AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 2002

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

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

                         POST-EFFECTIVE AMENDMENT NO. 1

                                       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 17 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..........................   17
Cautionary Statement Concerning
  Forward-Looking Statements..........   30
The Special Meeting...................   32
The Conversion........................   35
The Integration.......................   39
Opinion of Financial Advisor to
  MasterCard International............   53
Share Allocation and the Global
  Proxy...............................   58
Unaudited Pro Forma Combined Financial
  Statements..........................   68
Capitalization........................   78
Overview of the Global Payments
  Industry............................   79
Business of MasterCard
  International.......................   81
MasterCard Selected Consolidated
  Financial and Other Information.....  101
MasterCard Selected Statistical
  Information.........................  102
MasterCard Management's Discussion and
  Analysis of Financial Condition and
  Results of Operations...............  104
Business of Europay International.....  113






                                        PAGE
                                        ----
                                     
Europay Selected Historical
  Consolidated Financial Data.........  118
Europay Management's Discussion and
  Analysis of Financial Condition and
  Results of Operations...............  119
Management............................  125
Security Ownership of Certain
  Beneficial Owners and Management....  137
Certain Relationships and Related
  Transactions........................  139
Description of Capital Stock of
  MasterCard Incorporated.............  141
Comparison of Rights of MasterCard
  International Members Before and
  After the Conversion and
  Integration.........................  147
Federal Income Tax Consequences of the
  Conversion and the Integration......  157
Material Contracts Between MasterCard
  International and Europay...........  160
Legal Matters.........................  160
Experts...............................  160
Other Matters.........................  160
Stockholders Proposals................  161
Where You Can Find More Information...  161
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 April 16, 2002, the exchange rate between U.S. dollars and euros was
1.14 euros per U.S. dollar. As of December 31, 2001, the period end exchange
rate between U.S. dollars and euros was 1.14 euros per U.S. dollar, while the
average exchange rate for the year ended December 31, 2001 was 1.12 euros per
U.S. dollar. 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 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 second 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. If you intend to attend the special
   meeting in person, kindly notify the Secretary of MasterCard International in
   writing at the address set forth below. Failure to notify the Secretary will
   not disqualify you from attending the special meeting in person.


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 will result in the European member-stockholders holding 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 second 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.



                                        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 81)


     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 2001, 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, was $986
billion, an 18% increase (on a local currency basis) 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 24 million
locations around the world as of December 31, 2001. In 2000, our GDV increased
22% (on a local currency basis) to $858 billion from $726 billion in 1999. These
figures exclude Maestro, Cirrus and Mondex transactions.


     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 113)


     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
                                        6


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. 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 35)


     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 36)


     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 39)



     MasterCard Incorporated and MasterCard International have entered 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 44)


     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 58)


     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 calculation in effect at
that time. Under the terms of the integration agreement and as provided for in
the
                                        9


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 93% of MasterCard
International, (2) European Members owning 7% of MasterCard International and
85% of Europay International and (3) MasterCard International owning 15% of
Europay International.]


                                        10


            IMMEDIATELY AFTER CLOSING OF 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.]


            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 143)


     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 35)


     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 37)


     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 37)



     The conversion will be effected pursuant to the Agreement and Plan of
Merger 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 46)



     The acquisition of Europay, which we refer to as the integration, will be
accomplished pursuant to the Share Exchange and Integration Agreement 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 that of 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 17.61 million unconditional 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 $267.9 million. See "The Integration -- Accounting Treatment
of the Integration."


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 30)


     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 17)



     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 17 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, 2001 and as of the end of each such fiscal year, and selected
unaudited pro forma financial data as of and for the year ended December 31,
2001. The summary consolidated financial data as of December 31, 2001 and
December 31, 2000 and for the fiscal years ended December 31, 2001, December 31,
2000 and December 31, 1999 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, 1999 has been derived from the audited consolidated financial
statements of MasterCard International that have not been included in this proxy
statement-prospectus. 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.





                                                                YEAR ENDED DECEMBER 31,
                                                         --------------------------------------
                                                            2001          2000          1999
                                                         ----------    ----------    ----------
                                                          (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                                            
MASTERCARD INTERNATIONAL

INCOME STATEMENT DATA:
  Revenue..............................................  $1,773,848    $1,571,215    $1,389,155
  Operating Income.....................................     221,702       178,020       116,438
  Net Income...........................................     142,061       118,149        86,255

BALANCE SHEET DATA:
  Total Assets.........................................  $1,474,805    $1,187,060    $  981,535
  Long-Term Debt.......................................      80,065        82,992        82,682
  Members' Equity......................................     606,661       462,408       341,520

MASTERCARD INCORPORATED

PRO FORMA DATA:
  Earnings per share, basic and diluted................  $     1.50           N/A           N/A
  Book value per share.................................        8.79           N/A           N/A



                                        15


                                        16

             EUROPAY SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA


     The summary historical consolidated financial data set forth below for
Europay as of and for the two years ended December 31, 2001 and 2000 have 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 statement of income data set forth below for
Europay for the year ended 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 historical consolidated balance sheet
data of Europay set forth below as of December 31, 1999 have been derived from
Europay's unaudited consolidated financial statements not included in this proxy
statement-prospectus.



     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 19 to the Consolidated Financial
Statements of Europay as of December 31, 2001 and December 31, 2000 and for the
years ended December 31, 2001, 2000 and 1999 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.




                                                             YEAR ENDED DECEMBER 31,
                                    -------------------------------------------------------------------------
                                      2001        2001        2000        2000         1999          1999
                                    ---------   ---------   ---------   ---------   -----------   -----------
                                                  (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                                 BELGIAN                 BELGIAN                    BELGIAN
                                     US GAAP      GAAP       US GAAP      GAAP        US GAAP        GAAP
                                    ---------   ---------   ---------   ---------   -----------   -----------
                                    (AUDITED)   (AUDITED)   (AUDITED)   (AUDITED)   (UNAUDITED)   (UNAUDITED)
                                                                                
INCOME STATEMENT DATA:
  Revenue(1)......................   277,622     401,900     260,093     364,806      215,034       298,206
  Operating Profit................     1,261       4,926      16,241      18,223        8,249         7,321
  Cumulative effect of changes in
     accounting principle, net of
     tax..........................      (547)         --      (3,100)         --           --            --
  Net Income/(Loss)...............    12,927      12,172       5,657       9,253        8,546         7,641
  Earnings/(Loss) per share.......       129          --          57          --           85            --
BALANCE SHEET DATA:
  Total Assets....................   332,974     323,745     275,625     254,169      156,125       138,896
  Long-Term Debt..................     3,023          --       3,449          --        5,572         2,533
  Shareholders' Equity............    62,924      54,062      44,930      41,857       39,258        31,986



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

(1) 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 19 to the
    Consolidated Financial Statements of Europay as of December 31, 2001 and
    December 31, 2000 and for the years ended December 31, 2001, 2000 and 1999
    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 how to vote on the
conversion.


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

                                        17


     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 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

                                        18


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 so in the future. If we do not succeed in attracting sufficient new
personnel or retaining and motivating our

                                        19


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 has appealed 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. On April 10, 2002,
MasterCard filed its notice of appeal with the Second Circuit Court of Appeals.


     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 material
adverse effect on our business, prospects and financial condition. If the repeal
of the CPP is upheld on
                                        20


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 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 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 filed a
petition for a writ of certiorari to the U.S. Supreme Court on April 3, 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 condition. See "Business of MasterCard
International -- Legal Proceedings -- Merchant Antitrust Litigation."

                                        21


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 2001, approximately 34% 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.

                                        22


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, 2000 and 2001 is similarly challenged, this could result in a further
additional tax liability of up to approximately E16.9 million, including
possible penalties. Europay has appealed this matter further with the regional
tax director in accordance with applicable administra-

                                        23



tive tax 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 5% or more 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


                                        24


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, the 7% voting cap for the election of directors 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
                                        25


on the new global proxy formula). Our special tax counsel 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. 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 second 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
                                        26


following the conversion. With respect to federal credit unions, the common
stock may need to be held 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 will have agreed 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.

                                        27


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

                                        28


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.

                                        29


           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;


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


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


     - 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;


     - 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;

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

                                        30


     - 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;


     - supermajority voting provisions;



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



     - the introduction of a new global proxy formula; and



     - the fact that the common stock of MasterCard Incorporated is subject to
      reallocation.


                                        31


                              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, 1,536,135,930 votes will be cast


                                        32


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. IF
YOU INTEND TO ATTEND THE SPECIAL MEETING IN PERSON, KINDLY NOTIFY THE SECRETARY
OF MASTERCARD INTERNATIONAL IN WRITING AT THE ADDRESS SET FORTH BELOW. FAILURE
TO NOTIFY THE SECRETARY WILL NOT DISQUALIFY YOU FROM ATTENDING THE SPECIAL
MEETING IN PERSON.


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
                                        33


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 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.

                                        34


                                 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

                                        35


     - 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;

                                        36


     - 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 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


                                        37


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.

                                        38


                                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

                                        39


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
would result from the integration, MasterCard management developed a model to
project the final relative

                                        40


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.

                                        41


     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.

                                        42


     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.

                                        43


     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 2001, the Europe region represented approximately 20% 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

                                        44


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.

                                        45


     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 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) has been required to
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 have been required to 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
                                        46


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.

                                        47


     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.
                                        48


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;

                                        49


     - 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 have been required to 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

                                        50


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 have agreed 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 has also agreed 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 transaction provides
that the number of shares allocated to former shareholders of Europay and MEPUK
will increase or decrease at the end of the transition period as a result of the
application of the global proxy formula for the third year of the transition
period. See "Share Allocation and the Global Proxy." In accounting for the
initial purchase price of Europay, MasterCard will not consider shares above the
minimum number of shares allocable to Europay and MEPUK shareholders at the end
of the transition period because only the minimum number of shares is issued
unconditionally at the closing to such shareholders. Of the 23.76 million shares
attributable to the exchange of Europay and MEPUK shares, 6.15 million shares
are conditional shares subject to reallocation at the end of the transition
period and allocable to Europay and MEPUK shareholders. Europay and MEPUK
shareholders are therefore receiving 17.61 million unconditional shares at
closing. The value of each MasterCard Incorporated share, immediately before the
exchange, is estimated to be $15.21 based on an independent appraisal.
Accordingly, MasterCard's purchase price for the shares of Europay is estimated
to be $267.9 million.



