRIOR PLAN YEAR   PLAN YEAR
------------------------------------------------------------  -----------
                                                           
 0 -  4.....................................................      4.50%
 5 -  9.....................................................      5.75%
10 - 14.....................................................      8.00%
15 - 19.....................................................     10.00%
20 - 29.....................................................     12.00%


     Compensation is defined as base pay plus annual incentive compensation.
These accounts also receive investment credits. Participants elect to allocate
their account balance prior to the start of each plan year, during open
enrollment, based on the following allocation options:



                                                              S&P 500
THIRTY-YEAR TREASURY ACCOUNT                                  ACCOUNT
----------------------------                                  -------
                                                           
100%........................................................      0%
80%.........................................................     20%
50%.........................................................     50%
20%.........................................................     80%
0%..........................................................    100%


     The annual investment credits on the Standard & Poor's 500 Account are
restricted to a minimum of 0% and a maximum of 15%. No election can be made for
plan years beginning after December 31, 2002. When a participant terminates
employment, the amount credited to the participant's account is paid in a lump
sum or converted into an annuity.

SUPPLEMENTAL RETIREMENT BENEFITS

     Supplemental retirement benefits are provided to all named executive
officers and certain other participants under various funded and unfunded
nonqualified plans. Benefits are provided to certain employees whose benefits
are limited by compensation or amount under applicable federal tax laws and
regulations. Designated employees may also receive an annual benefit at
retirement equal to a designated percentage of their final average base
compensation reduced by the amount of all benefits received under the MAP and
other qualified and nonqualified arrangements.

                                       134


ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE TO CERTAIN EXECUTIVE OFFICERS

     The following table shows the estimated annual retirement benefits,
including supplemental retirement benefits under the plans applicable to the
individuals, which would be payable to each executive officer listed assuming
retirement at age 65 at his or her 2001 base salary with payments made for the
life of each participant.



                                                          YEAR OF 65TH    ESTIMATED ANNUAL
NAME                                                        BIRTHDAY         BENEFIT(1)
----                                                      ------------    -----------------
                                                                    
Robert W. Selander......................................      2015            $783,000
Alan J. Heuer...........................................      2006            $460,000
Jerry McElhatton........................................      2004            $460,000
Christopher D. Thom.....................................      2013            $400,000
Denise K. Fletcher......................................      2013            $ 57,000


---------------
(1) Assumes MAP and Annuity Bonus Plan account balance increases with annual
    salary credits and interest credits projected at 6% per year.

     Included in the Estimated Annual Benefit in the table above is the MAP
Conversion Annuity, part of MasterCard's nonqualified defined benefit plan,
which was applicable to all executives with earnings exceeding the Internal
Revenue Code section 401(a)(17) limit. This annuity was designed to cover
certain early retirement subsidies applicable under the former pension plan to
all plan participants. The aggregate annuity for certain named executive
officers exceeded $100,000 (Mr. Selander -- $194,693, Mr. Heuer -- $136,696, Mr.
McElhatton -- $130,514, Mr. Thom -- $114,057).

401(k) SAVINGS PLAN

     Employees who participate in the 401(k) plan may contribute from 2% to 6%
of base pay on a tax-deferred basis. In addition, after-tax contributions are
permitted, and employees may also contribute supplemental tax-deferred and
after-tax amounts from 1% to 3%. Internal Revenue Service limits apply to all
tax-deferred contributions.

     A 217% match is provided on employee contributions up to 6% of base pay.
Employees must contribute to the 401(k) plan to receive matching contributions.
Matching contributions are 100% vested after 4 years of service under a graded
vesting schedule. Loans and certain types of withdrawals are permitted.

COMPENSATION OF DIRECTORS

     Members of the board of MasterCard Incorporated will receive the same
compensation as members of the board of MasterCard International before the
conversion as set forth below. The board of MasterCard Incorporated does not
intend to establish any compensation for members of the board of MasterCard
International.

     In fiscal year 2001, directors who were not employees of MasterCard
International were paid an annual retainer of $25,000. The chairman of the board
received an annual retainer of $30,000. Non-employee directors also received an
annual retainer of $5,000 for serving as a chairperson of a standing committee;
a $1,500 meeting fee for attendance at global and U.S. regional board meetings;
a $1,000 meeting fee for attendance at committee meetings and a $500 meeting fee
for telephonic meetings. In addition, customary expenses for attending board and
committee meetings were reimbursed.

     Under the MasterCard Deferral Plan, up to 100% of non-employee director's
meeting fees and annual retainer may be deferred and invested among several
investment return options. In general, deferred amounts are not paid until after
the director retires from the board. The amounts are then paid, at the
director's option, either in a lump sum or in ten annual installments.

                                       135


EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS

EMPLOYMENT AGREEMENT

     MasterCard International is party to an employment agreement with Mr.
Selander. Under the terms of the agreement, Mr. Selander's employment shall
automatically terminate if he: (1) retires or becomes eligible to receive
retirement benefits; (2) dies or (3) becomes disabled. In addition, both he and
MasterCard can terminate the agreement for any reason upon ninety (90) days'
prior written notice. During the employment term, Mr. Selander is eligible to
participate in MasterCard's rewards plans and arrangements on a level
commensurate with his position.

     The agreement also provides that if Mr. Selander's employment is terminated
either by MasterCard other than for cause or by him for certain specified
reasons, he shall receive any earned, but unpaid base salary, a pro rata portion
of his target bonus and severance pay in the form of base salary continuation
and his average annual incentive bonus, received over the prior three years, for
a period of thirty-six (36) months. He is also subject to non-competition and
non-solicitation covenants for a minimum period of twelve (12) months, up to the
full length of the severance period.

     Pursuant to the agreement, Mr. Selander is eligible for annual company
contributions of up to $150,000 to a rabbi trust or other tax deferred
investment vehicle. $50,000 of this amount is guaranteed and the remaining
$100,000 is based upon MasterCard attaining certain threshold and target
performance goals. Generally, the vested portion of the assets is payable at the
later of age 55 or his termination of employment.

CHANGE-IN-CONTROL ARRANGEMENTS

     MasterCard International has approved a change in control agreement for
certain of its executive officers, including all of the named executive
officers. To date, Mr. Selander is the only executive officer who has executed
the change in control agreement. Under the agreement, if an executive officer's
employment is terminated without "cause" or for "good reason" (as defined in the
agreement) during the six-month period preceding or the two-year period
following a "change in control" of MasterCard International, the executive will
be entitled to the following:

     - a severance payment equal to two times the average base salary and bonus
       (three times in the case of the CEO), payable over a 24-month period (36
       months in the case of the CEO), subject to recalculation to be payable
       over the period until the executive is eligible to retire (without any
       increase in the amount payable);

     - continued coverage under the executive's individual long-term disability
       plan for the 24- or 36-month period;

     - continued coverage in the medical, dental, hospitalization and vision
       care plans for up to eighteen months;

     - accelerated vesting of performance units including special grants awarded
       prior to the change in control under the Executive Incentive Plan, with
       payout at 125% of target;

     - accelerated vesting of appreciation of share units granted under the
       value appreciation plan;

     - accelerated vesting of special grants awarded pursuant to the Executive
       Incentive Plan, nonqualified retirement and deferred compensation
       benefits;

     - lump sum payment equal to the value of unvested qualified plan benefits;

     - outplacement assistance; and

     - an excise tax gross-up for any taxes incurred as a result of Section 4999
       of the Internal Revenue Code.

     The executive would be subject to a covenant not to compete and not to
solicit employees for up to 24-months (36 in the case of the CEO).

                                       136


     For purposes of the agreement, a "change in control" is defined as follows:

          (a) as long as MasterCard International is a non-stock membership
     corporation or it or any of its affiliates is a private share corporation,
     if (1) at any time three members have become entitled to cast at least 45
     percent of the votes eligible to be cast by all the members of MasterCard
     International (or all the shareholders of such private share corporation)
     on any issue, (2) at any time, a plan or agreement is approved by the
     members or shareholders, as the case may be, to sell, transfer, assign,
     lease or exchange substantially all of MasterCard International's (or such
     private share corporations') assets, or (3) at any time, a plan is approved
     by the members of MasterCard International (or the shareholders of such
     private share corporation) for the sale or liquidation of MasterCard
     International or such private share corporation. The foregoing
     notwithstanding, a reorganization in which the members continue to have all
     of the ownership rights in the continuing entity shall not in and of itself
     be deemed a "change of control" under (2) and/or (3), and a reorganization
     to convert MasterCard International from a membership to a stock company or
     a transaction resulting in the integration of Europay and MasterCard
     International shall not in and of itself constitute a "change of control;"

          (b) if MasterCard International becomes a stock corporation, the
     approval of its stockholders of (1) any consolidation or merger in which it
     is not the continuing or surviving corporation or pursuant to which shares
     of stock would be converted into cash, securities or other property, other
     than a merger in which the holders of stock immediately prior to the merger
     will have the same proportionate ownership interest (i.e., still own 100%
     of total) of common stock of the surviving corporation immediately after
     the merger, (2) any sale, lease, exchange or other transfer (in one
     transaction or a series of related transactions) of all or substantially
     all of its assets, or (3) adoption of any plan or proposal for its
     liquidation or dissolution;

          (c) any "person" (as defined in Section 13(d) of the Securities
     Exchange Act of 1934), other than MasterCard International or a subsidiary
     or employee benefit plan or trust maintained by MasterCard International or
     any of its subsidiaries, becoming (together with its "affiliates" and
     "associates," as defined in Rule 12b-2 under the Exchange Act) the
     "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
     directly or indirectly, of more than 25% of the stock outstanding at the
     time, without the prior approval of the board of directors; or

          (d) a majority of the voting directors proposed on a slate for
     election by the members are rejected by a vote of those members.

                                       137


                         SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The table below sets forth certain information with respect to the
principal members of MasterCard International who, together with their
affiliates, are entitled to vote 5% or more of the total number of votes
eligible to be cast at the special meeting of principal members of MasterCard
International in connection with which we are distributing this proxy
statement-prospectus. None of the directors or executive officers of MasterCard
International beneficially owns any of the voting power with respect to the
votes to be cast at the meeting. To the best of our knowledge, each beneficial
owner has sole voting power and investment power with respect to the votes that
it is eligible to cast. A total number of 1,563,073,437 votes are eligible to be
cast at the meeting.

     Information in the following table is based on the historic global proxy
calculation for the period ended September 30, 2001.




                                                                 PRIOR TO CONVERSION AND INTEGRATION
                                                              -----------------------------------------
                      NAME AND ADDRESS                          NUMBER OF VOTES      PERCENT OF VOTES
                    OF BENEFICIAL OWNER                       ELIGIBLE TO BE CAST   ELIGIBLE TO BE CAST
                    -------------------                       -------------------   -------------------
                                                                              
Citicorp Credit Services, Inc. .............................      123,918,813              7.9%
  14700 Citicorp Drive
  Hagerstown, MD 21742
Chase Manhattan Bank USA, N.A. .............................      122,602,412              7.8%
  100 Duffy Avenue
  Hicksville, NY 11801
First USA Bank, N.A. .......................................      104,486,120              6.7%
  A Bank One Company
  201 North Walnut Street
  15th Floor
  Wilmington, DE 19801



     Additionally, the table below sets forth certain information, as of the
date immediately following the completion of the conversion and integration,
with respect to the beneficial ownership of our class A redeemable common stock
and class B convertible common stock by each person who we know will be the
beneficial owner of more than 5% of any class or series of our capital stock.
None of the directors or executive officers of MasterCard Incorporated will
beneficially own any of our class A redeemable or class B convertible common
stock following the conversion and integration. To the best of our knowledge,
each beneficial owner of class A redeemable common stock and class B convertible
common stock will have sole voting power and sole investment power with respect
to all of the class A redeemable and class B convertible shares that it owns.
This table does not give effect to shares that may be acquired pursuant to
options because no shares may be so acquired within 60 days from the date of
this proxy statement-prospectus.



                                                      AFTER CONVERSION AND INTEGRATION
                                  ------------------------------------------------------------------------
                                   SHARES OF      PERCENT OF     SHARES OF      PERCENT OF     PERCENT OF
                                    CLASS A        CLASS A        CLASS B        CLASS B         TOTAL
                                   REDEEMABLE     REDEEMABLE    CONVERTIBLE    CONVERTIBLE    OUTSTANDING
                                  COMMON STOCK   COMMON STOCK   COMMON STOCK   COMMON STOCK   COMMON STOCK
NAME AND ADDRESS                  BENEFICIALLY   BENEFICIALLY   BENEFICIALLY   BENEFICIALLY   BENEFICIALLY
OF BENEFICIAL OWNER                  OWNED          OWNED          OWNED          OWNED          OWNED
-------------------               ------------   ------------   ------------   ------------   ------------
                                                                               
Citicorp Credit Services,
  Inc...........................  5.04 million       6.0%       .96 million        6.0%           6.0%
  14700 Citicorp Drive
  Hagerstown, MD 21742
Chase Manhattan Bank USA, N.A...  4.54 million       5.4%       .86 million        5.4%           5.4%
  100 Duffy Avenue
  Hicksville, NY 11801
EURO Kartensysteme EUROCARD und
  eurocheque GbmH...............  4.45 million       5.3%       .85 million        5.3%           5.3%
  Solmsstrasse 2-26
  60648 Frankfurt/Main
  Germany


                                       138




                                                      AFTER CONVERSION AND INTEGRATION
                                  ------------------------------------------------------------------------
                                   SHARES OF      PERCENT OF     SHARES OF      PERCENT OF     PERCENT OF
                                    CLASS A        CLASS A        CLASS B        CLASS B         TOTAL
                                   REDEEMABLE     REDEEMABLE    CONVERTIBLE    CONVERTIBLE    OUTSTANDING
                                  COMMON STOCK   COMMON STOCK   COMMON STOCK   COMMON STOCK   COMMON STOCK
NAME AND ADDRESS                  BENEFICIALLY   BENEFICIALLY   BENEFICIALLY   BENEFICIALLY   BENEFICIALLY
OF BENEFICIAL OWNER                  OWNED          OWNED          OWNED          OWNED          OWNED
-------------------               ------------   ------------   ------------   ------------   ------------
                                                                               
First USA Bank, N.A. ...........  4.20 million       5.0%       .80 million        5.0%           5.0%
  A Bank One Company
  201 North Walnut Street
  15th Floor
  Wilmington, DE 19801
Europay France S.A. ............  4.20 million       5.0%       .80 million        5.0%           5.0%
  44, rue Cambronne
  75740 Paris Cedex 15
  France


                                       139


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Pursuant to an agreement, dated as of March 1, 1999, among MasterCard
International and Citibank, N.A., including certain of its affiliates, Citibank
has agreed, among other things, to increase, and then maintain, the overall
percentage of payment cards issued by Citibank that are MasterCard branded, in
exchange for certain pricing terms. MasterCard and Europay provide
authorization, clearing and settlement services in connection with transactions
for which Citibank or its affiliates act as issuer or acquirer. In addition,
Citibank uses several of MasterCard's fee-for-service products. A portion of
MasterCard International's $1.2 billion dollar credit facility is syndicated to
Citibank, N.A., for which Citibank and its affiliates receive a fee; Citibank is
the administrative agent of that facility and Salomon Smith Barney Inc., an
affiliate of Citibank, is the lead arranger and book manager of that facility.
Additional amounts are paid by MasterCard International for these services.
Another insurance affiliate of Citibank is a creditor of MasterCard
International in connection with a portion of the $149 million lease financing
for our O'Fallon, Missouri operations facility. In addition, Citibank and its
affiliates receive fees from MasterCard for cash management, asset management
and investment banking services. Citibank also acts as issuer of MasterCard's
corporate purchasing cards. For 2000, fees earned from Citibank and its
affiliates, as of the date of this proxy statement-prospectus, net of
contractual obligations under the agreement described above, were approximately
$140 million. Robert B. Willumstad, a member of our board of directors, is the
Chief Executive Officer of Citigroup's Global Consumer Group, an affiliate of
Citibank, N.A. As a result of the conversion and integration, Citibank, N.A.,
and its affiliates are expected to own approximately 6.0% of our class A
redeemable and class B convertible common stock on a combined basis.

     Pursuant to an agreement, dated as of July 1, 1999, between MasterCard and
The Chase Manhattan Bank, The Chase Manhattan Bank has agreed, among other
things, to continue to increase, and then maintain, the annual percentage of
payment cards issued by Chase that are MasterCard branded, in exchange for
certain pricing terms. MasterCard and Europay provide authorization, clearing
and settlement services in connection with transactions for which The Chase
Manhattan Bank or its affiliates act as issuer or acquirer. In addition, The
Chase Manhattan Bank uses several of MasterCard's fee-for-service products. A
portion of MasterCard International's $1.2 billion dollar credit facility is
syndicated to The Chase Manhattan Bank, for which the The Chase Manhattan Bank
receives a fee. In addition, The Chase Manhattan Bank and its affiliates receive
amounts from MasterCard for cash management services. The Chase Manhattan Bank
acts as issuer of MasterCard's corporate cards and provides a variety of banking
services for MasterCard employees pursuant to arrangements entered into with
MasterCard. MasterCard provides certain financial and other incentives to The
Chase Manhattan Bank for co-branded and affinity card programs issued by Chase.
For 2000, fees earned from The Chase Manhattan Bank and its affiliates, as of
the date of this proxy statement-prospectus, net of contractual obligations
under the agreement described above, were approximately $110 million. David A.
Coulter, a member of our board of directors, is Vice Chairman of J.P. Morgan
Chase & Co., of which The Chase Manhattan Bank is an affiliate, and Donald L.
Boudreau, our Chairman Emeritus, is a former executive officer of The Chase
Manhattan Bank. As a result of the conversion and integration, The Chase
Manhattan Bank and its affiliates are expected to own approximately 5.4% of our
class A redeemable and class B convertible common stock on a combined basis.

     Under the terms of a licensing agreement with Europay, EURO Kartensysteme
EUROCARD und eurocheque GmbH, or EKS, is the principal licensee for certain
Europay brands and payment products in Germany. EKS owns a 15.3% equity interest
in Europay and is a principal member of MasterCard International. In connection
with the conversion and integration, EKS may enter into one or more agreements
with MasterCard Incorporated, MasterCard International and/or Europay pursuant
to which, among other things, EKS will assign to Europay certain trademarks,
trade names and other intellectual property rights, and MasterCard and Europay
will provide support for marketing initiatives designed to migrate all uses by
German members of the Eurocard-MasterCard brand on cards, acceptance decals,
advertising and other materials to the MasterCard brand mark. For 2000, fees
earned by Europay from EKS were approximately E65 million. Jan A. M. Hendrikx, a
member of our board of directors, is Chief Executive Officer of EKS and a member
of the board of directors of Europay. As a result of the conversion and
integration, EKS is expected to own approximately 5.3% of our class A redeemable
and class B convertible common stock.

                                       140


     MasterCard and Europay provide authorization, clearing and settlement
services in connection with transactions for which Bank One or its affiliates,
including First USA Bank, N.A., act as issuer or acquirer. For 2000, fees earned
from Bank One and its affiliates, as of the date of this proxy
statement-prospectus were approximately $110 million. As a result of the
conversion and integration, Bank One and its affiliates are expected to own
approximately 5.0% of our class A redeemable and class B convertible common
stock on a combined basis.

     Europay France S.A., a company formed by certain French financial
institutions to promote Europay brands and payment products in France, owns a
15.3% equity interest in Europay and is a principal member of MasterCard
International. For 2000, fees earned by Europay from Europay France were
approximately E21 million. Jean-Pierre Ledru, a member of our board of
directors, is Chairman and Chief Executive Officer of Europay France and
Chairman of Europay. As a result of the conversion and integration, Europay
France is expected to own approximately 5.0% of our class A redeemable and class
B convertible common stock.

                                       141


            DESCRIPTION OF CAPITAL STOCK OF MASTERCARD INCORPORATED

     The following summary of MasterCard Incorporated's capital stock describes
the material terms of the stock. For a complete description, we refer you to
MasterCard Incorporated's charter and bylaws, which are attached as Annexes D
and E to this proxy statement-prospectus.

GENERAL

     Capitalization.  The authorized capital stock of MasterCard Incorporated
consists of:

     - 275 million shares of class A redeemable common stock, par value $.01 per
       share;

     - 25 million shares of class B convertible common stock, par value $.01 per
       share; and

     - 75 million shares of class C common stock, par value $.01 per share.

     Immediately following the closing of the conversion and integration, 84
million shares of class A redeemable common stock will be issued and
outstanding, 16 million shares of class B convertible common stock will be
issued and outstanding and no shares of class C common stock will be issued and
outstanding. MasterCard Incorporated may only issue the class B convertible
common stock in connection with the transactions contemplated by the integration
agreement.

     Conversion of Class B convertible common stock.  Each share of class B
convertible common stock, except shares that constitute ec Pictogram shares,
will automatically be converted into one share of class A redeemable common
stock on the third anniversary of the first day of the first fiscal quarter
beginning after the fiscal quarter in which the closing of the conversion and
integration occurs. Shares of class B convertible common stock that are ec
Pictogram shares will automatically be converted into one share of class A
redeemable common stock on the second anniversary of the day on which all of the
other shares of class B convertible common stock were converted and some or all
of these shares will be allocated among the members of MasterCard responsible
for ec Pictogram volumes to the extent such volumes have been previously
converted to Maestro, in accordance with the terms of the integration agreement.
Any remaining shares will be allocated to non-European member-stockholders.

     Reallocation.  At the conclusion of the three year transition period, all
shares of class A redeemable common stock, including class A redeemable common
stock resulting from the conversion of class B convertible common stock, will be
subject to reallocation as described more fully under "Share Allocation and the
Global Proxy -- Reallocation of Shares at the Conclusion of the Transition
Period." In connection with this reallocation, shareholders may be required to
return some or all of their common stock to MasterCard Incorporated for
reallocation. In addition, ec Pictogram shares will be subject to reallocation
at the conclusion of an additional two year period following the transition
period as described more fully under "-- Conversion of Class B Convertible
Common Stock" above.

     Fractional Shares.  No fractional shares of class A redeemable or class B
convertible common stock will be issued or delivered by MasterCard Incorporated.
Any fractional share interests will be rounded to a whole share in such manner
as the management of MasterCard Incorporated may determine in its sole
discretion.

VOTING RIGHTS, DIVIDEND RIGHTS AND LIQUIDATION RIGHTS

     Voting Rights.  Each holder of class A redeemable and class B convertible
common stock has the right to cast one vote for each share of class A redeemable
and class B convertible common stock held of record on all matters submitted to
a vote of stockholders of MasterCard Incorporated. At the end of the transition
period, all shares of class B convertible common stock, except for class B
convertible shares relating to ec Pictogram, will be converted into class A
redeemable common stock. Following this conversion, the remaining class B
convertible common stock will have no voting rights. At all times, each holder
of class A redeemable and class B convertible common stock, together with its
affiliates, will be subject to a 7% voting limitation in the election of
directors regardless of the number of shares owned. This provision may be
altered by a majority vote of the MasterCard Incorporated board of directors or
by a majority of the holders of the class A redeemable common stock and class B
convertible common stock voting together as a single class (so long as
                                       142


the class B convertible stock has voting rights). However, approval of at least
75% of the directors present at a meeting at which a quorum is present is
required to raise the limitation on voting for directors to more than 15% of the
shares that are entitled to vote in the election of directors. The above
provisions may be amended only with the approval of 75% of the directors present
at a meeting at which a quorum is present and the approval of the holders of a
majority of the outstanding class A redeemable and class B convertible common
stock voting together as a single class (so long as the class B convertible
stock has voting rights).

     Dividend Rights.  The holders of shares of class A redeemable and class B
convertible common stock are entitled to share ratably in dividends or
distributions, if, as and when dividends or distributions are declared by the
board of directors of MasterCard Incorporated at its discretion. MasterCard
Incorporated has no current plans to pay cash dividends on the common stock.

     Liquidation Rights.  Upon dissolution, liquidation or winding-up of
MasterCard Incorporated, holders of class A redeemable and class B convertible
common stock are entitled to share ratably in the net assets available for
distribution to stockholders after the payment of debts and other liabilities,
subject to the prior rights of any issued preferred shares.

     Redemption Rights.  If, within three years after the closing of the
conversion, a stockholder of MasterCard Incorporated ceases to be a principal
member of MasterCard International (other than in connection with a permitted
transfer of shares as described under "-- Transfer Restrictions" below),
MasterCard Incorporated will redeem that stockholder at par value. If more than
three years have elapsed since the conversion and a stockholder of MasterCard
Incorporated ceases to be a principal member of MasterCard International,
MasterCard Incorporated may, at its option, redeem that stockholder for the book
value of its shares based on MasterCard Incorporated's financial statements most
recently filed with the Securities and Exchange Commission. If MasterCard
Incorporated does not redeem the stockholder's shares, the stockholder will be
required to offer the unpurchased shares to the other stockholders in accordance
with procedures to be established by the board of directors.

     Certain Purchase and Sale Obligations.  Beginning three years after the
conversion and integration, no stockholder may own common stock representing
more than 125% or less than 75% of that stockholder's most recent global proxy
calculation. Stockholders may be required to purchase or sell shares of
MasterCard Incorporated in order to satisfy these requirements within 12 months
of receipt of notice from MasterCard Incorporated that such purchase or sale is
required. Any sales of shares would ordinarily constitute taxable transactions.
Stockholders who need to sell shares in order to satisfy the 125% requirement
are obligated under the bylaws of MasterCard Incorporated to accept the highest
price offered to them for the shares that are required to be sold.

     To the extent that member-stockholders are required to purchase shares in
order to satisfy the 75% minimum ownership requirement, shares will be available
either directly from MasterCard Incorporated or from other member-stockholders
that either are required to sell shares in order to satisfy the 125% maximum
ownership requirement or otherwise desire to sell shares. The board of directors
of MasterCard Incorporated is authorized to establish procedures by which shares
of MasterCard Incorporated common stock will be traded among member-stockholders
or purchased or sold by MasterCard. Methods for the purchase and disposition of
shares may include some or all of the following: an on-line bulletin board that
matches buyers and sellers of shares; a periodic auction conducted on behalf of
MasterCard Incorporated for buyers and sellers of shares; and directly
negotiated purchases and sales of shares. The price at which shares may be
purchased or sold will be determined through these methods. MasterCard
Incorporated will not charge member-stockholders any commissions for
facilitating trading in its shares.

     MasterCard Incorporated will purchase or sell its common stock subject to
its having sufficient capital available to effect each purchase transaction, and
only if each purchase or sale transaction is permitted under the laws, rules and
regulations applicable to MasterCard Incorporated at the time (including
securities laws). In particular, to the extent any offer by MasterCard
Incorporated to purchase its shares constitutes a tender offer under the
Exchange Act, MasterCard Incorporated will comply with the applicable tender
offer rules and regulations. In addition, MasterCard Incorporated will undertake
activities to facilitate trading of its common stock among member-stockholders
only to the extent such activities are permitted under the federal and state
                                       143


securities laws of the United States and related rules and regulations. Any
shares subsequently sold by MasterCard Incorporated may not be registered under
the Securities Act of 1933, as amended, and accordingly may be subject to resale
restrictions under the Securities Act.

     Rights.  Holders of class A redeemable and class B convertible common stock
have the right under the terms of the integration agreement and as provided for
in the bylaws of MasterCard Incorporated to receive additional shares at the end
of the three-year transition period to the extent that their new global proxy
calculation for the third year of the transition period (calculated on a
European or non-European basis, as the case may be) exceeds their initial
allocation of shares. See "Share Allocation and the Global Proxy -- Reallocation
of Shares at the Conclusion of the Transition Period." Similarly, holders of
class A redeemable and class B convertible common stock have the right to
receive additional shares in certain circumstances in connection with the
reallocation of ec Pictogram shares. See "Share Allocation and the Global
Proxy -- Conversion and Reallocation of ec Pictogram Shares." Members receiving
additional shares at the end of the three-year transition period and/or in
connection with the reallocation of ec Pictogram shares will do so pursuant to
rights initially granted with all shares of class A redeemable and class B
convertible common stock of MasterCard Incorporated. Each right is transferable
only with the applicable shares of class A redeemable and class B convertible
common stock, expires or terminates upon completion of the final reallocation
and is not redeemable except together with the redemption of a share of class A
redeemable or class B convertible common stock. Other than the right and as
otherwise described herein, holders of class A redeemable and class B
convertible common stock do not have any rights to purchase additional shares of
stock from MasterCard Incorporated, to have their common stock converted into or
exchanged for other securities (except for the conversion of class B convertible
shares into class A redeemable shares as described above), to have their common
stock repurchased by MasterCard Incorporated or to receive a preferred return on
their shares of common stock.

     Class C Common Stock.  Shares of class C common stock may be issued from
time to time with voting powers, designations, preferences and other rights to
be determined by the MasterCard Incorporated board of directors, provided that
no shares of class C common stock may be entitled to voting rights, dividends or
rights to participate in the proceeds of a liquidation that are greater than the
corresponding rights of the class A redeemable common stock. The MasterCard
Incorporated certificate of incorporation provides that any issuance of class C
common stock requires the approval of two-thirds of the board of directors, and
that any issuance of voting class C common stock or class C common stock that,
together with all other issuances of class C common stock made during the
immediately preceding two years, represents greater than 5% of the total number
of class A redeemable shares and class B convertible shares outstanding prior to
the issuance requires the approval of 75% of the board of directors. These
provisions may be amended only with the approval of 75% of the directors present
at a meeting at which a quorum is present and the approval of the holders of a
majority of the outstanding class A redeemable and class B convertible common
stock voting together as a single class (so long as the class B convertible
stock has voting rights).

TRANSFER RESTRICTIONS

     For three years following the closing of the conversion, no transfer of
shares of common stock and no assignment of the right to receive shares will be
permitted except:

     - in connection with a transfer of all or substantially all of a
       stockholder's card portfolio;

     - in the event that a stockholder that was a principal member becomes an
       affiliate member of another principal member, in which case the
       stockholder may transfer its common stock to the principal member with
       which it becomes affiliated;

     - in the event that a stockholder that was a principal member with one or
       more affiliate members ceases to be a principal member and one or more of
       its affiliate members thereupon become principal members, in which case
       the stockholder may transfer its common stock to the former affiliate
       members;

                                       144


     - if a stockholder is prohibited from holding the common stock of
       MasterCard Incorporated by applicable regulatory requirements, in which
       case the stockholder may transfer its common stock to an affiliate that
       is permitted to hold the stock, with the prior approval of the board of
       directors of MasterCard Incorporated; and

     - a stockholder may transfer shares to a class A member of MasterCard
       International that is an affiliate of such stockholder with the approval
       of the board of directors of MasterCard Incorporated. For these purposes,
       an affiliate is any parent company that directly or indirectly owns 80%
       or more of the voting power and economic interests in the stockholder,
       and any entity of which the stockholder or any of such parents owns 80%
       or more of the voting power and economic interests.

The permissible transfers described above apply only to transfers of all, but
not less than all, of a stockholder's shares in MasterCard Incorporated.

     After three years, each stockholder must maintain an ownership percentage
of MasterCard Incorporated common stock that is no less than 75% and no more
than 125% of the stockholder's most recent global proxy calculation.
Stockholders may be required to purchase or sell shares of MasterCard
Incorporated in order to satisfy these requirements within 12 months of receipt
of notice from MasterCard Incorporated that such purchase or sale is required.
Any sales of shares would ordinarily constitute taxable transactions.
Stockholders who need to sell shares in order to satisfy the 125% requirement
are obligated under the bylaws of MasterCard Incorporated to accept the highest
price offered to them for the shares that are required to be sold. In addition:

     - only class A members of MasterCard International may own shares of class
       A redeemable and class B convertible common stock of MasterCard
       Incorporated; and

     - unless otherwise approved by a two-thirds vote of the MasterCard
       Incorporated board of directors, no stockholder together with its
       affiliates may own more than 15% of the outstanding shares of voting
       stock of MasterCard Incorporated.

     Following the three year transition period, MasterCard Incorporated intends
to facilitate trading of its common stock among class A members of MasterCard
International according to procedures to be established by the board of
directors of MasterCard Incorporated. See "-- Certain Purchase or Sale
Obligations."

     The shares of MasterCard Incorporated common stock that MasterCard
International members will own following the conversion and integration have
been registered under the Securities Act of 1933. They may be traded in
accordance with the transfer restrictions contained in this section by you if
you are not an affiliate of MasterCard International under the Securities Act.
An "affiliate" as defined by the rules under the Securities Act is a person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, MasterCard International.
Persons who are affiliates of MasterCard International may not sell their shares
of MasterCard Incorporated common stock acquired in the merger except pursuant
to an effective registration statement under the Securities Act or an applicable
exemption from the requirements of the Securities Act, including Rules 144 and
145 issued by the SEC under the Securities Act. Affiliates generally include
directors, executive officers and beneficial owners of 10% or more of any class
of capital stock.

TRANSFER AGENT

     Initially, MasterCard Incorporated will be the transfer agent and registrar
of the common stock.

LIMITATIONS ON A CHANGE OF CONTROL

     We summarize below several provisions of our certificate of incorporation
and bylaws and the Delaware General Corporation Law. These provisions could have
the effect of delaying, deferring or preventing a change in control of
MasterCard Incorporated or deterring potential acquirers from making an offer to
our stockholders. This could be the case even though a majority of our
stockholders might benefit from such a change in control or offer. These
descriptions are not complete and we refer you to the documents that we have
filed as exhibits to this proxy statement-prospectus and to the Delaware General
Corporation Law.

                                       145


     Supermajority Vote of the Board of Directors.  Our certificate of
incorporation requires the approval of 75% of the directors present at a meeting
at which a quorum is present and the approval of the holders of a majority of
the outstanding class A redeemable and class B convertible common stock voting
together as a single class (so long as the class B convertible common stock has
voting rights) to: alter our status as a stock corporation; amend our
certificate of incorporation to authorize MasterCard Incorporated to issue stock
other than class A redeemable, B convertible or C common stock; sell, lease or
exchange all or substantially all of MasterCard Incorporated's assets; approve
the sale, lease or exchange of all or substantial all of the assets of
MasterCard International; engage in a business combination (merger or
consolidation) involving either MasterCard Incorporated or MasterCard
International; undertake an initial public offering; amend the MasterCard
International certificate of incorporation to allow MasterCard International to
issue capital stock, to create additional classes of membership interests in
MasterCard International, to subject the property of the members of MasterCard
International to the obligations of MasterCard International or to subject
non-U.S. programs to the satisfaction of any liabilities arising from the
current DOJ and merchant antitrust litigations in the United States; or amend
the provisions of the MasterCard International bylaws relating to special
assessments that may be imposed upon the members of MasterCard International.
Other provisions of the certificates of incorporation and by-laws of MasterCard
Incorporated and MasterCard International may be modified only if certain
supermajorities are achieved, and these provisions may have the effect of
deterring potential acquirors. See "Comparison of Rights of MasterCard
International Members Before and After the Conversion and Integration."