     Since former Europay and MEPUK shareholders would retain or receive shares
of MasterCard Incorporated at the end of the transition period without remitting
any additional consideration, any shares retained or received by them that are
above their minimum allocation at that time would constitute part of the
purchase price. Any such additional shares would be valued at that time based
upon the fair value of the stock of MasterCard Incorporated. Any such
reallocation of shares to former Europay and MEPUK shareholders will increase
the purchase price for Europay and, accordingly, the amount of goodwill and
additional paid-in-capital recorded. 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.


                                        51


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 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.

                                        52


            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;
                                        53


     - 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
                                        54


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

                                        55


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


                                        56


     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.

                                        57


                     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.


     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 AND ARE ALLOCATED SHARES OF MASTERCARD


                                        58



INCORPORATED DURING THE TRANSITION PERIOD IN ACCORDANCE WITH THE PROCEDURE
DESCRIBED AT THE END OF THE NEXT PARAGRAPH.



     ON THE CLOSING DATE OF THE CONVERSION AND INTEGRATION, EACH PRINCIPAL
MEMBERSHIP INTEREST IN MASTERCARD INTERNATIONAL WILL BE AUTOMATICALLY CONVERTED
INTO A CLASS A MEMBERSHIP INTEREST IN MASTERCARD INTERNATIONAL AND SHARES OF
COMMON STOCK OF MASTERCARD INCORPORATED. HOWEVER, TO RECEIVE SHARES AT CLOSING,
A MEMBER MUST, IN ADDITION TO QUALIFYING AS A PRINCIPAL MEMBER ON THE CLOSING
DATE, HAVE CONTRIBUTED REVENUES AND/OR VOLUMES TO MASTERCARD INTERNATIONAL AS A
PRINCIPAL MEMBER DURING THE 12 MONTH PERIOD ENDED DECEMBER 31, 2000 THAT ARE
ELIGIBLE TO BE CONSIDERED UNDER THE NEW GLOBAL PROXY FORMULA DESCRIBED HEREIN.
IF NO SUCH REVENUES OR VOLUMES WERE CONTRIBUTED, A PRINCIPAL MEMBER WILL
PARTICIPATE IN THE CONVERSION BUT WILL NOT RECEIVE SHARES OF COMMON STOCK OF
MASTERCARD INCORPORATED AT THE CLOSING. THE MASTERCARD INCORPORATED BOARD OF
DIRECTORS EXPECTS TO ADOPT PROCEDURES TO ISSUE SHARES OF MASTERCARD INCORPORATED
COMMON STOCK TO PRINCIPAL MEMBERS DURING THE TRANSITION PERIOD THAT DID NOT
QUALIFY TO RECEIVE SHARES AT CLOSING, IN ORDER TO PERMIT SUCH MEMBERS TO
PARTICIPATE IN THE REALLOCATION OF MASTERCARD INCORPORATED SHARES THAT WILL
OCCUR AT THE CONCLUSION OF THE TRANSITION PERIOD.


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

                                        59


       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.

     - 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

                                        60


       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;

      - 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.

                                        61


     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 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 to principal members or the
termination of principal members prior to 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 date used to calculate share ownership information 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


                                        62


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):  E304.0 billion
            Aggregate Weighted European GAV (gross euro acquiring
              volume):                                                    E303.6 billion
            Aggregate European Revenue:                                   E351.6 million
            Aggregate Weighted non-European GDV:                          $541.1 billion
            Aggregate Weighted non-European GAV:                          $515.7 billion
            Aggregate non-European Revenue:                               $1,332.1 million



     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.

                                        63


     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).

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-

                                        64


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 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

                                        65


       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-
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
                                        66


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 as of and for the year ended December 31, 2001 and the audited
financial statements of Europay as of and for the year ended December 31, 2001.
The historical financial information provided for Europay was prepared in
accordance with U.S. GAAP. Refer to Note 19 to the Consolidated Financial
Statements of Europay as of December 31, 2001 and December 31, 2000 and for the
years ended December 31, 2001, 2000 and 1999, 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
unconditional shares of MasterCard Incorporated being given in exchange for the
shares of Europay on the closing 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,
as discussed below, 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. 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 these reallocated shares, nor will there be any increase or
decrease in the total amount of shares outstanding.



     The transaction provides that the number of shares allocated to former
shareholders of Europay and MEPUK will increase or decrease at the end of the
transition period as a result of the application of the global proxy formula for
the third year of the transition period. See "Share Allocation and the Global
Proxy." In accounting for the initial purchase price of Europay, MasterCard will
not consider shares above the minimum number of shares allocable to Europay and
MEPUK shareholders at the end of the transition period because only the minimum
number of shares is issued unconditionally at the closing to such shareholders.
Of the 23.76 million shares attributable to the exchange of Europay and MEPUK
shares, 6.15 million shares are conditional shares subject to reallocation at
the end of the transition period and allocable to Europay and MEPUK
shareholders. Europay and MEPUK shareholders are therefore receiving 17.61
million unconditional shares at closing. The value of each MasterCard
Incorporated share, immediately before the exchange, is estimated to be $15.21
based on an independent appraisal. Accordingly MasterCard's purchase price for
the shares of Europay is estimated to be $267.9 million.



     Since former Europay and MEPUK shareholders would retain or receive shares
of MasterCard Incorporated at the end of the transition period without remitting
any additional consideration, any shares retained or received by them that are
above their minimum allocation at that time would constitute part of the


                                        68



purchase price. Any such additional shares would be valued at that time based
upon the fair value of the stock of MasterCard Incorporated. Any such
reallocation of shares to former Europay and MEPUK shareholders will increase
the purchase price for Europay and, accordingly, the amount of goodwill and
additional paid-in-capital recorded. The unaudited pro forma combined financial
information does not give effect to any potential contingent consideration.



     The unaudited pro forma condensed combined statement of income assumes that
the conversion and integration were effected on January 1, 2001. The unaudited
pro forma condensed combined balance sheet assumes that the conversion and
integration were effected on December 31, 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 YEAR ENDED DECEMBER 31, 2001
                                      ------------------------------------------------------------------
                                                                                             PRO FORMA
                                       MASTERCARD                         PRO FORMA          MASTERCARD
                                      INTERNATIONAL    EUROPAY(1)(2)    ADJUSTMENTS(3)      INCORPORATED
                                      -------------    -------------    --------------      ------------
                                                                                
REVENUE.............................   $1,773,848        $252,324          $(2,514)(A)       $2,018,477
                                                                            (5,181)(F)

OPERATING EXPENSES
General & administrative............      813,927         131,310           (2,514)(A)          935,731
                                                                            (6,992)(F)

Advertising & market development....      665,846          80,483            1,299(F)           747,628
Depreciation........................       39,680          11,853           (2,234)(B)           49,299
Amortization........................       32,693           5,021            8,906(C)            46,620
                                       ----------        --------          -------           ----------
          Total Operating
            Expenses................    1,552,146         228,667           (1,535)           1,779,278

Other Income and Expense............       11,237          (1,455)             400(E)            10,182
                                       ----------        --------          -------           ----------

INCOME BEFORE INCOME TAXES..........      232,939          22,202           (5,760)             249,381
Income Tax..........................       90,878          10,141           (2,669)(D)           98,867
Cumulative effect of change in                                                 517(F)
  accounting principle, net of
     tax............................           --            (490)                                 (490)
                                       ----------        --------          -------           ----------
NET INCOME..........................   $  142,061        $ 11,571          $(3,608)          $  150,024
                                       ==========        ========          =======           ==========

NUMBER OF SHARES....................                                                            100,000(G)
BASIC AND DILUTED EARNINGS PER
  SHARE.............................          N/A                                            $     1.50(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
   1.1172 euros per U.S. dollar, the average exchange rate between U.S. dollars
   and euros for the year ended December 31, 2001.



(2)A reconciliation of the Europay pro forma income statement for the year ended
   December 31, 2001 prepared in accordance with Belgian GAAP to the Europay pro
   forma income statement for the year ended December 31, 2001 prepared in
   accordance with U.S. GAAP as presented is provided below.





                                                   BELGIAN    RECONCILING        U.S.
                                                     GAAP        ITEMS           GAAP
                                                   --------   -----------      --------
                                                                      
REVENUE..........................................  $363,563    $(111,239)(a)   $252,324
OPERATING EXPENSES
General & administrative.........................   249,430     (118,120)(b)    131,310
Advertising & market development.................    80,483           --         80,483
Depreciation.....................................     7,252        4,601(c)      11,853
Amortization.....................................     4,671          350(d)       5,021
                                                   --------    ---------       --------
     Total Operating Expenses....................   341,836     (113,169)       228,667
                                                   --------    ---------       --------
Other Income and Expense.........................    (1,224)        (231)(e)     (1,455)
                                                   --------    ---------       --------
INCOME BEFORE INCOME TAXES.......................    20,503        1,699         22,202
Income Tax.......................................     9,608          533(f)      10,141
Cumulative effect of changes in accounting
  principle, net of tax..........................        --         (490)(g)       (490)
                                                   --------    ---------       --------
NET INCOME.......................................  $ 10,895    $     676       $ 11,571
                                                   ========    =========       ========




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



     (a) REVENUE



         Reconciling items totaling $111,239 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
         $110,507; 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 $732.



     (b)  GENERAL & ADMINISTRATIVE EXPENSES



          Reconciling items totaling $118,120 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 $110,507; 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 $2,188; the reversal of rental expense due to the
          capitalization of leases under U.S. GAAP of $4,619; a change in
          accounting estimate under U.S. GAAP relating to the modification of
          the lease terms for all existing automobile lease contracts which
          effectively terminated the capital lease agreements resulting in a
          gain of $27; decreased 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 $416; decreased expense of $353 relating to the
          change during 2001 in pension benefit cost recorded in accordance with
          SFAS No. 87; differences in net book value of fixed assets arising
          from differences in depreciation methods described below resulting in
          an increased gain on the disposal of fixed assets of $10.


                                        71



     (c) DEPRECIATION



         Reconciling items totaling $4,601 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 $87; differences in
         depreciation methods including application of the half-year convention
         method under U.S. GAAP resulting in increased depreciation expense of
         $611; and increased depreciation expense of $3,903 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 $350 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 $231 that reduce other income and expense
         under Belgian GAAP to conform with U.S. GAAP include: decreased
         interest expense of $40 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
         $271.



     (f) INCOME TAX



         Reconciling item of $533 that increases income tax 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 $490 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".



         For a more detailed explanation of the nature of the Belgian GAAP to
         U.S. GAAP reconciling items see Note 19 to the Consolidated Financial
         Statements of Europay as of December 31, 2001 and December 31, 2000 and
         for the years ended December 31, 2001, 2000 and 1999 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. 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.