     Ability to Call Special Meetings.  Special meetings of MasterCard
Incorporated stockholders may be called at any time for any purpose by written
request of the chairman of the board of directors or the President and Chief
Executive Officer of MasterCard Incorporated. Special meetings may also be
called by the Secretary upon the written request of at least 33 1/3% of the
board of directors or the holders of at least 25% of the outstanding shares
entitled to vote on the action being proposed. Notice of a special meeting must
state the time, place and date of the meeting, the name of the person or persons
calling the meeting, the purpose for which the meeting is called and the means
of acceptable remote participation. The business transacted at the special
meeting is limited to the purpose described in the notice.

     15% Share Ownership Limitation.  Unless otherwise approved by a two-thirds
vote of the MasterCard board of directors, no stockholder together with its
affiliates may own more than 15% of the outstanding shares of voting stock of
MasterCard Incorporated.

     7% Voting Power Limitation.  Each holder of class A redeemable and class B
convertible common stock, together with its affiliates, will be subject to a 7%
voting limitation in the election of directors regardless of the number of
shares owned.

     Only Class A Members of MasterCard International may be Stockholders of
MasterCard Incorporated. Only class A members of MasterCard International may
own shares of class A redeemable and class B convertible common stock of
MasterCard Incorporated.

     Authorized but Unissued Shares of Class C Common Stock.  Since the board of
directors of MasterCard Incorporated may issue shares of class C common stock
and set the voting powers, designations, preferences and other rights related to
that stock, any issuance of class C shares may delay or prevent a change of
control.

DELAWARE ANTI-TAKEOVER STATUTE

     Under Section 203 of the business combination statute of Delaware law, a
corporation is prohibited from engaging in any business combination with an
interested stockholder who, together with its affiliates or associates, owns 15%
or more of the corporation's voting stock for a three year period following the
time the stockholder became an interested stockholder, unless:

     - prior to the time the stockholder became an interested stockholder, the
       board of directors of the corporation approved either the business
       combination or the transaction which resulted in the stockholder becoming
       an interested stockholder;

                                       146


     - the interested stockholder owned at least 85% of the voting stock of the
       corporation, excluding specified shares, upon completion of the
       transaction which resulted in the stockholder becoming an interested
       stockholder; or

     - at or subsequent to the time the stockholder became an interested
       stockholder, the business combination is approved by the board of
       directors of the corporation and authorized by the affirmative vote, at
       an annual or special meeting and not by written consent, of at least
       66 2/3% of the outstanding voting shares of the corporation, excluding
       shares held by that interested stockholder.

     A business combination generally includes:

     - mergers, consolidations and sales or other dispositions of 10% or more of
       the assets of a corporation to or with an interested stockholder;

     - specified transactions resulting in the issuance or transfer to an
       interested stockholder of any capital stock of the corporation or its
       subsidiaries; and

     - other transactions resulting in a disproportionate financial benefit to
       an interested stockholder.

     The provisions of the Delaware business combination statute do not apply to
a corporation if, subject to certain requirements, the certificate of
incorporation or by-laws of the corporation contain a provision expressly
electing not to be governed by the provisions of the statute or the corporation
does not have voting stock listed on a national securities exchange, authorized
for quotation on an inter-dealer quotation system of a registered national
securities association or held of record by more than 2,000 stockholders.

     Although MasterCard Incorporated does not plan to "opt out" of this
provision, Section 203 will not apply as long as we have fewer than 2,000
stockholders. In addition, the provision may not be meaningful as a result of
certain provisions of our certificate of incorporation and bylaws, including the
provision prohibiting stockholders from holding more than 15% of our outstanding
common stock.

LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS

     Delaware law provides that a corporation may include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to the corporation and its stockholders for monetary damages arising from a
breach of fiduciary duty, except for:

     - a breach of the duty of loyalty to the corporation or its stockholders;

     - acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law;

     - payment of a dividend or the repurchase or redemption of stock in
       violation of Delaware law; or

     - any transaction from which the director derived an improper personal
       benefit.

     Our certificate of incorporation provides that, to the fullest extent
Delaware law permits the limitation or elimination of the liability of
directors, none of our directors will be liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Our bylaws require, among other things, that we indemnify our officers and
directors against all expenses, including attorney's fees, incurred in any
action, suit or proceeding by reason of the fact that the person is or was a
director, officer, employee or agent of MasterCard Incorporated. We are also
permitted to advance to the officers and directors all related expenses, subject
to reimbursement if it is determined subsequently that indemnification is not
permitted.

                                       147


            COMPARISON OF RIGHTS OF MASTERCARD INTERNATIONAL MEMBERS
                BEFORE AND AFTER THE CONVERSION AND INTEGRATION

     The rights of members are currently governed by the certificate of
incorporation, bylaws and rules of MasterCard International and the Delaware
General Corporation Law. On completion of the conversion and integration, the
rights of member-stockholders will be governed, regarding their ownership of
class A redeemable common stock and class B convertible common stock, by the
certificate of incorporation and bylaws of MasterCard Incorporated and by the
Delaware General Corporation Law, and regarding their class A membership
interest, by the revised certificate of incorporation and bylaws of MasterCard
International and by the Delaware General Corporation Law.

     We summarize below the principal differences between your current rights as
a member of MasterCard International, which is to say before the conversion and
integration, with what your rights will be as a stockholder of MasterCard
Incorporated and as a class A member of MasterCard International after the
conversion and integration. The following comparison is not complete and we
refer you to the certificate of incorporation and bylaws of MasterCard
Incorporated and MasterCard International, each of which will be adopted or
revised, as the case may be, on completion of the conversion and integration,
and which are contained as Annexes D, E, F and G of this proxy
statement-prospectus. We have also filed them as exhibits to the registration
statement of which this proxy statement-prospectus is a part.

     The provisions of the bylaws of MasterCard International relating to a
member's (including an affiliate member's) participation in MasterCard's global
payments programs, as well as the Standards described under the heading
"Business of MasterCard International -- Rule Making and Enforcement," are
unchanged by the conversion and integration.



                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
DIVIDENDS        The Delaware General Corporation Law permits    The board of each corporation has the
                 the payment of dividends by MasterCard          discretion to determine whether and when to
                 International. MasterCard International has     declare and distribute dividends to the
                 never paid any dividends.                       stockholders or, in the case of MasterCard
                                                                 International, the class B member. The class A
                                                                 members of MasterCard International will have
                                                                 no right to receive dividends or distributions
                                                                 under the certificate of incorporation of
                                                                 MasterCard International.
AUTHORIZED       The restated certificate of incorporation and   The certificate of incorporation of MasterCard
CAPITAL          bylaws of MasterCard International permit an    Incorporated authorizes the issuance of up to
                 unlimited number of memberships.                275 million shares of class A redeemable
                                                                 common stock, 25 million shares of class B
                                                                 convertible common stock and 75 million shares
                                                                 of class C common stock.
                                                                 The certificate of incorporation of MasterCard
                                                                 International authorizes an unlimited number
                                                                 of class A memberships and one class B
                                                                 membership.
MEMBER           MasterCard International principal members      All economic and voting rights in MasterCard
INTERESTS        hold membership interests representing          International are held by MasterCard
                 economic and voting rights in MasterCard        Incorporated in the form of one class B
                 International.                                  membership except for the right to vote on
                                                                 certain amendments to the governing documents
                                                                 of MasterCard International.
                                                                 Class A members of MasterCard International
                                                                 hold class A redeemable and class B
                                                                 convertible common stock in MasterCard
                                                                 Incorporated representing economic and voting
                                                                 rights in MasterCard Incorporated, which
                                                                 represent indirect economic and voting rights
                                                                 in MasterCard International.
MEMBER           MasterCard International members are limited    The eligibility criteria for class A members
ELIGIBILITY      to certain regulated financial institutions or  of MasterCard International remain unchanged.
                 such other


                                       148




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                 institutions as the board of directors may
                 permit, generally with a two-thirds majority.
LIQUIDITY AND    Members of MasterCard International may not     Shares of MasterCard Incorporated common stock
TRANSFERABILITY  transfer their memberships.                     cannot be transferred for three years after
                                                                 the conversion except: (i) in connection with
                                                                 a transfer of all or substantially all of a
                                                                 stockholder's card portfolio; (ii) in the
                                                                 event that a stockholder that was a principal
                                                                 member becomes an affiliate member of another
                                                                 principal member, in which case the
                                                                 stockholder may transfer its common stock to
                                                                 the principal member with which it becomes
                                                                 affiliated; (iii) in the event that a
                                                                 stockholder that was a principal member with
                                                                 one or more affiliate members ceases to be a
                                                                 principal member and one or more of its
                                                                 affiliate members thereupon become principal
                                                                 members, in which case the stockholder may
                                                                 transfer its common stock to the former
                                                                 affiliate members; (iv) if a stockholder is
                                                                 prohibited from holding the common stock of
                                                                 MasterCard Incorporated by applicable
                                                                 regulatory requirements, in which case the
                                                                 stockholder may transfer its common stock to
                                                                 an affiliate that is permitted to hold the
                                                                 stock, with the prior approval of the board of
                                                                 directors of MasterCard Incorporated; and (v)
                                                                 a stockholder may transfer shares to a class A
                                                                 member of MasterCard International that is an
                                                                 affiliate of such stockholder with the
                                                                 approval of the board of directors of
                                                                 MasterCard Incorporated. For these purposes,
                                                                 an affiliate is any parent company that
                                                                 directly or indirectly owns 80% or more of the
                                                                 voting power and economic interests in the
                                                                 stockholder, and any entity of which the
                                                                 stockholder or any of such parents owns 80% or
                                                                 more of the voting power and economic
                                                                 interests. The permissible transfers described
                                                                 above apply only to transfers of all, but not
                                                                 less than all, of a stockholder's shares in
                                                                 MasterCard Incorporated. After three years,
                                                                 each stockholder must maintain an ownership
                                                                 percentage of outstanding common stock not
                                                                 less than 75% nor more than 125% of the
                                                                 percentage represented by that stockholder's
                                                                 most recent global proxy calculation. In
                                                                 addition, after three years, class A
                                                                 redeemable and class B convertible common
                                                                 stock may be traded only among institutions
                                                                 that also hold a class A membership in
                                                                 MasterCard International, and no stockholder,
                                                                 together with its affiliates, may own more
                                                                 than 15% of the outstanding common stock of
                                                                 MasterCard Incorporated. See "Description of
                                                                 Capital Stock of MasterCard
                                                                 Incorporated -- Transfer Restrictions."
                                                                 Following the three year transition period,
                                                                 MasterCard Incorporated intends to facilitate
                                                                 trading of its common stock among class A
                                                                 members of MasterCard International according
                                                                 to procedures to be established by the board
                                                                 of directors of MasterCard Incorporated.
                                                                 There is no public market for MasterCard
                                                                 International class A memberships. Members may
                                                                 not transfer their memberships.


                                       149




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
GLOBAL PROXY     The global proxy calculation takes into         The global proxy calculation includes GDV, GAV
CALCULATION      account only revenue received from MasterCard   and revenue from MasterCard, Cirrus and
                 transactions and travelers cheques.             Maestro branded cards, and revenue from
                                                                 travelers cheques. In calculating GDV and GAV,
                                                                 the volumes associated with different cards
                                                                 will be assigned different weightings. See
                                                                 "Share Allocation and the Global Proxy."
VOTING RIGHTS    Members receive a number of votes equal to the  Each class A and class B stockholder of
                 total U.S. dollar amount of assessments and     MasterCard Incorporated is entitled to one
                 fees paid to MasterCard International in the    vote per share on all matters presented to the
                 12 months ended on the September 30 preceding   stockholders, provided that no holder of
                 the meeting at which the vote takes place,      common stock, together with its affiliates,
                 provided that no member may cast more than 15%  may exercise voting power in excess of 7% of
                 of the total votes of all the members or less   the outstanding shares of MasterCard
                 than 1,200 votes. Each member of MasterCard     Incorporated in an election of directors.
                 International also has the right to approve     Following the transition period, the class B
                 proposed amendments to MasterCard               convertible common stock will have no voting
                 International's bylaws.                         rights.
                                                                 The class B membership held by MasterCard
                                                                 Incorporated has the sole voting right on all
                                                                 matters relating to MasterCard International,
                                                                 except that class A members have the right to
                                                                 vote on amendments to Article
                                                                 I -- "Membership" of the bylaws by a
                                                                 two-thirds vote of the class A members present
                                                                 at a meeting at which there is a quorum. The
                                                                 class B member is required to elect the
                                                                 persons who are directors of MasterCard
                                                                 Incorporated as directors of MasterCard
                                                                 International. Any director of MasterCard
                                                                 Incorporated who ceases to be a director of
                                                                 MasterCard Incorporated will also cease to be
                                                                 a director of MasterCard International.
                                                                 In addition, a number of provisions of the
                                                                 certificate of incorporation and bylaws of
                                                                 MasterCard Incorporated and MasterCard
                                                                 International impose supermajority voting
                                                                 requirements. See "-- Vote on Extraordinary
                                                                 Transactions/Supermajority Voting Provisions"
                                                                 below.
VOTE ON          Delaware law requires that a merger,            In addition to the Delaware law provisions,
EXTRAORDINARY    consolidation, sale of all or substantially     which apply to both MasterCard Incorporated
TRANSACTIONS/    all of the assets or a dissolution must be      and MasterCard International, the MasterCard
SUPERMAJORITY    approved by an affirmative vote of holders of   Incorporated certificate of incorporation
VOTING           at least a majority of the memberships having   requires the approval of 75% of the directors
PROVISIONS       the right to vote for the election of           present at a meeting at which a quorum is
                 directors.                                      present and the approval of the holders of a
                                                                 majority of the outstanding class A redeemable
                                                                 common stock and class B convertible common
                                                                 stock voting together as a single class (so
                                                                 long as class B convertible common stock has
                                                                 voting rights) at a meeting at which a quorum
                                                                 is present to: alter MasterCard Incorporated's
                                                                 status as a stock corporation; amend the
                                                                 certificate of incorporation to authorize
                                                                 MasterCard Incorporated to issue stock other
                                                                 than the class A redeemable, class B
                                                                 convertible or class C common stock; sell,
                                                                 lease or exchange all or substantially all of
                                                                 MasterCard Incorporated's assets; approve the
                                                                 sale, lease or exchange of all or
                                                                 substantially all of the assets of MasterCard
                                                                 International; engage in a business
                                                                 combination (merger or consolidation)
                                                                 involving MasterCard Incorporated or
                                                                 MasterCard International; undertake an initial
                                                                 public offering; amend the MasterCard


                                       150




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 International certificate of incorporation to
                                                                 allow MasterCard International to issue
                                                                 capital stock, to subject the property of the
                                                                 members of MasterCard International to the
                                                                 obligations of MasterCard International or to
                                                                 subject non-U.S. programs to the satisfaction
                                                                 of any liabilities arising from the current
                                                                 DOJ and merchant antitrust litigations in the
                                                                 United States; or amend the provisions of the
                                                                 MasterCard International bylaws relating to
                                                                 special assessments that may be imposed upon
                                                                 the members of MasterCard International.
                                                                 The MasterCard Incorporated certificate of
                                                                 incorporation also provides that the approval
                                                                 of 75% of the directors present at a meeting
                                                                 at which a quorum is present is required to
                                                                 amend the global proxy formula or the
                                                                 requirement that no more than one-third of all
                                                                 MasterCard Incorporated directors come from
                                                                 any single region. This supermajority
                                                                 provision may be amended only with the
                                                                 approval of 75% of the directors present at a
                                                                 meeting at which a quorum is present and the
                                                                 approval of the holders of a majority of the
                                                                 outstanding class A redeemable and class B
                                                                 convertible common stock voting together as a
                                                                 single class (so long as the class B
                                                                 convertible stock has voting rights).
                                                                 The MasterCard Incorporated certificate of
                                                                 incorporation also provides that the 7% voting
                                                                 limitation for the election of directors may
                                                                 be altered by a majority vote of the
                                                                 MasterCard Incorporated board of directors or
                                                                 by a majority of the holders of the class A
                                                                 redeemable common stock and class B
                                                                 convertible common stock voting together as a
                                                                 single class (so long as the class B
                                                                 convertible stock has voting rights) at a
                                                                 meeting at which a quorum is present. However,
                                                                 approval of at least 75% of the directors
                                                                 present at a meeting at which a quorum is
                                                                 present is required to raise the limitation on
                                                                 voting for directors to more than 15% of the
                                                                 shares that are entitled to vote in the
                                                                 election of directors. The foregoing
                                                                 provisions may be amended only with the
                                                                 approval of 75% of the directors present at a
                                                                 meeting at which a quorum is present and the
                                                                 approval of the holders of a majority of the
                                                                 outstanding class A redeemable and class B
                                                                 convertible common stock voting together as a
                                                                 single class (so long as the class B
                                                                 convertible stock has voting rights).
                                                                 The MasterCard Incorporated certificate of
                                                                 incorporation also provides that any issuance
                                                                 of class C common stock requires the approval
                                                                 of two-thirds of the board of directors
                                                                 present at a meeting at which a quorum is
                                                                 present, and that any issuance of voting class
                                                                 C common stock or class C common stock that,
                                                                 together with all other issuances of class C
                                                                 common stock made during the immediately
                                                                 preceding two years, represents greater than
                                                                 5% of the total number of shares of class A
                                                                 redeemable and class B convertible common
                                                                 stock outstanding prior to the issuance
                                                                 requires the approval of 75% of the board


                                       151




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 of directors present at a meeting at which a
                                                                 quorum is present. The foregoing provisions
                                                                 may be amended only with the approval of 75%
                                                                 of the directors present at a meeting at which
                                                                 a quorum is present and the approval of the
                                                                 holders of a majority of the outstanding class
                                                                 A redeemable and class B convertible common
                                                                 stock voting together as a single class (so
                                                                 long as the class B convertible stock has
                                                                 voting rights).
                                                                 The MasterCard Incorporated certificate of
                                                                 incorporation also provides that approval of
                                                                 at least two-thirds of the board of directors
                                                                 present at a meeting at which a quorum is
                                                                 present is required to permit any stockholder
                                                                 of MasterCard Incorporated, together with its
                                                                 affiliates, to own more than 15% of the
                                                                 outstanding voting stock of MasterCard
                                                                 Incorporated. This provision may be amended
                                                                 only with the approval of two-thirds of the
                                                                 directors present at a meeting at which a
                                                                 quorum is present and the approval of the
                                                                 holders of a majority of the outstanding class
                                                                 A redeemable and class B convertible common
                                                                 stock voting together as a single class (so
                                                                 long as the class B convertible stock has
                                                                 voting rights).
                                                                 The MasterCard Incorporated bylaws require the
                                                                 approval of (1) 75% of the directors present
                                                                 at a meeting at which a quorum is present or
                                                                 the holders of a majority of the votes cast at
                                                                 a meeting of stockholders at which a quorum is
                                                                 present to alter MasterCard International's
                                                                 board seating methodology or (2) two-thirds of
                                                                 the directors present at a meeting at which a
                                                                 quorum is present or the holders of a majority
                                                                 of the votes cast at a meeting of stockholders
                                                                 at which a quorum is present to establish or
                                                                 eliminate regional boards, modify MasterCard's
                                                                 internal regional cost allocation methodology,
                                                                 modify the overall size of MasterCard
                                                                 Incorporated's board of directors, permit the
                                                                 issuance of any shares of class A redeemable
                                                                 or class B convertible common stock of
                                                                 MasterCard Incorporated in excess of the
                                                                 number of shares to which a stockholder would
                                                                 be entitled under the global proxy, or
                                                                 overrule a properly authorized decision of a
                                                                 regional board or overturn a recommendation of
                                                                 MasterCard Incorporated's Debit Advisory
                                                                 Board. These supermajority provisions may be
                                                                 amended only with the approval of a vote of
                                                                 the board of directors equivalent to the
                                                                 required supermajority percentage or the
                                                                 approval of the holders of a majority of the
                                                                 outstanding class A redeemable and class B
                                                                 convertible common stock voting together as a
                                                                 single class (so long as the class B
                                                                 convertible stock has voting rights).
                                                                 The MasterCard International certificate of
                                                                 incorporation requires the approval of
                                                                 two-thirds of the directors present at a
                                                                 meeting at which a quorum is present to create
                                                                 additional classes of membership interests in
                                                                 MasterCard International. The MasterCard
                                                                 International certificate of incorporation
                                                                 also requires the approval of MasterCard
                                                                 Incorporated


                                       152




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 and the holders of a majority of the
                                                                 outstanding voting stock of MasterCard
                                                                 Incorporated to amend provisions of the
                                                                 certificate of incorporation of MasterCard
                                                                 International relating to the authority of
                                                                 MasterCard International to issue capital
                                                                 stock, the creation of additional classes of
                                                                 membership interests in MasterCard
                                                                 International, the ability of MasterCard
                                                                 International to subject the property of its
                                                                 members to its debts or other obligations, the
                                                                 allocation of assessment liability for the
                                                                 current merchant antitrust actions, the
                                                                 modification of director eligibility
                                                                 requirements of MasterCard International, the
                                                                 liquidation provisions for MasterCard
                                                                 International and the certificate of
                                                                 incorporation amendment provisions of
                                                                 MasterCard International.
AMENDMENT OF     The members may amend the bylaws by a majority  The class B member of MasterCard
GOVERNING        vote except that any amendment to Article I --  International, MasterCard Incorporated, has
DOCUMENTS        "Membership" must be approved by a two-thirds   the sole vote on changes to the certificate of
                 vote.                                           incorporation and bylaws of MasterCard
                                                                 International except that the class A members
                 Amendments to the certificate of incorporation  of MasterCard International have the right to
                 need not be approved by the members.            amend Article I -- "Membership" of the bylaws
                                                                 by a two-thirds vote of the class A members
                                                                 present at a meeting at which there is a
                                                                 quorum. In addition, either the class B member
                                                                 or the board of directors may amend the bylaws
                                                                 of MasterCard International, provided that the
                                                                 consent of a 75% supermajority of the
                                                                 MasterCard International board and the
                                                                 approval of the holders of a majority of the
                                                                 outstanding class A redeemable and class B
                                                                 convertible common stock voting together as a
                                                                 single class (so long as the class B
                                                                 convertible stock has voting rights) is
                                                                 required to modify the bylaw provision
                                                                 limiting special assessments to two times
                                                                 MasterCard Incorporated's worldwide annual
                                                                 revenue, and the approval of two-thirds of the
                                                                 directors of MasterCard International present
                                                                 at a meeting at which a quorum is present is
                                                                 required to modify the bylaw provision
                                                                 limiting special assessments imposed on less
                                                                 than all members to eight times the revenues
                                                                 paid by a member to MasterCard Incorporated.
                                                                 See also "-- Vote on Extraordinary
                                                                 Transactions/ Supermajority Voting Provision"
                                                                 above.
ANNUAL MEETINGS  The bylaws of MasterCard International provide  The bylaws of MasterCard Incorporated provide
                 for annual meetings to be held in March or      that annual meetings may be held at any time
                 April of each year on such date as the board    or place fixed by the board of directors.
                 of directors determines.
                                                                 The bylaws of MasterCard International provide
                                                                 that annual meetings may be held at any time
                                                                 or place fixed by the board of directors.
FEES, EXPENSES   Each member must pay the joining fee,           Shares of MasterCard Incorporated are
AND ASSESSMENTS  operating fees and other fees (including        nonassessable. The class B membership interest
                 termination fees) established from time to      of MasterCard International is also
                 time by the board of directors, or such other   nonassessable.
                 fees described in commercial agreements
                 between MasterCard International and the        Each class A member of MasterCard
                 member subject to overall parameters            International must pay the joining fee,
                 determined by the board of directors.           operating fees and other fees (including
                                                                 termination fees) established from time to
                                                                 time by the board of directors, or such other
                                                                 fees


                                       153




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                 The board of directors may impose assessments   described in commercial agreements between
                 on any or all of the members from time to       MasterCard International and the member
                 time, in its sole discretion for any portion    subject to overall parameters determined by
                 of the expenses or liabilities of MasterCard    the board of directors.
                 International or for a violation of the bylaws
                 or other rules or policies of MasterCard        The board of directors of MasterCard
                 International.                                  International may impose assessments on any or
                                                                 all of the members of MasterCard International
                                                                 from time to time (other than the class B
                                                                 member, MasterCard Incorporated), in its sole
                                                                 discretion for any portion of the expenses or
                                                                 liabilities relating to the ordinary
                                                                 activities of MasterCard International or for
                                                                 a violation of the bylaws or other rules or
                                                                 policies of MasterCard International.
                                                                 In addition, the board of directors of
                                                                 MasterCard International may impose special
                                                                 assessments on any or all of the members of
                                                                 MasterCard International from time to time
                                                                 (other than the class B member, MasterCard
                                                                 Incorporated) for expenses and liabilities
                                                                 arising out of extraordinary events. However,
                                                                 the certificate of incorporation of MasterCard
                                                                 International provides that, with respect to
                                                                 any liabilities arising from the current DOJ
                                                                 and merchant litigations in the United States
                                                                 described elsewhere in this proxy statement-
                                                                 prospectus, no assessment may be made directly
                                                                 or indirectly against members based upon card
                                                                 issuing or acquiring programs operated outside
                                                                 the United States.
                                                                 In no event will the aggregate cumulative
                                                                 liability of all members for special
                                                                 assessments exceed two times MasterCard
                                                                 Incorporated's worldwide annual revenue. In
                                                                 addition, with respect to a special assessment
                                                                 that is imposed on less than all of the
                                                                 members, no member shall be required to
                                                                 contribute greater than eight times its latest
                                                                 annual revenue paid to MasterCard Incorporated
                                                                 and its subsidiaries. These limitations on
                                                                 special assessments apply on a prospective
                                                                 basis only, and do not apply to assessments
                                                                 relating to the DOJ and merchant antitrust
                                                                 litigations or to assessments made to
                                                                 compensate for losses and liabilities relating
                                                                 to any breach of the representations,
                                                                 warranties, covenants or agreements contained
                                                                 in the integration agreement.
                                                                 The imposition of a special assessment
                                                                 requires the approval of two-thirds of the
                                                                 board of directors of MasterCard International
                                                                 if the aggregate assessment is greater than
                                                                 one times (but less than or equal to two
                                                                 times) MasterCard Incorporated's worldwide
                                                                 annual revenue; otherwise a simple majority of
                                                                 the board is required to impose a special
                                                                 assessment.
                                                                 The bylaws of MasterCard International provide
                                                                 that losses and liabilities resulting from a
                                                                 breach of the representations, warranties,
                                                                 agreements and covenants of MasterCard
                                                                 Incorporated, MasterCard International or
                                                                 Europay contained in the integration agreement
                                                                 will be distributed equitably among
                                                                 MasterCard's six regions as an expense.
                                                                 However, losses and liabilities related to a
                                                                 breach by either of MasterCard Incorporated or
                                                                 MasterCard International exceeding


                                       154




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 $21 million in the aggregate will be allocated
                                                                 solely to regions other than Europe.
                                                                 Conversely, losses and liabilities related to
                                                                 a breach by Europay exceeding $7 million in
                                                                 the aggregate will be allocated solely to
                                                                 Europe.
REDEMPTION       The bylaws of MasterCard International do not   If, within three years after the conversion, a
                 provide for redemption rights, but do provide   stockholder of MasterCard Incorporated ceases
                 for involuntary termination of membership       to be a principal member of MasterCard
                 under certain circumstances.                    International (other than in connection with a
                                                                 permitted transfer of shares), MasterCard
                                                                 Incorporated will redeem that stockholder at
                                                                 par value. If more than three years have
                                                                 elapsed since the conversion and a stockholder
                                                                 of MasterCard Incorporated ceases to be a
                                                                 member of MasterCard International, MasterCard
                                                                 Incorporated may, at its option, redeem that
                                                                 stockholder for the book value of its shares
                                                                 based on MasterCard Incorporated's financial
                                                                 statements most recently filed with the
                                                                 Securities and Exchange Commission. If
                                                                 MasterCard Incorporated does not redeem the
                                                                 stockholder's shares, the stockholder will be
                                                                 required to offer the unpurchased shares to
                                                                 the other stockholders in accordance with
                                                                 procedures to be established by the board of
                                                                 directors.
                                                                 The bylaws of MasterCard International do not
                                                                 provide for redemption rights, but do provide
                                                                 for involuntary termination of membership
                                                                 under certain circumstances. If a member is
                                                                 voluntarily, involuntarily or automatically
                                                                 terminated from membership in MasterCard
                                                                 International, the redemption provisions
                                                                 described above will be implicated.
APPRAISAL        The organizational documents of MasterCard      Delaware law provides for appraisal rights for
RIGHTS           International do not provide for appraisal      stockholders of MasterCard Incorporated in the
                 rights.                                         case of certain mergers or other
                                                                 consolidations involving MasterCard
                                                                 Incorporated.
                                                                 The organizational documents of MasterCard
                                                                 International do not provide for appraisal
                                                                 rights.
LIQUIDATION      MasterCard International principal members are  Stockholders of MasterCard Incorporated are
RIGHTS           entitled to share ratably in any liquidation    entitled to share ratably in any liquidation
                 distributions.                                  distributions. Holders of class A memberships
                                                                 of MasterCard International are not entitled
                                                                 to any liquidation distributions. The holder
                                                                 of the class B membership, MasterCard
                                                                 Incorporated, has the right to any liquidation
                                                                 distributions of MasterCard International.
ELECTION OF      The members of MasterCard International are     Each class A and class B stockholder of
DIRECTORS        entitled to vote for the election of the        MasterCard Incorporated is entitled to cast
                 directors.                                      one vote per share for the election of the
                                                                 directors (so long as the class B convertible
                                                                 stock has voting rights), provided that no
                                                                 holder of class A redeemable or class B
                                                                 convertible common stock, together with its
                                                                 affiliates, will be entitled to vote more than
                                                                 7% of the outstanding shares that are entitled
                                                                 to vote in that election. Elections need not
                                                                 be by written ballot.
                                                                 As to MasterCard International, the class B
                                                                 member, MasterCard Incorporated, is required
                                                                 to appoint the directors of MasterCard
                                                                 Incorporated as directors of MasterCard
                                                                 International. Any director who leaves the
                                                                 board of MasterCard Incorporated is required
                                                                 to


                                       155




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 leave the board of MasterCard International.
                                                                 See also "The Conversion -- Effects of the
                                                                 Conversion."
GOVERNANCE       MasterCard International is governed by a       MasterCard Incorporated will be governed by a
PROVISIONS       global board of directors that supervises       global board of directors that supervises
                 regional boards of directors in the U.S.,       regional boards of directors in the U.S.,
                 Canada, Latin America and the Caribbean,        Canada, Europe, Latin America and the
                 Middle East/Africa and Asia/Pacific. Europay    Caribbean, Middle East/Africa and Asia/
                 International is a separate company governed    Pacific, as well as the Debit Advisory Board.
                 by its own board of directors. The global
                 MasterCard International board of directors     MasterCard International will be governed by a
                 has delegated certain authority to Europay      board of directors that will mirror the board
                 International in the European region.           of directors of MasterCard Incorporated.
TAXATION         MasterCard International is treated as a        MasterCard Incorporated will be treated as a
                 corporation for U.S. federal income tax         corporation for U.S. federal income tax
                 purposes, and is the common parent of an        purposes, and will be the common parent of an
                 affiliated group of corporations filing a U.S.  affiliated group of corporations, including
                 consolidated federal income tax return. The     MasterCard International, filing a U.S.
                 group's taxable income is taxed at regular      consolidated federal income tax return. The
                 corporate income tax rates. Members may be      group's taxable income will be taxed at
                 subject to taxation on any dividends they       regular corporate income tax rates.
                 receive depending upon the applicable tax laws  Stockholders may be subject to taxation on any
                 of their respective taxing jurisdictions.       dividends they receive depending upon the
                                                                 applicable tax laws of their respective taxing
                                                                 jurisdictions.
LIMITED          Under the charter of MasterCard International,  Stockholders of MasterCard Incorporated are
LIABILITY        members are not subject to personal liability   not subject to personal liability for the
                 for the payment of debts or any other           debts, obligations or liabilities of
                 obligations of MasterCard International.        MasterCard Incorporated. In addition, the
                 MasterCard International may assess its         common stock of MasterCard Incorporated is
                 members pursuant to the provisions of its       nonassessable.
                 bylaws.
                                                                 MasterCard International members are subject
                                                                 to the assessment provisions of MasterCard
                                                                 International's charter and bylaws.
INDEMNIFICATION  Delaware law permits indemnification of         MasterCard Incorporated and MasterCard
                 officers and directors against all expenses,    International will indemnify all officers and
                 including attorney's fees) incurred in any      directors to the fullest extent permitted by
                 action, suit or proceeding by reason of the     Delaware law.
                 fact that the person is or was a director,
                 officer, employee or agent of the company. It
                 is also permitted to advance to the officers
                 and directors all related expenses, subject to
                 reimbursement if it is determined subsequently
                 that indemnification is not permitted.
                 MasterCard International will indemnify all
                 officers and directors to the fullest extent
                 permitted by Delaware law.
OTHER RIGHTS     MasterCard International principal members are  Holders of MasterCard Incorporated class A
                 not entitled to any additional rights in        redeemable and class B convertible common
                 connection with their membership interests.     stock have the right under the terms of the
                                                                 integration agreement and as provided for in
                                                                 the bylaws of MasterCard Incorporated to
                                                                 receive additional shares at the end of the
                                                                 three-year transition period to the extent
                                                                 that their new global proxy calculation for
                                                                 the third year of the transition period
                                                                 (calculated on a European or non-European
                                                                 basis, as the case may be) exceeds their
                                                                 initial allocation of shares. Similarly,
                                                                 holders of class A redeemable and class B
                                                                 convertible common stock have the right to
                                                                 receive additional shares in certain
                                                                 circumstances in connection with the
                                                                 reallocation of ec Pictogram shares. Members
                                                                 receiving additional shares at the end of the
                                                                 three-year


                                       156




                                                                        MASTERCARD INTERNATIONAL CLASS A
                                                                    MEMBERSHIPS AND MASTERCARD INCORPORATED
                                                                   CLASS A REDEEMABLE AND CLASS B CONVERTIBLE
                      MASTERCARD INTERNATIONAL MEMBERSHIPS                  COMMON STOCK (AFTER THE
                    (BEFORE THE CONVERSION AND INTEGRATION)               CONVERSION AND INTEGRATION)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 transition period and/or in connection with
                                                                 the reallocation of ec Pictogram shares will
                                                                 do so pursuant to rights initially granted
                                                                 with all shares of class A redeemable and
                                                                 class B convertible common stock of MasterCard
                                                                 Incorporated. Each right is transferable only
                                                                 with the applicable shares of class A
                                                                 redeemable and class B convertible common
                                                                 stock, expires or terminates upon completion
                                                                 of the final reallocation and is not
                                                                 redeemable except together with the redemption
                                                                 of a share of class A redeemable or class B
                                                                 convertible common stock.