                                        72


     (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.

     (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 26%            CHANGE
                                                 ---------------    ---------------    -------------
                                                                               
     NET INCOME FOR THE YEAR ENDED DECEMBER 31,
       2001 ATTRIBUTABLE TO:
       Non-European members-stockholders of
          MasterCard(a)........................   $134       87%     $111       74%    $(23)     (17)%
       European members-stockholders(b)........     20       13%       39       26%      19       95%
                                                  ----      ---      ----      ---     ----
                                                  $154      100%     $150      100%    $ (4)(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 increased share allocations to European member-stockholders
         at the end of the transition period:





                                                   POST-                               POST-
                                                INTEGRATION       CHANGE FROM       INTEGRATION       CHANGE FROM
                                                 AT 33 1/3%     PRE-INTEGRATION        AT 44%       PRE-INTEGRATION
                                                ------------    ----------------    ------------    ----------------
                                                                                       
        NET INCOME FOR THE YEAR ENDED DECEMBER
          31, 2001 ATTRIBUTABLE TO:
        Non-European member-stockholders of
          MasterCard(a).......................  $100     67%     $(34)      (25)%   $ 84     56%     $(50)      (37)%
        European member-stockholders(b).......    50     33%       30       150%      66     44%       46       230%
                                                ----    ---      ----               ----    ---      ----
                                                $150    100%     $ (4)(c)           $150    100%     $ (4)(c)
                                                ====    ===      ====               ====    ===      ====



                                        73


                            MASTERCARD INCORPORATED

                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET

                            AS OF DECEMBER 31, 2001

                                 (IN THOUSANDS)




                                                                                             PRO FORMA
                                          MASTERCARD                       PRO FORMA         MASTERCARD
                                         INTERNATIONAL   EUROPAY(1)(2)   ADJUSTMENTS(3)     INCORPORATED
                                         -------------   -------------   --------------     ------------
                                                                                
ASSETS
Cash and cash equivalents..............   $  176,143       $ 83,550        $   2,176(D)      $  261,869
Investment securities..................      494,243             --               --            494,243
Property, plant & equipment............      159,742         45,469            8,377(A)         213,929
                                                                                 341(D)

Other assets...........................      547,923        144,034          (16,063)(A)        646,745
                                                                             (14,699)(B)
                                                                              (4,407)(C)
                                                                             (10,043)(D)

Intangible assets......................       96,754         19,914          305,093(A)         421,761
                                          ----------       --------        ---------         ----------
          TOTAL ASSETS.................   $1,474,805       $292,967        $ 270,775         $2,038,547
                                          ==========       ========        =========         ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities....................   $  638,471       $217,466        $ (14,699)(B)     $  871,220
                                                                              (7,755)(D)
                                                                              37,737(E)

Long-term liabilities..................      229,673         17,445           41,161(E)         288,279
                                          ----------       --------        ---------         ----------
          TOTAL LIABILITIES............      868,144        234,911           56,444          1,159,499
Minority interest......................           --          2,691              230(D)             230
                                                                              (2,691)(F)
STOCKHOLDERS' EQUITY
Common stock...........................           --             --            1,000(G)           1,000
Paid-in-capital........................           --         17,832          250,024(A)         873,881
                                                                             601,724(G)
                                                                               4,301(I)

Retained earnings......................      602,724         39,049         (602,724)(G)             --
                                                                             (39,049)(H)

Accumulated other comprehensive income
  (loss)...............................        3,937         (1,516)           1,516(H)           3,937
                                          ----------       --------        ---------         ----------
          TOTAL STOCKHOLDERS' EQUITY...      606,661         55,365          216,792            878,818
                                          ----------       --------        ---------         ----------
          TOTAL LIABILITIES &
            STOCKHOLDERS' EQUITY.......   $1,474,805       $292,967        $ 270,775         $2,038,547
                                          ==========       ========        =========         ==========



            See notes to unaudited pro forma combined balance sheet.
                                        74


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
   1.1366 euros per U.S. dollar, the period end exchange rate between U.S.
   dollars and euros as of December 31, 2001.



(2)A reconciliation of the Europay pro forma balance sheet as of December 31,
   2001 prepared in accordance with Belgian GAAP to the Europay pro forma
   balance sheet as of December 31, 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.................  $ 83,550           --       $ 83,550
Investment securities.....................        --           --             --
Property, plant & equipment...............    29,956       15,513(a)      45,469
Other assets..............................   151,923       (7,889)(b)    144,034
Intangible assets.........................    19,417          497(c)      19,914
                                            --------     --------       --------
     TOTAL ASSETS.........................  $284,846     $  8,121       $292,967
                                            ========     ========       ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities.......................  $229,782     $(12,316)(d)   $217,466
Long-term liabilities.....................     4,807       12,638(e)      17,445
                                            --------     --------       --------
     TOTAL LIABILITIES....................   234,589          322        234,911
                                            --------     --------       --------
Minority interest.........................     2,691           --          2,691
STOCKHOLDERS' EQUITY
Common stock..............................        --           --             --
Paid-in-capital...........................    17,832           --         17,832
Retained earnings.........................    29,734        9,315         39,049
Accumulated other comprehensive income
  (loss)..................................        --       (1,516)(f)     (1,516)
                                            --------     --------       --------
     TOTAL STOCKHOLDERS' EQUITY...........    47,566        7,799         55,365
                                            --------     --------       --------
     TOTAL LIABILITIES & STOCKHOLDERS'
       EQUITY.............................  $284,846     $  8,121       $292,967
                                            ========     ========       ========




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



     (a) PROPERTY, PLANT AND EQUIPMENT



     Reconciling items totaling $15,513 that increase property, plant and
     equipment recorded under Belgian GAAP to conform with U.S. GAAP include:
     the capitalization of borrowing costs of $2,078; differences in
     depreciation methods including application of the half-year convention
     method under U.S. GAAP totaling $5,187; and the capitalization of capital
     leases of $8,248.



     (b) OTHER ASSETS



     Reconciling items totaling $7,889 that decrease other assets recorded under
     Belgian GAAP to conform with U.S. GAAP include: an adjustment to net the
     receivable recorded under Belgian GAAP for a disputed tax assessment
     against the related liability of ($14,850); prepaid pension assets of $609;
     deferred tax assets of $2,420; adjustments to record derivative financial
     instruments at fair value $4,205; 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 ($499); and $226
     related to a loss in value on an investment accounted for under the equity
     method that was deemed other than temporary.


                                        75



     (c) INTANGIBLE ASSETS



     Reconciling items totaling $497 that increase intangible assets recorded
     under Belgian GAAP to conform with U.S. GAAP are comprised of
     capitalization of internally developed software costs of $497.



     (d) CURRENT LIABILITIES



     Reconciling items totaling $12,316 that decrease current liabilities
     recorded under Belgian GAAP to conform with U.S. GAAP include: an
     adjustment to net the liability recorded under Belgian GAAP for a disputed
     tax assessment against the related receivable of ($14,850); adjustments to
     record derivative financial instruments at fair value of ($184); net
     present value of minimum lease obligations under capital leases of $1,754;
     and deferred licensing fee revenue of $964.



     (e) LONG-TERM LIABILITIES



     Reconciling items totaling $12,638 that increase long-term liabilities
     recorded under Belgian GAAP to U.S. GAAP include: deferred tax liabilities
     of $4,920; net present value of minimum lease obligations under capital
     leases of $2,660; and deferred licensing fee revenue of $5,058.



     (f) OTHER COMPREHENSIVE INCOME (LOSS)



     Reconciling items totaling ($1,516) include the effective portion of fair
     value changes on derivative financial instruments designated as a cash flow
     hedge of $4,450; and the impact of foreign currency translation of
     ($5,966).



    For a more detailed explanation of the nature of the Belgian GAAP to U.S.
    GAAP reconciling items see Note 19 to the Consolidated Financial Statements
    of Europay as of December 31, 2001 and December 31, 2000 and for the years
    ended December 31, 2001, 2000 and 1999 included elsewhere in this proxy
    statement-prospectus.


(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)).......................................    $267,856
         Allocated as follows:
           Historical book value of 85% of Europay's assets and
              liabilities............................................  $49,347
           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)..............................    $263,315
                                                                                  ========




          Total intangible assets amount to $305,093 and consist of customer
          relationships of $176,928; goodwill of $86,387; 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.

                                        76


     (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.


     (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 principal 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 and MEPUK stockholders and 5.37 million shares will be
         issued to European members who are not Europay or MEPUK stockholders.
         Europay and MEPUK 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 and
         MEPUK shares. The transaction provides that the number of shares
         allocated to former shareholders of Europay and MEPUK will increase or
         decrease at the end of the transition period as a result of the
         application of the global proxy formula for the third year of the
         transition period. See "Share Allocation and the Global Proxy." In
         accounting for the initial purchase price of Europay, MasterCard will
         not consider shares above the minimum number of shares allocable to
         Europay and MEPUK shareholders at the end of the transition period
         because only the minimum number of shares is issued unconditionally at
         the closing to such shareholders. Of the 23.76 million shares
         attributable to the exchange of Europay and MEPUK shares, 6.15 million
         shares are conditional shares subject to reallocation at the end of the
         transition period and allocable to Europay and MEPUK shareholders.
         Europay and MEPUK shareholders are therefore receiving 17.61 million
         unconditional shares at closing. Immediately before the integration,
         the value of each MasterCard share will be approximately $15.21 based
         upon an independent appraisal ($1.091 billion divided by 71.71 million
         shares). Accordingly, MasterCard's purchase price for the shares of
         Europay is estimated to be $267.9 million ($15.21 per share multiplied
         by 17.61 million shares). Since former Europay and MEPUK shareholders
         would retain or receive shares of MasterCard Incorporated at the end of
         the transition period without remitting any additional consideration,
         any shares retained or received by them that are above their minimum
         allocation at that time would constitute part of the purchase price.
         Any such additional shares would be valued at that time based upon the
         fair value of the stock of MasterCard Incorporated. Any such
         reallocation of shares to former Europay and MEPUK shareholders will
         increase the purchase price for Europay and, accordingly, the amount of
         goodwill and additional paid-in-capital recorded.


                                        77


                                 CAPITALIZATION


     The following table sets forth the capitalization of MasterCard
Incorporated as of December 31, 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 December 31, 2001, other than the impact of
current earnings subsequent to December 31, 2001, that would result in a
material change to the pro forma capitalization set forth below.





                                                               AS OF DECEMBER 31, 2001
                                                              --------------------------
                                                                          PRO FORMA FOR
                                                                          THE CONVERSION
                                                                               AND
                                                               ACTUAL     INTEGRATION(1)
                                                              --------    --------------
                                                                    (IN THOUSANDS
                                                                  EXCEPT SHARE DATA)
                                                                    
Long term debt..............................................  $ 80,065       $ 80,065
Members'/Stockholders' Equity:
  Retained Earnings.........................................   602,724             --
  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................................        --        873,881
  Accumulated other comprehensive income....................     3,937          3,937
                                                              --------       --------
Total members'-stockholders' equity.........................   606,661        878,818
                                                              --------       --------
Total capitalization........................................  $686,726       $958,883
                                                              ========       ========



---------------
(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."

                                        78


                    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.

                                        79


     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.

                                        80


                      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 2001, our GDV, which represents gross spending (purchase and cash
disbursements) on MasterCard-branded cards for goods and services, including
balance transfers and convenience checks, was $986.0 billion, a 17.6% increase
(on a local currency basis) 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 24 million locations
around the world as of December 31, 2001. In 2000, our GDV increased 21.6% (on a
local currency basis) to $857.7 billion from $725.7 billion in 1999. These
figures exclude Maestro, Cirrus and Mondex transactions.


     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.

                                        81


     - 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 1991. 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

                                        82


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 fourth quarter of 2001, more than 110 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

                                        83


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 near 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). If
principal members are not rated by established rating agencies, 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

                                        85


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.


     Security and cardholder authentication for remote channels are critical
issues facing MasterCard members and merchants who engage in electronic commerce
transactions, where a signed cardholder sales receipt is generally unavailable.
Without a receipt, it can be difficult for a merchant to dispute a cardholder
claim of not engaging in a given transaction. As a result, chargebacks due to
"cardholder non-authorization" represent the substantial portion of all
electronic commerce chargebacks processed through the MasterCard network today.



     MasterCard has addressed this issue through the implementation of the
Universal Cardholder Authentication Field ("UCAF"), a standard, globally
interoperable method of collecting cardholder authentication data at the point
of interaction across all remote channels, including the Internet and mobile
devices. UCAF uses simple, hidden information from merchants, along with
authentication information generated by issuers, to address two key barriers to
electronic commerce growth: consumer concern about security and non-guaranteed
payments to online merchants. By supporting a broad spectrum of issuer security
schemes, UCAF standardizes the means for collecting and carrying online
cardholder authentication, thereby reinforcing consumer confidence in the
electronic channel. UCAF also allows online merchants to receive a global
payment guarantee from MasterCard similar to the one they enjoy in the physical
world.



     Prior to developing UCAF, MasterCard played a leading role in developing
the cross-industry 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. Today,
over 50 MasterCard members use the SET solution, primarily in Europe, Asia and
Latin America.



     MasterCard RPPS.  MasterCard's Remote Payment and Presentment Service
("RPPS"), launched in 1987, is a leading processor of electronic bill payments
in the United States and Canada. RPPS provides routing, editing, settlement and
reconciliation services and also handles electronic bill presentment and credit
counseling payments. RPPS has connections to almost all of the bill payment
service providers and over 700 credit counseling agencies in the U.S. RPPS
transmits over 16 million payments valued at approximately $7 billion per month.


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.

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     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.

     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.

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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 more than 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.


     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.

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MERCHANT ACCEPTANCE INITIATIVES


     At December 31, 2001, our members estimate that cards carrying MasterCard
brands were accepted at over 24 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 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.

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     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.


     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 affected 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. More than 1.7 billion MasterCard, Cirrus
and Maestro logos are present on credit, charge and debit cards in circulation
today.


     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


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CATEGORY                 PROGRAM
--------                 -------
                      
                         - MasterCard debit
                         - Gold MasterCard debit
                         - Platinum MasterCard debit
                         - Maestro (online debit cards)
                         - MasterCard/Cirrus/Maestro ATM Network
                         - Cirrus ATM Cards

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



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.

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     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 online, PIN-based global debit program. 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. 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). At the end of 2001, the Maestro
brand mark appeared on 475.8 million cards worldwide. Maestro is accepted for
purchases at more than 5.7 million merchant terminals in 82 countries and
territories.



     We believe that the MasterCard/Cirrus/Maestro ATM Network is among the
world's largest global ATM networks, with more than 760,000 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
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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), 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

                                        93


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, principally to financial institutions, in most major national
markets. Mondex electronic cash programs have been implemented in a number of
countries including Hong Kong, Canada and the United Kingdom. Current launches
of the program include corporate campuses in Japan, the national lottery in
Norway and a transit application in South Korea.


     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 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, electronic
business-to-business (eB2B), mobile commerce and smart cards.



     Electronic Commerce and eB2B.  MasterCard's Electronic Commerce and
Electronic Business-to-Business Center of Excellence, based in our Purchase, New
York global headquarters, was established in 2001 to manage all aspects of
MasterCard's electronic commerce offerings. This team seeks to ensure that
MasterCard-branded payment cards -- consumer cards and corporate cards -- play
an important role in payment channels that are developing as a result of the
continued evolution of the Internet. Key electronic commerce activities include
the development and deployment of MasterCard's guaranteed payments model for
online purchases and the UCAF solution underpinning it. The team also
identifies, tests and develops a range of emerging technologies that offer
MasterCard and its members new ways of building business.



     MasterCard's eB2B strategy is to grow profitable GDV by taking advantage of
the emerging use of electronic commerce tools and practices for corporate
applications. MasterCard's vision is to be an integrated financial services
solutions provider and partner to our members in executing their eB2B electronic
commerce strategies. Our purchasing card (P-Card) integration initiative is
expected to enable MasterCard to integrate purchasing cards as a seamless,
online payment type on leading e-procurement platforms and online supplier
catalogs. Likewise, MasterCard SmartLink(TM) is a software solution that
integrates procurement information from MasterCard Corporate Purchasing cards
with enterprise resource planning ("ERP") systems, such as SAP R/3. The
automated integration of this data streamlines procurement and expense processes
for businesses of all sizes to save them time and money. With MasterCard
SmartLink, ERP system administrators can generate specific transaction data
about any corporate card purchase at any point of interaction worldwide.



     Smart Cards and Mobile Commerce.  MasterCard's Chip and Mobile Commerce
Center of Excellence, based in Waterloo, Belgium, was established in 2002 to
manage all aspects of smart cards, chip terminals and mobile/wireless
development for MasterCard.


                                        94



     In the area of smart cards, we are currently 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 cardholder
authentication, storing cardholders' personal and purchasing information, and
allowing banks and merchants to provide more personalized loyalty/rewards
programs and 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 other parties, allowing for secure purchases.



     MasterCard has played a leading role in the implementation of smart card
technology. As of the fourth quarter of 2001, more than 110 million smart cards
bearing MasterCard's or Europay's brands were issued worldwide. In April 2002,
MasterCard introduced "OneSMART(TM) MasterCard," a flexible and customized
approach to smart cards designed to help our members stand apart from their
competitors. OneSMART MasterCard provides our members with comprehensive support
in all areas needed to launch a successful smart card program, integrating the
key areas of consumer value proposition, market-ready technology solutions,
end-to-end implementation support and global marketing initiatives. Using
OneSMART MasterCard, our members can choose from a broad menu of smart card
applications to bundle with their own card programs, including chip-based credit
and debit, personal data storage, digital ID and security, loyalty, e-
ticketing, e-couponing and stored value applications.



     MasterCard is dedicated to creating a universal platform and infrastructure
that will make it easier and less expensive for our members to deploy
multi-application smart cards on a global basis. MasterCard continues to
actively support all major smart card environments (MULTOS, JavaCard, and
proprietary platforms). To underscore our commitment to flexibility, we recently
joined GlobalPlatform, a cross-industry organization to develop, manage and
promote a standardized framework for multiple application smart cards.



     In the area of mobile commerce, MasterCard is working to develop 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 wireless device. Our global mobile commerce team works with
standards organizations to establish reliable, secure wireless payment
standards. For example, MasterCard is a founding member of the new Mobile
Payment Forum, established in November 2001 as a cross-industry group dedicated
to enabling secure, user-friendly mobile payment transactions and expanding the
global market for mobile commerce. As the use of cellular phone service
continues to grow around the world, MasterCard is working to develop a solution
for providing pre-paid airtime payment using payment cards. MasterCard is also
developing contactless chip technology programs for members around the world.
These programs provide cardholders with substantially enhanced payment
convenience, allowing them to "touch and go" a point-of-sale terminal with a
chip-enabled payment card using radio frequency technology.



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.

                                        95


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.

     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 December 31, 2001, we employed approximately 3,266 persons, of which
approximately 563 were employed outside the United States. We consider our
relationship with our employees to be good.


PROPERTIES


     As of December 31, 2001, MasterCard and its subsidiaries owned or leased 43
properties. These facilities primarily consist of corporate and regional
headquarters offices, as well as our operations centers.


                                        96


     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 39 other facilities. These facilities
include the following: 31 regional or country offices, 4 operations centers, 1
public affairs office and 3 storage facilities. Included in these totals are 28
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
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
                                        97


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 has appealed 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. On April 10, 2002,
MasterCard filed its notice of appeal with the Second Circuit Court of Appeals.



     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.


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 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 filed a
petition for a writ of certiorari to the U.S. Supreme Court on April 3, 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

                                        98


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 May 20, 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. The Senequier matter has
been assigned to Judge Pauley as a related case to the currency conversion cases
discussed below. 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." Pursuant to an order of the Judicial Panel on
Multidistrict Litigation, the federal complaints have been consolidated in MDL
No. 1409 before Judge William H. Pauley III in the U.S. District Court for the
Southern District of New York. In January 2002, the federal plaintiffs filed a
Consolidated Amended Complaint ("MDL Complaint") adding MBNA Corporation and
MBNA America Bank, N.A. as defendants. This pleading asserts two theories of
antitrust conspiracy under Section 1 of the Sherman Act, 15 U.S.C. sec.1: (i) an
alleged "inter-association" conspiracy among MasterCard (together with its
members), Visa (together with its members) and Diners Club to fix currency
conversion "fees" allegedly charged to cardholders of "no less than 1% of the
transaction amount and frequently more;" and (ii) two alleged "intra-
association" conspiracies, whereby each of Visa and MasterCard is claimed
separately to have conspired with its members to fix currency conversion "fees"
allegedly charged to cardholders of "no less than 1% of the transaction amount"
and "to facilitate and encourage institution -- and collection -- of second tier
currency conversion surcharges." The MDL Complaint also asserts that the alleged
currency conversion "fees" have not been disclosed as required by the Truth In
Lending Act and Regulation Z.