                                       157


               FEDERAL INCOME TAX CONSEQUENCES OF THE CONVERSION
                              AND THE INTEGRATION

     The following is a discussion of the material U.S. federal income tax
consequences of the conversion or the integration, or both, as the case may be,
to the principal members of MasterCard International, the shareholders of
Europay and MEPUK, MasterCard International and MasterCard Incorporated. Insofar
as it relates to matters of law and legal conclusions, this discussion
constitutes the opinion of Pillsbury Winthrop LLP, our special tax counsel.

     This discussion does not address all U.S. federal income tax considerations
that may be relevant to a specific member of MasterCard International or
shareholder of Europay or MEPUK in light of its particular circumstances. This
discussion also does not address the special U.S. federal income tax rules that
may apply to certain members or shareholders (including insurance companies,
dealers or traders in securities or currencies, tax-exempt entities or persons
that "mark to market" their securities). Further, this discussion does not
address any state, local or non-U.S. tax consequences of the conversion or the
integration.

     This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations promulgated under the Code, and
administrative rulings and pronouncements and judicial decisions, in each case
as of the date of this proxy statement-prospectus. All of these authorities are
subject to change, possibly with retroactive effect.

     This discussion is also based on factual statements and representations
made by us in this proxy statement-prospectus, in a request for an Internal
Revenue Service ("IRS") private letter ruling, described below, and in a
separate representation letter addressed to Pillsbury Winthrop LLP.

     WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS ABOUT THE PARTICULAR TAX
CONSEQUENCES OF THE CONVERSION OR THE INTEGRATION, OR BOTH, TO YOU, INCLUDING
THE EFFECTS OF U.S. FEDERAL, AS WELL AS ANY STATE, LOCAL OR NON-U.S. OR OTHER,
TAX LAWS.

     Based on the foregoing, and subject to the limitations stated herein,
Pillsbury Winthrop LLP is of the opinion that the material U.S. federal income
tax consequences of the conversion or the integration, or both, as the case may
be, to the principal members of MasterCard International, the shareholders of
Europay and MEPUK, MasterCard International and MasterCard Incorporated, will be
as follows:

     - Each principal member of MasterCard International will be treated as
       having exchanged (A) the equity rights associated with its current
       membership interest in MasterCard International for an interest in the
       class B membership interest in MasterCard International and (B) its
       rights as a licensee to use MasterCard's brands, programs and services
       for a class A membership in MasterCard International (collectively, the
       "recapitalization").

     - Pursuant to the conversion, each principal member of MasterCard
       International will be treated as having transferred its interest in the
       class B membership interest in MasterCard International to MasterCard
       Incorporated solely in exchange for shares of MasterCard Incorporated
       class A redeemable and class B convertible common stock.

     - The equity rights associated with a current membership interest in
       MasterCard International and the class B membership interest in
       MasterCard International will each be treated as stock of MasterCard
       International.

     - Insofar as it relates to the deemed exchange of equity rights associated
       with current membership interests in MasterCard International for an
       interest in the class B membership interest in MasterCard International,
       the recapitalization will qualify as a reorganization within the meaning
       of Section 368(a)(1)(E) of the Code. MasterCard International will be a
       party to a reorganization within the meaning of Section 368(b) of the
       Code.

     - No gain or loss will be recognized by a principal member of MasterCard
       International as a result of the deemed exchange of the equity rights
       associated with its current membership interest in MasterCard
       International for an interest in the class B membership interest in
       MasterCard International.

                                       158


     - No gain or loss will be recognized by a principal member of MasterCard
       International as a result of the exchange of its rights as a licensee to
       use MasterCard's brands, programs and services for a class A membership
       in MasterCard International.

     - The basis of a principal member of MasterCard International in its
       interest in the class B membership interest in MasterCard International
       will equal the member's basis in the equity rights associated with its
       current membership interest in MasterCard International immediately
       before the recapitalization.

     - The holding period of a principal member of MasterCard International for
       its interest in the class B membership interest in MasterCard
       International will include the period during which the member held the
       equity rights associated with its current membership interest in
       MasterCard International, provided that those equity rights are held as a
       capital asset on the date of the recapitalization.

     - No gain or loss will be recognized by MasterCard International as a
       result of the recapitalization.

     - No gain or loss will be recognized by a principal member of MasterCard
       International on the deemed transfer of its interest in the class B
       membership interest in MasterCard International, or by a shareholder of
       Europay or MEPUK on the transfer of its shares of Europay or MEPUK stock,
       to MasterCard Incorporated in exchange for shares of MasterCard
       Incorporated class A redeemable and class B convertible common stock,
       taking into consideration any surrender or receipt of shares at the end
       of the three year transition period or thereafter pursuant to the
       integration agreement.

     - Notwithstanding the immediately preceding paragraph, as to any shares of
       MasterCard Incorporated stock received by a principal member of
       MasterCard International or a shareholder of Europay or MEPUK at the end
       of the three year transition period or thereafter pursuant to the
       integration agreement, a portion of such shares will be treated as
       imputed interest. The amount treated as imputed interest will be
       determined by discounting the fair market value of those shares from the
       date of receipt back to the closing date, using the applicable federal
       rate determined under Section 1274 of the Code. As to such imputed
       interest, a member or shareholder otherwise subject to U.S. federal
       income taxation will be required to recognize ordinary income. If a
       member or shareholder is not a United States person for U.S. federal
       income tax purposes, MasterCard Incorporated may be required to withhold
       U.S. federal income tax at a rate of 30% of the imputed interest or, if
       applicable, at a lower treaty rate.

     - No gain or loss will be recognized when shares of MasterCard Incorporated
       class B convertible common stock are converted to class A redeemable
       common stock.

     - No gain or loss will be recognized by MasterCard Incorporated on the
       receipt of the class B membership interest in MasterCard International
       and the shares of Europay and MEPUK stock in exchange for shares of
       MasterCard Incorporated class A redeemable and class B convertible common
       stock.

     - Except as to any shares treated as imputed interest, as described above,
       the basis of a principal member of MasterCard International or a
       shareholder of Europay or MEPUK in the shares of MasterCard Incorporated
       class A redeemable and class B convertible common stock received will be
       the same as the basis of the member in its deemed interest in the class B
       membership interest or the shareholder in the shares of Europay or MEPUK
       stock, as the case may be, immediately before the transfer. You should
       consult with your own tax advisors regarding your basis in any shares
       treated as imputed interest.

     - Except as to any shares treated as imputed interest, as described above,
       the holding period for the shares of MasterCard Incorporated class A
       redeemable and class B convertible common stock received by a principal
       member of MasterCard International or a shareholder of Europay or MEPUK
       will include the period during which the interest in the class B
       membership interest was deemed held, or the shares of Europay or MEPUK
       stock were held, provided that the interest in the class B membership
       interest is deemed held, or the shares of Europay or MEPUK stock are
       held, as capital

                                       159


       assets on the date of the transfer. You should consult with your own tax
       advisors regarding your holding period for any shares treated as imputed
       interest.


     Notwithstanding the foregoing, the opinion of Pillsbury Winthrop LLP does
not apply to the extent that the percentage interest in MasterCard Incorporated
ultimately allocated to a principal member of MasterCard International or to a
shareholder of Europay or MEPUK pursuant to the integration agreement exceeds
the percentage interest of the member or shareholder immediately after the
closing of the conversion and the integration (in each case, without taking into
account any allocation of MasterCard Incorporated shares based on the new global
proxy formula). Pillsbury Winthrop LLP is unable to opine as to such excess
because the IRS generally assumes that when shareholders of a corporation
transfer a single class of stock to an acquiring corporation, the stock they
receive in exchange will be allocated in proportion to their relative ownership
interests immediately before the exchange. The IRS might therefore take the
position that the excess, whether received on the date of the closing or
thereafter, should not be treated for U.S. federal income tax purposes as having
been received in exchange for property. In that event, a principal member of
MasterCard International or a shareholder of Europay or MEPUK could be required
to recognize ordinary income, but only to the extent of the excess. A member or
shareholder that is not a United States person for U.S. federal income tax
purposes would be required to recognize such income only to the extent that the
income was considered to be effectively connected with a trade or business of
the member or shareholder in the United States and, if required by an applicable
income tax treaty, as attributable to a permanent establishment maintained by
the member or shareholder in the United States.


     The opinion of Pillsbury Winthrop LLP is not binding on the IRS. On July 6,
2001, we filed with the IRS a request for a private letter ruling concluding
that the conversion and integration will have the U.S. federal income tax
consequences described in the bullet-point paragraphs above. If the IRS issues a
ruling in the form requested, the material U.S. federal income tax consequences
of the conversion and integration will be as described in the bullet-point
paragraphs above. An IRS private letter ruling is generally binding on the IRS,
but may, under certain circumstances, be revoked or retroactively modified.

     The IRS may decline to issue a ruling in the form requested, and there can
be no assurance that the IRS will not take, or that a court will not sustain, a
position that the U.S. federal income tax consequences of the conversion and
integration are materially different from those described in the bullet-point
paragraphs above. In particular, the IRS could successfully challenge our
characterization of the conversion and integration and determine that they are
taxable transactions for U.S. federal income tax purposes. Receipt of an IRS
ruling is not a condition to the closing of the conversion or the integration.

     BECAUSE OF THE COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES
OF THE CONVERSION OR THE INTEGRATION, OR BOTH, AS THE CASE MAY BE, TO A
PRINCIPAL MEMBER OF MASTERCARD INTERNATIONAL OR A SHAREHOLDER OF EUROPAY OR
MEPUK MAY DIFFER FROM THOSE DESCRIBED ABOVE OR BE AFFECTED BY MATTERS NOT
DISCUSSED ABOVE, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS ABOUT YOUR
PARTICULAR CIRCUMSTANCES AND ABOUT THE TAX CONSEQUENCES TO YOU OF THE CONVERSION
OR THE INTEGRATION, OR BOTH, AS THE CASE MAY BE, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AND ANY PROPOSED CHANGES IN
APPLICABLE TAX LAWS.

                                       160


                     MATERIAL CONTRACTS BETWEEN MASTERCARD
                           INTERNATIONAL AND EUROPAY

     We summarize below the material contracts between MasterCard International
and Europay before the conversion and integration. If the conversion and
integration are completed, these agreements will be terminated.

ALLIANCE AGREEMENT

     MasterCard International and Europay are parties to an Alliance Agreement,
dated as of November 14, 1996, that provides for a broad alliance between the
two companies and sets forth the terms and conditions under which MasterCard
International and Europay agreed to improve the acceptance, visibility, brand
awareness and technological support of the MasterCard brand in Europe.

     Under the Alliance Agreement, MasterCard International agreed to grant
Europay the exclusive right to elect new European members for the non-exclusive
use of the MasterCard brand marks in Europe and agreed to approve and execute
new member agreements and/or licenses on a non-exclusive basis for newly elected
European members and/or licensees for use of the MasterCard brand marks in
Europe.

MAESTRO AGREEMENT

     MasterCard International and Europay are also parties to a Maestro
Agreement, dated as of June 19, 1997, that provides for the joint development,
promotion and management by MasterCard International and Europay of Maestro
International Incorporated. Maestro International Incorporated is 50% owned by
MasterCard International and 50% owned by Europay. Maestro International grants
licenses to use and to grant sublicenses for the Maestro brands to MasterCard
and Europay for each of the regions of the world.

                                 LEGAL MATTERS

     The validity of the common stock offered by this proxy statement-prospectus
will be passed upon for MasterCard Incorporated by Simpson Thacher & Bartlett,
New York, New York. In addition, Pillsbury Winthrop LLP will pass upon certain
United States federal income tax consequences of the conversion and integration
for MasterCard Incorporated.

                                    EXPERTS

     The consolidated financial statements of MasterCard International and
subsidiaries as of December 31, 2000 and 1999 and for each of the three years in
the period ended December 31, 2000 included in this proxy statement-prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.

     The consolidated financial statements of Europay International S.A. and
subsidiaries as of December 31, 2000 and for the year then ended included in
this proxy statement-prospectus have been so included in reliance on the report
of PricewaterhouseCoopers Reviseurs d'Entreprises, independent accountants,
given on the authority of said firm as experts in accounting and auditing.

                                 OTHER MATTERS

     MasterCard International does not currently intend to bring any matters
other than those described in this proxy statement-prospectus before its special
meeting. Further, MasterCard International has no knowledge of any other matters
that may be introduced by other persons. If any other matters do properly come
before our special meeting or any adjournment or postponement of our special
meeting, the persons named in the enclosed proxy form will vote the proxies in
keeping with their judgment on such matters.

                                       161


                             STOCKHOLDERS PROPOSALS

     Pursuant to Rule 14a-8 under the Exchange Act, as amended, stockholders may
present proper proposals for inclusion in a company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to the company in a timely manner.

     MasterCard Incorporated does not expect to hold an annual meeting of
stockholders in 2002. MasterCard Incorporated will hold an annual meeting of
stockholders in the year 2003 only if the conversion is completed in 2002. If
the annual meeting is held, stockholder proposals will be eligible for inclusion
in MasterCard Incorporated's proxy statement relating to the 2003 annual meeting
of stockholders if the stockholder proposals are received no later than November
15, 2002. To be considered for presentation at the MasterCard Incorporated
annual meeting, although not included in the proxy statement, proposals must be
received no later than February 1, 2003. All stockholder proposals should be
marked for the attention of Secretary, MasterCard Incorporated, 2000 Purchase
Street, Purchase, New York 10577.

                      WHERE YOU CAN FIND MORE INFORMATION

     MasterCard International has filed with the Securities and Exchange
Commission a registration statement on Form S-4 under the Securities Act of 1933
with respect to the shares of common stock of MasterCard Incorporated being
offered in the conversion and integration. This proxy statement-prospectus,
which constitutes a part of the registration statement, does not contain all the
information set forth in the registration statement. Some items of information
are contained in exhibits to the registration statement, as permitted by the
rules and regulations of the Securities and Exchange Commission. Statements made
in this proxy statement-prospectus as to the content of any contract, agreement
or other document filed or incorporated by reference as an exhibit to the
registration statement are not necessarily complete. With respect to those
statements, you should refer to the corresponding exhibit for a more complete
description of the matter involved and read all statements in this proxy
statement-prospectus in light of that exhibit.

     Following completion of the conversion, MasterCard International will be
required to file reports and other information with the Securities and Exchange
Commission on an ongoing basis. We intend to furnish holders of the common stock
of MasterCard Incorporated with annual reports containing audited financial
statements with a report thereon by MasterCard Incorporated's independent
certified public accountants.

     MasterCard Incorporated filings are available to the public at the
Securities and Exchange Commission's web site at http://www.sec.gov.

                                       162


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                              PAGE
                                                              ----
                                                           
MASTERCARD INCORPORATED
  As of December 31, 2001
     Report of Independent Accountants......................   F-2
     Balance Sheet..........................................   F-3

MASTERCARD INTERNATIONAL INCORPORATED
  As of December 31, 2000 and December 31, 1999 and for the
  years ended December 31, 2000, 1999 and 1998
     Report of Independent Auditors.........................   F-4
     Consolidated Statements of Income......................   F-5
     Consolidated Balance Sheets............................   F-6
     Consolidated Statements of Cash Flows..................   F-7
     Consolidated Statements of Comprehensive Income........   F-8
     Consolidated Statements of Changes in Members'
      Equity................................................   F-8
     Notes to Consolidated Financial Statements.............   F-9

  As of September 30, 2001 and December 31, 2000 and for the
  nine months ended September 30, 2001 and 2000 (Unaudited)
     Consolidated Interim Statements of Income..............  F-27
     Consolidated Interim Balance Sheets....................  F-28
     Consolidated Interim Statements of Cash Flows..........  F-29
     Consolidated Interim Statements of Comprehensive
      Income................................................  F-30
     Consolidated Interim Statements of Changes in Members'
      Equity................................................  F-30
     Notes to Consolidated Interim Financial Statements.....  F-31

EUROPAY INTERNATIONAL S.A.
  As of December 31, 2000 and December 31, 1999 (Unaudited)
  and for the years ended December 31, 2000, 1999
  (Unaudited) and 1998 (Unaudited)
     Report of Independent Accountants......................  F-38
     Consolidated Balance Sheets............................  F-39
     Consolidated Statements of Income......................  F-40
     Consolidated Statements of Cash Flows..................  F-41
     Notes to Consolidated Financial Statements.............  F-42

  As of June 30, 2001 and December 31, 2000 (Unaudited) and
  for the six months ended June 30, 2001 and 2000
  (Unaudited)
     Consolidated Interim Balance Sheets....................  F-65
     Consolidated Interim Statements of Income..............  F-66
     Consolidated Interim Statements of Cash Flows..........  F-67
     Notes to Consolidated Interim Financial Statements.....  F-68


                                       F-1


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of MasterCard Incorporated:

     In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of MasterCard Incorporated at December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America. This financial statement is the responsibility of the
Company's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this statement
in accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit of the
balance sheet provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York
January 16, 2002

                                       F-2


                            MASTERCARD INCORPORATED

                                 BALANCE SHEET



                                                              DECEMBER 31,
                                                                  2001
                                                              ------------
                                                           
ASSETS
Cash and cash equivalents...................................     $1,000
                                                                 ------
     TOTAL ASSETS...........................................     $1,000
                                                                 ======
LIABILITIES AND STOCKHOLDER'S EQUITY
STOCKHOLDER'S EQUITY
Common Stock, $.01 par value 1,000,000 shares authorized,
  100 shares issued and outstanding.........................     $    1
Paid-in-Capital.............................................        999
                                                                 ------
     Total Stockholder's Equity.............................      1,000
                                                                 ------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY..................     $1,000
                                                                 ======


                             NOTE TO BALANCE SHEET

  FORMATION AND BASIS OF PRESENTATION

  MasterCard Incorporated (the "Company") was organized to become the new
  stock-based holding company of MasterCard International and Europay
  International S.A.

  The Company was incorporated in Delaware on May 9, 2001.

                                       F-3


                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Members of
MasterCard International Incorporated:

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, comprehensive income, changes in
members' equity, and cash flows present fairly, in all material respects, the
financial position of MasterCard International Incorporated and its subsidiaries
at December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York
April 11, 2001

                                       F-4


                     MASTERCARD INTERNATIONAL INCORPORATED

                       CONSOLIDATED STATEMENTS OF INCOME



                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                         --------------------------------------
                                                            2000          1999          1998
                                                         ----------    ----------    ----------
                                                                     (IN THOUSANDS)
                                                                            
REVENUE................................................  $1,571,215    $1,389,155    $1,205,968

OPERATING EXPENSES
General and administrative.............................     742,807       729,957       664,874
Advertising and market development.....................     596,539       491,027       476,877
Depreciation...........................................      34,728        31,525        30,594
Amortization...........................................      24,669        21,593        15,369
                                                         ----------    ----------    ----------
  Total operating expenses.............................   1,398,743     1,274,102     1,187,714
                                                         ----------    ----------    ----------
  Operating income.....................................     172,472       115,053        18,254

OTHER INCOME AND EXPENSE
Investment income......................................      30,380        32,182        21,549
Interest expense.......................................      (9,652)      (11,198)       (5,087)
Minority interest......................................       7,031        12,994         5,589
                                                         ----------    ----------    ----------
  Total other income and expense.......................      27,759        33,978        22,051
                                                         ----------    ----------    ----------
Income before taxes....................................     200,231       149,031        40,305
Income tax expense.....................................      82,082        62,776        16,122
                                                         ----------    ----------    ----------
NET INCOME.............................................  $  118,149    $   86,255    $   24,183
                                                         ==========    ==========    ==========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-5


                     MASTERCARD INTERNATIONAL INCORPORATED

                          CONSOLIDATED BALANCE SHEETS



                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999
                                                              ------------    ------------
                                                                     (IN THOUSANDS)
                                                                        
ASSETS
Cash and cash equivalents...................................   $  193,304       $261,244
Investment securities, at fair value:
  Available-for-sale........................................      316,507        146,839
  Trading...................................................       54,958         64,102
Accounts receivable.........................................      218,882        187,768
Prepaid expenses and other current assets...................       42,863         37,201
Deferred income taxes.......................................       18,142         38,716
                                                               ----------       --------
  TOTAL CURRENT ASSETS......................................      844,656        735,870
Property, plant and equipment, at cost (less accumulated
  depreciation of $273,479 and $222,151)....................      206,196        105,482
Deferred income taxes.......................................       59,975         44,835
Intangible assets, net......................................       13,427         27,715
Investments in affiliates...................................       41,583         41,291
Investment securities held-to-maturity......................        8,050          8,775
Other assets................................................        7,900          8,509
                                                               ----------       --------
TOTAL ASSETS................................................   $1,181,787       $972,477
                                                               ==========       ========
LIABILITIES AND MEMBERS' EQUITY

LIABILITIES
Accounts payable............................................   $  196,221       $143,364
Accrued expenses............................................      256,728        236,525
Other current liabilities...................................       29,222         44,219
                                                               ----------       --------
  TOTAL CURRENT LIABILITIES.................................      482,171        424,108
Other liabilities...........................................      152,344        115,264
Long-term debt..............................................       82,992         82,682
                                                               ----------       --------
  TOTAL LIABILITIES.........................................      717,507        622,054

Minority interest...........................................        1,872          8,903

Commitments and contingencies (Note 9)

MEMBERS' EQUITY
Retained earnings...........................................      460,663        342,514
Accumulated other comprehensive income (loss), net of tax:
  Cumulative translation adjustment.........................         (345)           (17)
  Net unrealized gain (loss) on investment securities
     available-for-sale.....................................        2,090           (977)
                                                               ----------       --------
Total accumulated other comprehensive income (loss).........        1,745           (994)
                                                               ----------       --------
  TOTAL MEMBERS' EQUITY.....................................      462,408        341,520
                                                               ----------       --------
  TOTAL LIABILITIES AND MEMBERS' EQUITY.....................   $1,181,787       $972,477
                                                               ==========       ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-6


                     MASTERCARD INTERNATIONAL INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          -----------------------------------
                                                            2000         1999         1998
                                                          ---------    ---------    ---------
                                                                    (IN THOUSANDS)
                                                                           
OPERATING ACTIVITIES
  Net income............................................  $ 118,149    $  86,255    $  24,183
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation.......................................     34,728       31,525       30,594
     Amortization.......................................     24,669       21,593       15,369
     Write down of franchise rights.....................      8,609       15,334           --
     Deferred income tax................................      5,434      (32,794)     (38,040)
     Loss (gain) on disposal of property, plant and
       equipment, net...................................         50        1,385           (8)
     Amortization of premiums and discounts, net........      1,779        1,299           97
     Minority interest..................................     (7,031)     (12,994)      (5,589)
     Changes in operating assets and liabilities:
       Trading securities...............................      9,144       (6,517)     (19,803)
       Accounts receivable..............................    (31,114)     (54,192)      24,816
       Prepaid expenses and other current assets........     (9,476)      (6,690)      (3,676)
       Accounts payable.................................     52,857       18,633       30,896
       Accrued expenses.................................     20,203      (11,722)      47,971
       Other current liabilities........................    (14,997)     (35,070)     (17,240)
       Net change in other assets and liabilities.......     36,933       61,163       39,946
                                                          ---------    ---------    ---------
Net cash provided by operating activities...............    249,937       77,208      129,516

INVESTING ACTIVITIES
  Purchases of property, plant and equipment, net.......   (153,715)     (54,264)     (38,448)
  Purchases of investment securities
     available-for-sale.................................   (480,849)    (183,536)    (309,903)
  Proceeds from sales of investment securities
     available-for-sale.................................    308,628      251,597      127,435
  Proceeds from principal pay-downs and maturities of
     investment securities..............................      4,725        9,507        4,633
  Payments received on affiliate franchise sales........      3,626       18,993        9,848
  Purchase of investment securities held-to-maturity....         --       (8,775)          --
  Investment in affiliates..............................       (292)         263        2,720
                                                          ---------    ---------    ---------
Net cash (used in) provided by investing activities.....   (317,877)      33,785     (203,715)

FINANCING ACTIVITIES
  Proceeds from borrowings..............................         --           --       83,136
  Payments on borrowings................................         --           --      (49,324)
                                                          ---------    ---------    ---------
Net cash provided by financing activities...............         --           --       33,812
                                                          ---------    ---------    ---------
  Net (decrease) increase in cash and cash
     equivalents........................................    (67,940)     110,993      (40,387)
  Cash and cash equivalents -- beginning of year........    261,244      150,251      190,638
                                                          ---------    ---------    ---------
  Cash and cash equivalents -- end of year..............  $ 193,304    $ 261,244    $ 150,251
                                                          =========    =========    =========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-7


                     MASTERCARD INTERNATIONAL INCORPORATED

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                2000         1999        1998
                                                              ---------    --------    --------
                                                                       (IN THOUSANDS)
                                                                              
NET INCOME..................................................  $118,149     $86,255     $24,183
Other comprehensive income (loss), net of tax:
  Foreign currency translation adjustments..................        20          --         343
  Income tax effect.........................................      (348)       (188)         --
                                                              --------     -------     -------
                                                                  (328)       (188)        343
  Net unrealized gain (loss) on investment securities
     available-for-sale arising during the year.............     5,383      (4,278)        496
  Income tax effect.........................................    (2,220)      1,731        (223)
                                                              --------     -------     -------
                                                                 3,163      (2,547)        273
  Reclassification adjustment for net (gain) loss
     realized on investment securities available-for-sale...      (162)      1,299          97
  Income tax effect.........................................        66        (547)        (44)
                                                              --------     -------     -------
                                                                   (96)        752          53
                                                              --------     -------     -------
  Other comprehensive income (loss).........................     2,739      (1,983)        669
                                                              --------     -------     -------
COMPREHENSIVE INCOME........................................  $120,888     $84,272     $24,852
                                                              ========     =======     =======


                     MASTERCARD INTERNATIONAL INCORPORATED

             CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY



                                                           ACCUMULATED
                                                              OTHER
                                                          COMPREHENSIVE    RETAINED
                                                          INCOME (LOSS)    EARNINGS     TOTAL
                                                          -------------    --------    --------
                                                                     (IN THOUSANDS)}
                                                                              
BALANCE AT JANUARY 1, 1998..............................     $   320       $232,076    $232,396
Net income..............................................          --         24,183      24,183
Other comprehensive income..............................         669             --         669
                                                             -------       --------    --------
BALANCE AT DECEMBER 31, 1998............................         989        256,259     257,248
Net income..............................................          --         86,255      86,255
Other comprehensive loss................................      (1,983)            --      (1,983)
                                                             -------       --------    --------
BALANCE AT DECEMBER 31, 1999............................        (994)       342,514     341,520
Net income..............................................          --        118,149     118,149
Other comprehensive income..............................       2,739             --       2,739
                                                             -------       --------    --------
BALANCE AT DECEMBER 31, 2000............................     $ 1,745       $460,663    $462,408
                                                             =======       ========    ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-8


                     MASTERCARD INTERNATIONAL INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (IN THOUSANDS)

1. ORGANIZATION

     Organization -- MasterCard International Incorporated ("MasterCard") is a
nonstock company, owned by certain of its member financial institutions and
incorporated under the laws of Delaware, United States of America. MasterCard
and its consolidated subsidiaries (the "Company") promote the interests of their
members by providing credit, debit, smart card, travelers cheque, electronic
cash, and Automated Teller Machine services, and by promoting the Company's
brands. The Company enters into transactions with its members in the normal
course of business, and operates a system for authorizing, clearing and settling
payment transactions among its members. The Company is governed by a global
board of directors, comprised principally of officers of member financial
institutions and of the President and Chief Executive Officer of the Company,
who are elected by the membership. The global board is responsible for managing
the business of the Company, including the approval of a budget that provides
for funding of operations and technology support, program and service
development, and strategy execution, among other things.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Consolidation and basis of presentation -- The Company follows accounting
principles generally accepted in the United States of America. Certain prior
period amounts have been reclassified to conform to 2000 classifications.

     The consolidated financial statements include the accounts of MasterCard
and its majority-owned subsidiaries. All significant intercompany transactions
are eliminated in consolidation. The Company consolidates those entities that it
owns more than 50% of the outstanding voting interest and over which it
exercises control. The Company accounts for its investments in entities that it
owns between 20% and 50% and over which it exercises significant influence using
the equity method of accounting. The Company accounts for its investments in
entities that it owns less than 20% and over which it does not exercise
significant influence using the historical cost method of accounting. The equity
method of accounting is also utilized for limited partnerships and limited
liability companies if the investment ownership percentage is greater than 3% of
outstanding ownership interests or common stock, respectively, regardless of
whether MasterCard has significant influence over the investee. Investments in
entities for which the equity method of accounting is appropriate are reported
as investments in affiliates on the balance sheet. MasterCard's share of net
earnings of these entities is included in general and administrative expenses
and investment income depending on the nature of the investment, in the
consolidated statements of income. Investments in affiliates for which the
equity method is not appropriate are accounted for using historical cost.
Management evaluates all investments accounted for under APB 18 for impairment
on an ongoing basis primarily using cash flow analyses. If the sum of expected
net future cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized. The loss is
measured as the amount by which the carrying amount of the asset exceeds its
fair value calculated using the present value of estimated net future cash
flows.

     Use of estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities, at the date of the financial statements, and the reported amounts
of revenue and expenses during the reporting periods. Actual results may differ
from these estimates.

     Revenue recognition -- Revenues are recognized when services are performed
and when products are sold. MasterCard revenue is comprised of member
assessments and operations fees.

     Member assessments represent payments made by principal members to support
MasterCard's operating requirements. Assessments are based upon daily, monthly
or quarterly issuer and acquirer gross dollar volumes

                                       F-9

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

("GDV") which represent gross spending on MasterCard cards for goods and
services as well as cash disbursements. Assessments are recorded as revenue in
the month they are earned, which is when the related GDV is generated on
MasterCard cards.

     Operations fees represent user fees for authorization, clearing, settlement
and other member products and services that facilitate transaction and
information management among our members on a global basis. These fees are
recognized as revenue in the same period as the related transactions occur or
services are rendered. Products sold include holograms, paper warning bulletins,
manuals and publications. Revenue from product sales is recognized upon their
sale.

     MasterCard has strategic arrangements with certain members, which provide
for fee rebates when the member meets certain transaction hurdles. Such rebates
are calculated as incurred based upon member transaction levels and the
contracted discount rates for the services provided, and are recorded as a
reduction of revenue in the same period as the revenue is recorded.

     Advertising expense -- Advertising and promotional items are expensed at
the time the event occurs.

     Cash and cash equivalents -- Cash and cash equivalents include certain
highly liquid investments with a maturity of three months or less from the date
of purchase. Such investments are recorded at cost, which approximates fair
value.

     Investment securities -- The Company classifies debt securities as either
"held-to-maturity," "available-for-sale" or "trading" and equity securities as
"trading." Investments for which management has the intent, and the Company has
the ability, to hold them to maturity are carried at cost adjusted for
amortization of premium and accretion of discount. Amortization and accretion
are calculated principally using the interest method. Securities bought and held
primarily for the purpose of selling them in the near term are classified as
"trading" and reported at fair value. Changes in unrealized gains and losses on
"trading" securities are recognized in the consolidated statements of income.
Securities classified as "available-for-sale" are reported at fair value.
Changes in unrealized gains and losses for "available-for-sale" securities, net
of applicable taxes, are recorded as a separate component in the statement of
comprehensive income. Quoted market values, when available, are used to
determine the fair value of "available-for-sale" securities. The Company also
has publicly traded securities, which are connected to an executive compensation
plan. These securities are accounted for as trading securities and carried at
fair value. The specific identification method is used to determine realized
gains and losses. All net realized and unrealized gains and losses on these
securities are recognized in other income and expense and a corresponding offset
is recorded in compensation expense. Investment securities are evaluated for
permanent impairment on a periodic basis.

     Property, plant and equipment -- Property, plant and equipment are stated
at cost less accumulated depreciation. Depreciation on computer equipment and
furniture and fixtures is computed under the straight-line method over the
related estimated useful lives of the assets, generally ranging from two to five
years. Amortization of leasehold improvements is computed under the
straight-line method, using the shorter of the estimated useful lives of the
improvements or the terms of the related leases. Capital leases are amortized
over the lives of the leases. Depreciation on buildings is calculated under the
straight-line method over an estimated useful life of 30 years.

     On January 1, 1998, the Company adopted the provisions of Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." In accordance with the provisions of this statement,
eligible direct internal and external costs related to the application
development stage are capitalized and, upon completion of the project, are
amortized using the straight-line method over the estimated useful life of the
software, not to exceed three years.

                                       F-10

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     Intangible assets -- Intangible assets are comprised of goodwill and other
intangibles. Intangible assets acquired in business combinations accounted for
by the purchase method of accounting are capitalized and amortized over their
expected useful life as a non-cash charge against future results of operations.
The Company amortizes goodwill on a straight-line method over an estimated
useful life, not to exceed twenty years. Other intangibles consist of
shareholder franchise rights which are being amortized on a straight-line basis
over their estimated useful lives, none of which exceed seven years. The
realizability of goodwill and other intangibles is evaluated on an ongoing basis
to determine the recoverability of carrying amounts. If the sum of expected net
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset, an impairment loss is recognized. The loss is
measured as the amount by which the carrying amount of the asset exceeds its
fair value, calculated using the present value of estimated net future cash
flows.

     Derivative financial instruments -- The Company enters into foreign
exchange forward and swap contracts to minimize the risk of anticipated revenues
and expenses, and assets and liabilities denominated in foreign currencies. This
activity minimizes the Company's exposure to transaction gains and losses
resulting from fluctuations of foreign currencies against the U.S. dollar. The
terms of the forward contracts are generally less than 18 months. Foreign
exchange forward and swap contracts are recorded at fair value and any
unrealized gains and losses are recognized in income.

     Income taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." In accordance with SFAS No. 109,
deferred tax assets and liabilities are established for the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities using enacted tax rates. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amounts
expected to be realized.

     Foreign currency translation -- The U.S. dollar is the functional currency
for the majority of MasterCard businesses except its Mondex International
operations, where the local currency is the functional currency. Where the U.S.
dollar is considered the functional currency, monetary assets and liabilities
are translated to U.S. dollars using current exchange rates in effect at the
balance sheet date; non-monetary assets and liabilities are translated at
historical exchange rates; and revenue and expense accounts are translated at a
weighted average exchange rate for the period. Resulting exchange gains and
losses are included in net income. For businesses where the local currency is
the functional currency, translation to U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using a weighted average exchange rate for
the period. Resulting translation adjustments are reported as a component of
other comprehensive income.

     Pension and other postretirement plans -- The compensation cost of an
employee's pension benefit is recognized on the projected unit credit method
over the employee's approximate service period. The aggregate cost method is
utilized for funding purposes.

     New accounting standards -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 1999 by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133," and in June 2000, by SFAS No. 138,
"Accounting for Derivative Instruments and Hedging Activities, an Amendment of
FASB Statement No. 133" (collectively, "SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities, including certain derivative instruments embedded in other
contracts. The statement requires that all derivatives be recognized in the
balance sheet, as either assets or as liabilities, and measured at fair value.
Additionally, changes in a derivative's fair value will be recognized in current
earnings unless specific hedge accounting criteria are met. For the Company,
SFAS No. 133 is effective January 1, 2001. The adoption of this pronouncement
did not have a material effect on the Company's consolidated financial
statements.