     Defendants have moved to dismiss the MDL Complaint. That motion currently
is scheduled for oral argument on June 21, 2002. Pending determination of
defendants' motion to dismiss, the parties may engage in discovery except for
non-custodial depositions. No trial date has been set.


     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
                                        99


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.

                                       100


        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, 2001 and as of the end of each such fiscal year, and selected
unaudited pro forma financial data for the year ended December 31, 2001. The
selected consolidated financial data as of December 31, 2001 and December 31,
2000 and for the fiscal years ended December 31, 2001, December 31, 2000 and
December 31, 1999 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, 1999, December 31, 1998 and December 31, 1997 and for the fiscal years ended
December 31, 1998 and December 31, 1997 have been derived from the audited
consolidated financial statements of MasterCard International that have not been
included in this proxy statement-prospectus. 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.





                                                          YEAR ENDED DECEMBER 31,
                                       --------------------------------------------------------------
                                          2001         2000         1999         1998         1997
                                       ----------   ----------   ----------   ----------   ----------
                                                    (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                                            
MASTERCARD INTERNATIONAL

INCOME STATEMENT DATA:
  Revenue............................  $1,773,848   $1,571,215   $1,389,155   $1,205,968   $1,077,099
  Operating Income...................     221,702      178,020      116,438       18,254       36,253
  Net Income.........................     142,061      118,149       86,255       24,183       44,283(a)

BALANCE SHEET DATA:
  Total Assets.......................  $1,474,805   $1,187,060   $  981,535   $  871,643   $  715,986
  Long-Term Debt.....................      80,065       82,992       82,682       82,419       11,467
  Members' Equity....................     606,661      462,408      341,520      257,248      232,396

MASTERCARD INCORPORATED

PRO FORMA DATA:
  Earnings per share, basic and
     diluted.........................  $     1.50          N/A          N/A          N/A          N/A
  Book value per share...............        8.79          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.


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                  MASTERCARD SELECTED STATISTICAL INFORMATION


     The tables below set forth, for the years ended December 31, 2001 and 2000,
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 denominated in U.S. dollars is calculated by
applying an established U.S. dollar/local currency exchange rate for each local
currency in which MasterCard volumes are reported. These exchange rates are
calculated on a quarterly basis using the 90 day average exchange rate for each
quarter. However, MasterCard reports period-over-period rates of change in U.S.
dollar denominated information solely on the basis of local currency
information, in order to eliminate the impact of changes in the value of foreign
currencies against the U.S. dollar in calculating such rates of change.
Accordingly, period-over-period rates of change cannot be extrapolated solely by
reference to the U.S. dollar denominated volumes reported below and in other
public releases of statistical information by MasterCard International.


     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, 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


                                       102





                                                              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



                                       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



YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000



     Revenue was $1.774 billion for the year ended December 31, 2001 compared to
$1.571 billion for the year ended December 31, 2000, an increase of $203 million
or 13%. 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
$1.079 billion for the year ended December 31, 2001 compared to $969 million for
the year ended December 31, 2000, an increase of $110 million or 11%. This
increase was attributable to an increase in the number of transactions processed
by MasterCard. Transactions processed by MasterCard represent card volume
processed for which we earn transaction fees, as opposed to volume processed by
a third party processor, for which we generally do not receive revenues. Such
transactions exclude balance transfers, convenience checks, ATM debit cash and
volumes processed by issuers who are also acquirers. Transactions processed
increased to 12 billion in 2001, compared to 10 billion in 2000, an increase of
17%. In addition, the dollar volume of transactions processed by MasterCard
increased from $475 billion in 2000 to $557 billion in 2001, an increase of 17%.
Increases in operations fees were partially offset by lower average pricing
based on our pricing structure, which rewards members with lower prices for
incremental volume. Also offsetting increases in operations fees were rebates
provided to our members, which grew $21 million from 2000 to 2001.



     Member assessments represent payments made by principal members to support
MasterCard's operating requirements and brand support, acceptance and awareness
initiatives. Member assessments were $695 million for the year ended December
31, 2001 compared to $602 million for the year ended December 31, 2000, an
increase of $93 million or 15%. The increase in member assessments was
attributable primarily to a 14% 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. GDV was $986 billion for the year ended
December 31, 2001 compared to $865 billion for the year ended December 31, 2000.
The growth in GDV, without adjusting for the impact of changes in value of
foreign currencies against the U.S. dollar, was driven primarily by a 19%
increase in MasterCard cards issued between the periods reflecting the continued
commitment from members to issue MasterCard cards. At December 31, 2001, members
reported that there were 520 million MasterCard cards in circulation worldwide,
compared to 438 million reported at December 31, 2000. Member assessment rebates
provided to our members also increased $15 million from 2000 to 2001.



     While the events of September 11, 2001 did not have a significant impact on
MasterCard's total volume, they did impact in the mix between domestic and
international volumes experienced by MasterCard. International volume decreased
dramatically in the weeks following September 11th, due to decreased
international travel and related expenditures. However, this decrease was
partially offset by higher domestic volume. Toward the end of the year, volumes
began to recover, which helped drive the overall increase in revenue over the
prior year.



     Operating expenses were $1.552 billion for the year ended December 31, 2001
compared to $1.393 billion for the year ended December 31, 2000, an increase of
$159 million or 11%. 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 $814 million for the year ended December 31, 2001
compared to $737 million for the year ended December 31, 2000, an increase of


                                       104



$77 million or 10%. This increase was primarily attributable to increases in
personnel costs of $52 million resulting from increases in headcount and
compensation. As a percentage of revenue, general and administrative expenses
declined from 47% to 46% for the years ended December 31, 2000 and 2001,
respectively.



     For the year ended December 31, 2001, MasterCard 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 $666 million for the year ended December 31, 2001 compared to $595
million for the year ended December 31, 2000, an increase of $71 million or 12%.
This increase was attributable primarily to additional costs of $45 million
associated with strong performance in card-based and other long-term member
incentive programs as well as incremental merchant acceptance initiatives. In
addition, our promotions and sponsorship fees increased $47 million between the
periods primarily as a result of incremental promotions in the year ended
December 31, 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, National Hockey League, Major League Baseball and PGA Golf
organizations. These increases were partially offset by reductions in media
expenditures between the periods in traditional television venues and the
Internet of $22 million.



     Depreciation expense was $40 million for the year ended December 31, 2001
compared to $35 million for the year ended December 31, 2000, an increase of $5
million or 14%, primarily due to purchases of equipment in 2001.



     Amortization expense was $33 million for the year ended December 31, 2001
compared to $26 million for the year ended December 31, 2000, an increase of $7
million or 26%. 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 $11 million for the year ended December 31,
2001 compared to $22 million for the year ended December 31, 2000, a decrease of
$11 million or 49%. Other income and expense comprises primarily interest,
dividend and other investment income related to the portfolio of investments
held, as well as interest expense, minority interest and other expense. The
decrease in other income and expense was primarily the result of a devaluation
of the trading securities portfolio.



     The effective tax rate for the year ended December 31, 2001 decreased to
39.0 % from 41.0 % for the year ended December 31, 2000. The lower rate for the
year ended December 31, 2001 was primarily due to the utilization for income tax
purposes of a loss related to foreign operations, the apportionment of pre-tax
income to states with a lower tax rate and a larger amount of tax-exempt
interest income as a percentage of pre-tax income than in the year ended
December 31, 2001.



     As a result of the foregoing, our net income was $142 million for the year
ended December 31, 2001 compared to $118 million for the year ended December 31,
2000, an increase of $24 million or 20%.



     In addition, EBITDA, which we define as operating earnings before interest,
taxes, depreciation and amortization, was $294 million for the year ended
December 31, 2001 compared to $239 million for the year ended December 31, 2000,
an increase of $55 million or 23%. The EBITDA margin percentage was 17% in 2001
compared to 15% in 2000. 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.



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


                                       105



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. These fees generated $31 million in additional revenue for the
year ended December 31, 2000. Increase in operations fees 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 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 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 GDV figures set
forth in the preceding sentence do not reflect the January 2002 restatement of
MasterCard's methodology for estimating the dollar volume of cash transactions
for off-line debit programs in the United States. Using the revised methodology,
GDV for the year ended December 31, 2000 was $865 billion.) 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
member reported 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 $1.393 billion for the year ended December 31, 2000
compared to $1.273 billion for the year ended December 31, 1999, an increase of
$120 million or 9%.



     General and administrative expenses were $737 million for the year ended
December 31, 2000 compared to $729 million for the year ended December 31, 1999,
an increase of $9 million or 1%. 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 52% to 47% for the years ended December 31, 1999 and
2000, respectively.



     In 2000, MasterCard 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 $595 million for
the year ended December 31, 2000 compared to $491 million for the year ended
December 31, 1999, an increase of $104 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.


                                       106



     Amortization expense was $26 million for the year ended December 31, 2000
compared to $22 million for the year ended December 31, 1999, an increase of $4
million or 20%. 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 $22 million for the year ended December 31,
2000 compared to $33 million for the year ended December 31, 1999, a decrease of
$10 million or 32%. The decrease in other income 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 is
largely comprised of 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 $239 million for the year ended December 31, 2000
compared to $170 million for the year ended December 31, 1999, an increase of
$69 million or 41%. The EBITDA margin percentage was 15% in 2000 compared to 12%
in 1999.



LIQUIDITY AND CAPITAL RESOURCES



     We need substantial capital resources and liquidity to fund our global
development, to finance our capital expenditures and any future acquisitions and
to service the payments of principal and interest on our outstanding debt. At
December 31, 2001, we had $627 million of liquid investments to manage
operations. In addition, 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 2002. Management believes that our resources are
also sufficient to meet the estimated costs of the integration of Europay, which
is expected to take place during 2002.



     At December 31, 2001, net cash provided by operating activities was $148
million compared to $221 million and $80 million for the years ended December
31, 2000 and 1999, respectively. Cash provided by operations decreased by $73
million in 2001 compared to 2000, primarily due to a decrease of $69 million in
the net change in other assets and liabilities. This decrease primarily resulted
from an increase in the long-term incentive compensation liability during 2000
as well as increases in capitalized Europay acquisition costs and cash surrender
values of certain life insurance policies in 2001. The significant increase in
2000 over 1999 primarily reflects an increase in net income of $32 million, a
larger increase in accounts payable and accrued expenses of $78 million.



     Net cash (used in) provided by investing activities was $(171) million,
$(283) million and $54 million for the years ended December 31, 2001, 2000 and
1999, respectively. The outlay of cash in 2001 was primarily due to capital
expenditures and purchases of investment securities available-for-sale. Capital
expenditures were predominantly associated with investments in a local access
network and data center equipment for the Winghaven facility. Investment
securities available-for-sale increased as a result of investments made with
excess funds. The change between 2000 and 1999 reflected a large increase due to
the purchase of our corporate headquarters building of $70 million as well as an
increase in the investment securities available-for-sale portfolio.



     Net cash provided by (used in) financing activities for the years ended
December 31, 2001, 2000 and 1999 was $5 million, $(6) million and $(23) million
and was primarily due to proceeds (repayments) of short-term borrowings
connected with MasterCard's net settlement overdraft positions at year end.


                                       107



     Our financial position continues to reflect strong liquidity. Working
capital, consisting of current assets less current liabilities, was $466 million
at December 31, 2001 and $360 million at December 31, 2000, a working capital
ratio of 1.7 to 1 for each of 2001 and 2000.



     We have entered into contractual commitments associated with operating
lease agreements for office buildings, equipment and sponsorship, licensing and
other agreements. Obligations relating to these contractual commitments are
estimated to be payable in the following periods:





                                                                 SPONSORSHIP,
                                                    OPERATING    LICENSING &     LONG TERM
                                         TOTAL        LEASE         OTHER          DEBT
                                        --------    ---------    ------------    ---------
                                                           IN THOUSANDS
                                                                     
2002..................................  $ 82,595    $ 24,046       $ 58,549            --
2003..................................    41,763      22,137         19,626            --
2004..................................    32,077      19,630         12,447            --
2005..................................    29,013      17,988         11,025            --
2006..................................    18,376      16,946          1,430            --
Thereafter............................   115,383      35,318             --       $80,065
                                        --------    --------       --------       -------
Total.................................  $319,207    $136,065       $103,077       $80,065
                                        ========    ========       ========       =======




     In addition, the adverse outcome of certain of the legal proceedings
described in Note 10 to the Consolidated Financial Statements of MasterCard
International could have a detrimental impact on liquidity and capital resources
if they result in adverse awards of damages to the relevant plaintiffs.



     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 the amount to $1.2 billion, from $1.0
billion in the prior period. On September 11, 2001, MasterCard drew down the
entire line for one day as a precautionary measure and repaid it on the
following day, with minimal financial impact. 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. MasterCard must maintain minimum net worth requirements under the
facility of $406 million as of December 31, 2001.



     On June 30, 1998, MasterCard issued $80 million 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. MasterCard has the
ability to prepay the Notes with a "make-whole" payment to the investors, if
market interest rates are lower at the time of prepayment. MasterCard must
maintain minimum net worth requirements under the terms of the Notes of $345
million as of December 31, 2001.



     On August 31, 1999, MasterCard entered into an off-balance sheet financing
arrangement associated with its global technology and operations center located
in O'Fallon, Missouri. The owner of the property, a third party, leased the land
for a ten-year period to the MCI O'Fallon 1999 Trust ("the Trust"). The Trust
financed the operations center through a combination of a third party equity
investment and the issuance of 7.36 percent Series A Senior Secured Notes (the
"Secured Notes") in the amount of $149 million. MasterCard leases the facility
and is obligated to pay rent to the Trust in amounts sufficient to cover
interest payments to note-holders and any returns to equity-holders. The lease
agreement permits MasterCard to purchase the facility upon 180 days notice at a
purchase price equal to the aggregate outstanding principal amount of the
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 after August 31, 2006. In conjunction with the lease agreement,
MasterCard executed a Guarantee of 85.15 percent of the Secured Notes
outstanding, totaling $127 million as of December 31, 2001. The events of
default include MasterCard not meeting minimum net worth requirements of $333
million at December 31, 2001 and not making rent payments. Upon the occurrence
of an event of default, MasterCard will guarantee repayment of the total


                                       108



outstanding principal and interest on the Secured Notes and take ownership of
the building. At December 31, 2001, the impact of consolidating the special
purpose entity and recording its assets on MasterCard's balance sheet would
result in $154 million in debt for MasterCard and $8 million of minority
interest relating to the equity in the Trust held by a third party. For the year
ended December 31, 2001, net income would have been reduced by depreciation in
the amount of $3 million after tax. Furthermore, instead of the 2001 rent
expense of $4 million ($11 million annually after 2001) to the Trust, MasterCard
would record interest expense and minority interest in the same amount.
Consequently, EBIDTA would have increased by approximately $4 million in 2001
($11 million annually after 2001) while cash flow would have been unaffected.



     In the normal course of business, MasterCard operates systems for clearing
and settling payment transactions among its members. Net settlements are
generally cleared daily among members by wire transfer or other bank clearing
means, via settlement cash accounts. However, some transactions may not settle
until subsequent business days due to varying local currency settlement value
date intervals and other timing differences. These timing differences result in
amounts due to MasterCard by members or amounts due to members from MasterCard
for a duration normally ranging from one to four calendar days and are included
in the balance sheet of MasterCard International as settlement due to/due from
members. The net impact of the settled transactions was the main contributor to
net settlement cash account overdraft positions of $9.5 million and $4.1 million
at December 31, 2001 and 2000, respectively, which have been recorded in other
current liabilities.



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.



MEMBER RELATIONSHIPS AND RELATED PARTIES



     MasterCard has a diversified member base of over 1,500 principal members
and 13,500 affiliate members. As disclosed in Note 1 to the Consolidated
Financial Statements of MasterCard International, it is implicit in our
organizational structure that MasterCard enters into transactions with its
members in the normal course of business. These members do not constitute
related parties pursuant to Statement of Financial Accounting Standards ("SFAS")
No. 57 "Related Party Disclosures". In accordance with SFAS 57, we have
disclosed all of the necessary related party transactions within the financial
statements and related footnotes.



     Certain members generate in excess of five percent of our revenue. The loss
of any of these members could adversely impact MasterCard's net income. In
addition, as part of our business strategy to increase our market share,
MasterCard, among other things, enters into customized agreements with members.
These agreements can be terminated in a variety of circumstances. Under certain
circumstances, we may be required to permit members that have entered into
agreements with us to terminate those agreements without penalty as a result of
the current antitrust litigation being brought against us by the U.S. Department
of Justice. Any termination of these agreements could have an adverse impact on
our financial condition. However, MasterCard believes it is not currently
possible to estimate the impact, if any, that the termination of any customized
member agreements would have on our results of operations, financial position or
cash flows.



RECENT ACCOUNTING PRONOUNCEMENTS



     In August 2001, the Financial Accounting Standards Board ("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

                                       109



Of," and the accounting and reporting provisions of 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 adoption
of this pronouncement will not have a significant effect on MasterCard's
consolidated financial statements.



     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 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 adoption of this
pronouncement will not have a significant effect on MasterCard's consolidated
financial statements.



     On June 29, 2001, the FASB unanimously approved SFAS No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." The
integration with Europay International will be accounted for in accordance with
both of these standards.



     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., 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 accordance with this
standard, goodwill acquired in a business combination for which the acquisition
date is after June 30, 2001, will not be amortized. The adoption of this
pronouncement will cause $6.6 million of goodwill as of December 31, 2001
related to the acquisition of Cirrus System, Inc. to no longer be amortized. See
Note 12 of the Consolidated Financial Statements of MasterCard International.
Amortization related to this asset was $1.1 million for each of the three years
ended December 31, 2001. In accordance with this standard, MasterCard will
complete the required impairment analysis within six months of adoption.



CRITICAL ACCOUNTING POLICIES & 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. Management believes that the most
critical accounting policies, which require significant estimates and
assumptions in the preparation of MasterCard's consolidated financial
statements, are set forth below.



     MasterCard has business agreements with certain members, which provide for
fee rebates when the member meets certain transaction hurdles. In compliance
with EITF Abstract 00-22, "Accounting for Points and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to
Be Delivered in the Future," such rebates are calculated on a monthly basis
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.



     Included in advertising and market development expense are volume-based and
support incentives that are expensed as incurred. All incentives represent
payments to members to support the MasterCard brand


                                       110



through either marketing and advertising programs or systems enhancements, all
of which have an identifiable benefit to MasterCard with a fair value that can
be determined. Volume-based incentives are generally based on the members'
achievement of predefined GDV, market share or account-conversion targets.
Support incentives are generally predefined amounts to be utilized by the member
for specific MasterCard programs. Incentives are based on management's estimate
of the members' performance in a given period and actual results may differ from
these estimates.



     MasterCard accrues legal costs that are expected to be incurred to defend
MasterCard in the Department of Justice and merchant antitrust litigations
discussed in Note 10 to the Consolidated Financial Statements of MasterCard
International. The accruals are estimated based on management's expectations of
foreseeable costs, which we have assessed in accordance with FASB Statement No.
5, "Accounting for Contingencies" after consultation with outside counsel. Our
policy has been consistently applied since the commencement of these
litigations.



     Management evaluates all long-lived assets accounted for under Accounting
Principles Board Opinion ("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.



     MasterCard's accounting policies are described in further detail in Note 2
to the Consolidated Financial Statements of MasterCard International.



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 December 31, 2001
as compared to December 31, 2000 and 1999.



     We enter into foreign exchange forward 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, 2001 and 2000, foreign currency forward contracts were
both sold (with notional amounts of $3 million and $43 million, respectively)
and purchased (with notional amounts of $11 million and $60 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
the timeframe between setting the foreign exchange rate for financial
transactions and the clearing of settlement positions is typically one business
day and is limited to ten stable transaction currencies. The remaining 174
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 2001 and 2000 foreign exchange positions, excluding
the currency and interest rate swap since they are no longer outstanding at the
end of 2000, the effect of a hypothetical 10 percent strengthening of the U.S.
dollar is estimated to create a loss valued at $738,000 and $1 million at
December 31, 2001 and December 31, 2000, respectively.



     Our interest sensitive assets are our debt instruments rated AA minus 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


                                       111



rates, assuming a parallel shift of the yield curve, would result in fair value
changes and a related pre-tax loss effect of $14 million and $10 million for
2001 and 2000, respectively.



     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 gain or loss of $4 and $6
million for December 31, 2001 and 2000, respectively. Because these securities
are part of a deferred executive compensation plan, with a corresponding
liability, offsetting gains or losses would be recorded in compensation expense
to the extent that the plan remains in a net appreciation position.



     At December 31, 2001, we had a $1.2 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.