                                       F-11

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," which provides guidance related to revenue recognition and
disclosure in the financial statements. SAB 101, as amended by SAB 101A and SAB
101B, was required to be implemented in the Company's fourth quarter of 2000,
retroactive to the beginning of the year. It requires companies to report any
changes in revenue recognition as a cumulative change in accounting principle at
the time of implementation in accordance with Accounting Principles Board
Opinion 20, "Accounting Changes." The adoption of SAB 101 did not have a
material effect on the Company's financial position or results of operations.

     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," ("SFAS
No. 140") replacing FASB Statement No. 125. SFAS No. 140 revises the standard
for accounting and reporting for transfers and servicing of financial assets and
extinguishments of liabilities. The new standard is based on consistent
application of a financial-components approach that recognizes the financial and
servicing assets controlled and the liabilities incurred, derecognizes financial
assets when control has been surrendered and derecognizes liabilities when
extinguished. SFAS No. 140 provides consistent guidelines for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. The Company was required to adopt SFAS No. 140 by March 31, 2001.
SFAS No. 140 did not have a material impact on the Company's consolidated
financial statements.

3. INVESTMENT SECURITIES

     The amortized cost and estimated fair value of investment securities
available-for-sale are as follows:



                                                           GROSS UNREALIZED
                                              AMORTIZED    ----------------
DECEMBER 31, 2000                               COST       GAINS     LOSSES    FAIR VALUE
-----------------                             ---------    ------    ------    ----------
                                                                   
Municipal bonds.............................  $307,952     $3,681    $(217)     $311,416
Corporate securities........................     5,000         91       --         5,091
                                              --------     ------    -----      --------
                                              $312,952     $3,772    $(217)     $316,507
                                              ========     ======    =====      ========




                                                           GROSS UNREALIZED
                                              AMORTIZED    ----------------
DECEMBER 31, 1999                               COST       GAINS    LOSSES     FAIR VALUE
-----------------                             ---------    -----    -------    ----------
                                                                   
U.S. Treasury securities....................  $    570       --     $    (5)    $    565
Municipal bonds.............................   142,935     $141      (1,802)     141,274
Corporate securities........................     5,000       --          --        5,000
                                              --------     ----     -------     --------
                                              $148,505     $141     $(1,807)    $146,839
                                              ========     ====     =======     ========


     The maturity distribution based on contractual terms of investment
securities available-for-sale at December 31, 2000, is as follows:



                                                              AMORTIZED
                                                                COST       FAIR VALUE
                                                              ---------    ----------
                                                                     
Due within 1 year...........................................  $ 14,322      $ 14,406
Due after 1 year through 5 years............................   278,107       281,313
Due after 5 years through 10 years..........................    20,523        20,788
                                                              --------      --------
                                                              $312,952      $316,507
                                                              ========      ========


     The Company holds a 5.25 percent Missouri Development Bond due August 1,
2009, as an investment security held-to-maturity. The amortized cost of this
security was $8,050 and $8,775 at December 31, 2000

                                       F-12

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

and 1999, respectively. Principal and interest payments are received on a
semi-annual basis with a final maturity date of August 1, 2009. The fair market
value of this security approximates amortized cost.

     Components of investment income are as follows for the years ended December
31:



                                                       2000        1999        1998
                                                     --------    --------    --------
                                                                    
Interest income....................................  $ 23,811    $ 19,083    $ 14,800
Dividend income....................................     2,799       3,571       2,799

Investment securities available-for-sale:
Gross realized gains...............................       306          63          44
Gross realized losses..............................      (144)     (1,362)       (141)

Trading Securities:
Gross unrealized gains.............................    16,633      19,605      22,234
Gross unrealized losses............................   (16,251)    (15,435)    (20,879)
Gross realized gains...............................     3,973       5,407       3,473
Gross realized losses..............................    (1,449)        (97)     (1,864)

All other investment income........................       702       1,347       1,083
                                                     --------    --------    --------
Total investment income............................  $ 30,380    $ 32,182    $ 21,549
                                                     ========    ========    ========


4. PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following at December 31:



                                                                2000         1999
                                                              ---------    ---------
                                                                     
Equipment...................................................  $ 222,693    $ 192,727
Capitalized software........................................     79,629       38,740
Building and land...........................................     71,166          866
Furniture and fixtures......................................     57,446       55,090
Leasehold improvements......................................     48,741       40,210
                                                              ---------    ---------
                                                                479,675      327,633
                                                              ---------    ---------
Less accumulated depreciation and amortization..............   (273,479)    (222,151)
                                                              ---------    ---------
                                                              $ 206,196    $ 105,482
                                                              =========    =========


     For the years ended December 31, 2000, 1999 and 1998, depreciation and
amortization expense aggregated $52,951, $42,439 and $35,333, respectively.
Included in these amounts was $12,000, $5,774 and $523 in 2000, 1999 and 1998,
respectively, of amortization of capitalized software.

     On January 12, 2000, MasterCard exercised its option to purchase the
corporate headquarters building in Purchase, New York, for $70,000, in
accordance with the provisions of its lease agreement.

                                       F-13

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

5. INCOME TAXES

     The income tax provision for the years ended December 31 is composed of the
following components:



                                                       2000        1999        1998
                                                      -------    --------    --------
                                                                    
CURRENT
Federal.............................................  $68,650    $ 74,702    $ 45,809
State and local.....................................    8,505       8,192       7,710
Foreign.............................................    2,350       1,959         910
                                                      -------    --------    --------
                                                       79,505      84,853      54,429
DEFERRED
Federal.............................................    2,200     (20,770)    (34,201)
State and local.....................................      377      (1,307)     (4,106)
                                                      -------    --------    --------
                                                        2,577     (22,077)    (38,307)
                                                      -------    --------    --------
Total tax provision.................................  $82,082    $ 62,776    $ 16,122
                                                      =======    ========    ========


     For the year ended December 31, 2000, domestic operations contributed
approximately $214,000 to earnings before income taxes and foreign operations
resulted in a loss before income taxes of approximately $14,000.

     The provision for income taxes differs from the amount of income tax
determined by applying the appropriate statutory U.S. federal income tax rate to
pretax income for the years ended December 31, as a result of the following:



                                                              2000    1999    1998
                                                              ----    ----    ----
                                                                     
Federal statutory tax rate..................................  35.0%   35.0%   35.0%
State tax, net of Federal benefit...........................   3.1     3.0     4.9
Foreign tax effect, net of Federal benefit..................   2.5     3.7     6.2
Non-deductible expenses and other differences...............   2.9     3.1     1.2
Tax-exempt income...........................................  (2.5)   (2.7)   (7.3)
                                                              ----    ----    ----
Effective tax rate..........................................  41.0%   42.1%   40.0%
                                                              ====    ====    ====


                                       F-14

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     Deferred tax assets and liabilities represent the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. The net deferred tax asset at December 31 is
composed of the following:



                                                        ASSETS (LIABILITIES)
                                          ------------------------------------------------
                                                   2000                      1999
                                          ----------------------    ----------------------
                                          CURRENT    NON-CURRENT    CURRENT    NON-CURRENT
                                          -------    -----------    -------    -----------
                                                                   
Accrued liabilities.....................  $23,322      $   501      $42,143      $   501
Changes in tax methods..................   (4,490)      (4,490)      (4,495)      (8,990)
Deferred compensation and benefits......      974       42,076          844       31,326
Excess foreign losses...................       --       12,487           --        8,574
Gains/losses included in comprehensive
  income................................   (1,465)         463          690          124
Intangible assets.......................       --       13,699           --        9,656
Prepaid state tax credits...............      176        8,050          155        8,775
Property, plant and equipment...........       --       (6,583)          --       (1,576)
Other items.............................     (375)       2,111         (621)       1,780
Valuation allowance.....................       --       (8,339)          --       (5,335)
                                          -------      -------      -------      -------
                                          $18,142      $59,975      $38,716      $44,835
                                          =======      =======      =======      =======


     The valuation allowance relates primarily to the ability to recognize tax
benefits associated with foreign operations. The valuation allowance was $3,602
at December 31, 1998. The valuation allowance increased in each year as a result
of additional foreign losses incurred during that year, the benefits of which
may not be recognized.

     Cash paid for income taxes for the years ended December 31, 2000, 1999 and
1998 was $81,854, $83,406 and $35,029, respectively.

6. PENSION, SAVINGS PLAN AND OTHER BENEFITS

     The Company has a trusteed, noncontributory defined benefit pension plan
covering substantially all of its employees. Prior to 2000, individual benefits
were based on years of service, average pay during the last five years of
employment and age at retirement. Effective January 1, 2000, the Company
converted the plan to a noncontributory cash balance plan. Participants are
credited with a percentage of their compensation for the plan year based on
completed years of service. The Company's funding policy is to contribute
annually an amount, based on actuarial present value computations, which
satisfies the U.S. Internal Revenue Service's funding standards.

     At December 31, 2000 and 1999, a MasterCard member was the plan trustee.
Plan assets are invested in U.S. government and agency securities, corporate
debt instruments, common stocks, foreign investments and certain funds of the
plan's investment managers. Certain investments may be in corporate debt or
common stock of MasterCard members and certain funds may hold securities of
MasterCard members.

                                       F-15

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at December 31:



                                                                2000        1999
                                                              --------    --------
                                                                    
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.....................  $ 56,779    $ 56,645
Service cost................................................     9,854       8,562
Interest cost...............................................     5,619       3,685
Actuarial (gain) or loss....................................    17,675      (8,359)
Benefits paid...............................................    (5,297)     (3,754)
                                                              --------    --------
Benefit obligation at end of year...........................  $ 84,630    $ 56,779
                                                              ========    ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year..............  $ 42,850    $ 35,887
Adjustment..................................................       (44)         --
Actual return on plan assets................................     2,128       6,610
Employer contributions......................................     8,241       4,107
Benefits paid...............................................    (5,297)     (3,754)
                                                              --------    --------
Fair value of plan assets at end of year....................  $ 47,878    $ 42,850
                                                              ========    ========
RECONCILIATION OF FUNDED STATUS
Funded status...............................................  $(36,752)   $(13,929)
Unrecognized actuarial (gain) or loss.......................     9,951      (6,902)
Unrecognized transition (asset).............................      (148)       (264)
Unrecognized prior service cost.............................    (1,372)     (1,594)
                                                              --------    --------
(Accrued) benefit cost......................................  $(28,321)   $(22,689)
                                                              ========    ========


     Net pension expense included the following components for the years ended
December 31:



                                                         2000       1999       1998
                                                        -------    -------    -------
                                                                     
Service cost..........................................  $ 9,854    $ 8,562    $ 7,695
Interest cost.........................................    5,619      3,685      3,284
Expected return on plan assets........................   (2,775)    (2,455)    (2,323)
Amortization of prior service cost....................     (223)      (132)      (132)
Amortization of transition (asset)....................     (116)      (116)      (116)
Recognized actuarial loss.............................    1,513        823        820
                                                        -------    -------    -------
Net periodic benefit cost.............................  $13,872    $10,367    $ 9,228
                                                        =======    =======    =======


     Assumptions used to measure the accumulated and projected benefit
obligation included a weighted average discount rate of 7.75 percent for both
2000 and 1999. An assumed rate of increase in future compensation levels for
2000 and 1999 was 7.0 percent, and an expected long-term rate of return on plan
assets was 8.5 percent and 9.5 percent for 2000 and 1999, respectively.

     The Company has an employee savings plan, whereby eligible employees may
contribute a portion of their base compensation and the Company contributes an
amount in excess of the participant's contribution. The Company's contribution
aggregated $17,180, $16,125 and $14,562 in 2000, 1999 and 1998, respectively.

                                       F-16

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

Participating employees can invest contributions among several fund
alternatives. Certain of these funds may hold securities in MasterCard members.

     The Company has a Value Appreciation Program ("VAP"), which is an incentive
program established in 1995. Annual awards were granted to VAP participants from
1995 through 1998, which entitled participants to the net appreciation on a
portfolio of securities of member banks. The plan states that participants vest
at a rate of 20% for each year of service. If a participant is not fully vested
and redeems their shares, the appreciation that he/she forfeits is returned to
MasterCard. In 1999, VAP was replaced by an Executive Incentive Plan
arrangement. Although contributions to VAP have been discontinued effective
1999, plan assets remain intact and participants are entitled to the net
appreciation on the plan assets in accordance with plan provisions. The
Company's liability at December 31, 2000 and 1999 related to VAP was $15,871 and
$18,978, respectively, and the expense was $499, $5,707 and $1,934 for the years
ending December 31, 2000, 1999 and 1998, respectively.

     MasterCard's Executive Incentive Plan ("EIP"), effective January 1999, is a
performance unit plan, where a participant receives a grant of units with a
target value contingent on the achievement of MasterCard's long-term performance
goals. The end value of the units will vary based upon the level of performance
achieved. Earned incentive awards are paid in the form of cash. Employees who
are designated Senior Vice President or higher are eligible for participation in
any performance period provided they have achieved the minimum performance
evaluation rating and have been designated to the appropriate level by March 1
of the calendar year. The Compensation Committee and/or the President and Chief
Executive Officer may also designate any other employee as eligible to
participate in the plan.

     Performance units were granted under the EIP with an actual value that will
be calculated based on the Company's performance over a three-year period. Each
unit will be valued at threshold ($50), target ($100) or maximum ($200) if, on a
weighted-average basis, threshold, target or maximum performance is achieved for
all of the performance measures. The units will have no value if performance is
below the threshold. Upon completion of the three-year performance period,
participants will receive a payout equal to 80% of the award earned. The
remaining 20% of the award will be paid upon completion of two additional years
of service. The performance units vest over a period of five years from the date
of grant. The Company's liability related to EIP at December 31, 2000 and
December 31, 1999 was $45,307 and $17,857, respectively, and the expense was
$29,682, $17,910 and $5,708 for the years ending December 31, 2000, 1999 and
1998, respectively.

     Both the VAP and the EIP are accounted for in accordance with FIN 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option of
Award Plans". In accordance with FIN 28, compensation is accrued as a charge to
expense over the periods the employee performs the related services.

7. POSTRETIREMENT HEALTH AND LIFE INSURANCE BENEFITS

     MasterCard has a combined defined benefit/defined contribution plan for
providing postretirement medical, dental and life insurance benefits. The plan
provides each employee with a notional account, which grows with an annual
credit (twelve hundred dollars) and an interest credit (3%). Upon retirement,
the account is converted to a lifetime medical subsidy expressed as a percentage
of estimated future premiums. The medical account is MasterCard's contribution
toward medical coverage. MasterCard currently does not fund its retiree medical
obligation.

     Regular full-time employees not eligible for grandfathering are eligible
for MasterCard's account plan after the earlier of the completion of 5 years of
vesting service or attainment of age 40. All active employees who, as of January
1, 1993, were 50 years old or age 45 with at least 10 years of vesting service
were grandfathered when the account-based plan was implemented. Full coverage is
provided for all grandfathered employees.

                                       F-17

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     Effective July 1, 2001 MasterCard intends to modify certain provisions of
the current design based on certain business objectives. The new design better
aligns with MasterCard's account-based pension plan by providing flat dollar
annual contributions based upon employee service. The new program does not apply
to benefits applicable to former grandfathered employees and also provides full
coverage for career employees with proportionally less for early retirees. A
portion of MasterCard's retiree medical obligation becomes funded when the new
design is implemented as these accounts are vested and are portable subaccounts
within MasterCard's pension plan.

     In adopting Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
MasterCard elected to defer and amortize the $11,592 transition obligation
through the year 2013.

     The following table presents the status of the Company's postretirement
benefit plan at December 31:



                                                                2000        1999
                                                              --------    --------
                                                                    
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.....................  $ 17,895    $ 17,961
Service cost................................................     2,309       2,162
Interest cost...............................................     1,657       1,243
Actuarial (gain) or loss....................................     3,766      (3,252)
Benefits paid...............................................      (172)       (219)
                                                              --------    --------
Benefit obligation at end of year...........................  $ 25,455    $ 17,895
                                                              ========    ========
CHANGE IN PLAN ASSETS
Employer contributions......................................  $    172    $    219
Benefits paid...............................................      (172)       (219)
                                                              --------    --------
Fair value of plan assets at end of year....................  $     --    $     --
                                                              ========    ========
RECONCILIATION OF FUNDED STATUS
Funded status...............................................  $(25,455)   $(17,895)
Unrecognized actuarial (gain)...............................    (6,850)    (10,900)
Unrecognized transition obligation..........................     6,955       7,535
                                                              --------    --------
(Accrued) benefit cost......................................  $(25,350)   $(21,260)
                                                              ========    ========


     The Company's postretirement benefit plan is currently unfunded. Net
periodic postretirement benefit cost for the years ended December 31, 2000, 1999
and 1998 included the following components:



                                                            2000      1999      1998
                                                           ------    ------    ------
                                                                      
Service cost.............................................  $2,309    $2,162    $1,771
Interest cost............................................   1,657     1,243     1,017
Amortization of transition obligation....................     580       580       580
Recognized actuarial gain................................    (284)     (324)     (381)
                                                           ------    ------    ------
Net periodic benefit cost................................  $4,262    $3,661    $2,987
                                                           ======    ======    ======


     Assumptions used in determining the postretirement defined benefit
obligation included a weighted average discount rate of 7.75 percent for both
2000 and 1999, and a rate of increase in future compensation levels of 7.0
percent for both 2000 and 1999.

                                       F-18

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     For net postretirement benefit cost measurement purposes, an annual rate of
increase in the per capita cost of covered medical benefits of 8.0 percent was
assumed for 2000. The rate was assumed to decrease gradually to 6.0 percent by
2004 and remain at that level thereafter. Increasing (decreasing) the assumed
health care cost trend rates by 1.0 percent in each year would increase
(decrease) the accumulated postretirement defined benefit obligation and the
aggregate of the service and interest cost components of net periodic
postretirement benefit as follows:



                                                              1% INCREASE    1% DECREASE
                                                              -----------    -----------
                                                                       
Postretirement benefit obligation...........................    $2,898         $(2,366)
Service and interest cost components........................       592            (475)


8. DEBT

     At December 31, 2000, the Company had a $1 billion ($742,500 at December
31, 1999) committed credit facility from banks, some of whom are members.
Pursuant to this facility, the Company has the right to borrow funds at a
variable rate calculated in accordance with the provisions of the agreement, to
provide liquidity for member settlement failures. As of December 31, 2000, the
Company has not borrowed under this credit facility. Commitment and other fees
associated with this credit facility totaled $1,279, $1,055 and $550 for each of
the years ended December 31, 2000, 1999 and 1998, respectively.

     On June 30, 1998, the Company issued $80,000 in subordinated debt ("the
Notes") fixed at 6.67 percent per annum. The terms of the Notes require
MasterCard to repay the principal amount on June 30, 2008. The Company has the
option to prepay the Notes with a "make-whole" payment to the investors, if
market interest rates are lower at the time of prepayment. Interest expense
aggregated $5,336 for each of the years ended December 31, 2000 and 1999.
Interest expense for the year ended December 31, 1998 totaled $2,668.

     Cash paid for interest during the years ended December 31, 2000, 1999 and
1998 was $5,750, $5,593 and $5,034, respectively. The fair value of subordinated
debt is estimated at $78,117 and $73,528 at December 31, 2000 and 1999,
respectively.

     The terms of the borrowing facilities include various covenants including,
but not limited to, limitations on liens and the maintenance of minimum net
worth. The Company was in compliance with such covenants at December 31, 2000.

9. COMMITMENTS AND CONTINGENT LIABILITIES

     On August 31, 1999, the Company entered into a ten-year operating lease
agreement for a global technology and operations center that will be constructed
in O'Fallon, Missouri. The lease may be extended for one ten-year term for
annual payments of $100 per year subject to the repayment of the principal on
the senior secured notes described below. The Company plans to occupy the
facility at the anticipated completion date in the fourth quarter of 2001. In
conjunction with the lease agreement, the owner of the property leased the land
to the MCI O'Fallon 1999 Trust. The Trust financed the operations center through
a combination of an equity investment and the issuance of 7.36 percent Series A
Senior Secured Notes in the amount of $149,380. In the event that additional
financing is needed to complete the facility, the Trust may issue its Series B
Senior Secured Notes in an aggregate amount not to exceed $5,000. Rent is
payable in amounts equal to interest payments on the Notes plus a return of 2.75
percent. The lease agreement permits the Company to purchase the facility upon
180 days notice at a purchase price equal to the aggregate outstanding principal
amount of the Series A Senior Secured Notes, including any accrued and unpaid
interest and investor equity, along with any accrued and unpaid amounts due to
the investor under the lease agreement. In conjunction with the lease agreement,
the Company executed a Guarantee of 85.73 percent of the Series A Senior Secured

                                       F-19

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

Notes outstanding. Additionally, upon the occurrence of specific events of
default, the Company will guarantee repayment of the total outstanding principal
and interest on the Series A Senior Secured Notes.

     Rental expense for office space aggregated approximately $16,254, $18,940
and $18,827 for the years ended December 31, 2000, 1999 and 1998, respectively.
Rental of computer equipment, communications lines, and office equipment
aggregated $31,064, $31,096 and $33,442 for the years ended December 31, 2000,
1999 and 1998, respectively.

     The future minimum lease payments under non-cancellable operating leases at
December 31, 2000 are as follows:


                                                           
2001........................................................  $ 24,939
2002........................................................    18,554
2003........................................................    16,322
2004........................................................    15,715
2005........................................................    15,140
Thereafter..................................................    48,285
                                                              --------
Total minimum lease payments................................  $138,955
                                                              ========


     On March 6, 1996, the Company entered into an agreement whereby a vendor
will design and monitor a virtual private network to support the Company's data
networking needs. At December 31, 2000, the remaining cost associated with this
agreement was approximately $40,600 to be paid over six years, subject to
certain termination provisions. Additionally, the agreement calls for certain
variable costs to be paid annually. The Company also leases certain
communications lines on a monthly basis. These are cancelable without penalty
upon 30 days' notice.

     MasterCard has guaranteed the payment of settlement obligations between
members should a member institution fail to settle their transactions. See Note
13 for a description of settlement credit risk.

     MasterCard has also guaranteed the payment of MasterCard branded travelers
cheques outstanding. MasterCard had outstanding travelers cheques of $1,480,279
and $1,676,771 at December 31, 2000 and 1999, respectively. MasterCard has
obtained an unlimited guarantee in the amount of $1,399,663 and $1,487,608 at
December 31, 2000 and 1999, respectively, from a financial institution in order
to cover most of the exposure of outstanding travelers cheques.

     Maestro International Incorporated ("Maestro") was formed in July 1992 as a
joint venture of MasterCard and Europay International S.A. ("Europay"). The
Company owns a 50% interest in Maestro but does not have control. Accordingly,
MasterCard accounts for this investment using the equity method. Maestro owns
the Maestro name mark and uses the blue and red interlocking circle mark as part
of the Maestro logo, pursuant to a license from MasterCard. Europay is the
regional licensor for the Maestro brand in Europe, while MasterCard, through its
wholly owned subsidiaries, is the regional licensor for the Maestro brand
elsewhere in the world. Under the terms of their agreement, the Company is
required to reimburse Maestro for its share of net expenses and paid $8,909,
$8,876 and $8,932 to Maestro for the years ended December 31, 2000, 1999 and
1998, respectively.

10. LEGAL PROCEEDINGS

     MasterCard is a party to litigation with respect to a variety of matters in
the ordinary course of business. Except as described below, MasterCard does not
believe that any litigation to which it is a party may have a material adverse
impact on the Company's business or prospects.

                                       F-20

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

DEPARTMENT OF JUSTICE ANTITRUST LITIGATION

     In October 1998, the United States Department of Justice ("DOJ") filed suit
against MasterCard, Visa U.S.A., Inc. and Visa International Corp. in the U.S.
District Court for the Southern District of New York alleging that both
MasterCard's and Visa's governance structure and policies violated U.S. federal
antitrust laws. First, the DOJ claimed that "dual governance" -- the situation
where a financial institution has a representative on the board of directors of
MasterCard or Visa while a portion of its card portfolio is issued under the
brand of the other association -- was anti-competitive and acted to limit
innovation within the payment card industry. At the same time, the DOJ conceded
that "dual issuance" -- a term describing the structure of the bank card
industry in the United States in which a single financial institution can issue
both MasterCard and Visa-branded cards -- was pro-competitive. Second, the DOJ
challenged MasterCard's Competitive Programs Policy ("CPP") and a Visa bylaw
provision that prohibit financial institutions participating in the respective
associations from issuing competing proprietary payment cards (such as American
Express or Discover). The DOJ alleged that the CPP and bylaw provision acted to
restrain competition.

     MasterCard denies the DOJ's allegations and believes that both "dual
governance" and the CPP are pro-competitive and fully consistent with U.S.
federal antitrust law.

     A bench trial concerning the DOJ's allegations was concluded on August 22,
2000. In response to the judge's request for a proposed remedy, the DOJ
submitted a proposed order that, if implemented, would require MasterCard to
repeal the CPP and Visa to repeal its bylaw. The government's proposed order
also would require all financial institutions with representatives on any
governing MasterCard board or committee (defined as any body having
decision-making authority or access to competitively sensitive information with
respect to MasterCard, unless the activities of that board or committee relate
solely to activities outside the United States) to (i) with regard to new
issuance, issue general purpose cards bearing MasterCard brands exclusively, and
(ii) ensure that by 2003 at least 80% of each such institution's total issuing
volume in the United States and globally is derived from MasterCard-branded
cards. The proposed order would impose parallel requirements on Visa, and would
also require that financial institutions that have signed long-term member
agreements with MasterCard or Visa have a two-year period to exercise
termination rights related to such agreements. MasterCard has objected to the
DOJ's proposed order and believes that the remedies reflected in the order are,
among other things, inconsistent with the evidence of intense competition
offered throughout the trial as well as the testimony of the DOJ's own expert
economist. As of December 31, 2000, no decision has been rendered in the trial.

MERCHANT ANTITRUST LITIGATION

     Commencing in October 1996, several putative class action suits were
brought by a number of U.S. merchants -- including Wal-Mart Stores, Inc., Sears
Roebuck & Co., Inc., The Limited Inc. and Safeway, Inc. -- against MasterCard
and Visa U.S.A., Inc. challenging certain aspects of the payment card industry
under U.S. federal antitrust law. Those suits were later consolidated in the
U.S. District Court for the Eastern District of New York. The plaintiffs
challenge MasterCard's "Honor All Cards" rule (and a similar Visa rule), which
ensures universal card acceptance for consumers by requiring merchants who
accept MasterCard cards to accept for payment every validly presented MasterCard
card. Plaintiffs claim that MasterCard and Visa unlawfully have tied acceptance
of debit cards to acceptance of credit cards. In essence, the merchants desire
the ability to reject off-line, signature-based debit transactions (for example,
MasterCard card transactions) in favor of other payment forms, including
on-line, PIN-based debit transactions (for example, Maestro or regional ATM
network transactions) which generally impose lower transaction costs for
merchants. The plaintiffs also claim that MasterCard and Visa have conspired to
monopolize what they characterize as the point-of-sale debit card market,
thereby suppressing the growth of regional networks such

                                       F-21

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

as ATM payment systems. Plaintiffs allege that the plaintiff class has been
forced to pay unlawfully high prices for debit and credit card transactions as a
result of the alleged tying arrangement and monopolization practices. There are
related consumer class actions pending in two state courts that have been stayed
pending developments in this matter.

     MasterCard denies the merchant allegations and believes that the "Honor All
Cards" rule and MasterCard practices with respect to debit card programs in the
United States are pro-competitive and fully consistent with U.S. federal
antitrust law.

     On February 22, 2000, the district court granted plaintiffs' motion for
class certification. MasterCard and Visa promptly appealed. The Second Circuit
Court of Appeals subsequently agreed to consider the appeal of the grant of
class certification. As of December 31, 2000, the parties were awaiting a
hearing before that court to consider the appeal. Motions seeking summary
judgment have been filed by both sides and fully briefed in the district court.
Currently, no argument date for summary judgment has been set pending resolution
of the appeal of the class certification decision and no trial date has been
set.

     Management believes that it is not currently possible to estimate the
impact, if any, that the ultimate resolution of the DOJ and merchant antitrust
litigations will have on the Company's results. MasterCard's policy is to accrue
probable estimated legal fees in defending these claims.

11. MONDEX

     On February 21, 1997, the Company completed a transaction with Mondex
International, Ltd. ("MXI") and MXI's shareholders. MXI, which is based in
London, England, owns and licenses to franchisees and to others the rights to
implement Mondex's "smart card" technology of which the initial use is in the
Mondex electronic cash system. The Company acquired a 51 percent interest in MXI
for $16,720 (L10,333) and agreed (i) to pay its proportionate share of fees
assessed by MXI in exchange for global support services and (ii) until February
20, 2002, to pay fees assessed against minority shareholders for global support
services up to L56,400 subject to certain adjustments primarily related to
franchise sales and the net present value of amounts paid under (i) above. With
respect to the amount paid pursuant to (ii), MasterCard members and others will
have the right to obtain licenses in regions in which they operate to
participate in the MXI electronic cash system and to participate in other
applications of the MXI technology in chip-based programs. Through subsequent
investments in affiliates, the Company obtained an incremental beneficial
interest in MXI of 7.2 percent.

     In a separate transaction, MasterCard also paid $43,691(L27,000) to a
shareholder of MXI in exchange for that shareholder's existing right to receive
up to an equivalent amount from Mondex's sales of franchise rights to exploit
MXI technology in territories that remained unsold at the time of the agreement.
Such rights to proceeds from MXI franchise sales of $2,643 and $952 are included
in prepaid expenses and other current assets and in other assets, respectively,
in the consolidated balance sheet. The amount included in prepaid expenses and
other current assets relates to contractual payments due within one year from
third party purchasers. From the sale of franchises, MasterCard received $3,626,
$18,993 and $9,848 in 2000, 1999 and 1998, respectively.

     The MXI acquisition described above was accounted for as a purchase and,
accordingly, the results of MXI's operations have been included in the
consolidated financial statements since the date of acquisition. The excess of
purchase price over book value, which approximated fair value, was recorded as
an intangible asset. The investment is accounted for on a consolidated basis.

     On October 22, 1997, the Company purchased a 51% ownership interest in
three regional Mondex Franchises, Mondex Asia Pte., Ltd. ("Mondex Asia"), Mondex
China Pte., Ltd. ("Mondex China"), and Mondex India Pte., Ltd. ("Mondex India")
for $24,511. These acquisitions were accounted for under the
                                       F-22

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

purchase method and, accordingly, the results of acquired operations have been
included in the consolidated financial statements since the date of acquisition.
The investments are accounted for on a consolidated basis.

12. INTANGIBLE ASSETS

     The following table sets forth net intangible assets at December 31:



                                                                2000        1999
                                                              --------    --------
                                                                    
Goodwill....................................................  $ 28,469    $ 28,469
Shareholder franchise rights................................    49,527      49,527
                                                              --------    --------
                                                                77,996      77,996
                                                              --------    --------
Less:
Accumulated amortization....................................   (40,626)    (34,947)
Accumulated impairment......................................   (23,943)    (15,334)
                                                              --------    --------
                                                              $ 13,427    $ 27,715
                                                              ========    ========


     Amortization expense related to intangible assets was $5,679, $9,508 and
$9,725 in 2000, 1999 and 1998, respectively.

     In conjunction with the October 22, 1997 acquisition of a 51 percent
ownership interest in Mondex Asia, Mondex China and Mondex India, the Company
recorded shareholder franchise rights to develop and exploit the MXI technology
in 13 Asian countries. These rights, totaling $47,985, are being amortized on a
straight-line basis over seven years. During 2000 and 1999, the Company
evaluated the recoverability of these franchise rights. Government restrictions
and slower than expected development in these countries limit future cash
streams in the foreseeable future. Accordingly, pursuant to SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and Assets to be Disposed
Of", the Company adjusted the carrying value of franchise rights associated with
Mondex Asia, Mondex China and Mondex India to the estimated net present value of
future cash flows from those entities resulting in an impairment loss of $8,609
and $15,334 for the years ended December 31, 2000 and 1999, respectively.

     The acquisition of MXI on February 21, 1997, resulted in approximately
$6,400 of goodwill, which was fully amortized over the three-year period ending
December 31, 1999.

     The 1988 acquisition of Cirrus System, Inc. resulted in $22,048 of
goodwill, which is being amortized on a straight-line basis over 20 years.

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

     On February 17, 1999, the Company entered into an interest rate swap with a
notional amount of $55,000 that matured on February 17, 2000. This swap paid a
floating rate of interest based upon the BMA Municipal Swap Index and received a
fixed rate of 3.24% in order to reduce interest rate risk on that portion of the
Company's short term municipal investment portfolio which earned a floating
rate.

     On June 30, 1998, the Company entered into two foreign currency swaps
totaling L24,700 to hedge the Mondex franchise receivable which is denominated
in U.K. pounds sterling. One currency swap expired on June 30, 2000 (L4,000) and
the other currency swap was originally contracted to expire on June 30, 2001
(L20,700). The two contracts called for the sale of pounds sterling into U.S.
dollars at a rate of $1.665 to L1.0. On July 19, 2000, the Company elected to
terminate the remaining contract of L20,700. During 2000, the Company realized a
net gain of $1,385 as a result of the maturity and termination of these currency
swaps.

                                       F-23

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     The notional amounts and estimated fair values of these contracts at
December 31 are as follows:



                                                     2000                      1999
                                            ----------------------    ----------------------
                                                        ESTIMATED                 ESTIMATED
                                            NOTIONAL    FAIR VALUE    NOTIONAL    FAIR VALUE
                                            --------    ----------    --------    ----------
                                                                      
Forwards
  Commitments to purchase foreign
     currency.............................  $60,275      $(1,427)     $66,950      $  (641)
  Commitments to sell foreign currency....   43,416          291       27,798         (137)
Interest rate swap........................       --           --       55,000           --
Currency swap.............................       --           --       41,125       (1,454)


     The Company's derivative financial instruments are subject to both credit
and market risk. Credit risk is the risk of loss due to failure of a
counterparty to perform its obligations in accordance with contractual terms.
Market risk is the potential change in an investment's value caused by
fluctuations in interest and currency exchange rates, equity and commodity
prices, credit spreads or other risk. Credit and market risk related to
derivative instruments were not material at December 31, 2000 and 1999. Foreign
exchange forward, option and swap contracts are not used for trading purposes.

     The currencies underlying the forward exchange commitments consist
primarily of Australian dollars, Japanese yen, Canadian dollars, Singapore
dollars, Brazilian real and U.K. pounds sterling. The fair value of off-balance
sheet financial instruments generally reflects the estimated amounts that the
Company would receive or pay to terminate the contracts at the reporting date,
thereby taking into account the current unrealized gains or losses of
outstanding forward and option contracts.

     Credit risk is the risk of loss due to the failure of a counterparty to
fulfill its contractual obligations. Credit risk is concentrated with members
who are principally in the financial services industry and is primarily related
to the Company's guarantee of qualifying settlement transactions between its
members and of foreign currency forward, option and swap contracts with members
as counterparties.

     Settlement credit risk is the legal exposure due to the difference in
timing between payments made by and receipts due to MasterCard. A member's
settlement credit risk is estimated as the average daily card charges of the
member multiplied by the estimated maximum number of days that could elapse
between MasterCard's payment to the acquiring bank and receipt of funds from the
issuing bank.

     To minimize its exposure to settlement credit risk, the Company has
established member risk standards. Members that are not in compliance with
established risk standards are required to provide collateral or other security
in the form of cash deposits, escrow accounts, letters of credit or bank
guarantees. MasterCard held collateral for legal settlement risk of $528,472 and
$114,933 and had unlimited guarantees estimated at $597,039 and $460,136 at
December 31, 2000 and December 31, 1999, respectively. MasterCard monitors its
credit risk portfolio on a regular basis to assess potential concentration risks
and to evaluate the adequacy of collateral on hand. MasterCard's member credit
exposure at December 31, 2000 and 1999, after consideration of collateral and
guarantees, amounted to $7,921,109 and $6,601,427, respectively. MasterCard
member credit exposure had concentrations of 58% and 55% in North America and
28% and 32% in Europe at December 31, 2000 and December 31, 1999, respectively.
The Company also reviews the credit worthiness of banks to consider the
appropriateness of establishing reserves for non-payment.

     A significant portion of the Company's credit risk is concentrated in one
MasterCard travelers cheque issuer. MasterCard travelers cheques outstanding
issued by that issuer at December 31, 2000 and 1999 was $1,399,663 and
$1,487,608, respectively. MasterCard has obtained an unlimited guarantee from a
financial institution in order to mitigate its exposure to outstanding travelers
cheques for that issuer.

                                       F-24

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)

     Generally, the Company does not obtain collateral related to forward,
option and swap contracts because of the high credit ratings of the
counterparties involved. The amount of accounting loss the Company would incur
if the counterparties failed completely to perform according to the terms of the
contracts is not material.

14. SEGMENT REPORTING

     MasterCard has one reportable segment, "Payment Services." All of the
Company's activities are interrelated, and each activity is dependent upon and
supportive of the other. Accordingly, all significant operating decisions are
based upon analyses of MasterCard as one operating segment. The CEO has been
identified as the chief operating decision maker.

     General information required by SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," is disclosed in the consolidated
financial statements. There is no single customer that accounted for more than
10 percent of the Company's revenue.

     The following geographic data represents revenues based on the geographic
locations of the Company's customers for each years ended:



                                                              DECEMBER 31,
                                                 --------------------------------------
                                                    2000          1999          1998
                                                 ----------    ----------    ----------
                                                                    
United States..................................  $1,050,145    $  933,367    $  815,702
Asia/Pacific...................................     185,564       159,595       127,947
Latin America/Caribbean........................     138,150       119,591       106,307
Europe.........................................     121,129       114,246       103,038
Canada.........................................      44,691        34,047        28,020
Middle East/Africa.............................      31,536        28,309        24,954
                                                 ----------    ----------    ----------
Total Revenue..................................  $1,571,215    $1,389,155    $1,205,968
                                                 ==========    ==========    ==========


MasterCard does not maintain or measure long-lived assets by geographical
location.

15. SUBSEQUENT EVENT

     At a meeting on February 8, 2001, the Board of Directors of MasterCard
International approved a management recommendation to undertake a transaction to
integrate MasterCard and Europay International S.A. into a single global entity.
At the same meeting, the MasterCard Board authorized management to negotiate
with Europay and take all steps necessary to implement the integration
transaction.

                                       F-25


                     MASTERCARD INTERNATIONAL INCORPORATED

              UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

               AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 AND

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

                                       F-26


                     MASTERCARD INTERNATIONAL INCORPORATED

                   CONSOLIDATED INTERIM STATEMENTS OF INCOME
                                  (UNAUDITED)



                                                                 NINE MONTHS ENDED
                                                                   SEPTEMBER 30,
                                                              ------------------------
                                                                 2001          2000
                                                              ----------    ----------
                                                                   (IN THOUSANDS)
                                                                      
REVENUE.....................................................  $1,308,630    $1,142,361

OPERATING EXPENSES
General and administrative..................................     589,453       534,615
Advertising and market development..........................     438,772       320,748
Depreciation................................................      27,970        25,150
Amortization................................................      24,224        16,729
                                                              ----------    ----------
  Total operating expenses..................................   1,080,419       897,242
                                                              ----------    ----------
  Operating income..........................................     228,211       245,119

OTHER INCOME AND EXPENSE
Investment income...........................................      14,001        23,350
Interest expense............................................      (7,460)       (6,152)
Minority interest...........................................       1,759         2,401
                                                              ----------    ----------
  Total other income and expense............................       8,300        19,599
                                                              ----------    ----------
Income before taxes.........................................     236,511       264,718
Income tax expense..........................................      90,743       109,072
                                                              ----------    ----------
NET INCOME..................................................  $  145,768    $  155,646
                                                              ==========    ==========


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-27


                     MASTERCARD INTERNATIONAL INCORPORATED

                      CONSOLIDATED INTERIM BALANCE SHEETS
                                  (UNAUDITED)



                                                              SEPTEMBER 30,    DECEMBER 31,
                                                                  2001             2000
                                                              -------------    ------------
                                                                     (IN THOUSANDS)
                                                                         
ASSETS
Cash and cash equivalents...................................   $  239,389       $  193,304
Investment securities, at fair value:
  Available-for-sale........................................      416,146          316,507
  Trading...................................................       52,923           54,958
Accounts receivable.........................................      228,191          218,882
Prepaid expenses and other current assets...................       50,845           61,005
                                                               ----------       ----------
     TOTAL CURRENT ASSETS...................................      987,494          844,656
Property, plant and equipment, at cost (less accumulated
  depreciation and amortization of $320,151 and $273,479)...      249,323          206,196
Deferred income taxes.......................................       52,213           59,975
Intangible assets, net......................................       18,088           13,427
Other assets................................................       42,997           57,533
                                                               ----------       ----------
TOTAL ASSETS................................................   $1,350,115       $1,181,787
                                                               ==========       ==========
LIABILITIES AND MEMBERS' EQUITY

LIABILITIES
Accounts payable............................................   $  162,571       $  196,221
Accrued expenses and other current liabilities..............      353,299          285,950
                                                               ----------       ----------
     TOTAL CURRENT LIABILITIES..............................      515,870          482,171

Other liabilities...........................................      138,531          152,344
Long-term debt..............................................       82,525           82,992
                                                               ----------       ----------
     TOTAL LIABILITIES......................................      736,926          717,507

Minority interest...........................................            6            1,872

Commitments and contingencies (Note 3)

MEMBERS' EQUITY
Retained earnings...........................................      606,431          460,663
Accumulated other comprehensive income, net of tax:
  Cumulative translation adjustment.........................         (743)            (345)
  Net unrealized gain on investment securities
     available-for-sale.....................................        7,495            2,090
                                                               ----------       ----------
Total accumulated other comprehensive income................        6,752            1,745
                                                               ----------       ----------
     TOTAL MEMBERS' EQUITY..................................      613,183          462,408
                                                               ----------       ----------
TOTAL LIABILITIES AND MEMBERS' EQUITY.......................   $1,350,115       $1,181,787
                                                               ==========       ==========


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-28


                     MASTERCARD INTERNATIONAL INCORPORATED

                 CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)



                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                              ----------------------
                                                                2001         2000
                                                              ---------    ---------
                                                                  (IN THOUSANDS)
                                                                     
OPERATING ACTIVITIES
  Net income................................................  $ 145,768    $ 155,646
  Adjustments to reconcile net income to net cash provided
     by operating activities:
  Depreciation..............................................     27,970       25,150
  Amortization..............................................     24,224       16,729
  Other adjustments to net income...........................         21       (1,134)
  Changes in operating assets and liabilities:
     Accounts receivable....................................     (9,309)      17,667
     Prepaid expenses and other current assets..............     (2,046)     (21,213)
     Deferred income tax....................................     14,106      (28,898)
     Accounts payable.......................................    (33,650)     (27,002)
     Accrued expenses.......................................     69,473      116,742
     Net change in other assets and liabilities.............    (28,113)      16,898
                                                              ---------    ---------
Net cash provided by operating activities...................    208,444      270,585

INVESTING ACTIVITIES
  Purchases of property, plant and equipment................    (91,464)    (123,611)
  Purchases of investment securities available-for-sale.....   (188,263)    (416,054)
  Proceeds from sales of investment securities
     available-for-sale.....................................     94,053      233,232
  Investment in affiliates..................................     16,250       (1,358)
  Other investing activities................................      7,065        7,813
                                                              ---------    ---------
Net cash used in investing activities.......................   (162,359)    (299,978)
                                                              ---------    ---------
Net increase (decrease) in cash and cash equivalents........     46,085      (29,393)
Cash and cash equivalents -- beginning of year..............    193,304      261,244
                                                              ---------    ---------
Cash and cash equivalents -- end of period..................  $ 239,389    $ 231,851
                                                              =========    =========


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-29


                     MASTERCARD INTERNATIONAL INCORPORATED

            CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
                                  (UNAUDITED)



                                                               NINE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              --------------------
                                                                2001        2000
                                                              --------    --------
                                                                 (IN THOUSANDS)
                                                                    
NET INCOME..................................................  $145,768    $155,646
Other comprehensive income, net of tax:
  Foreign currency translation adjustments..................      (398)        (83)

  Unrealized gain on investment securities
     available-for-sale, net................................     5,405         897
                                                              --------    --------
  Other comprehensive income................................     5,007         814
                                                              --------    --------

COMPREHENSIVE INCOME........................................  $150,775    $156,460
                                                              ========    ========


                     MASTERCARD INTERNATIONAL INCORPORATED

         CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN MEMBERS' EQUITY
                                  (UNAUDITED)



                                                           ACCUMULATED
                                                              OTHER
                                                          COMPREHENSIVE     RETAINED
                                                          INCOME (LOSS)     EARNINGS     TOTAL
                                                          --------------    --------    --------
                                                                      (IN THOUSANDS)
                                                                               
BALANCE AT JANUARY 1, 2000..............................      $ (994)       $342,514    $341,520
Net income..............................................          --         155,646     155,646
Other comprehensive income..............................         814              --         814
                                                              ------        --------    --------
BALANCE AT SEPTEMBER 30, 2000...........................      $ (180)       $498,160    $497,980
                                                              ======        ========    ========
BALANCE AT JANUARY 1, 2001..............................      $1,745        $460,663    $462,408
Net income..............................................          --         145,768     145,768
Other comprehensive income..............................       5,007              --       5,007
                                                              ------        --------    --------
BALANCE AT SEPTEMBER 30, 2001...........................      $6,752        $606,431    $613,183
                                                              ======        ========    ========


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-30


                     MASTERCARD INTERNATIONAL INCORPORATED

               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 (IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The consolidated financial statements for the nine months ended September
30, 2001 should be read in conjunction with the consolidated financial
statements of MasterCard International Incorporated ("MasterCard" or "the
Company") for the year ended December 31, 2000. Significant accounting policies
disclosed therein have not changed.

     The consolidated financial statements for the nine months ended September
30, 2001 and 2000 and as of September 30, 2001 are unaudited but in the opinion
of management include all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair statement of the Company's results of
operations and financial positions for the periods and dates presented. The
results of operations for the nine months ended September 30, 2001 are not
necessarily indicative of the results to be expected for the full year.

     All intercompany accounts and transactions have been eliminated in
consolidation.

     Certain prior year amounts have been reclassified to conform to the current
year presentation.

     New accounting standards -- In August 2001, the Financial Accounting
Standards Board, ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. This Statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions of
Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of
Operations" for the disposal of a business segment. SFAS No. 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years. The Company is in the
process of determining the effects of this Statement on its business.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. However, early adoption
is permitted. The standard provides the accounting requirements for retirement
obligations associated with tangible long-lived assets and the associated asset
retirement cost. The standard requires that the obligation associated with the
retirement of the tangible long-lived assets be capitalized into the asset cost
at the time of initial recognition. The liability is then discounted to its fair
value using the guidance provided by the standard. The Company is assessing the
impact that this new standard will have on its financial position and results of
operations.

     On June 29, 2001, the FASB unanimously approved SFAS No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets."

     SFAS No. 141 supersedes APB No. 16, "Business Combinations." SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and establishes specific criteria for
the recognition of intangible assets separately from goodwill. The new standard
also requires unallocated negative goodwill to be written off immediately as an
extraordinary gain (instead of being deferred and amortized).

     SFAS No. 142 supersedes APB No. 17, "Intangible Assets." SFAS No. 142
primarily addresses the accounting for goodwill and intangible assets subsequent
to their acquisition (i.e., the post-acquisition accounting). The provisions of
SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001. SFAS No. 142 establishes that goodwill and indefinite lived intangible
assets will no longer be amortized and that goodwill be tested for impairment at
least annually at the reporting unit level. The new standard also requires that
intangible assets deemed to have an indefinite life be tested for impairment at
least annually, and the amortization period of intangible assets with finite
lives will no longer be limited to forty years. In
                                       F-31

                     MASTERCARD INTERNATIONAL INCORPORATED

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
                                 (IN THOUSANDS)

accordance with this standard, goodwill, acquired in a business combination for
which the acquisition date is after June 30, 2001, will not be amortized. SFAS
No. 142 is not expected to have a material impact on the Company's consolidated
financial statements in relation to goodwill and other intangible assets
recorded as of September 30, 2001.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 1999 by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133," and in June 2000, by SFAS No. 138,
"Accounting for Derivative Instruments and Hedging Activities, an Amendment of
FASB Statement No. 133" (collectively, "SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities, including certain derivative instruments embedded in other
contracts. The statement requires that all derivatives be recognized in the
balance sheet, as either assets or liabilities, and measured at fair value.
Additionally, changes in a derivative's fair value will be recognized in current
earnings unless specific hedge accounting criteria are met. For the Company,
SFAS No. 133 was effective January 1, 2001. The adoption of SFAS No. 133 did not
have a significant effect on the Company's consolidated financial statements.

2. INVESTMENT SECURITIES

     The amortized cost and fair value of investment securities
available-for-sale are as follows:



                                                           GROSS UNREALIZED
                                              AMORTIZED    -----------------
SEPTEMBER 30, 2001                              COST        GAINS     LOSSES    FAIR VALUE
------------------                            ---------    -------    ------    ----------
                                                                    
Municipal bonds.............................  $403,654     $12,512     $(20)     $416,146
                                              ========     =======     ====      ========




                                                           GROSS UNREALIZED
                                              AMORTIZED    ----------------
DECEMBER 31, 2000                               COST       GAINS     LOSSES    FAIR VALUE
-----------------                             ---------    ------    ------    ----------
                                                                   
Municipal bonds.............................  $307,952     $3,681    $(217)     $311,416
Corporate securities........................     5,000         91       --         5,091
                                              --------     ------    -----      --------
                                              $312,952     $3,772    $(217)     $316,507
                                              ========     ======    =====      ========


     The maturity distribution based on contractual terms of investment
securities available-for-sale at September 30, 2001, is as follows:



                                                              AMORTIZED
                                                                COST       FAIR VALUE
                                                              ---------    ----------
                                                                     
Due within 1 year...........................................  $  3,993      $  4,024
Due 1 year through 5 years..................................   356,995       368,550
Due 5 years through 10 years................................    42,666        43,572
                                                              --------      --------
                                                              $403,654      $416,146
                                                              ========      ========


     The Company holds a 5.25 percent Missouri Development Bond, due August 1,
2009 as an investment security held-to-maturity. The amortized cost of this
security was $7,326 and $8,050 at September 30, 2001 and December 31, 2000,
respectively. Principal and interest payments are received on a semi-annual
basis with a final maturity date of August 1, 2009. The fair value of this
security approximates amortized cost.

                                       F-32

                     MASTERCARD INTERNATIONAL INCORPORATED

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
                                 (IN THOUSANDS)

3. COMMITMENTS AND CONTINGENCIES

     On August 31, 1999, the Company entered into a ten-year operating lease
agreement for a global technology and operations center that is being
constructed in O'Fallon, Missouri. The lease may be extended for one ten-year
term for annual payments of $100 per year subject to the repayment of the
principal on the senior secured notes described below. Certain areas of the
facility have been occupied upon completion. The Company plans to fully occupy
the facility at the anticipated completion date in the fourth quarter of 2001.
In conjunction with the lease agreement, the owner of the property leased the
land to the MCI O'Fallon 1999 Trust (the "Trust"). The Trust financed the
operations center through a combination of an equity investment and the issuance
of 7.36 percent Series A Senior Secured Notes in the amount of $149,380. In the
event that additional financing is needed to complete the facility, the Trust
may issue its Series B Senior Secured Notes in an aggregate amount not to exceed
$5,000. Rent is payable in amounts equal to interest payments on the Notes plus
a return of 2.75 percent. The lease agreement permits the Company to purchase
the facility upon 180-days notice at a purchase price equal to the aggregate
outstanding principal amount of the Series A Senior Secured Notes, including any
accrued and unpaid interest and investor equity, along with any accrued and
unpaid amounts due to the investor under the lease agreement. In conjunction
with the lease agreement, the Company executed a guarantee of 85.73 percent of
the Series A Senior Secured Notes outstanding. Additionally, upon the occurrence
of specific events of default, the Company will guarantee repayment of the total
outstanding principal and interest on the Series A Senior Secured Notes.

     On March 6, 1996, the Company entered into an agreement whereby a vendor
will design and monitor a virtual private network to support the Company's data
networking needs. At September 30, 2001, the remaining cost associated with this
agreement was approximately $28,136 to be paid over six years, subject to
certain termination provisions. Additionally, the agreement calls for certain
variable costs to be paid annually. The vendor provides telecommunication
services on a monthly basis. These are cancelable without penalty upon 30 days
notice.

     MasterCard has guaranteed the payment of settlement obligations between
members should a member institution fail to settle their transactions. See Note
6 for a description of settlement credit risk.

     MasterCard has also guaranteed the payment of MasterCard branded travelers
cheques outstanding. MasterCard had outstanding travelers cheques of $1,549,820
and $1,480,279 at September 30, 2001 and December 31, 2000, respectively.
MasterCard has obtained an unlimited guarantee from a financial institution to
cover most of the exposure of outstanding travelers cheques. The guarantee
covered $1,472,404 and $1,399,663 at September 30, 2001 and December 31, 2000,
respectively.

4. LEGAL PROCEEDINGS

     MasterCard is a party to litigation with respect to a variety of matters in
the ordinary course of business. MasterCard believes that it is not currently
possible to estimate the impact, if any, that the ultimate resolution of the
following matters will have on its results of operations, financial position or
cash flows.

DEPARTMENT OF JUSTICE ANTITRUST LITIGATION

     On October 9, 2001, the District Court Judge issued an opinion upholding
the legality and pro-competitive nature of dual governance. In so doing, the
judge specifically found that MasterCard and Visa have competed with each other
vigorously over the years, that prices to consumers have dropped dramatically,
and that MasterCard has fostered rapid innovations in systems, product offerings
and services.

     However, the judge also held that MasterCard's Competitive Programs Policy,
("CPP") and the Visa Bylaw constitute unlawful restraints of trade under the
U.S. federal antitrust laws. The judge found that the
                                       F-33

                     MASTERCARD INTERNATIONAL INCORPORATED

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
                                 (IN THOUSANDS)

CPP and Visa bylaw weakened competition and harmed U.S. consumers by preventing
competing proprietary payment card networks such as American Express and
Discover from entering into agreements with U.S. banks to issue cards on their
networks. In reaching this decision, the judge found that two distinct
markets -- a credit and charge card issuing market and a network services
market -- existed in the United States, and that both MasterCard and Visa had
market power in the network market. MasterCard strongly disputes these findings
and believes that the DOJ failed, among other things, to demonstrate that U.S.
consumers have been harmed by the CPP.

     On November 26, 2001, the judge issued a final judgment ordering MasterCard
to repeal the CPP insofar as it applies to issuers and enjoined MasterCard from
enacting or enforcing any bylaw, rule, policy or practice that prohibits its
issuers from issuing general purpose or debit cards in the United States on any
other general purpose card network. The judge also concluded that during the
period in which the CPP was in effect, MasterCard was able to "lock up" certain
members by entering into agreements with them pursuant to which the members
committed to maintain a certain percentage of their general purpose card volume,
new card issuance or total number of cards in force in the United States on
MasterCard's network. Accordingly, the final judgment provides that there will
be a period (commencing on the effective date of the judgment and ending on the
later of two years from that date or two years from the resolution of any final
appeal) during which MasterCard will be required to permit any issuer with which
it entered into such an agreement prior to the effective date of the final
judgment to terminate that agreement without penalty, provided that the reason
for the termination is to permit the issuer to enter into an agreement with
American Express or Discover. MasterCard would be free to apply to the District
Court to recover funds paid but not yet earned under any terminated agreement.
The final judgment imposes parallel requirements on Visa. The judge explicitly
provided that MasterCard and Visa would be free to enter into new partnership or
member business agreements in the future.

     MasterCard believes that it has a strong legal basis to challenge the
judge's ruling with respect to the CPP, and presently intends to appeal the
decision on that count. On February 6, 2002, the judge issued an order granting
MasterCard's and Visa's motion to stay the final judgment pending appeal. The
DOJ is also free to appeal the judge's ruling with respect to dual governance.

MERCHANT ANTITRUST LITIGATION

     On February 22, 2000, the District Court granted the plaintiffs' motion for
class certification. MasterCard and Visa subsequently appealed the decision to
the Second Circuit Court of Appeals. On October 17, 2001, a three-judge panel
affirmed the lower court decision by a two-to-one majority. MasterCard intends
to file a petition for a writ of certiorari to the U.S. Supreme Court by early
March 2002. Motions seeking summary judgment have been filed by both sides and
fully briefed in the District Court. As of the date of this report, neither an
argument date for summary judgment nor a trial date has been set.

CURRENCY CONVERSION LITIGATION

     Subsequent to December 31, 2000, there have been a number of developments
in certain litigations relating to MasterCard's currency conversion practices.
MasterCard, together with Visa U.S.A., Inc. and Visa International Corp., are
defendants in two lawsuits that allege that MasterCard and Visa wrongfully
imposed an asserted one percent currency conversion "fee" on every credit card
transaction by U.S. MasterCard and Visa cardholders involving the purchase of
goods or services in a foreign country, and that such alleged "fee" is unlawful.
The first of these actions, Schwartz v. Visa Int'l Corp., et al., was brought in
the Superior Court of California in February 2000, purportedly on behalf of the
general public. The second action, Senequier v. Visa

                                       F-34

                     MASTERCARD INTERNATIONAL INCORPORATED

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
                                 (IN THOUSANDS)

Int'l Corp., et al. was commenced in January 2001 in the Supreme Court of the
State of New York and is a purported class action. A trial date of April 29,
2002 has been set for the Schwartz matter, which defendants removed to federal
court in January 2002. No trial date has been set for the Senequier matter. Both
actions claim that the alleged "fee" grossly exceeds any costs the defendants
might incur in connection with currency conversions relating to credit card
purchase transactions made in foreign countries and is not properly disclosed to
cardholders. Plaintiffs seek to prevent defendants from continuing to engage in,
use or employ the alleged practice of charging and collecting the asserted one
percent currency conversion "fee" and from charging any type of purported
currency conversion "fee" without providing a clear, obvious and comprehensive
notice that a fee will be charged. Plaintiffs also request an order (1)
requiring defendants to fund a corrective advertising campaign; and (2) awarding
restitution of the monies allegedly wrongfully acquired by imposing the
purported currency conversion "fee". The complaints assert that, during the
four-year period that preceded the respective lawsuits, MasterCard collected
approximately $200 million as a result of allegedly imposing the claimed one
percent currency conversion "fee." MasterCard denies these allegations.
MasterCard, Visa U.S.A., Inc., Visa International Corp., several member banks
including Citibank (South Dakota), N.A., Citibank (Nevada), N.A., Chase
Manhattan Bank USA, N.A., and Bank of America, N.A. (USA), and Diners Club are
defendants in a number of federal putative class actions that allege, among
other things, violations of federal antitrust laws based on the asserted one
percent currency conversion "fee." MBNA Corporation and MBNA America Bank, N.A.
were named as defendants in late January 2002. The complaints also allege
violations of the Truth-In-Lending Act against the member banks. Seven of the
purported class actions, Ross, et al. v. Visa U.S.A., Inc., et al., Kune v. Visa
U.S.A., Inc., et al., Chatham v. Visa U.S.A., Inc., et al., Steinlauf v. Visa
U.S.A., Inc., et al., Finkelman v. Visa U.S.A. Inc., et al., La Marca v. Visa
U.S.A. Inc., et al. and Lipner v. Visa U.S.A., Inc., et al., were brought in
United States District Court for the Eastern District of Pennsylvania in 2001.
Five other purported class actions, Cooper v. Visa U.S.A., Inc., et al., Ramsey
v. Visa U.S.A, Inc., et al., La Place v. Visa U.S.A., Inc., et al., Salvagio v.
Visa U.S.A., Inc., et al. and Javier, et al. v. Visa U.S.A., Inc. et al., were
brought in the United States District Court for the Northern District of
California in 2001. Five other purported class actions, Wood v. Visa U.S.A.,
Inc., et al., Oshry v. Visa U.S.A., Inc., et al., Inducon Park Assocs. Inc. v.
Visa U.S.A., Inc., et al., Matthews v. Visa U.S.A., Inc., et al. and Silberman
et al. v. Visa U.S.A., Inc. were brought in the United States District Court for
the Southern District of New York. As against MasterCard, the plaintiffs seek
treble damages for an alleged conspiracy to fix and maintain prices in violation
of the Sherman Antitrust Act. The complaints allege that MasterCard's and Visa's
system of dual governance inhibits competition between them and provides each
with the ability and incentive to collude and fix the asserted currency
conversion "fee" in violation of antitrust laws. At most, two of the complaints,
Silberman and Ramsey, also allege violations of the Truth-in-Lending Act against
MasterCard. MasterCard denies these allegations.

     Pursuant to motions to the Judicial Panel on Multidistrict Litigation and
subsequent notices of tag-along actions, these actions were centralized in the
United States District Court for the Southern District of New York (Pauley, J.)
for coordinated or consolidated pretrial proceedings. Plaintiffs filed a
consolidated amended complaint on January 22, 2002. Defendants' response to that
complaint is due on March 21, 2002.

5. SEGMENT REPORTING

     In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," MasterCard has one reportable segment,
"Payment Services." All of the Company's activities are interrelated, and each
activity is dependent upon and supportive of the other. Accordingly, all
significant operating decisions are based upon analysis of MasterCard as one
operating segment. The CEO has been identified as the chief operating
decision-maker.

                                       F-35

                     MASTERCARD INTERNATIONAL INCORPORATED

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
                                 (IN THOUSANDS)

     There is no single customer that accounted for more than 10 percent of the
Company's revenue. For the nine months ended September 30, 2001 and September
30, 2000, revenue generated in the United States accounted for approximately 66%
and 67% of the Company's total revenue, respectively. The Company estimates that
no other individual country contributed a significant portion to the Company's
revenue for the three and nine months ended September 30, 2001 or September 30,
2000.

     MasterCard does not maintain or measure long-lived assets by geographic
location.

6. RISK MANAGEMENT

     MasterCard held collateral for legal settlement risk of $1,230,723 and
$1,125,511 at September 30, 2001 and December 31, 2000, respectively. MasterCard
monitors its credit risk portfolio on a regular basis to assess potential
concentration risks and to evaluate the adequacy of collateral on hand.
MasterCard's settlement exposure at September 30, 2001 and December 31, 2000,
after consideration of collateral and guarantees, amounted to $7,577,392 and
$7,921,109, respectively. MasterCard's settlement exposure had concentrations of
64% and 58% in North America and 20% and 28% in Europe at September 30, 2001 and
December 31, 2000, respectively. The Company also reviews the credit worthiness
of financial institutions to consider the appropriateness of establishing
reserves for non-payment.

     A significant portion of the Company's credit risk is concentrated in one
MasterCard travelers cheque issuer. See Note 3 for a description of the exposure
related to outstanding travelers cheques.

     Generally, the Company does not obtain collateral related to forward,
option and swap contracts because of the high credit ratings of the
counter-parties involved. The amount of accounting loss the Company would incur
if the counter-parties failed to perform according to the terms of the contracts
is not considered material.

7. MONDEX

     On June 29, 2001, the Company purchased all the outstanding minority shares
of Mondex International, Ltd. ("MXI") that it did not previously own. As a
result of assuming full ownership of MXI, MasterCard now directly controls all
of MXI's operations and management. Accordingly, MasterCard is no longer
responsible for MXI assessments. The Company purchased the minority interest for
$4,251 consisting of $115 for 80,535 common and preferred shares of MXI and
$4,136 in acquisition costs. This acquisition was treated as a step-acquisition
and was accounted for as a purchase. The transaction did not have a material
impact on the financial statements of MasterCard International.

                                       F-36


                           EUROPAY INTERNATIONAL S.A.

                       CONSOLIDATED FINANCIAL STATEMENTS

                                       F-37


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Europay International S.A.:

     In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of income and cash flows present fairly, in all material
respects, the financial position of Europay International S.A. and its
subsidiaries at December 31, 2000, and the results of their operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the Belgium, expressed in euros. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

     Accounting principles generally accepted in Belgium vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
consolidated net income for the year ended December 31, 2000 and the
determination of consolidated shareholders' equity and consolidated financial
position at December 31, 2000 to the extent summarized in Note 22 to the
consolidated financial statements.

PricewaterhouseCoopers Reviseurs d'Entreprises
represented by

Yves Vandenplas

Brussels, Belgium
May 22, 2001
Except for Note 21 as to which the date is July 31, 2001

                                       F-38


                           EUROPAY INTERNATIONAL S.A.

                          CONSOLIDATED BALANCE SHEETS
                                (IN E THOUSANDS)



                                                                          AS OF DECEMBER 31,
                                                                        ----------------------
                                                              NOTES      2000         1999
                                                              ------    -------    -----------
                                                                                   (UNAUDITED)
                                                                          
ASSETS
NON CURRENT ASSETS
Intangible assets...........................................    5         8,825        2,559
Fixed assets................................................    6        34,133       29,076
Financial assets............................................    7         2,029        2,138
                                                                        -------      -------
  Total Non Current Assets..................................             44,987       33,773
                                                                        -------      -------
CURRENT ASSETS
Amounts receivable within one year
  Trade debtors.............................................             45,915       40,519
  Other amounts receivable..................................    9        46,619       13,458
                                                                        -------      -------
     Total amounts receivable within one year...............             92,534       53,977
Investments and deposits....................................    10        1,852        6,951
Cash at bank and in hand....................................    11      112,117       33,244
Deferred charges and accrued income.........................              2,679       10,951
                                                                        -------      -------
  Total Current Assets......................................            209,182      105,123
                                                                        -------      -------
          TOTAL ASSETS......................................            254,169      138,896
                                                                        =======      =======
CAPITAL AND RESERVES AND LIABILITIES
CAPITAL AND RESERVES
Issued capital..............................................             17,611       17,611
Consolidated reserves.......................................    8        23,628       14,375
Consolidation difference....................................    7           383           --
Cumulative translation adjustment...........................                235           --
                                                                        -------      -------
  Total Capital and Reserves................................             41,857       31,986
                                                                        -------      -------
MINORITY INTEREST...........................................    12        2,619        2,366
                                                                        -------      -------
PROVISION FOR LIABILITIES AND CHARGES.......................  10, 17      2,301          240
                                                                        -------      -------
DEFERRED TAX................................................    18        2,792           --
                                                                        -------      -------
CREDITORS
Amounts payable within one year
  Bank overdrafts...........................................    11       37,789          737
  Suppliers.................................................             63,587       62,465
  Taxes.....................................................              2,150        2,363
  Remuneration and social security..........................              9,932        7,382
  Other amounts payable.....................................    14       89,749       25,309
                                                                        -------      -------
     Total amounts payable within one year..................            203,207       98,256
Accrued charges and deferred income.........................              1,149        3,515
Amounts payable after one year..............................    15          244        2,533
                                                                        -------      -------
  Total Creditors...........................................            204,600      104,304
                                                                        -------      -------
TOTAL CAPITAL AND RESERVES AND LIABILITIES..................            254,169      138,896
                                                                        =======      =======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-39


                           EUROPAY INTERNATIONAL S.A.

                       CONSOLIDATED STATEMENTS OF INCOME
                                (IN E THOUSANDS)



                                                                   FOR THE YEARS ENDED DECEMBER 31,
                                                                  -----------------------------------
                                                          NOTES    2000        1999          1998
                                                          -----   -------   -----------   -----------
                                                                            (UNAUDITED)   (UNAUDITED)
                                                                              
OPERATING INCOME
Revenue.................................................   19     364,806     298,206       245,506
Capitalization of intangible assets.....................   5        7,822          --           860
Other operating income..................................            3,041       1,041        11,202
                                                                  -------     -------       -------
  Total operating income................................          375,669     299,247       257,568
                                                                  -------     -------       -------
OPERATING EXPENSES
Services and other goods................................   19     282,387     226,776       198,777
Remuneration, social security and pension costs.........   17      58,902      50,741        41,017
Depreciation and amortization expense...................  5, 6     11,143       9,275         8,261
Bad debt expense........................................               29         270            86
Increase in provisions for liabilities and charges......   17         127          --            --
Other operating expenses................................            4,858       4,864         4,389
                                                                  -------     -------       -------
  Total operating expenses..............................          357,446     291,926       252,530
                                                                  -------     -------       -------
OPERATING PROFIT........................................           18,223       7,321         5,038
FINANCIAL INCOME/(EXPENSE)
Interest income.........................................            1,072       1,131           450
Net other financial income/(expense)....................   10        (543)      6,855           (60)
Interest expense........................................             (172)       (280)         (336)
                                                                  -------     -------       -------
  Net financial income..................................              357       7,706            54
                                                                  -------     -------       -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION...........           18,580      15,027         5,092
EXTRAORDINARY INCOME/(CHARGES)
Adjustments to amounts written off financial assets.....   7          184          --            --
Net gain/(loss) on disposal of fixed assets.............             (300)       (411)            6
Impairment of fixed asset...............................   6           --          --        (3,063)
Provisions for liabilities and charges..................   17      (1,353)         --            --
                                                                  -------     -------       -------
  Net extraordinary income/(charges)....................           (1,469)       (411)       (3,057)
                                                                  -------     -------       -------
PROFIT FOR THE FINANCIAL PERIOD BEFORE TAXATION.........           17,111      14,616         2,035
INCOME TAXES............................................   18      (7,447)     (6,721)       (1,747)
                                                                  -------     -------       -------
NET INCOME..............................................            9,664       7,895           288
NET LOSS FROM EQUITY INVESTEES, NET OF TAX..............   7         (158)         --            --
MINORITY INTEREST, NET OF TAX...........................   12        (253)       (254)          (10)
                                                                  -------     -------       -------
NET INCOME ATTRIBUTABLE TO THE GROUP....................            9,253       7,641           278
                                                                  =======     =======       =======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-40


                           EUROPAY INTERNATIONAL S.A.