                                       112


                       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

                                       113


       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 198
       modules, or connection points, at 143 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-

                                       114


       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 December 31, 2001, Europay employed approximately 647 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

                                       115


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 has appealed this matter
further with the regional tax director in accordance with applicable
administrative tax procedures.


                                       116



     If Europay's deduction of such costs in 1999, 2000 and 2001 is similarly
challenged, this could result in a further additional tax liability of up to
approximately E16.9 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 April 15, 2002, there were 34 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.


                                       117


            EUROPAY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA


     The selected historical consolidated financial data set forth below for
Europay as of and for the two years ended December 31, 2001 and 2000 have 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 statement of income data
set forth below for Europay for the year ended 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 balance sheet data of Europay set forth below as of December 31,
1999 and as of and for the two years ended December 31, 1998 and 1997 have been
derived from Europay's unaudited consolidated financial statements not included
in this proxy statement-prospectus. The selected historical consolidated balance
sheet data of Europay as of December 31, 1999 and the selected historical
consolidated financial data of Europay as of and for the two years ended
December 31, 1998 and 1997 set forth below have been derived from Europay's
unaudited consolidated financial statements not included in this proxy
statement-prospectus.



     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 19 to the Consolidated Financial
Statements of Europay as of December 31, 2001 and December 31, 2000 and for the
years ended December 31, 2001, 2000 and 1999 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.



                                             YEAR ENDED DECEMBER 31,
                                 -----------------------------------------------
                                   2001        2001        2000         2000
                                 ---------   ---------   ---------   -----------
                                  (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                              BELGIAN       US         BELGIAN
                                  US GAAP      GAAP        GAAP         GAAP
                                 (AUDITED)   (AUDITED)   (AUDITED)    (AUDITED)
                                 ---------   ---------   ---------    ---------
                                                         
INCOME STATEMENT DATA(1):
  Revenue(2)...................   277,622    401,900..    260,093      364,806
  Operating Profit.............     1,261    4,926...      16,241       18,223
  Cumulative effect of changes
    in accounting principle,
    net of tax.................      (547)   --......      (3,100)          --
  Net Income/(Loss)............    12,927    12,172..       5,657        9,253
  Earnings/(Loss) per share....       129    --......          57           --
BALANCE SHEET DATA(1):
  Total Assets.................   332,974    323,745..    275,625      254,169
  Long-Term Debt...............     3,023    --......       3,449           --
  Shareholders' Equity.........    62,924    54,062..      44,930       41,857


                                                YEAR ENDED DECEMBER 31,
                                 -----------------------------------------------------
                                    1999          1999          1998          1997
                                 -----------   -----------   -----------   -----------
                                     (IN THOUSANDS OF EUROS EXCEPT PER SHARE DATA)
                                                 BELGIAN       BELGIAN       BELGIAN
                                   US GAAP        GAAP          GAAP          GAAP
                                 (UNAUDITED)   (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
                                 -----------   -----------   -----------   -----------
                                                               
INCOME STATEMENT DATA(1):
  Revenue(2)...................    215,034       298,206       245,506       153,486
  Operating Profit.............      8,660         7,321         5,038         4,350
  Cumulative effect of changes
    in accounting principle,
    net of tax.................         --            --            --            --
  Net Income/(Loss)............      8,546         7,641           278         1,566
  Earnings/(Loss) per share....         85            --            --            --
BALANCE SHEET DATA(1):
  Total Assets.................    156,125       138,896       125,897        79,914
  Long-Term Debt...............      5,572         2,533         2,533         2,533
  Shareholders' Equity.........     39,258        31,986        24,345        24,067



---------------
(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.


(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 19 to the
    Consolidated Financial Statements of Europay as of December 31, 2001 and
    December 31, 2000 and for the years ended December 31, 2001, 2000 and 1999
    included elsewhere in this proxy statement-prospectus.


                                       118



                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 19 to the Consolidated Financial Statements of Europay
included elsewhere in this proxy statement-prospectus.



RESULTS OF OPERATIONS



YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000



     Revenue consists of operations fees and assessment fees charged to members.
Total revenue was E401.9 million for the year ended December 31, 2001 compared
to E364.8 for the year ended December 31, 2000, an increase of E37.1 or 10%.



     Operations fees represent user fees for authorization, clearing and
settlement and other member services. Operations fees increased E48.4 million,
or 30%, from E158.9 million for the year ended December 31, 2000 to E207.3
million for the year ended December 31, 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 billed of
25% and 29%, respectively, from 735 million authorization and 884 million
clearing transactions for the year ended December 31, 2000 to 918 million
authorization and 1.1 billion clearing transactions for the year ended December
31, 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 decreased E9.3
million, or 5%, from E206.8 million for the year ended December 31, 2000 to
E197.5 million for the year ended December 31, 2001. This decrease was
attributable to a price decrease on intra-regional assessments implemented in
April 2001, which was partially offset by the increase in revenues attributable
to the increase in GEV associated with the increase in clearing transactions
processed noted above.



     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 E46.1 million, or 16%, from E282.4 million for the year ended December
31, 2000 to E328.5 million for the year ended December 31, 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 E19.6 million, or
19%, from E103.9 million for the year ended December 31, 2000 to E123.5 million
for the year ended December 31, 2001. A 2% 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 2000 to 2001 accounts for E2.4 million, or 12%,
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 E24.1 million, or 28%, from
E86.0 million for the year ended December 31, 2000 to E110.1 million for the
year ended December 31, 2001. This increase was primarily due to additional
costs of E10.8 million for brand awareness and development programs, which
includes E4.2 million related to a brand awareness campaign launched in advance
of the 2002 introduction of the euro as the single currency for European
countries in the euro-zone, E6.1 million for the UEFA European soccer
championships, E3.6 million for card issuance and acceptance development efforts
and E3.0 million for a European members' meeting held in June 2001.



     Remuneration, social security and pension costs amounted to E64.0 million
for the year ended December 31, 2001 compared to E58.9 million for the year
ended December 31, 2000, an increase of E5.1


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million or 9%. 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 E13.3 million for the year ended
December 31, 2001 compared to E11.1 million for the year ended December 31,
2000, an increase of E2.2 million or 20%. This increase was primarily due to
Europay's continuing investment in information technology equipment and software
and expansion of buildings and facilities to accommodate increases in staff and
equipment.



     Net financial income increased E21.2 million, from E0.4 million for the
year ended December 31, 2000 to E21.6 million for the year ended December 31,
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 net establishment of provisions for liabilities and charges of E2.1
million and E1.4 million for the years ended December 31, 2001 and 2000,
respectively, represents primarily movements in employee severance provisions.
The E0.6 million of other extraordinary charges for the year ended December 31,
2001 represents a loss incurred as a result of a member settlement failure.



     The effective tax rates for the years ended December 31, 2001 and 2000 were
46% and 44%, respectively. The variance with the statutory tax rate of 40% for
the year ended December 31, 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. The variance for the year
ended December 31, 2001 was due to the effect of such disallowed expenses as
well as net prior year tax adjustments which represent an increase in the basis
and amount of 2000 non-deductible employee benefits partially offset by a refund
of 1999 tax overpayments.



     As a result of the foregoing, Europay's net income increased to E12.9
million for the year ended December 31, 2001 compared to E9.7 million for the
year ended December 31, 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 E12.2 million for the year ended December 31, 2001 compared to E9.3 million
for the year ended December 31, 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 billed of 24% and 31%,
respectively, from 593 million authorization and 675 million clearing
transactions for the year ended December 31, 1999 to 735 million authorization
and 884 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.



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 2002.



     Net cash provided by/(used in) operating activities for the year ended
December 31, 2001 was (E18.5) million, as compared to E62.1 million and E43.7
million for the years ended December 31, 2000 and 1999,

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respectively. The E80.6 million decrease from 2000 to 2001 was attributable
primarily to a significant increase in other amounts receivable, an increase in
deferred charges and accrued income versus a decrease in 2000, and a decrease in
other amounts payable in 2001 versus a substantial increase in 2000, offset by a
decrease in trade debtors in 2001 versus an increase in 2000, a larger increase
in suppliers, an increase in taxes payable in 2001 versus a decrease in 2000 and
an increase in net income before taxation. The increase in other amounts
receivable is primarily due to the receivable established in 2001 for a disputed
income tax assessment related to the 1997 and 1998 tax years imposed by the
Belgian tax authorities, and a larger increase in 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 a decrease
in member settlement payables related to the Euro D0 settlement service in 2001
versus an increase in 2000, partially offset by a larger increase in member
settlement security deposits. The decrease in trade debtors is due primarily to
the change from quarterly to monthly billing and collection of certain
assessments as from January 2001. The increase in taxes payable is due primarily
to the liability established for the disputed tax assessment noted above,
partially offset by tax payments made on current tax obligations. In addition to
the increase in net income before taxation, the E18.4 million increase in 2000
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.



     Net cash used in investing activities was E33.8 million, E17.9 million and
E16.8 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The E15.9 million increase from 2000 to 2001 was principally due
to a E8.9 million increase in the level of acquisitions and capitalization of
intangible assets, a E9.0 million investment in short term cash deposits and a
E7.0 million decrease in the proceeds from short term deposits, offset by a E6.0
million decrease in the level of acquisitions of fixed assets and a decrease of
E3.7 million due to proceeds from and a reduction in investments in foreign
currency options. 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.



     Net cash provided by/(used in) financing activities for the years ended
December 31, 2001, 2000 and 1999 was E26.1 million, E34.8 million and (E19.4)
million, respectively. The E8.7 million decrease from 2000 to 2001 was primarily
the result of E11.9 million decrease in the level of incremental borrowing on a
settlement bank overdraft, partially offset by a reclassification of stockholder
loans totaling E2.5 million to other amounts payable in current liabilities that
was required in 2000 but not in 2001. 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.



     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 December 31, 2001 and E4.8 million at
December 31, 2000. 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 E30 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.


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ECONOMIC FLUCTUATIONS



INFLATION



     Europay does not believe inflation has a significant impact on its
operations, as both its costs and revenues would 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 would negatively impact cross-border traffic, and
therefore the growth of Europay's revenues.



     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.
Europay's risk exposure relating to fluctuations in foreign currency exchange
rates is similar at December 31, 2001 compared to December 31, 2000.