                            SUPPLEMENTAL DISCLOSURE
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN E THOUSANDS)



                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                            -------------------------------------
                                                             2000         1999           1998
                                                            -------    -----------    -----------
                                                                       (UNAUDITED)    (UNAUDITED)
                                                                             
OPERATING ACTIVITIES
Profit for the financial period before taxation...........   17,111       14,616          2,035
Adjustments to reconcile profit for the financial period
  before taxation to net cash provided by/(used in)
  operating activities:
  Adjustments for non-cash (income)/expense:
     Adjustments to amounts written off financial
       assets.............................................     (184)          --             --
     Depreciation and amortization expense................   11,143        9,275          8,261
     Net (gain)/loss on disposals of fixed assets.........      300          411             (6)
     Impairment of fixed asset............................       --           --          3,063
  Changes in operating assets and liabilities:
     Trade debtors........................................   (5,396)       7,986        (27,681)
     Other amounts receivable.............................  (33,161)      (6,932)        (1,389)
     Deferred charges and accrued income..................    8,272          761         (9,551)
     Security deposits....................................    1,028         (169)           (83)
     Suppliers............................................    1,122        8,706         24,194
     Taxes paid...........................................   (4,868)      (5,911)        (1,611)
     Remuneration and social security.....................    2,550        1,389            468
     Other amounts payable................................   64,440       10,910          1,498
     Accrued charges and deferred income..................   (2,366)       2,651            127
     Provision for liabilities and charges................    2,061           --             --
                                                            -------      -------        -------
Net cash provided by/(used in) operating activities.......   62,052       43,693           (675)
                                                            -------      -------        -------
INVESTING ACTIVITIES
  Acquisitions of intangible assets.......................   (2,001)      (3,698)        (2,248)
  Capitalization of intangible assets.....................   (7,822)          --           (860)
  Acquisitions of fixed assets............................  (13,761)      (9,839)       (10,048)
  Proceeds from sales of fixed assets.....................      548        3,805              6
  Investment in affiliates................................       (5)         (92)            --
  Investment in short-term cash deposit...................       --       (6,951)            --
  Proceeds from maturity of short-term cash deposit.......    6,951           --             --
  Investment in foreign currency option...................   (1,852)          --             --
                                                            -------      -------        -------
Net cash used in investing activities.....................  (17,942)     (16,775)       (13,150)
                                                            -------      -------        -------
FINANCING ACTIVITIES
  Net change in bank overdrafts...........................   37,052          469           (559)
  Proceeds from short-term bank loan......................       --           --         19,831
  Payment of short-term bank loan.........................       --      (19,831)            --
  Net change in amounts payable after one year............   (2,289)          --             --
                                                            -------      -------        -------
Net cash provided by/(used in) financing activities.......   34,763      (19,362)        19,272
                                                            -------      -------        -------
Net increase in cash at bank and in hand..................   78,873        7,556          5,447
Cash at bank and in hand at beginning of year.............   33,244       25,688         20,241
                                                            -------      -------        -------
Cash at bank and in hand at end of year...................  112,117       33,244         25,688
                                                            =======      =======        =======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-41


                           EUROPAY INTERNATIONAL S.A.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (IN E THOUSANDS)

1. ORGANIZATION

     Europay International S.A., incorporated in Belgium, manages and licenses
banks and banking organizations in Europe for payment systems trademarks such as
eurocheque, Eurocard-MasterCard, Maestro, Cirrus and Clip. Services provided
also include processing services such as authorization, clearing and settlement
of transactions carried out under the above mentioned trademarks. Europay also
engages in a variety of marketing activities designed to maintain and enhance
the value of the brands, and plays a leading role in the development of new
technologies aimed at facilitating and expanding electronic and mobile commerce.

2. LIST OF CONSOLIDATED ENTERPRISES AND ENTERPRISES INCLUDED USING THE EQUITY
METHOD

     The financial statements include the accounts of Europay and also the
accounts of the subsidiaries listed below.



                                                                                                CHANGE OF
                                                                                              PERCENTAGE OF
                                                                               PROPORTION     CAPITAL HELD
                                                                  METHOD       OF CAPITAL     (AS COMPARED
NAME, FULL ADDRESS OF REGISTERED OFFICE AND FOR ENTERPRISES        USED         HELD IN      TO THE PREVIOUS
GOVERNED BY BELGIAN LAW, THE VAT NUMBER OR THE NATIONAL NUMBER  (SEE BELOW)     PERCENT          PERIOD)
--------------------------------------------------------------  -----------    ----------    ---------------
                                                                                    
MAESTRO INTERNATIONAL, INC..................................      E1              50.00           0.00
  Corporate Trust Center
  1209 Orange Street
  19801 Wilmington, Delaware
  UNITED STATES OF AMERICA
EUROPEAN PAYMENT SYSTEM SERVICES S.A........................      F               85.00           0.00
  Chaussee de Tervuren 198a
  1410 Waterloo
  BELGIUM
  BE 427.503.348
EUROTRAVELLERS CHEQUE INTERNATIONAL S.A.....................      F              100.00           0.00
  Chaussee de Tervuren 198a
  1410 Waterloo
  BELGIUM
  BE 421.611.290
EUROCARD LIMITED (Dormant)..................................      F              100.00           0.00
  UNITED KINGDOM
EUROCARD U.S.A., INC........................................      F              100.00           0.00
  Fifth Avenue 500
  10110 New York, New York
  UNITED STATES OF AMERICA

E1 -- Associated enterprise accounted for using the equity method
F  -- Full consolidation


                                       F-42

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

3. CHANGES IN FINANCIAL STATEMENT PRESENTATION

     The Consolidated Financial Statements for the years ended December 31, 1999
and 1998 have been amended in order to reflect the following changes and
improvements in presentation:


                                 
Consolidated Balance Sheets:        Certain reclassifications have been made in the December
                                    31, 1999 Consolidated Balance Sheet to conform to the
                                    classifications used in the December 31, 2000 Consolidated
                                    Balance Sheet.
Consolidated Statements of Income:  Following the 1999 introduction of the new single European
                                    currency, the euro, in the Economic and Monetary Union
                                    (EMU), Europay changed its functional currency from the
                                    Belgian Franc to the euro (E). Accordingly, the 1998
                                    Consolidated Statement of Income and accompanying
                                    supplemental disclosures and notes have been converted into
                                    euros at the fixed exchange rate of E1 = BEF 40.3399.
Reporting Currency:                 The informative value and trends presented for 1998 are
                                    consistent with those of the financial statements had the
                                    conversion from Belgian Franc to euro not been applied. The
                                    1998 financial statements are not comparable to financial
                                    statements of other companies that report in euros and that
                                    restate amounts from currencies other than the Belgian
                                    Franc.


4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The significant accounting policies used in the preparation of these
financial statements are set out below.

CONSOLIDATION

     Europay follows accounting principles and reporting requirements generally
accepted in Belgium ("Belgian GAAP"). Assets and liabilities are recorded under
the accrual method of accounting and valued at historical cost less any amounts
provided for possible reduction in value.

     The consolidated financial statements include the accounts of Europay and
its majority-owned subsidiaries. All significant intercompany transactions are
eliminated in consolidation. Investments in entities for which the equity method
of accounting is appropriate are reported as financial assets on the balance
sheet. Europay's share of net earnings of these entities is included in the
consolidated statements of income. Investments in entities for which the equity
method is not appropriate are accounted for using historical cost. All
investments are evaluated for impairment on an ongoing basis.

REVENUES

     Revenues are recognized when services are performed. The main operating
revenues arise from the following fees.

     Operations fees -- consists of authorization, clearing and settlement fees
charged to issuers/acquirers based on transaction volumes either through
settlement or through invoices. This also includes fees for other member
services that are collected based on monthly invoices.

     Assessment fees -- consists of assessment fees charged to issuers and
acquirers for costs associated with the overall management of the payments
system, and currency conversion fees charged to issuers, which are charged daily
and quarterly based on transaction volumes. These fees are recognized as revenue
when

                                       F-43

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

collected through direct debit or upon invoicing of customers. Assessment fees
also include card fees charged to issuers that are recognized as revenue upon
invoicing of customers.

FOREIGN CURRENCY TRANSLATION

     The euro is the functional currency for the majority of Europay's
businesses except its Eurocard U.S.A. operations, where the local currency is
the functional currency. Transactions arising from EMU countries in foreign
currencies are translated at their EMU fixed rate. Bank movements generated by
Europay's centralized processing system, known as European Common Clearing &
Settlement System (ECCSS), are translated at the transaction date. All other
transactions arising in foreign currencies are translated to and recorded in
euros at the rate prevailing at the end of the month that precedes the month the
transaction takes place, which is not significantly different from the rate at
the respective transaction date. Current assets and liabilities expressed in
foreign currencies are translated at the spot rate on the balance sheet date.
Profits and losses arising from the translation of foreign currencies are
reflected in the statements of income. For businesses where the local currency
is the functional currency, translation to euros is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using an average exchange rate for the period.
Resulting translation adjustments are reported as cumulative translation
adjustments in the consolidated balance sheets.

DEFERRED TAXES

     Deferred tax liabilities on consolidation entries are recorded when it is
probable that a tax charge will effectively be incurred in the foreseeable
future.

INTANGIBLE ASSETS

     Intangible assets are recorded at historical cost and amortized over their
estimated useful lives using the straight-line method between three and five
years.

PROPERTY, PLANT AND EQUIPMENT

     Land and buildings, plant and equipment, and office furniture and equipment
are recorded at historical cost, including ancillary expenses. Depreciation is
provided on buildings, plant and equipment and office furniture and equipment,
at the following rates calculated to amortize the cost of the assets over their
estimated useful lives, using the straight-line method.


                                                           
Buildings...................................................  10 to 33 years
Installations and equipment.................................   5 to 10 years
Office furniture and equipment..............................   5 to 10 years
Other fixed assets..........................................         5 years
Computer hardware...........................................    3 to 4 years
Personal computer equipment.................................         3 years
Automobiles.................................................    3 to 4 years


     Property, plant and equipment are depreciated for a full year in the year
of acquisition.

PENSIONS

     Europay has a defined benefit pension plan providing retirement and death
benefits to employees, which is funded by a group insurance contract. Premiums
charged by the insurance company are expensed as

                                       F-44

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

retirement benefits as incurred, on the assumption that the amount of the
premium constitutes an appropriate measure of the economic cost of pension
obligations for the period.

RESEARCH & DEVELOPMENT

     It is Europay's policy to expense the costs of research and development,
such as chip card research and development, in the year in which they are
incurred.

5. INTANGIBLE ASSETS



                                                                               CONCESSIONS,
                                                              SOFTWARE AND       PATENTS,
                                                                KNOW-HOW      LICENSES, ETC.
                                                              ------------    --------------
                                                                        
ACQUISITION COST
As at December 31, 1999 (unaudited).........................     17,560           1,823
Movements during the period:
  Acquisitions, including fixed assets, own production......      9,823              --
  Contribution to joint venture.............................       (269)             --
                                                                 ------           -----
As at December 31, 2000.....................................     27,114           1,823
                                                                 ------           -----
ACCUMULATED AMORTIZATION AND AMOUNTS WRITTEN DOWN
As at December 31, 1999 (unaudited).........................     15,001           1,823
Movements during the period:
  Amortization expense......................................      3,288              --
                                                                 ------           -----
As at December 31, 2000.....................................     18,289           1,823
                                                                 ------           -----
NET CARRYING VALUE AT DECEMBER 31, 2000.....................      8,825              --
                                                                 ======           =====


     Europay capitalized work completed on the EMV (Europay, MasterCard, Visa)
integrated circuit card, terminal and card application specifications for
payment systems and related documents as intellectual property for estimated
costs of E269 and E860 in 2000 and 1998, respectively, and in doing so
recognized income for the same amounts, which is included in the 2000 and 1998
Consolidated Statements of Income under capitalization of intangible asset. The
EMV intangible assets have been contributed in their entirety as part of a
capital contribution to a joint venture as described in Note 7 below.

     Starting in 1999 and continuing in 2000 Europay put in place systems and
procedures in order to assess the criteria in respect of capitalization of
internally developed software, which resulted in the effective capitalization of
costs incurred as of January 1, 2000. Accordingly, eligible direct internal and
external costs related to the application development and testing stages are
capitalized and, upon completion of the project, are amortized using the
straight-line method over a three year estimated useful life.

     Capitalized software amounting to E1,192 and related amortization expense
of E9 should have been recognized in the consolidated accounts for the year
ended December 31, 1999. Under Belgian GAAP it is not permitted to restate
opening retained earnings or to account for this non-capitalization in the
following year.

     Europay capitalized internally developed software amounting to E7,553 in
the year ended December 31, 2000. Amortization expense related to this
capitalized software amounted to E602 in 2000.

                                       F-45

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

6. FIXED ASSETS



                                         LAND        COMPUTER      FURNITURE    OTHER        ASSETS
                                          AND       EQUIPMENT &       AND      TANGIBLE      UNDER
                                       BUILDINGS   INSTALLATIONS   VEHICLES     ASSETS    CONSTRUCTION   TOTAL
                                       ---------   -------------   ---------   --------   ------------   ------
                                                                                       
ACQUISITION COST
As at December 31, 1999
  (unaudited)........................   30,060         23,666        4,034      7,340         3,136      68,236
Movements during the period:
  Acquisitions, including fixed
     assets, own construction........    7,039          4,962          907        852             1      13,761
  Sales and disposals................       --           (611)        (717)        --            --      (1,328)
  Transfers..........................    2,655             --           --         --        (2,655)         --
                                        ------         ------        -----      -----        ------      ------
As at December 31, 2000..............   39,754         28,017        4,224      8,192           482      80,669
                                        ------         ------        -----      -----        ------      ------
ACCUMULATED DEPRECIATION AND AMOUNTS
  WRITTEN DOWN
As at December 31, 1999
  (unaudited)........................   13,082         17,796        2,435      5,847            --      39,160
Movements during the period:
  Expense............................    2,907          4,038          612        298            --       7,855
  Written down after sales and
     disposals.......................       --           (206)        (273)        --            --        (479)
                                        ------         ------        -----      -----        ------      ------
As at December 31, 2000..............   15,989         21,628        2,774      6,145            --      46,536
                                        ------         ------        -----      -----        ------      ------
NET CARRYING VALUE AT DECEMBER 31,
  2000...............................   23,765          6,389        1,450      2,047           482      34,133
                                        ======         ======        =====      =====        ======      ======


     In July 1999 Europay sold a building, which it formerly occupied, for a
sales price of E3,718. Europay realized a loss of E124 on the sale. In 1998,
based on an independent valuation made of the building in July 1998 Europay
recorded an impairment of E3,063 to reflect a permanent diminution in value.

     In 1998 Europay began a process of expanding and renovating its Waterloo
premises in order to accommodate current and future organizational and
operational requirements. Assets under construction in relation to this effort
amounting to E482 and E3,136 are included in the Consolidated Balance Sheets at
December 31, 2000 and 1999, respectively. During 2000 assets under construction
amounting to E2,655 were put into use and as such transferred to buildings.

     Europay rents network computer equipment required for network operations
under an operating lease agreement. The value of the computer equipment rented
under this lease agreement totaled E24,313 and E20,878 at December 31, 2000 and
1999, respectively. Rent expense related to this lease amounted to E4,717,
E5,231 and E5,868 in 2000, 1999 and 1998, respectively.

     During 1999 and 1998 Europay rented personal computer equipment required
for its activities under operating lease agreements. Rent expense related to
these lease agreements amounted to E1,717 and E2,064 in 1999 and 1998,
respectively. In December 1999 Europay bought out the operating lease
agreements. Under the terms of the transaction Europay acquired personal
computer equipment at a cost of E632 and incurred a cancellation fee of E2,169,
which was expensed.

     Europay provides cars to certain levels of management under 4 year
operating lease agreements. Total expense related to these lease agreements,
including insurance, fuel and maintenance, amounted to E2,634, E2,185 and E2,055
in 2000, 1999 and 1998, respectively.

     Europay also rents office buildings and equipment under operating lease
agreements. Total rents related to these lease agreements amounted to E4,774,
E5,614 and E5,038 in 2000, 1999 and 1998, respectively.

                                       F-46

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     Future scheduled operating lease payments are summarized below. Computer
equipment includes lease payments plus related computer hardware and software
maintenance and service contract costs.



                                                                        OFFICE
                                          COMPUTER                    BUILDINGS &
YEAR                                      EQUIPMENT    AUTOMOBILES     EQUIPMENT     TOTAL
----                                      ---------    -----------    -----------    ------
                                                                         
2001....................................   11,710         1,816          1,530       15,056
2002....................................    9,189         1,325          1,526       12,040
2003....................................    7,350           791          1,526        9,667
2004....................................       --           243          1,331        1,574
2005 & after............................       --            --          4,529        4,529
                                           ------         -----         ------       ------
          Total.........................   28,249         4,175         10,442       42,866
                                           ======         =====         ======       ======


     In 2000 and 1999 Europay concluded a physical observation of fixed assets
and reconciled the results to its books of account. Adjustments were made in
order to equate the books of account to the physical observation. As a result of
these adjustments Europay recognized net losses of E295 and E394 in 2000 and
1999, respectively, which are included in fixed asset disposals.

7. FINANCIAL ASSETS



                                                                   ENTERPRISES
                                                                    ACCOUNTED
                                                                    FOR USING
                                                                   THE EQUITY
                                                                     METHOD       OTHER     TOTAL
                                                                   -----------    ------    ------
                                                                                
1.   INVESTMENTS IN AFFILIATES
     ACQUISITION COST
     As of December 31, 1999 (unaudited).........................     1,136           --     1,136
     Movements during the period:
     Acquisitions................................................       274           --       274
     Translation differences.....................................       230           --       230
                                                                      -----       ------    ------
     As at December 31, 2000.....................................     1,640           --     1,640
                                                                      -----       ------    ------
     AMOUNTS WRITTEN DOWN
     As at December 31, 1999 (unaudited).........................       184           --       184
     Movements during the period:
     Reversal of prior loss provisions...........................      (184)          --      (184)
                                                                      -----       ------    ------
     As at December 31, 2000.....................................        --           --        --
                                                                      -----       ------    ------
     MOVEMENTS IN THE CAPITAL AND RESERVES OF THE ENTERPRISES
     Share in the result for the financial period................      (158)          --      (158)
     Other movements in the capital and reserves.................       389           --       389
                                                                      -----       ------    ------
     Total Movements.............................................       231           --       231
                                                                      -----       ------    ------
     NET CARRYING VALUE AT DECEMBER 31, 2000.....................     1,871           --     1,871
                                                                      -----       ------    ------


                                       F-47

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)



                                                                   ENTERPRISES
                                                                    ACCOUNTED
                                                                    FOR USING
                                                                   THE EQUITY
                                                                     METHOD       OTHER     TOTAL
                                                                   -----------    ------    ------
                                                                                
2.   SECURITY DEPOSIT
     NET CARRYING VALUE AT THE END OF THE YEAR
     As at December 31, 1999 (unaudited).........................        --        1,186     1,186
     Movements during the period:
     Reimbursements..............................................        --       (1,028)   (1,028)
                                                                      -----       ------    ------
     As at December 31, 2000.....................................        --          158       158
                                                                      -----       ------    ------
     TOTAL.......................................................     1,871          158     2,029
                                                                      =====       ======    ======


     In 1999 Europay assigned the rights to intellectual property described in
Note 5 to EMVCo, LLC ("EMVCo"), a Delaware (U.S.) limited liability company.
EMVCo was established as a joint venture under equal ownership by Europay,
MasterCard and Visa to manage, maintain and enhance the EMV Integrated Circuit
Card Specifications for Payment Systems as technology advances and the
implementation of chip card programs become more prevalent. This assignment,
amounting to the full E860 value of the intellectual property and a cash payment
of E92, represents Europay's capital contribution for its one-third interest in
EMVCo. In 2000 Europay's interest in EMVCo was increased by the contribution of
additional intellectual property valued at E269 (see also Note 5). The full
capital contribution is accounted for as an investment in EMVCo on an equity
basis.

     Europay also has a 50% interest in a joint venture company, Maestro
International Incorporated. ("Maestro"), of which the remaining 50% interest is
held by MasterCard. At December 31, 1999 the net value of the investment in the
joint venture was nil as the original investment of E184 was fully offset by
loss provisions from previous years.

     In 2000 Europay reversed the loss provision of E184 and recognized a
consolidation adjustment of E383 for the equity share of Maestro's undistributed
1999 net earnings. The reversal of the provision resulted from a change in the
joint venture's profitability. Furthermore, the E383 income from the joint
venture was recognized subsequent to 1999 or the period earned, and is reflected
in the following required disclosure of consolidation differences:


                                                           
Net carrying value at December 31, 1999 (unaudited).........   --
Movements during the period:
  Adjustments as described above............................  383
                                                              ---
Net carrying value at December 31, 2000.....................  383
                                                              ===


The Consolidated Balance Sheets include receivables from Maestro of E345 and
E890 and payables to Maestro of E1,874 and E1,513 at December 31, 2000 and 1999,
respectively. The income statements include amounts of E4,878, E4,128 and E3,978
representing Europay's share of the net costs incurred by Maestro in 2000, 1999
and 1998, respectively.

                                       F-48

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

8. CONSOLIDATED RESERVES



                                                                 AT DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Consolidated reserves at beginning of year..................  14,375       6,734
Movements during the period:
  Net income attributable to the Group......................   9,253       7,641
                                                              ------      ------
Consolidated reserves at end of year........................  23,628      14,375
                                                              ======      ======


9. OTHER AMOUNTS RECEIVABLE

     Other amounts receivable consists of the following.



                                                                  AT DECEMBER 31,
                                                              -----------------------
                                                               2000         1999
                                                              ------    -------------
                                                                         (UNAUDITED)
                                                                  
Recoverable VAT.............................................   5,282       12,647
Settlement accounts receivable..............................  39,303           --
Income tax refund receivable................................   1,314          245
Other.......................................................     720          566
                                                              ------       ------
          Total other amounts receivable....................  46,619       13,458
                                                              ======       ======


     At December 31, 1999 Europay had recoverable value added tax, or VAT, for
the third and fourth quarters of 1999, whereas at December 31, 2000 only the
recoverable VAT for the fourth quarter of 2000 was receivable.

     In 2000 a same day settlement service called "Euro D0" for euro-currency
transactions was implemented. This new service results in settlement receivables
and payables arising from the two-day delay in the settlement of issued and
acquired transactions between euro-currency members that settle on a same-day
basis and non-euro currency members that settle two days later. See Note 14 for
Euro D0 settlement payables.

10. INVESTMENTS AND DEPOSITS

     Europay had a short-term deposit at December 31, 1999 of E6,951 ($7,000) at
5.35% that matured on January 4, 2000.

     The E1,852 investment at December 31, 2000 consists of foreign currency
option premiums paid to cover future cash flows denominated in U.S. dollars.
Option premium payments are recorded as short-term investments whereas option
premiums received are recorded as deferred income.

     At December 31, 2000 Europay made a loss provision for E583 on a written
option for the difference between the strike price of the option and the closing
U.S. dollar exchange rate. This loss provision is included in provisions for
liabilities and charges in the Consolidated Balance Sheet at December 31, 2000
and in net other financial income/(expense) in the Consolidated Statement of
Income for the year then ended.

     In January 1999 Europay bought a 12-month forward exchange contract for the
purchase of U.S. dollars, which matured in December 1999. A gain of E5,509
realized on this contract is included in net other financial income/(expense) in
the Consolidated Statement of Income for the year ended December 31, 1999.

                                       F-49

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     The notional and estimated fair values of the outstanding derivative
contracts at December 31, 2000 and 1999 are as follows:



                                              AT DECEMBER 31, 2000      AT DECEMBER 31, 1999
                                             ----------------------    ----------------------
                                             NOTIONAL    FAIR VALUE    NOTIONAL    FAIR VALUE
                                             --------    ----------    --------    ----------
                                                                            (UNAUDITED)
                                                                       
Options
  Written put U.S. dollar..................   53,333       2,271         --           --
  Written call U.S. dollar.................   18,824          33
  Purchased call U.S. dollar...............   44,735         359         --           --
Forwards...................................       --          --         --           --


11. CASH AT BANK AND IN HAND AND BANK OVERDRAFTS

     Cash at bank and in hand consists of the following:



                                                                 AT DECEMBER 31,
                                                              ----------------------
                                                               2000         1999
                                                              -------    -----------
                                                                         (UNAUDITED)
                                                                   
Cash........................................................   73,234       8,381
Member security deposits....................................   38,883      24,863
                                                              -------      ------
          Total cash at bank and on hand....................  112,117      33,244
                                                              =======      ======


     Cash includes E47,210 of cash on Europay's settlement bank accounts from
Euro D0 (described in Note 9 above) and other new settlement service operations
that commenced in 2000.

     Europay requires and holds security deposits from certain members in order
to ensure proper settlement of their transactions. The deposits are in euros or
U.S. dollars and are placed on-call at market interest rates. At December 31,
2000 the applicable interest rates were 4.33% on euro deposits and 5.99% on U.S.
dollar deposits. These amounts are fully offset by corresponding liabilities
included in other amounts payable in the Consolidated Balance Sheets (see Note
14). The 1999 to 2000 increase is primarily due to the addition of new members
in Eastern Europe.

     The bank overdrafts consist of the following:



                                                                 AT DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Overdraft on corporate bank accounts........................       2        737
Overdraft on settlement bank accounts.......................  37,787         --
                                                              ------        ---
          Total bank overdrafts.............................  37,789        737
                                                              ======        ===


     The overdraft on settlement bank accounts is due to Euro D0 (described in
Note 9 above) and other new settlement service operations that commenced in
2000. Overdrafts on corporate bank accounts are subject to an interest rate of
the Euro OverNight Index Average (Eonia) + 0.5% p.a.

                                       F-50

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

12. MINORITY INTEREST

     MasterCard has a 15% shareholding in European Payment Systems Services
("EPSS"), Europay's transaction processing subsidiary, for which a minority
interest in Europay is determined as follows:



                                                                AT DECEMBER 31,
                                                              --------------------
                                                              2000        1999
                                                              -----    -----------
                                                                       (UNAUDITED)
                                                                 
15% interest in the capital of EPSS.........................  1,562       1,562
Minority share in the profits of EPSS
  Accumulated results.......................................    804         550
  Result for the year.......................................    253         254
                                                              -----       -----
          Total minority interest...........................  2,619       2,366
                                                              =====       =====


13. CREDIT LINES

     Europay has credit lines available amounting to E35,000 at December 31,
2000 (E24,789 at December 31, 1999) with the following interest rate conditions,
which are based on the Euro Interbank Offered Rate (Euribor):




                                              
Straight loans for periods up to 6 months:       Euribor + 0.0625% p.a.
Straight loans for periods from 6 to 12 months:  Euribor + 0.125%


     Europay had no borrowings on these credit lines at December 31, 2000.

14. OTHER AMOUNTS PAYABLE

     Other amounts payable consists of the following.



                                                                 AT DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Settlement accounts payable, see Note 9.....................  47,577          --
Liability for member security deposits, see Note 11.........  38,883      24,863
Loans from members, see Note 15.............................   2,533          --
Other.......................................................     756         446
                                                              ------      ------
          Total other amounts payable.......................  89,749      25,309
                                                              ======      ======


15. LONG TERM LIABILITIES

     At December 31, 1999 Europay had long-term loans outstanding from members
amounting to E2,533 which are interest free with no fixed repayment date.
Europay will repay these loans in 2001; consequently, the loans have been
reclassified as current and are included in other amounts payable in the
Consolidated Balance Sheet at December 31, 2000 (see Note 14).

     The balance of E244 at December 31, 2000 represents an invoice for a
sponsorship campaign that is payable in 2002.

                                       F-51

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

16. COMMITMENTS

     In addition to the future lease payments summarized in Note 6, Europay has
entered into other contractual obligations, which are estimated to be payable in
the following years:



YEAR                                                     SPONSORSHIP    OTHER    TOTAL
----                                                     -----------    -----    ------
                                                                        
2001...................................................    18,147       1,703    19,850
2002...................................................    20,426          --    20,426
2003...................................................    10,907          --    10,907
                                                           ------       -----    ------
          Total........................................    49,480       1,703    51,183
                                                           ======       =====    ======


17. AVERAGE NUMBER OF PERSONS EMPLOYED AND PERSONNEL CHARGES



                                                           YEARS ENDED DECEMBER 31,
                                                     ------------------------------------
                                                      2000        1999           1998
                                                     ------    -----------    -----------
                                                               (UNAUDITED)    (UNAUDITED)
                                                                     
PERSONNEL BY CATEGORY
Employees..........................................     560         526            466
Management personnel...............................       8           8              7
                                                     ------      ------         ------
  Average number of persons employed...............     568         534            473
                                                     ======      ======         ======
REMUNERATION, SOCIAL SECURITY AND PENSIONS.........  58,902      50,741         41,017
                                                     ======      ======         ======


     Management personnel consist of the directors of Europay and all other
staff are included in the employees category.

     In 2000 Europay provided E1,479 for obligations arising from severance
agreements with employees, of which E127 is included in operating expenses and
E1,353 is included in extraordinary income/(charges) in the Consolidated
Statement of Income for the year ended December 31, 2000. The liability for
these obligations is included as part of the provisions for liabilities and
charges in the Consolidated Balance Sheet at December 31, 2000.

18. TAXATION

     The reconciliation of the 2000, 1999 and 1998 income tax charges compared
to the statutory rate of 40.17% is as follows:



                                                           YEARS ENDED DECEMBER 31,
                                                     ------------------------------------
                                                      2000        1999           1998
                                                     ------    -----------    -----------
                                                               (UNAUDITED)    (UNAUDITED)
                                                                     
Consolidated profit for year before taxation.......  17,111      14,616          2,035
                                                     ======      ======          =====
Taxes at statutory rate of 40.17%..................   6,873       5,871            817
Adjusted for the tax effect of:
  Disallowed expenses..............................     656         735            940
  Penalties for insufficient tax prepayments.......       1         115             --
  Non-taxable reversal of investment loss
     provision.....................................     (74)         --             --
  Non-taxable loss in consolidated subsidiary......       5          --             --
  Tax adjustments..................................     (13)         --             53
  Tax surplus for prior years......................      (1)         --            (63)
                                                     ------      ------          -----
Tax charge for the year............................   7,447       6,721          1,747
                                                     ======      ======          =====
Effective tax rate.................................    43.5%       46.0%          85.8%
                                                     ======      ======          =====


                                       F-52

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     Included in the consolidated tax charge for the year ended December 31,
2000 is deferred tax amounting to E2,792 related to the capitalization of
internally developed software, net of related amortization expense for the year.

19. ALLIANCE AGREEMENT WITH MASTERCARD INTERNATIONAL INCORPORATED

     On November 14, 1996, Europay entered into an Alliance Agreement with
MasterCard pursuant to which Europay has been granted exclusive licensing rights
for the MasterCard brand in Europe and is responsible for the overall management
of the MasterCard brand within the European region. In accordance with this
agreement:

     (a) Europay took over from MasterCard the billing of European members for
inter-regional credit program and service transactions as from January 1, 1998
and for inter-regional debit program and service transactions as from January 1,
1999. The Consolidated Statements of Income include revenues generated from
these transactions amounting to E126,606, E111,925 and E74,186 in 2000, 1999 and
1998, respectively.

     (b) Europay is responsible for funding MasterCard's Europe region costs
plus an agreed profit margin. Total MasterCard Europe region charges of
E103,868, E83,172 and E65,099 in 2000, 1999 and 1998, respectively, are included
in services and other goods.

     (c) European members were required to migrate to a new Eurocard/MasterCard
acceptance brand over the three-year period from 1997 to 1999, and MasterCard
compensated the European members for their brand migration efforts through a
Country Migration Fund over the same time period. Europay incurred E4,558 and
E7,557 in advertising and marketing costs related to European members' brand
migration activities in 1999 and 1998, respectively. These costs are included in
services and other goods in the Consolidated Statements of Income. Europay
re-billed MasterCard and recorded related revenues for the full amount of these
costs. These revenues, as well as other revenues and income received from
MasterCard are included in the Consolidated Statements of Income as follows:



                                                             YEARS ENDED DECEMBER 31,
                                                        ----------------------------------
                                                        2000       1999           1998
                                                        ----    -----------    -----------
                                                                (UNAUDITED)    (UNAUDITED)
                                                                      
Revenue
  Country Migration Fund..............................   --        4,558          7,557
  MasterCard Strategy Fund............................   --            5          2,135
                                                        ---        -----         ------
          Total revenue from MasterCard...............   --        4,563          9,692
                                                        ---        -----         ------
Other operating income
  Debit switch cost sharing...........................   --           --          4,544
  Chip program cost sharing...........................   --           --          1,847
  Marketing funds.....................................   --           --          1,480
  Office rent and services............................  245          118            118
                                                        ---        -----         ------
          Total other operating income from
            MasterCard................................  245          118          7,989
                                                        ---        -----         ------
  Total...............................................  245        4,681         17,681
                                                        ===        =====         ======


     The Consolidated Balance Sheets include receivables from MasterCard of
E2,401 and E4,284 and payables to MasterCard of E11,955 and E4,194 at December
31, 2000 and 1999, respectively.

                                       F-53

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

20. SUBSEQUENT EVENT, PROPOSED INTEGRATION WITH MASTERCARD INCORPORATED

     Europay's shareholders are considering entering into an integration
agreement with MasterCard Incorporated and MasterCard International that
provides for MasterCard Incorporated to acquire all of Europay's capital stock
in exchange for class A redeemable and class B convertible common stock of
MasterCard Incorporated (the "integration").

     The integration is conditioned upon the merger of MasterCard International
with a subsidiary of MasterCard Incorporated and the exchange of existing
principal and association memberships in MasterCard International for new class
A membership interests in MasterCard International and shares of class A
redeemable and class B convertible common stock of MasterCard Incorporated (the
"conversion"), the approval of Europay's shareholders, and other customary
closing conditions. Upon completion of the conversion and integration, the
European principal members of MasterCard International will own 33 1/3% of the
outstanding capital stock of MasterCard Incorporated and the non-European
members will own 66 2/3%.

     Following the completion of the conversion and integration, the Alliance
Agreement between Europay and MasterCard described in Note 19 above will be
terminated.

     As of May 22, 2001 the conversion and integration have not occurred.

21. SUBSEQUENT EVENT, TAX NOTICE

     In April 1999 the Belgian tax authorities initiated an investigation of
Europay's tax returns for 1997 and 1998. In June 2001, Europay received a notice
from the Belgian tax authorities challenging Europay's deduction of certain
card-based incentive program costs totaling E10.4 million in 1997 and E13.4
million in 1998. The aggregate tax liability claimed in the notice approximates
E16.3 million, including possible penalties and interest accrued to December 31,
2000. Based on the methodology and assertions used by the Belgian tax
authorities in determining the possible tax liability for 1997 and 1998, Europay
has estimated the possible impact for 1999 and 2000 to be a further additional
tax liability of up to approximately E9.5 million, including possible penalties.
Interest will accrue on any additional amounts to be paid at a per annum rate of
7% until settlement. Interest on additional amounts will begin to accrue on July
1 of the second fiscal year following the fiscal year in which the deduction to
which the additional amount relates was made.

     Europay believes that it has reasonable and meritorious arguments in favor
of its characterization of these deductions and has submitted a vigorous
response to the notice.

     In the event that Europay is unsuccessful in appealing the findings of the
Belgian tax authorities in their investigation, under certain circumstances
MasterCard International could, under its bylaws, levy an assessment upon its
European members for the additional tax liability to the extent that it,
together with other losses and liabilities arising out of the representations
and warranties of Europay in the draft integration agreement, exceeds $7 million
in the aggregate.

     Europay cannot predict the outcome of this matter or any additional matters
that may be raised by the Belgian tax authorities. Europay believes that it is
not currently possible to estimate the impact, if any, that the ultimate
resolution of these matters will have on its financial position or results of
operations.

22. SUMMARY OF DIFFERENCES BETWEEN BELGIUM AND UNITED STATES GENERALLY ACCEPTED
    ACCOUNTING PRINCIPLES

     The accompanying consolidated financial statements have been prepared in
accordance with Belgian GAAP, which differ in certain material respects from
accounting principles generally accepted in the United States of America ("U.S.
GAAP"). These differences involve methods for measuring the amounts shown in the
financial statements, as well as additional disclosures required by U.S. GAAP.
                                       F-54

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     U.S. GAAP RECONCILING ITEMS TO CONSOLIDATED NET INCOME AND TOTAL
SHAREHOLDERS' EQUITY.

     The following is a summary of the material adjustments to profit on
ordinary activities after taxation and shareholders' equity that would have been
required in applying the significant differences between Belgian and U.S. GAAP.

            RECONCILIATION OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS
                   (IN E THOUSANDS EXCEPT EARNINGS PER SHARE)



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                              NOTES     2000        1999
                                                              -----    ------    -----------
                                                                                 (UNAUDITED)
                                                                        
Profit on ordinary activities after taxation as reported
  under Belgian GAAP........................................            9,253       7,641
U.S. GAAP adjustments:
  Pensions..................................................   (a)       (558)        328
  Capitalization of borrowing costs, net....................   (c)        (35)        (64)
  Depreciation of fixed assets..............................   (d)        508         577
  Internally developed software costs, net..................   (e)       (227)      1,183
  Financial instruments.....................................   (f)     (1,600)         --
  Leases, net...............................................   (g)        691        (418)
  Capitalization of intangible assets.......................   (h)        513          --
  Financial assets..........................................   (i)        255         (56)
  Licensing fee revenue recognition.........................   (j)       (845)         --
                                                                       ------       -----
Net U.S. GAAP adjustments before deferred taxes.............           (1,298)      1,550
  Deferred taxes: effects of differences in methodology and
     adjustments............................................   (b)        802        (645)
                                                                       ------       -----
  Net income under U.S. GAAP before cumulative effect of
     change in accounting principle.........................            8,757       8,546
  Cumulative effect of change in accounting principle, net
     of tax.................................................   (j)     (3,100)         --
                                                                       ------       -----
Net income under U.S. GAAP..................................            5,657       8,546
                                                                       ======       =====
Earnings per share in accordance with U.S. GAAP:............   (k)
  Basic and diluted.........................................               57          85
Weighted average number of shares outstanding (in thousands
  of shares):
  Basic and diluted.........................................              100         100

Net income per U.S. GAAP....................................            5,657       8,546
Other Comprehensive income, net of tax:
  Translation adjustment....................................               15          --
                                                                       ------       -----
  Total other comprehensive income..........................               15          --
                                                                       ------       -----
Comprehensive income under U.S. GAAP........................   (l)      5,672       8,546
                                                                       ======       =====


                                       F-55

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

              RECONCILIATION OF CONSOLIDATED SHAREHOLDER'S EQUITY



                                                                            YEARS ENDED
                                                                           DECEMBER 31,
                                                                       ---------------------
                                                              NOTES     2000        1999
                                                              -----    ------    -----------
                                                                                 (UNAUDITED)
                                                                        
Total shareholders' equity reported under Belgian GAAP......           41,857      31,986
U.S. GAAP adjustments:
  Pensions..................................................   (a)        297         855
  Deferred taxes............................................   (b)     (4,696)     (5,498)
  Capitalization of borrowing costs, net....................   (c)      2,414       2,449
  Depreciation of fixed assets..............................   (d)      6,568       6,060
  Internally developed software costs, net..................   (e)        956       1,183
  Financial instruments.....................................   (f)     (1,600)         --
  Leases, net...............................................   (g)      3,830       3,139
  Capitalization of intangible assets.......................   (h)       (567)       (860)
  Financial assets..........................................   (i)       (184)        (56)
  Licensing fee revenue recognition.........................   (j)       (845)         --
                                                                       ------      ------
Net U.S. GAAP adjustments before cumulative effect of change
  in accounting principle...................................            6,173       7,272
                                                                       ------      ------
Shareholders' equity under U.S. GAAP before cumulative
  effect of change in accounting principle..................           48,030      39,258
Cumulative effect of change in accounting principle, net of
  tax.......................................................   (j)     (3,100)         --
                                                                       ------      ------
Shareholders' equity under U.S. GAAP........................           44,930      39,258
                                                                       ======      ======


         MOVEMENTS IN SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP



                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Balance, beginning of year..................................  39,258      30,712
Net income..................................................   5,657       8,546
Other comprehensive income..................................      15          --
                                                              ------      ------
Balance, end of year........................................  44,930      39,258
                                                              ======      ======


     A summary of the principal differences and additional disclosures
applicable to Europay are set out below:

  (a) Pensions

     Under Belgian GAAP, enterprises are required to make provision for their
obligations relating to retirement or survivors' pensions, early-retirement and
other similar pensions or allowances. However, enterprises are also bound by law
to fund their pension obligations with an independent pension fund or insurance
company. Consequently, the practice in Belgium is to expense as incurred the
premium charged by the insurance company or pension fund, on the assumption that
the amount of the premium constitutes an appropriate measure of the economic
cost of their pension obligations for the period concerned.

                                       F-56

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     Under U.S. GAAP, the annual pension cost comprises the estimated cost of
benefits accruing in the period as determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 87, which requires readjustment of the
significant actuarial assumptions annually to reflect current market and
economic conditions. Under SFAS No. 87, a pension asset representing the excess
plan assets over benefit obligations is recognized in the balance sheet. The
pension benefit obligation is calculated by using a projected unit credit
method. Actuarial gains or losses within a 10% "corridor" are recognized. In
addition, in cases where the accumulated benefit obligation exceeds the
unamortized prior service cost, Europay has recorded the excess as a separate
component of shareholders' equity.

     The net periodic pension cost under U.S. GAAP for Europay's defined benefit
pension plan is as follows:

                     COMPONENTS OF NET PERIOD BENEFIT COST



                                                                  YEARS ENDED
                                                                  DECEMBER 31,
                                                              --------------------
                                                              2000        1999
                                                              -----    -----------
                                                                       (UNAUDITED)
                                                                 
Service cost................................................  1,963       1,675
Interest cost...............................................    482         404
Expected return on plan assets..............................   (551)       (437)
Amortization of transition obligation.......................    117         117
Amortization of net (gain)/loss.............................   (179)       (150)
Amortization of prior service cost..........................     92          92
                                                              -----       -----
Net periodic benefit cost...................................  1,924       1,701
                                                              =====       =====


     Changes in the projected benefit obligation and plan assets during the year
were as follows:

                    CHANGES IN PROJECTED BENEFIT OBLIGATION



                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Benefit obligation at beginning of year.....................   9,228       8,487
Service cost................................................   1,963       1,675
Interest cost...............................................     482         404
Actuarial (gains)/losses....................................     205        (206)
Benefits paid...............................................    (964)     (1,132)
                                                              ------      ------
Benefits obligation at end of year..........................  10,914       9,228
                                                              ======      ======


                                       F-57

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

                             CHANGES IN PLAN ASSETS



                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                               2000        1999
                                                              ------    -----------
                                                                        (UNAUDITED)
                                                                  
Fair value of plan assets at beginning year.................  10,437       8,761
Actual return on plan assets................................     758         779
Employer contributions......................................   1,366       2,029
Benefits paid...............................................    (964)     (1,132)
                                                              ------      ------
Fair value of plan assets, end of year......................  11,597      10,437
                                                              ======      ======


     The funded status under U.S. GAAP for Europay's defined benefit pension
plan is as follows:

                                 FUNDED STATUS



                                                              YEARS ENDED DECEMBER 31,
                                                              ------------------------
                                                                2000          1999
                                                              --------    ------------
                                                                          (UNAUDITED)
                                                                    
Fair value of plan assets...................................   11,597        10,437
Projected benefit obligation................................  (10,914)       (9,228)
                                                              -------        ------
Funded status...............................................      683         1,209
Unrecognized net actuarial (gain) loss......................   (2,342)       (2,518)
Unrecognized prior service cost.............................      510           601
Unrecognized transition amount..............................    1,446         1,563
                                                              -------        ------
Prepaid (accrued) benefit cost..............................      297           855
                                                              =======        ======


     The weighted-average assumptions used to determine pension cost for
Europay's defined benefit pension plan were as follows:



                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                              2000       1999
                                                              ----    -----------
                                                                      (UNAUDITED)
                                                                
Discount rate...............................................  5.50%      5.00%
Expected rate of return of plan assets: on financing
  funds.....................................................  5.50%      5.00%
Expected rate of return of plan assets: on mathematical
  reserves..................................................  4.75%      4.75%
Expected rate of compensation increase......................  4.50%      4.50%
                                                              ====       ====


  (b) Deferred Tax

     Under Belgian GAAP, deferred tax liabilities on consolidation entries
should be recorded when it is probable that a tax charge will effectively be
incurred in the foreseeable future.

     Under U.S. GAAP, deferred tax is provided for on a full liability basis.
Under the full liability method, deferred tax assets or liabilities are
recognized for differences between the financial and tax basis of assets and
liabilities and for tax loss carry forwards at the statutory rate at each
reporting date. A valuation allowance is established when it is more likely than
not that some portion or all of the deferred tax assets will not be realized.

                                       F-58

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

  (c) Capitalization of Borrowing Costs

     Under Belgian GAAP, an entity may choose between capitalizing or not
capitalizing interest on specific borrowings to finance the construction of
individual qualifying assets. Europay does not capitalize interest cost as part
of the historical cost of its qualifying construction projects.

     Under U.S. GAAP, interest recognized on borrowings and other obligations
must be capitalized for assets that are produced under a discrete project and
require a substantial period of time to get ready for their intended use or
sale. The amount of interest eligible for capitalization is determined as either
the actual cost incurred on a specific borrowing or the weighted average of the
rates applicable for all the general borrowings outstanding during the period.
The total amount of interest cost capitalized in each period is limited to the
total amount of interest cost incurred in that period.

     The adjustment to net income under U.S. GAAP reflects the decrease in
interest expense for the period as well as the increase in depreciation expense
on the constructed assets. The adjustment to shareholders' equity under U.S.
GAAP reflects the amount of interest capitalized on constructed assets, net of
depreciation.

  (d) Depreciation of Fixed Assets

     Under Belgian GAAP, Europay depreciates its fixed assets for a full year in
the year of acquisition under the straight-line basis. Further, Europay may
depreciate an asset during the period of its construction or development
regardless of whether the asset is substantially ready for its intended use.
Prior to 1999 Europay depreciated assets during the period of construction
regardless of when the asset was substantially ready for its intended use.

     Under U.S. GAAP, fixed assets are depreciated from the date of acquisition
on a straight-line basis. Constructed assets are depreciated on a straight-line
basis when substantially complete. For purposes of the U.S. GAAP reconciliation,
Europay has applied the half-year convention method whereby a half-year of
depreciation is taken in the year of acquisition and in the year of disposal.
Additionally, a constructed asset is depreciated when it is substantially ready
for its intended use.

  (e) Internally Developed Software Costs

     Under Belgian GAAP, costs relating to internally developed software are
capitalized when it can be demonstrated that:

     - The product or process is useful;

     - The product or process is clearly defined;

     - Costs related to the project are clearly identified,

     - The project is technically feasible; and

     - Financial resources are available to complete the project.

     Under U.S. GAAP, certain costs to develop or obtain internal-use software
should be capitalized when the preliminary project stage is completed,
management implicitly or explicitly authorizes and commits to funding a computer
software project and it is probable that the project will be completed. Costs of
computer software developed or obtained for internal use that can be capitalized
include external direct material and service costs, payroll and payroll-related
costs for employees who devote time to the internal-use computer software
project and interest costs incurred while developing internal-use computer
software. Capitalized costs are amortized under a straight-line basis over the
expected useful life of the software.

                                       F-59

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

     The 1999 addition to net income and shareholders' equity under U.S. GAAP
reflects the excess of capitalized internal software development costs over the
related amortization expense (see Note 5). This excess was due to the fact that
nearly all of the capitalized internally developed software was in progress at
the end of 1999 and was not completed and placed in service until 2000.

  (f) Financial Instruments

     Under Belgian GAAP, premiums paid and received on option contracts intended
to reduce (hedge) foreign exchange risk on future U.S. dollar payments are
deferred. Option contracts that do not qualify as risk reducing (non-hedge) are
accounted for using the lower of cost or market approach.

     Under U.S. GAAP, gains and losses related to derivative instruments that
satisfy the criteria for hedge accounting are recognized in the same period as
gains and losses on the hedged item. Upon termination of the derivative, any
gains and losses are deferred and amortized to profit and loss over the
remaining life of the hedged item. Derivatives that do not qualify for hedge
accounting are recorded on the balance sheet at fair value with gains and losses
immediately included in earnings.

     The adjustment to net income under U.S. GAAP reflects the fact that certain
contracts accounted for by Europay as hedges do not meet the criteria for hedge
accounting under U.S. GAAP. In addition, premiums paid for hedge contracts are
carried at cost by Europay, whereas they are amortized over the life of the
derivative contract under U.S. GAAP.

  (g) Leases

     Under Belgian GAAP, a capital lease is deemed to exist when the sum of the
minimum lease payments is equal to or greater than the lessor's investment in
the leased asset, including related interest and other transaction costs.

     Under U.S. GAAP, a capital lease is deemed to exist when any of the
following criteria are met:

     - The present value of the minimum lease payments is greater than or equal
       to 90% of the fair value of the asset at the inception of the lease, or

     - The length of the lease period is greater than or equal to 75% of the
       asset's estimated useful economic life, or

     - The transfer of ownership of the asset to the lessee by the end of the
       lease term, or

     - The existence of a bargain purchase option.

     The adjustment to net income under U.S. GAAP reflects a decrease in rental
expense and an increase in depreciation expense related to the capitalized
leased assets. The adjustment to shareholders' equity under U.S. GAAP reflects
the capitalization of the net present value of the minimum lease payments using
the interest rate implicit in the lease.

  (h) Capitalization of Intangible Assets

     Europay recognized the initial contributions to a joint venture at fair
value of the assets contributed. As such, any contribution of "know-how" is
recognized at fair value by both Europay and the joint venture. Further, Europay
recognizes its proportionate share of expenses associated with the amortization
of "know-how" recorded by the joint venture. See Note 5 for additional
information.

     Under U.S. GAAP, initial contributions to a joint venture should generally
be recorded at cost, i.e., the amount of cash contributed or net book value of
non-cash assets contributed.

                                       F-60

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

  (i) Financial Assets

     Under Belgian GAAP, Europay recorded a loss in value of an investment
accounted for under the equity method. Losses must be subsequently reversed.
Dividends to be received from an equity investee are accrued as income when
declared. See Note 7 for additional information.

     Under U.S. GAAP, a loss in value of an investment, accounted for under the
equity method, which is other than temporary should be recognized. Recognized
losses are not subsequently reversed based on subsequent events or economic
developments. Dividends from an investee accounted for under the equity method
are recognized when declared as a reduction in the carrying amount of the
investment. Europay's share of earnings or losses from equity investees is
recognized as an adjustment to the carrying amount of the investment.

  (j) Licensing Fee Revenue Recognition

     Under Belgian GAAP, revenue from licensing fees is recognised immediately
upon invoicing of customers.

     Under U.S. GAAP, licensing fees are earned as services are delivered and
performed over the term of the arrangement or the expected period of performance
and generally should be deferred and recognized systematically over the periods
that the fees are earned.

     The adjustment to net income and shareholders' equity under U.S. GAAP
reflects the deferral and recognition of licensing revenue over the life of the
licensing arrangement for the current year.

     The cumulative effect adjustment to net income and shareholders' equity
under U.S. GAAP reflects the cumulative adjustment, net of tax effects, related
to the deferral and proportionate recognition of licensing revenue upon adoption
of SAB 101.

  (k) Earnings Per Share

     Belgian GAAP does not require the presentation of earnings per share (EPS).

     Under U.S. GAAP, basic and diluted earnings per share must be disclosed for
companies that file public reports under the U.S. federal securities laws. Basic
EPS is calculated as profit available to common shareholders, divided by the
weighted average number of shares in issue during the period. To calculate
diluted EPS, earnings are adjusted for the after-tax amount of dividends and
interest recognized in the period in respect of the dilutive potential on
ordinary shares and for any other changes in income or expense that would result
from the conversion of the dilutive potential ordinary shares. The conversion is
deemed to have occurred at the beginning of the period or, if later, the date of
the issue of potential ordinary shares.

  (l) Comprehensive Income

     Belgian GAAP does not require the presentation of comprehensive income.

     U.S. GAAP requires disclosure of the components of total comprehensive
income in the period in which they are recognized in the financial statements.
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise arising from transactions and other events and circumstances
from non-owner sources. It includes all changes in shareholders' equity during
the reporting period except those resulting from investments by owners and
distributions to owners.

                                       F-61

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

Revenue Recognition

     Under Belgian GAAP, revenue earned and related cost of sales incurred while
acting as an agent may be presented on a gross basis in the statement of income.

     Under U.S. GAAP, revenue and related cost of sales should be presented
gross if Europay acts as a principal in the transactions and has the risk and
rewards of ownership. Europay acts as an agent on behalf of MasterCard
International for the billing and collection of inter-regional transactions with
members. Europay does not bear the risk and rewards of ownership related to
these transactions and therefore revenue and related costs should be reported
net under U.S. GAAP. The impact would be a reduction in revenue of E126,606 and
E111,925, net of a reduction in MasterCard costs included in services and other
goods of E103,868 and E83,172 for the years ended December 31, 2000 and 1999,
respectively.

Extraordinary Items

     Items classified as extraordinary under Belgian GAAP do not meet the
definition of "extraordinary" under U.S. GAAP and, accordingly, are classified
as operating expenses under U.S. GAAP.

Cash Flow Information

     Under Belgian GAAP, a presentation of cash flows is considered voluntary.
The statement of cash flows presented in the financial statements has been
prepared in accordance with IAS 7. This presentation is acceptable under Belgian
GAAP.

     Under U.S. GAAP a statement of cash flows is required to be present in
accordance with SFAS No. 95. Interest paid and received and dividends received
are shown as operating activity cash flows, while dividends paid are shown as
financing cash flows.

     A summary of Europay's operating, investing and financing activities,
classified in accordance with U.S. GAAP is as follows:



                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                                2000          1999
                                                              --------    ------------
                                                                          (UNAUDITED)
                                                                    
Net cash provided by operating activities...................   65,234        49,216
Net cash provided by (used in) investing activities.........  (22,321)      (21,720)
Net cash provided by (used in) financing activities.........   35,960       (19,940)
                                                              -------       -------
Net increase in cash and cash equivalents...................   78,873         7,556
Cash and cash equivalents under U.S. GAAP, beginning of
  year......................................................   33,244        25,688
                                                              -------       -------
Cash and cash equivalents under U.S. GAAP, end of year......  112,117        33,244
                                                              =======       =======


Recently Issued Accounting Standards

     United States

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities." Europay
has reviewed the effect of the implementation of SFAS 133, as amended by SFAS
138 and related implementation guidance. This statement requires Europay to
recognize all derivatives in the consolidated balance sheet measuring these
derivatives at fair value. The recognition of the change in the fair value of a
derivative depends on a number of factors, including the intended use of the
derivative and the extent to which it is effective as part of a hedge
transaction. SFAS 133

                                       F-62

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)

is effective for Europay for the fiscal year commencing January 1, 2001. Europay
intends to continue to pursue hedge accounting under SFAS 133.

     Europay estimates that it will record a net-of-tax cumulative-effect-type
adjustment of E548 (loss) in earnings to recognize at fair value all derivative
instruments that will be designated as cash flow hedging instruments upon
adoption of SFAS 133.

                                       F-63


                           EUROPAY INTERNATIONAL S.A.

              UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

                 AS OF JUNE 30, 2001 AND DECEMBER 31, 2000 AND

                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

                                       F-64


                           EUROPAY INTERNATIONAL S.A.

                      CONSOLIDATED INTERIM BALANCE SHEETS
                                (IN E THOUSANDS)



                                                                                  AS OF
                                                                       ---------------------------
                                                                        JUNE 30,      DECEMBER 31,
                                                              NOTES       2001            2000
                                                              -----    -----------    ------------
                                                                       (UNAUDITED)
                                                                             
ASSETS
NON CURRENT ASSETS
Intangible assets...........................................    2         11,534          8,825
Fixed assets................................................    3         33,387         34,133
Financial assets............................................               2,027          2,029
                                                                         -------        -------
  Total Non Current Assets..................................              46,948         44,987
                                                                         -------        -------
CURRENT ASSETS
Amounts receivable within one year
  Trade debtors.............................................              36,581         45,915
  Other amounts receivable..................................    5         75,636         46,619
                                                                         -------        -------
     Total amounts receivable within one year...............             112,217         92,534
Investments and deposits....................................    6          7,200          1,852
Cash at bank and in hand....................................    7        107,944        112,117
Deferred charges and accrued income.........................               2,123          2,679
                                                                         -------        -------
  Total Current Assets......................................             229,484        209,182
                                                                         -------        -------
TOTAL ASSETS................................................             276,432        254,169
                                                                         =======        =======

CAPITAL AND RESERVES AND LIABILITIES
CAPITAL AND RESERVES
Issued Capital..............................................              17,611         17,611
Consolidated reserves.......................................    4         28,272         23,628
Consolidation difference....................................                 383            383
Cumulative translation adjustment...........................                 291            235
                                                                         -------        -------
  Total Capital and Reserves................................              46,557         41,857
                                                                         -------        -------
MINORITY INTEREST...........................................               2,726          2,619
                                                                         -------        -------
PROVISION FOR LIABILITIES AND CHARGES.......................    6          1,272          2,301
                                                                         -------        -------
DEFERRED TAX................................................               3,857          2,792
                                                                         -------        -------
CREDITORS
Amounts payable within one year
  Bank overdrafts and loans.................................    7         78,253         37,789
  Suppliers.................................................              45,059         63,587
  Taxes.....................................................               1,643          2,150
  Remuneration and social security..........................   10          9,249          9,932
  Other amounts payable.....................................    8         87,236         89,749
                                                                         -------        -------
     Total amounts payable within one year..................             221,440        203,207
Accrued charges and deferred income.........................                  86          1,149
Amounts payable after one year..............................                 494            244
                                                                         -------        -------
  Total Creditors...........................................             222,020        204,600
                                                                         -------        -------
TOTAL CAPITAL AND RESERVES AND LIABILITIES..................             276,432        254,169
                                                                         =======        =======


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-65


                           EUROPAY INTERNATIONAL S.A.

                   CONSOLIDATED INTERIM STATEMENTS OF INCOME
                                (IN E THOUSANDS)



                                                                           SIX MONTHS
                                                                         ENDED JUNE 30,
                                                                       ------------------
                                                              NOTES     2001       2000
                                                              -----    -------    -------
                                                                          (UNAUDITED)
                                                                         
OPERATING INCOME
Revenue.....................................................           191,095    168,003
Capitalization of intangible assets.........................     2       3,681      4,045
Other operating income......................................             2,170      1,790
                                                                       -------    -------
  Total operating income....................................           196,946    173,838
                                                                       -------    -------
OPERATING EXPENSES
Services and other goods....................................           156,653    135,503
Remuneration, social security and pension costs.............    10      31,310     29,199
Depreciation and amortization expense.......................  2, 3       5,412      4,584
Bad debt expense............................................               868         --
Other operating expenses....................................             1,192      1,433
                                                                       -------    -------
  Total operating expenses..................................           195,435    170,719
                                                                       -------    -------
OPERATING PROFIT............................................             1,511      3,119
FINANCIAL INCOME/(EXPENSE)
Interest income.............................................               478        342
Net other financial income/(expense)........................     6       6,978       (748)
Interest expense............................................            (1,377)      (143)
                                                                       -------    -------
  Net financial income/(expense)............................             6,079       (549)
                                                                       -------    -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION...............             7,590      2,570
EXTRAORDINARY INCOME/(CHARGES)
Adjustments to amounts written off financial assets.........                --        184
Net gain/(loss) on disposal of fixed assets.................                --         (1)
Net use/(establishment) of provisions for liabilities and
  charges...................................................               447         --
Other extraordinary charges.................................                --         (1)
                                                                       -------    -------
  Net extraordinary income/(charges)........................               447        182
                                                                       -------    -------
PROFIT FOR THE FINANCIAL PERIOD BEFORE TAXATION.............             8,037      2,752
INCOME TAXES................................................    11      (3,237)    (1,417)
                                                                       -------    -------
NET INCOME..................................................             4,800      1,335
NET INCOME/(LOSS) FROM EQUITY INVESTEES, NET OF TAX.........               (49)      (415)
MINORITY INTEREST, NET OF TAX...............................              (107)      (210)
                                                                       -------    -------
NET INCOME ATTRIBUTABLE TO THE GROUP........................             4,644        710
                                                                       =======    =======


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-66


                           EUROPAY INTERNATIONAL S.A.

                            SUPPLEMENTAL DISCLOSURE
                 CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                                (IN E THOUSANDS)



                                                                  SIX MONTHS
                                                                ENDED JUNE 30,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                 (UNAUDITED)
                                                                   
OPERATING ACTIVITIES
Profit for the financial period before taxation.............    8,037      2,752
Adjustments to reconcile profit for the financial period
  before taxation to cash provided by/(used in) operating
  activities:
  Adjustments for non-cash (income)/expense:
     Adjustments to amounts written off financial assets....       --       (184)
     Depreciation and amortization expense..................    5,412      4,584
     Net (gain)/loss on disposals of fixed assets...........       --          1
  Changes in operating assets and liabilities:
     Trade debtors..........................................    9,334      8,490
     Other amounts receivable...............................  (29,017)     5,216
     Deferred charges and accrued income....................      556      5,703
     Security deposits......................................        9      1,005
     Suppliers..............................................  (18,528)   (11,701)
     Taxes paid.............................................   (2,679)      (395)
     Remuneration and social security.......................     (683)    (1,417)
     Other amounts payable..................................   (2,513)     7,053
     Accrued charges and deferred income....................   (1,063)    (3,500)
     Provision for liabilities and charges..................   (1,029)        --
                                                              -------    -------
Net cash provided by/(used in) operating activities.........  (32,164)    17,607
                                                              -------    -------
INVESTING ACTIVITIES
  Acquisitions of intangible assets.........................     (786)      (372)
  Capitalization of intangible assets.......................   (3,681)    (4,045)
  Acquisitions of fixed assets..............................   (2,919)    (4,384)
  Proceeds from sales of fixed assets.......................       11          6
  Investment in affiliates..................................       --         (5)
  Investment in short-term cash deposit.....................   (7,200)   (13,000)
  Proceeds from short-term cash deposit.....................       --      6,951
  Proceeds from investment in foreign currency option.......    1,852         --
                                                              -------    -------
Net cash used in investing activities.......................  (12,723)   (14,849)
                                                              -------    -------
FINANCING ACTIVITIES
  Net change in bank overdrafts.............................   10,464       (737)
  Proceeds from short-term bank loan........................   30,000         --
  Net change in amounts payable after one year..............      250         --
                                                              -------    -------
Net cash provided by/(used in) financing activities.........   40,714       (737)
                                                              -------    -------
Net increase/(decrease) in cash at bank and in hand.........   (4,173)     2,021
Cash at bank and in hand at beginning of year...............  112,117     33,244
                                                              -------    -------
Cash at bank and in hand at end of year.....................  107,944     35,265
                                                              =======    =======


   The accompanying notes are an integral part of these consolidated interim
                             financial statements.
                                       F-67


                           EUROPAY INTERNATIONAL S.A.

               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                         (UNAUDITED AND IN E THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The consolidated interim financial statements for the six months ended June
30, 2001 should be read in conjunction with the consolidated financial
statements of Europay International S.A. ("Europay") for the year ended December
31, 2000. Significant accounting policies disclosed therein have not changed.

     The consolidated interim financial statements for the six months ended June
30, 2001 and 2000 and as of June 30, 2001 are unaudited but in the opinion of
management include all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair statement of Europay's results of
operations and financial positions for the periods and dates presented. The
results of operations for the six months ended June 30, 2001 and 2000 are not
necessarily indicative of the results to be expected for the full years. The
year-end balance sheet has been derived from Europay's audited financial
statements.

2. INTANGIBLE ASSETS



                                                              SOFTWARE     CONCESSIONS,
                                                                AND          PATENTS,
                                                              KNOW-HOW    LICENSES, ETC.
                                                              --------    --------------
                                                                    
ACQUISITION COST
As at December 31, 2000.....................................   27,114         1,823
Movements during the period:
  Acquisitions, including fixed assets, own production......    4,467            --
                                                               ------         -----
As at June 30, 2001.........................................   31,581         1,823
                                                               ------         -----
ACCUMULATED AMORTIZATION AND AMOUNTS WRITTEN DOWN
As at December 31, 2000.....................................   18,289         1,823
Movements during the period:
  Amortization expense......................................    1,758            --
                                                               ------         -----
As at June 30, 2001.........................................   20,047         1,823
                                                               ------         -----
NET CARRYING VALUE AT JUNE 30, 2001.........................   11,534            --
                                                               ======         =====


     Europay capitalized internally developed software amounting to E3,681 and
recorded E1,030 of amortization expense related to capitalized software in the
six months ended June 30, 2001.

3. FIXED ASSETS



                                    LAND        COMPUTER      FURNITURE    OTHER        ASSETS
                                     AND       EQUIPMENT &       AND      TANGIBLE      UNDER
                                  BUILDINGS   INSTALLATIONS   VEHICLES     ASSETS    CONSTRUCTION   TOTAL
                                  ---------   -------------   ---------   --------   ------------   ------
                                                                                  
ACQUISITION COST
As at December 31, 2000.........   39,754         28,017        4,224      8,192          482       80,669
Movements during the period:
  Acquisitions, including fixed
     assets, own construction...      551          1,562          133         29          644        2,919
  Sales and disposals...........       --             --          (32)        --           --          (32)
                                   ------         ------       ------      -----        -----       ------
As at June 30, 2001.............   40,305         29,579        4,325      8,221        1,126       83,556
                                   ------         ------       ------      -----        -----       ------


                                       F-68

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)



                                    LAND        COMPUTER      FURNITURE    OTHER        ASSETS
                                     AND       EQUIPMENT &       AND      TANGIBLE      UNDER
                                  BUILDINGS   INSTALLATIONS   VEHICLES     ASSETS    CONSTRUCTION   TOTAL
                                  ---------   -------------   ---------   --------   ------------   ------
                                                                                  
ACCUMULATED DEPRECIATION AND
  AMOUNTS WRITTEN DOWN
As at December 31, 2000.........   15,989         21,628        2,774      6,145           --       46,536
Movements during the period:
  Expense.......................    1,425          1,787          291        151           --        3,654
  Written down after sales and
     disposals..................       --             --          (21)        --           --          (21)
                                   ------         ------       ------      -----        -----       ------
As at June 30, 2001.............   17,414         23,415       3 ,044      6,296           --       50,169
                                   ------         ------       ------      -----        -----       ------
NET CARRYING VALUE AT JUNE 30,
  2001..........................   22,891          6,164        1,281      1,925        1,126       33,387
                                   ======         ======       ======      =====        =====       ======


4. CONSOLIDATED RESERVES




                                                           
Consolidated reserves at December 31, 2000..................  23,628
Movements during the period:
  Net income attributable to the Group......................   4,644
                                                              ------
Consolidated reserves at June 30, 2001......................  28,272
                                                              ======


5. OTHER AMOUNTS RECEIVABLE

     Other amounts receivable consists of the following:



                                                                 AT            AT
                                                              JUNE 30,    DECEMBER 31,
                                                                2001          2000
                                                              --------    ------------
                                                                    
Recoverable VAT.............................................    4,140         5,282
Settlement accounts receivable..............................   68,520        39,303
Income tax refund receivable................................    1,500         1,314
Other.......................................................    1,476           720
                                                               ------        ------
          Total other amounts receivable....................   75,636        46,619
                                                               ======        ======


     A same day settlement service called "euro D0" for euro-currency
transactions results in settlement receivables and payables arising from the
2-day delay in the settlement of issued and acquired transactions between
euro-currency members that settle on a same-day basis and non-euro currency
members that settle two days later. See Note 7 for a credit line and Note 8 for
payables relating to euro D0 settlement operations.

6. INVESTMENTS AND DEPOSITS

     The E7,200 investment at June 30, 2001 represents a cash deposit from June
29, 2001 to July 2, 2001 at an interest rate of 4.63%.

     The E1,852 investment at December 31, 2000 consists of foreign currency
option premiums paid to hedge future cash flows denominated in U.S. dollars.
Option premium payments are recorded as short-term investments whereas option
premiums received are recorded as deferred income. These options expired during
the six months ended June 30, 2001.

                                       F-69

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

     At December 31, 2000 Europay made a loss provision for E583 on a written
option for the difference between the strike price of the option and the closing
U.S. dollar exchange rate. This loss provision is included in provisions for
liabilities and charges in the Consolidated Balance Sheet at December 31, 2000
and in net other financial income/(expense) in the Consolidated Statement of
Income for the year then ended. This provision was utilized when the option
expired in January 2001.

     The notional and estimated fair values of the outstanding foreign exchange
forward and derivative contracts at June 30, 2001 and December 31, 2000 were as
follows:



                                                AT JUNE 30, 2001        AT DECEMBER 31, 2000
                                             ----------------------    ----------------------
                                             NOTIONAL    FAIR VALUE    NOTIONAL    FAIR VALUE
                                             --------    ----------    --------    ----------
                                                                       
Options:
  Written put U.S. dollar..................       --          --        53,333       2,271
  Written call U.S. dollar.................       --          --        18,824          33
  Purchased call U.S. dollar...............       --          --        44,735         359
Forwards:
  Buy U.S. dollar..........................   33,911       3,396            --          --
  Sell U.S. dollar.........................    8,651         769            --          --


7. CASH AT BANK AND IN HAND AND BANK OVERDRAFTS AND LOANS

     Cash at bank and in hand consists of the following:



                                                                 AT            AT
                                                              JUNE 30,    DECEMBER 31,
                                                                2001          2000
                                                              --------    ------------
                                                                    
Cash........................................................   48,938        73,234
Member security deposits....................................   59,006        38,883
                                                              -------       -------
          Total cash at bank and on hand....................  107,944       112,117
                                                              =======       =======


     Cash includes E46,299 of cash on Europay's settlement bank accounts from
Euro D0 (described in Note 5 above) and other settlement service operations.

     Europay requires and holds security deposits from certain members in order
to ensure proper settlement of their transactions. The deposits are in euros or
U.S. dollars and are placed on-call at market interest rates. At June 30, 2001
the applicable interest rates were 3.25% on euro deposits and 4.08% on U.S.
dollar deposits. These amounts are fully offset by corresponding liabilities
included in other amounts payable in the Consolidated Balance Sheets (see Note
8). The increase for the six-month period is primarily due to the addition of
new members in Eastern Europe.

     The bank overdrafts and loans consist of the following:



                                                                 AT            AT
                                                              JUNE 30,    DECEMBER 31,
                                                                2001          2000
                                                              --------    ------------
                                                                    
Overdraft on corporate bank accounts........................      179             2
Overdraft on settlement bank accounts.......................   48,074        37,787
Fixed term loan.............................................   30,000            --
                                                               ------        ------
          Total bank overdrafts.............................   78,253        37,789
                                                               ======        ======


                                       F-70

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

     The overdraft on settlement bank accounts is due to Euro D0 and other
settlement service operations. Overdrafts on corporate bank accounts are subject
to an interest rate of the Euro OverNight Index Average (Eonia) + 0.5% p.a.

     Europay had two credit lines for a total of E65,000 available at June 30,
2001.

     a) A credit line for operational funding requirements amounting to E35,000
with the following interest rate conditions, which are based on the Euro
Interbank Offered Rate (Euribor):


                                                       
     Straight loans for periods up to 6 months         :     Euribor + 0.0625% p.a.
     Straight loans for periods from 6 to 12                 Euribor + 0.125%
       months                                          :


     Europay had no borrowings on this credit line at June 30, 2001 or December
31, 2000.

     b) A credit line amounting to E30,000 to provide fixed term financing to
fund Euro D0 settlement service operations. Interest rate conditions are agreed
with the bank based on the most favorable market conditions at the time the
credit line is utilized. Europay borrowed E30,000 on this credit line on June
29, 2001 for a fixed term to July 29, 2001 at an interest rate of 4.65%.

8. OTHER AMOUNTS PAYABLE

     Other amounts payable consists of the following:



                                                                 AT            AT
                                                              JUNE 30,    DECEMBER 31,
                                                                2001          2000
                                                              --------    ------------
                                                                    
Settlement accounts payable, see note 5.....................   27,212        47,577
Liability for member security deposits, see note 7..........   59,006        38,883
Loans from Members..........................................       --         2,533
Other.......................................................    1,018           756
                                                               ------        ------
          Total other amounts payable.......................   87,236        89,749
                                                               ======        ======


9. COMMITMENTS

     Europay has entered into operating lease agreements for computer equipment,
automobiles and office buildings and equipment, and a sponsorship agreement for
the UEFA European soccer championships. Obligations relating to these
contractual obligations are estimated to be payable in the following periods:



                                                                     SPONSOR-
PERIOD                                                     LEASES      SHIP      TOTAL
---------------------------------------------------------  ------    --------    ------
                                                                        
July to December 2001....................................   7,897      9,559     17,456
Year ending December 31, 2002............................  13,428     20,264     33,692
Year ending December 31, 2003............................  10,546     10,706     21,252
Year ending December 31, 2004............................   2,572         --      2,572
Year ending December 31, 2005 and after..................   6,833         --      6,833
                                                           ------     ------     ------
          Total..........................................  41,276     40,529     81,805
                                                           ======     ======     ======


10. VARIABLE PAY PROGRAM

     In 2001 Europay introduced a performance-based variable pay program for all
management and staff. Under this program a bonus is paid to an employee on an
annual basis based on the level of achievement of
                                       F-71

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

targeted corporate and personal performance for the year. Europay monitors
performance to corporate targets on a regular basis and accrues for the cost of
the variable pay program when it is probable that the targets will be reached.
Based on year-to-date and projected full year performance E2,445 in variable pay
cost was accrued to June 30, 2001.

11. TAXATION

     The reconciliation of the income tax charges for the six months ended June
30, 2001 and 2000 compared to the statutory rate of 40.17% is as follows:



                                                                SIX MONTHS
                                                              ENDED JUNE 30,
                                                              --------------
                                                              2001     2000
                                                              -----    -----
                                                                 
Consolidated profit for year before taxation................  8,037    2,752
                                                              =====    =====
Taxes at statutory rate of 40.17%...........................  3,228    1,105
Adjusted for the tax effect of:
  Disallowed expenses.......................................    325      312
  Non-taxable loss in consolidated subsidiary...............      4       --
  Tax adjustments from prior years..........................   (320)      --
                                                              -----    -----
Tax charge for the year.....................................  3,237    1,417
                                                              =====    =====
Effective tax rate..........................................   40.3%    51.5%


12. ALLIANCE AGREEMENT WITH MASTERCARD INTERNATIONAL INCORPORATED

     On November 14, 1996, Europay entered into an Alliance Agreement with
MasterCard pursuant to which Europay has been granted exclusive licensing rights
for the MasterCard brand in Europe and is responsible for the overall management
of the MasterCard brand within the European region. In accordance with this
agreement:

     a) Europay took over from MasterCard the billing of European members for
inter-regional credit program and service transactions as from January 1, 1998
and for inter-regional debit program and service transactions as from January 1,
1999. The Consolidated Statements of Income include revenues generated from
these transactions amounting to E77,409 and E61,232 in the six months ended June
30, 2001 and 2000, respectively.

     b) Europay is responsible for funding MasterCard's Europe region costs plus
an agreed profit margin. Total MasterCard Europe region charges of E58,899 and
E52,299 are included in services and other goods in the six months ended June
30, 2001 and 2000, respectively.

     The Consolidated Balance Sheets include receivables from MasterCard of E718
and E2,401 and payables to MasterCard of E3,519 and E11,955 at June 30, 2001 and
December 31, 2000, respectively.

13. THE PROPOSED TRANSACTION

     Europay's shareholders are considering entering into an integration
agreement with MasterCard Incorporated and MasterCard International that
provides for MasterCard Incorporated to acquire all of Europay's capital stock
in exchange for class A redeemable and class B convertible common stock of
MasterCard Incorporated (the "integration").

     The integration is conditioned upon the merger of MasterCard International
with a subsidiary of MasterCard Incorporated and the exchange of existing
principal and association memberships in MasterCard International for new class
A membership interests in MasterCard International and shares of class A

                                       F-72

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

redeemable and class B convertible common stock of MasterCard Incorporated (the
"conversion"), the approval of Europay's shareholders, and other customary
closing conditions. Upon completion of the conversion and integration, the
European principal members of MasterCard International will own 33.3% of the
outstanding capital stock of MasterCard Incorporated and the non-European
members will own 66.7%.

     Following completion of the conversion and integration, the Alliance
Agreement between Europay and MasterCard described in Note 11 above will be
terminated.


     As of February 13, 2002, the conversion and integration have not occurred.


14. TAX NOTICE

     In April 1999, the Belgian tax authorities initiated an investigation of
Europay's tax returns for 1997 and 1998. In June 2001, Europay received a notice
from the Belgian tax authorities challenging Europay's deduction of certain
card-based incentive program costs. Although Europay challenged these findings
in its August 2001 response to the notice, the Belgian tax authorities
reaffirmed their position in a November 2001 letter to Europay and, on December
12, 2001, Europay received a formal notice of assessment imposing an additional
tax liability of approximately E16.9 million, including penalties and interest,
in connection with Europay's tax returns for 1997 and 1998. If Europay's
deduction of such costs in 1999 and 2000 is similarly challenged, this could
result in a further additional tax liability of up to approximately E9.5
million, including possible penalties. Europay intends to appeal this matter
further with the regional tax director in accordance with applicable
administrative procedures. Interest will accrue on any additional amounts to be
paid at a per annum rate of 7% until settlement. Interest on additional amounts
will begin to accrue on July 1 of the second fiscal year following the fiscal
year in which the deductions to which the additional amount relates was made.

     In the event that Europay is unsuccessful in appealing the findings to the
Belgian tax authorities in their investigation, under certain circumstances
MasterCard International could, under its bylaws, levy an assessment on its
European members for the additional tax liability to the extent that it,
together with other losses and liabilities arising out of the representations
and warranties of Europay in the draft integration agreement, exceeds $7 million
in the aggregate.

     Although Europay believes that it has reasonable and meritorious arguments
in favor if its characterization of these deductions, Europay cannot predict the
outcome of this matter or any additional matters that may be raised by the
Belgian tax authorities. Europay believes that it is not currently possible to
estimate the impact, if any, that the ultimate resolution of these matters will
have on its financial position or results of operations.

15. SUMMARY OF DIFFERENCES BETWEEN BELGIUM AND UNITED STATES GENERALLY ACCEPTED
    ACCOUNTING PRINCIPLES

     The accompanying consolidated financial statements have been prepared in
accordance with Belgian GAAP, which differ in certain material respects from
generally accepted accounting principles in the United States ("U.S. GAAP").
Such differences involve methods for measuring the amounts shown in the
financial statements, as well as additional disclosures required by U.S. GAAP.

U.S. GAAP RECONCILING ITEMS TO CONSOLIDATED NET INCOME AND TOTAL SHAREHOLDERS'
EQUITY

     The following is a summary of the material adjustments to profit on
ordinary activities after taxation and shareholders' equity that would have been
required in applying the significant differences between Belgian and U.S. GAAP.

                                       F-73

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

            RECONCILIATION OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS
                    (IN THOUSANDS EXCEPT EARNINGS PER SHARE)



                                                                         SIX MONTHS
                                                                       ENDED JUNE 30,
                                                                       ---------------
                                                              NOTES    2001      2000
                                                              -----    -----    ------
                                                                         (UNAUDITED)
                                                                       
Profit on ordinary activities after taxation as reported
  under Belgian GAAP........................................           4,644       710
U.S. GAAP adjustments:
  Pensions..................................................   (a)        --      (620)
  Capitalization of borrowing costs, net....................   (c)       (49)       (9)
  Depreciation of fixed assets..............................   (d)      (835)     (550)
  Internally developed software costs, net..................   (e)      (195)      (57)
  Financial instruments.....................................   (f)     2,636        --
  Leases, net...............................................   (g)       145       346
  Capitalization of intangible assets.......................   (h)       193       264
  Financial assets..........................................   (i)        --       255
  Licensing fee revenue recognition.........................   (j)      (678)     (224)
                                                               --      -----    ------
Net U.S. GAAP adjustments before deferred taxes.............           1,217      (595)
  Deferred taxes: effects of differences in methodology and
     adjustments............................................   (b)      (412)      448
                                                               --      -----    ------
Net income under U.S. GAAP before cumulative effect of
  change in accounting principle............................           5,449       563
Cumulative effect of changes in accounting principle, net of
  tax
  Financial instruments.....................................   (f)      (547)       --
  Licensing fee revenue recognition.........................   (j)        --    (3,100)
                                                                       -----    ------
Total cumulative effect of changes in accounting principle,
  net of tax................................................            (547)   (3,100)
                                                                       -----    ------
Net income/(loss) under U.S. GAAP...........................           4,902    (2,537)
                                                                       =====    ======
Earnings/(loss) per share in accordance with U.S. GAAP:        (k)
  Basic and diluted.........................................              49       (25)
Weighted average number of shares outstanding (in thousands
  of shares):
  Basic and diluted.........................................             100       100
Net income/(loss) per U.S. GAAP.............................           4,902    (2,537)
Other Comprehensive income, net of tax:
  Financial instruments.....................................   (f)     2,408        --
  Translation adjustment....................................              13        12
                                                                       -----    ------
  Total other comprehensive income..........................           2,421        12
                                                                       -----    ------
Comprehensive income under U.S. GAAP........................   (l)     7,323    (2,525)
                                                                       =====    ======


                                       F-74

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

     A summary of the principal differences and additional disclosures
applicable to Europay are set out below:

              RECONCILIATION OF CONSOLIDATED SHAREHOLDERS' EQUITY



                                                                           AT              AT
                                                                        JUNE 30,      DECEMBER 31,
                                                              NOTES       2001            2000
                                                              -----    -----------    ------------
                                                                       (UNAUDITED)
                                                                             
Total shareholders' equity reported under Belgian GAAP......             46,557          41,857
U.S. GAAP adjustments:
  Pensions..................................................   (a)          297             297
  Deferred taxes............................................   (b)       (5,108)         (4,696)
  Capitalization of borrowing costs, net....................   (c)        2,365           2,414
  Depreciation of fixed assets..............................   (d)        5,733           6,568
  Internally developed software costs, net..................   (e)          761             956
  Financial instruments.....................................   (f)        3,444          (1,600)
  Leases, net...............................................   (g)        3,975           3,830
  Capitalization of intangible assets.......................   (h)         (374)           (567)
  Financial assets..........................................   (i)         (227)           (184)
  Licensing fee revenue recognition.........................   (j)       (1,523)           (845)
                                                                         ------          ------
Net U.S. GAAP adjustments before cumulative effect of change
  in accounting principle...................................              9,343           6,173
                                                                         ------          ------
Shareholders' equity under U.S. GAAP before cumulative
  effect of change in accounting principle..................             55,900          48,030
Cumulative effect of changes in accounting principle, net of
  tax
  Financial instruments.....................................   (f)         (547)             --
  Licensing fee revenue recognition.........................   (j)       (3,100)         (3,100)
                                                                         ------          ------
Total cumulative effect of changes in accounting principle,
  net of tax................................................             (3,647)         (3,100)
                                                                         ------          ------
Shareholders' equity under U.S. GAAP........................             52,253          44,930
                                                                         ======          ======


         MOVEMENTS IN SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP



                                                                         AT              AT
                                                                      JUNE 30,      DECEMBER 31,
                                                                        2001            2000
                                                                     -----------    ------------
                                                                     (UNAUDITED)
                                                                           
Balance, beginning of year..................................           44,930          39,258
Net income..................................................            4,902           5,657
Other comprehensive income:
  Financial instruments.....................................   (f)      2,408              --
  Translation adjustment....................................               13              15
                                                                       ------          ------
  Total other comprehensive income..........................            2,421              15
                                                                       ------          ------
Balance, end of year........................................           52,253          44,930
                                                                       ======          ======


                                       F-75

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

  (a) Pensions

     Under Belgian GAAP, enterprises are required to make provision for their
obligations relating to retirement or survivors' pensions, early-retirement and
other similar pensions or allowances. However, enterprises are also bound by law
to fund their pension obligations with an independent pension fund or insurance
company. Consequently, the practice in Belgium is to expense as incurred the
premium charged by the insurance company or pension fund, on the assumption that
the amount of the premium constitutes an appropriate measure of the economic
cost of their pension obligations for the period concerned.

     Under U.S. GAAP, the annual pension cost comprises the estimated cost of
benefits accruing in the period as determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 87, which requires readjustment of the
significant actuarial assumptions annually to reflect current market and
economic conditions. Under SFAS No. 87, a pension asset representing the excess
plan assets over benefit obligations is recognized in the balance sheet. The
pension benefit obligation is calculated by using a projected unit credit
method. Actuarial gains or losses within a 10% "corridor" are recognized. In
addition, in cases where the accumulated benefit obligation exceeds the
unamortized prior service cost, Europay has recorded the excess as a separate
component of shareholders' equity.

     During the six months ended June 30, 2000 Europay received a refund from
its insurance company representing part of the pension plan over funding at
December 31, 1999. Under Belgian GAAP this refund was recorded as a reduction in
pension premium expense in the six months ended June 30, 2000 whereas under U.S.
GAAP the refund was recorded as a reduction of the prepaid pension asset
recorded at the end of 1999.

  (b) Deferred Tax

     Under Belgian GAAP, deferred tax liabilities on consolidation entries
should be recorded when it is probable that a tax charge will effectively be
incurred in the foreseeable future.

     Under U.S. GAAP, deferred tax is provided for on a full liability basis.
Under the full liability method, deferred tax assets or liabilities are
recognized for differences between the financial and tax basis of assets and
liabilities and for tax loss carry forwards at the statutory rate at each
reporting date. A valuation allowance is established when it is more likely than
not that some portion or all of the deferred tax assets will not be realized.

  (c) Capitalization of Borrowing Costs

     Under Belgian GAAP, an entity may choose between capitalizing or not
capitalizing interest on specific borrowings to finance the construction of
individual qualifying assets. Europay does not capitalize interest cost as part
of the historical cost of their qualifying construction projects.

     Under U.S. GAAP, interest recognized on borrowings and other obligations
must be capitalized for assets that are produced under a discrete project and
require a substantial period of time to get ready for their intended use or
sale. The amount of interest eligible for capitalization is determined as either
the actual cost incurred on a specific borrowing or the weighted average of the
rates applicable for all the general borrowings outstanding during the period.
The total amount of interest cost capitalized in each period is limited to the
total amount of interest cost incurred in that period.

     The adjustment to net income under U.S. GAAP reflects the decrease in
interest expense for the period as well as the increase in depreciation expense
on the constructed assets. The adjustment to shareholders' equity under U.S.
GAAP reflects the amount of interest capitalized on constructed assets, net of
depreciation.

                                       F-76

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

  (d) Depreciation of Fixed Assets

     Under Belgian GAAP, Europay depreciates its fixed assets for a full year in
the year of acquisition under the straight-line basis. Further, Europay may
depreciate an asset during the period of its construction or development
regardless of whether the asset is substantially ready for its intended use.
Prior to 1999 Europay depreciated assets during the period of construction
regardless of when the asset was substantially ready for its intended use.

     Under U.S. GAAP, fixed assets are depreciated from the date of acquisition
on a straight-line basis. Constructed assets are depreciated on a straight-line
basis when substantially complete. For purposes of the U.S. GAAP reconciliation,
Europay has applied the half-year convention method whereby, a half-year of
depreciation is taken in the year of acquisition and in the year of disposal.
Additionally, a constructed asset is depreciated when it is substantially ready
for its intended use.

  (e) Internally Developed Software Costs

     Under Belgian GAAP, costs related to internally developed software are
capitalized when it can be demonstrated that:

     - The product or process is useful;

     - The product or process is clearly defined;

     - Costs related to the project are clearly identified;

     - The project is technically feasible; and

     - Financial resources are available to complete the project.

     Under U.S. GAAP, certain costs to develop or obtain internal-use software
should be capitalized when the preliminary project stage is completed,
management implicitly or explicitly authorizes and commits to funding a computer
software project and it is probable that the project will be completed. Costs of
computer software developed or obtained for internal use that can be capitalized
include external direct material and service costs, payroll and payroll-related
costs for employees who devote time to the internal-use computer software
project and interest costs incurred while developing internal-use computer
software. Capitalized costs are amortized under a straight-line basis over the
expected useful life of the software.

  (f) Financial Instruments

     Under Belgian GAAP, premiums paid and received on option contracts intended
to reduce (hedge) foreign exchange risk on future U.S. dollar payments are
deferred. Option contracts that do not qualify as risk reducing (non-hedge) are
accounted for using the lower of cost or market approach.

     Under U.S. GAAP, gains and losses related to derivative instruments that
satisfy the criteria for hedge accounting are recognized in the same period as
gains and losses on the hedged item. Upon termination of the derivative, any
gains and losses are deferred and amortized to profit and loss over the
remaining life of the hedged item. Derivatives that do not qualify for hedge
accounting are recorded on the balance sheet at fair value with gains and losses
immediately included in earnings.

     The adjustment to net income under U.S. GAAP reflects the fact that certain
contracts accounted for by Europay as hedges do not meet the criteria for hedge
accounting under U.S. GAAP.

                                       F-77

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

     On January 1, 2001 Europay adopted hedge accounting under Statement of
Financial Accounting Standards (SFAS) No. 133. Under SFAS No. 133 Europay is
required to recognize all derivatives in the consolidated balance sheet by
measuring these derivatives at fair value. The recognition of the change in the
fair value of a derivative depends on a number of factors, including the
intended use of the derivative and the extent to which it is effective as part
of a hedge transaction.

     Europay recorded a cumulative effect adjustment of E547 (loss) to net
income and shareholders' equity under U.S. GAAP for the six months ended June
30, 2001 to recognize at fair value all derivative instruments that were
designated as cash flow hedging instruments upon adoption of SFAS 133.

     As discussed in Note 6, Europay had entered into forward currency hedge
contracts at June 30, 2001. Under Belgian GAAP, premiums or discounts are
amortized over the life of the contract. Under U.S. GAAP, the effective portion
of the gain or loss of the derivative instrument is recorded as a component of
other comprehensive income whereas the non-effective portion of the gain or loss
is recognized currently in earnings. For the six months ended June 30, 2001,
E2,408 has been recorded as other comprehensive income for the effective portion
of the contracts.

  (g) Leases

     Under Belgian GAAP, a capital lease is deemed to exist when the sum of the
minimum lease payments is equal to or greater than the lessor's investment in
the leased asset, including related interest and other transaction costs.

     Under U.S. GAAP, a capital lease is deemed to exist when any of the
following criteria are met:

     - The present value of the minimum lease payments greater than or is equal
       to 90% of the fair value of the asset at the inception of the lease, or

     - The length of the lease period is greater than or equal to 75% of the
       asset's estimated useful economic life, or

     - The transfer of ownership of the asset to the lessee by the end of the
       lease term, or

     - The existence of a bargain purchase option.

     The adjustment to net income under U.S. GAAP reflects a decrease in rental
expense and an increase in depreciation expense related to the capitalized
leased assets. The adjustment to shareholders' equity under U.S. GAAP reflects
the capitalization of the net present value of the minimum lease payments using
the interest rate implicit in the lease.

     During the third quarter of 2001, the Company revised its lease term for
all existing automobile contracts from 4 years to 3 1/2 years with its leasing
company. Under U.S. GAAP, this modification of the lease terms effectively
terminated the existing capital lease agreements. As such, any assets and
liabilities will need to be removed from the balance sheet and an appropriate
gain or loss will be charged to profit and loss. As a result of this change in
accounting estimate, capital lease assets under U.S. GAAP with a net book value
of E1,129 and a total capital lease obligation of E1,156 will be removed from
the balance sheet and a gain of E27 will be recorded in the third quarter of
2001. Going forward, under the new lease term, the existing leases will be
recorded as operating leases.

  (h) Capitalization of Intangible Assets

     Europay recognized the initial contributions to a joint venture at fair
value of the assets contributed. As such, any contribution of "know-how" is
recognized at fair value by both Europay and the joint venture.

                                       F-78

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

Further, Europay recognizes its proportionate share of expenses associated with
the amortization of "know-how" recorded by the joint venture.

     Under U.S. GAAP, initial contributions to a joint venture should be
recorded at cost (i.e., the amount of cash contributed or net book value of
non-cash assets contributed).

  (i) Financial Assets

     Under Belgian GAAP, Europay recorded a loss in value of an investment
accounted for under the equity method. Losses must be subsequently reversed.

     Under U.S. GAAP, a loss in value of an investment, accounted for under the
equity method, which is other than temporary should be recognized. Recognized
losses are not subsequently reversed based on subsequent events or economic
developments.

  (j) Licensing Fee Revenue Recognition

     Under Belgian GAAP, revenue from licensing fees is recognized immediately
upon invoicing of customers.

     Under U.S. GAAP, licensing fees are earned as services are delivered and
performed over the terms of the arrangement or the expected period of
performance and generally should be deferred and recognized systematically over
the periods that the fees are earned.

     The adjustment to net income and stockholders' equity under U.S. GAAP
reflects the deferral and recognition of licensing revenue over the life of the
licensing arrangement for the current year.

     The cumulative effect adjustment to net income and shareholders' equity
under U.S. GAAP for the six months ended June 30, 2000 reflects the cumulative
adjustment, net of tax effects, related to the deferral and proportionate
recognition of licensing revenue upon adoption of SAB 101.

  (k) Earnings Per Share

     Belgian GAAP does not require the presentation of earnings per share (EPS).

     Under U.S. GAAP, basic and diluted earnings per share must be disclosed for
companies that file public reports under U.S. federal securities laws. Basic EPS
is calculated as profit available to common shareholders, divided by the
weighted average number of shares in issue during the period. Shares issued as a
result of a bonus issue are treated as if in issue for the whole year. To
calculate diluted EPS, earnings are adjusted for the after-tax amount of
dividends and interest recognized in the period in respect of the dilutive
potential ordinary shares and for any other changes in income or expense that
would result from the conversion of the dilutive potential on ordinary shares
and for any other changes in income or expense that would result from the
conversion of the dilutive potential ordinary shares. The conversion is deemed
to have occurred at the beginning of the period or, if later, the date of the
issue of potential ordinary shares.

  (l) Comprehensive Income

     Belgian GAAP does not require the presentation of comprehensive income.

     U.S. GAAP requires disclosure of the components of total comprehensive
income in the period in which they are recognized in the financial statements.
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise arising from transactions and other events and circumstances
from non-owner sources. It includes all changes in shareholders' equity during
the reporting period except those resulting from investments by owners and
distributions to owners.
                                       F-79

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

Revenue Recognition

     Under Belgian GAAP, revenue earned and related cost of sales incurred while
acting as an agent may be presented on a gross basis in the statement of income.

     Under U.S. GAAP, revenue and related cost of sales should be presented
gross if Europay acts as a principal in the transactions and has the risk and
rewards of ownership. Europay acts as an agent on behalf of MasterCard
International for the billing and collection of inter-regional transactions with
members. Europay does not bear risk and rewards of ownership related to these
transactions and therefore revenue and related costs should be reported net
under U.S. GAAP. The impact would be a reduction in revenue of E77,409 and
E61,232 net of a reduction in MasterCard costs included in services and other
goods of E58,899 and E52,299 for the six months ended June 30, 2001 and 2000,
respectively.

Extraordinary Items

     Items classified as extraordinary under Belgian GAAP do not meet the
definition of "extraordinary" under U.S. GAAP and, accordingly, are classified
as operating expenses under U.S. GAAP.

Cash Flow Information

     Under Belgian GAAP, a presentation of cash flows is considered voluntary.
The statement of cash flows presented in the financial statements has been
prepared in accordance with IAS 7. This presentation is acceptable under Belgian
GAAP.

     Under U.S. GAAP a statement of cash flows is required to be present in
accordance with SFAS No. 95. Interest paid and received and dividends received
are shown as operating activity cash flows, while dividends paid are shown as
financing cash flows.

     A summary of Europay's operating, investing and financing activities,
classified in accordance with U.S. GAAP is as follows:



                                                                 SIX MONTHS
                                                               ENDED JUNE 30,
                                                              -----------------
                                                               2001      2000
                                                              -------   -------
                                                                  
Net cash provided by/(used in) operating activities.........  (29,885)   19,392
Net cash provided by/(used in) investing activities.........  (15,887)  (17,232)
Net cash provided by/(used in) financing activities.........   41,599      (139)
                                                              -------   -------
Net increase/(decrease) in cash and cash equivalents........   (4,173)    2,021
Cash and cash equivalents under U.S. GAAP, beginning of
  year......................................................  112,117    33,244
                                                              -------   -------
Cash and cash equivalents under U.S. GAAP, end of year......  107,944    35,265
                                                              =======   =======


Recently Issued Accounting Standards

     United States

     SFAS No. 141, "Business Combinations" ("SFAS 141"), and SFAS No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142") were issued in July 2001.
SFAS 141 and SFAS 142 will be required to be implemented with effect from July
1, 2001 and January 1, 2002, respectively. SFAS 141 requires that all business
combinations be accounted for by the purchase method. SFAS 142 addresses the
accounting for acquired goodwill and other intangible assets and contains
certain transitional provisions, which may affect classification of intangible
assets, as well as the balance of goodwill. The ongoing impact will be that
goodwill

                                       F-80

                           EUROPAY INTERNATIONAL S.A.

       NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
                         (UNAUDITED AND IN E THOUSANDS)

will no longer be amortized, but instead will be tested at least annually for
impairment. The requirements of both statements will be applied prospectively
from the effective date. Europay is assessing the impact that this new standard
will have on its financial position and results of operations.

     SFAS 143, "Asset Retirement Obligations", was issued in June 2001. This
standard will be effective for Europay's fiscal year beginning after June 15,
2002; however, early adoption is permitted. The standard provides the accounting
requirements for retirement obligations associated with tangible long-lived
assets and the associated asset retirement cost. The standard requires that the
obligation associated with the retirement of the tangible long-lived assets be
capitalized into the asset cost at the time of initial recognition. The
liability is then discounted to its fair value at the time of recognition using
the guidance provided by the standard. Europay is assessing the impact that this
new standard will have on its financial position and results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB No. 30, "Reporting the Results of
Operations." This statement also amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. SFAS 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Europay is in
the process of determining the effects of this statement on its business.

                                       F-81


                                                                         ANNEX A

                          AGREEMENT AND PLAN OF MERGER
                      DATED AS OF                  , 2002
                                  BY AND AMONG
                     MASTERCARD INTERNATIONAL INCORPORATED,
                            MASTERCARD INCORPORATED
                                      AND
                          MASTERCARD MERGER SUB, INC.


                               TABLE OF CONTENTS



                                                              PAGE
                                                              ----
                                                           
ARTICLE I  THE MERGER.......................................  A-1
     Section 1.1.  The Merger...............................  A-1
     Section 1.2.  Effective Time...........................  A-1
     Section 1.3.  Charter and Bylaws.......................  A-2
     Section 1.4.  Directors................................  A-2
     Section 1.5.  Officers.................................  A-2
     Section 1.6.  Additional Actions.......................  A-2
     Section 1.7.  MC Parent Charter........................  A-2
ARTICLE II  EFFECTS OF THE MERGER...........................  A-2
     Section 2.1.  Effect on Membership.....................  A-2
ARTICLE III  MISCELLANEOUS..................................  A-3
     Section 3.1.  Termination..............................  A-3
     Section 3.2.  Approval.................................  A-3
     Section 3.3.  Notices..................................  A-3
     Section 3.4.  Amendments...............................  A-3
     Section 3.5.  Counterparts.............................  A-3
     Section 3.6.  Entire Agreement; No Third-Party
      Beneficiaries.........................................  A-3
     Section 3.7.  Governing Law............................  A-3

Exhibit A  Form of Certificate of Incorporation for the
  Surviving Corporation
Exhibit B  Form of Bylaws for the Surviving Corporation
Exhibit C  Directors
Exhibit D  Form of Certificate of Incorporation of MC Parent
Exhibit E  Form of Bylaws of MC Parent


                                       A-i


                          AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER ("AGREEMENT"), dated as of
                  , 2002 is by and among MASTERCARD INTERNATIONAL INCORPORATED
(the "MCI"), a nonstock corporation organized and existing under the Delaware
General Corporation Law (the "DGCL"), MASTERCARD INCORPORATED ("MC PARENT"), a
stock corporation organized and existing under the DGCL, and MASTERCARD MERGER
SUB, INC. ("MERGER SUB"), a nonstock corporation organized and existing under
the DGCL, that is a wholly-owned subsidiary of MC Parent.

                                    RECITALS

     The Boards of Directors of MCI, Merger Sub and MC Parent each has
determined that it is advisable and in the best interests of their respective
company, members and/or stockholders that upon the terms and subject to the
conditions set forth in this Agreement, Merger Sub will merge with and into MCI
(the "MERGER"), with MCI being the surviving entity of the Merger.

     For United States federal income tax purposes, the parties intend that the
transactions contemplated by this Agreement and the related documents, including
(i) the Merger, pursuant to which, in substance, the principal members,
association members and travelers cheque members of MCI will effectively
transfer to MC Parent the equity rights associated with their membership
interests, in the form of a Class B membership interest in MCI, and retain the
rights as licensees associated with their existing membership interests in the
form of Class A membership interests in MCI and their existing license
agreements with MCI, (ii) the Share Exchange (as defined in the Share Exchange
and Integration Agreement by and among MC Parent, MCI and Europay International
S.A., as amended, modified, supplemented or restated from time to time, dated as
of                            , 2002 (the "INTEGRATION AGREEMENT") and (iii) the
reallocations of shares of MC Parent Class A Stock and MC Parent Class B Stock
among the shareholders of MC Parent, shall together constitute an integrated
series of transactions consisting solely of transfers of property to MC Parent
in exchange for shares of MC Parent Class A Stock and MC Parent Class B Stock
described in Section 351(a) of the Internal Revenue Code of 1986, as amended.

                                   AGREEMENT

     In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:

                                   ARTICLE I

                                   THE MERGER

     Section 1.1. The Merger.

     (a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as defined in Section 1.2), Merger Sub shall
be merged with and into MCI in accordance with the DGCL, whereupon the separate
corporate existence of Merger Sub shall cease and MCI shall be the surviving
company in the Merger (the "SURVIVING CORPORATION").

     (b) The Merger shall have the effects set forth in the DGCL. Accordingly,
from and after the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities, liabilities and duties of MCI and Merger Sub.

     Section 1.2. Effective Time. The parties shall execute and file a
Certificate of Merger or other appropriate documents in accordance with the
DGCL, and shall make all other filings or recordings required with respect to
the Merger under the DGCL. The Merger shall become effective at the time of
acceptance for filing by the Secretary of State of the State of Delaware of the
Certificate of Merger (the "EFFECTIVE TIME").

                                       A-1


     Section 1.3. Charter and Bylaws. The certificate of incorporation (the
"CHARTER") and bylaws (the "BYLAWS") of the Surviving Corporation at the
Effective Time shall be amended and restated to read substantially in the forms
set forth in EXHIBIT A and EXHIBIT B hereto, respectively, until further amended
in accordance with applicable Delaware law.

     Section 1.4. Directors. The persons set forth on EXHIBIT C shall be the
Directors of the Surviving Corporation from and after the Effective Time and
shall hold office until their respective successors are duly elected or
appointed and qualified in the manner provided in the Charter and Bylaws of the
Surviving Corporation, or as otherwise provided by law.

     Section 1.5. Officers. The persons who immediately prior to the effective
time of the Merger are the officers of MCI shall be the officers of the
Surviving Corporation (each to hold the same office or offices) from and after
the Effective Time and shall hold office until their respective successors are
duly elected or appointed and q