     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 E20.2 million and E20.3 million
at December 31, 2001 and December 31, 2000, 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. Europay utilizes
foreign currency forward 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 December
31, 2001 Europay had foreign currency forward contracts outstanding to buy U.S.
dollars with a notional amount of E118 million to manage the anticipated U.S.
dollar denominated cash flows for 2002. As of December 31, 2001, Europay's
exposure with respect to the foreign exchange forward contracts, assuming a ten
percent decrease in the U.S. dollar versus euro exchange rate was E11.7 million.
In January 2002, Europay reversed $72 million of outstanding U.S. dollar
denominated forward contracts with maturity after April 2002 and realized income
of E6 million on the closing of the contracts.


                                       123



     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 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, 2001, a ten percent
fluctuation of the exchange rate for these foreign settlement currencies would
result in a loss of E11.2 million. The majority of this exposure relates to the
settlement of 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, 2001 was E4.6 million and E5.7 million, respectively. 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, of which
E0.4 million and E1.1 million related to the pound sterling and U.S. dollar,
respectively. These one-day outstanding positions can vary substantially due to
the day-to-day changes in the distribution of settlement volumes.



     Europay has a E35 million credit line with a bank to cover short-term cash
needs. As of December 31, 2001 and December 31, 2000, 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 1 week. At December 31, 2001 Europay has
two outstanding short-term deposits for a total amount of E9.0 million.



     During 2001, Europay obtained an additional E30 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 E15 million
of these credit lines is used. At December 31, 2001 no funding was obtained from
these credit lines. 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 these credit lines, an agreement was reached with the
members that the cost of these credit lines could 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

                                       125


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....................  63    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.....................  47    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 over 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
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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

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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.

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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.

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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).

                                       135


     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.

                                       136


                         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 1,536,135,930 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              8.1%
  14700 Citicorp Drive
  Hagerstown, MD 21742
Chase Manhattan Bank USA, N.A. .............................      122,602,412              8.0%
  100 Duffy Avenue
  Hicksville, NY 11801
First USA Bank, N.A. .......................................      104,486,120              6.8%
  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...........................  5.14 million       6.1%       .98 million        6.1%           6.1%
  14700 Citicorp Drive
  Hagerstown, MD 21742
Chase Manhattan Bank USA, N.A...  4.60 million       5.5%       .88 million        5.5%           5.5%
  100 Duffy Avenue
  Hicksville, NY 11801
EURO Kartensysteme EUROCARD und
  eurocheque GmbH...............  4.41 million       5.3%       .84 million        5.3%           5.3%
  Solmsstrasse 2-26
  60648 Frankfurt/Main
  Germany



                                       137





                                                      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. ...........  4.29 million       5.1%       .82 million        5.1%           5.1%
  A Bank One Company
  201 North Walnut Street
  15th Floor
  Wilmington, DE 19801
Europay France S.A. ............  4.23 million       5.0%       .81 million        5.0%           5.0%
  44, rue Cambronne
  75740 Paris Cedex 15
  France



                                       138


                 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 6.1% 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 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 5.5% 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.

                                       139



     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 5.1% 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.

                                       140


            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
                                       141


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 the shares of that
stockholder 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 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
                                       142


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;

                                       143


     - 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.

                                       144


     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;

                                       145


     - 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.

                                       146


            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


                                       147




                                                                        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.


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                 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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 $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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 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


                                       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)
                 ----------------------------------------------  ----------------------------------------------
                                                           
                                                                 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.


                                       156


               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.

                                       157


     - 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

                                       158


       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.

                                       159


                     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, 2001 and 2000 and for each of the three years in
the period ended December 31, 2001 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, 2001 and 2000 and for the years 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.

                                       160


                             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.

                                       161


                   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, 2001 and December 31, 2000 and for the
  years ended December 31, 2001, 2000 and 1999
     Report of Independent Accountants......................   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

EUROPAY INTERNATIONAL S.A.
  As of December 31, 2001 and December 31, 2000 and for the
  years ended December 31, 2001, 2000 and 1999 (Unaudited)
     Report of Independent Accountants......................  F-30
     Consolidated Balance Sheets............................  F-31
     Consolidated Statements of Income......................  F-32
     Consolidated Statements of Cash Flows..................  F-33
     Notes to Consolidated Financial Statements.............  F-34



                                       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 ACCOUNTANTS


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, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001 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

March 6, 2002


                                       F-4



                     MASTERCARD INTERNATIONAL INCORPORATED



                       CONSOLIDATED STATEMENTS OF INCOME





                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                         --------------------------------------
                                                            2001          2000          1999
                                                         ----------    ----------    ----------
                                                                     (IN THOUSANDS)
                                                                            
REVENUE................................................  $1,773,848    $1,571,215    $1,389,155
OPERATING EXPENSES
General and administrative.............................     813,927       737,259       728,572
Advertising and market development.....................     665,846       595,339       491,027
Depreciation...........................................      39,680        34,728        31,525
Amortization...........................................      32,693        25,869        21,593
                                                         ----------    ----------    ----------
  Total operating expenses.............................   1,552,146     1,393,195     1,272,717
                                                         ----------    ----------    ----------
  Operating income.....................................     221,702       178,020       116,438
OTHER INCOME AND EXPENSE
Investment income......................................      22,250        30,380        32,182
Minority interest in losses of subsidiaries............       4,086         7,031        12,994
Interest expense.......................................      (9,548)       (9,652)      (11,198)
Other expense..........................................      (5,551)       (5,548)       (1,385)
                                                         ----------    ----------    ----------
  Total other income and expense.......................      11,237        22,211        32,593
                                                         ----------    ----------    ----------
Income before taxes....................................     232,939       200,231       149,031
Income tax expense.....................................      90,878        82,082        62,776
                                                         ----------    ----------    ----------
NET INCOME.............................................  $  142,061    $  118,149    $   86,255
                                                         ==========    ==========    ==========




  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-5



                     MASTERCARD INTERNATIONAL INCORPORATED



                          CONSOLIDATED BALANCE SHEETS





                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2001            2000
                                                              ------------    ------------
                                                                     (IN THOUSANDS)
                                                                        
ASSETS
Cash and cash equivalents...................................   $  176,143      $  193,304
Investment securities, at fair value:
  Available-for-sale........................................      451,090         316,507
  Trading...................................................       43,153          54,958
Accounts receivable.........................................      180,510         147,540
Settlement due from members.................................      189,573          76,614
Prepaid expenses and other current assets...................       50,899          39,918
Deferred income taxes.......................................       12,695          18,142
                                                               ----------      ----------
  TOTAL CURRENT ASSETS......................................    1,104,063         846,983
Property, plant and equipment, at cost (less accumulated
  depreciation and amortization of $256,253 and $252,753)...      159,742         147,293
Deferred income taxes.......................................       66,535          59,975
Intangible assets, net......................................       96,754          81,276
Investments in affiliates...................................       22,871          41,583
Investment security held-to-maturity........................        7,326           8,050
Other assets................................................       17,514           1,900
                                                               ----------      ----------
  TOTAL ASSETS..............................................   $1,474,805      $1,187,060
                                                               ==========      ==========
LIABILITIES AND MEMBERS' EQUITY

LIABILITIES
Accounts payable............................................   $  110,907      $  132,559
Settlement due to members...................................      143,471          64,846
Accrued expenses............................................      353,194         257,027
Other current liabilities...................................       30,899          33,010
                                                               ----------      ----------
  TOTAL CURRENT LIABILITIES.................................      638,471         487,442
Other liabilities...........................................      149,608         152,346
Long-term debt..............................................       80,065          82,992
                                                               ----------      ----------
  TOTAL LIABILITIES.........................................      868,144         722,780
Minority interest...........................................           --           1,872
Commitments and contingencies (Note 9)

MEMBERS' EQUITY
Retained earnings...........................................      602,724         460,663
Accumulated other comprehensive income, net of tax:
  Cumulative translation adjustment.........................         (678)           (345)
  Net unrealized gain on investment securities
     available-for-sale.....................................        4,615           2,090
                                                               ----------      ----------
Total accumulated other comprehensive income................        3,937           1,745
                                                               ----------      ----------
  TOTAL MEMBERS' EQUITY.....................................      606,661         462,408
                                                               ----------      ----------
  TOTAL LIABILITIES AND MEMBERS' EQUITY.....................   $1,474,805      $1,187,060
                                                               ==========      ==========




  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,
                                                          -----------------------------------
                                                            2001         2000         1999
                                                          ---------    ---------    ---------
                                                                    (IN THOUSANDS)
                                                                           
OPERATING ACTIVITIES
  Net income............................................  $ 142,061    $ 118,149    $  86,255
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation.......................................     39,680       34,728       31,525
     Amortization.......................................     32,693       25,869       21,593
     Write down of intangible assets....................      6,327        8,609       15,334
     Write down and losses on investments in
       affiliates.......................................      8,185        5,758        2,450
     Loss on disposal of property, plant and equipment,
       net..............................................      2,425           50        1,385
     Amortization of premiums and discounts, net........      2,754        1,779        1,299
     Minority interest..................................     (4,086)      (7,031)     (12,994)
     Changes in operating assets and liabilities:
       Trading securities...............................     11,805        9,144       (6,517)
       Accounts receivable..............................    (32,970)     (26,951)     (17,919)
       Settlement due from members......................   (112,959)        (376)     (45,331)
       Prepaid expenses and other current assets........    (13,311)      (6,531)      (6,690)
       Deferred income tax..............................     (2,725)       5,434      (32,794)
       Intangible assets................................    (50,813)     (51,217)     (22,559)
       Accounts payable.................................    (21,652)      60,920       14,682
       Settlement due to members........................     78,625       (6,042)      35,909
       Accrued expenses.................................     96,167       20,502      (11,722)
       Other current liabilities........................     (7,554)     (15,297)     (35,070)
       Net change in other assets and liabilities.......    (26,257)      43,117       61,163
                                                          ---------    ---------    ---------
Net cash provided by operating activities...............    148,395      220,614       79,999

INVESTING ACTIVITIES
  Purchases of property, plant and equipment, net.......    (57,861)    (112,826)     (31,705)
  Purchases of investment securities
     available-for-sale.................................   (251,205)    (480,849)    (183,536)
  Proceeds from sales of investment securities
     available-for-sale.................................    115,439      308,628      251,597
  Proceeds from principal pay-downs and maturities of
     investment securities available-for-sale...........      4,440        4,000        9,507
  Payments received on affiliate franchise sales........      6,937        3,626       18,993
  Maturities (purchases) of investment security
     held-to-maturity...................................        724          725       (8,775)
  Investments in affiliates: (contributions) return of
     capital............................................     10,527       (6,050)      (2,187)
                                                          ---------    ---------    ---------
Net cash (used in) provided by investing activities.....   (170,999)    (282,746)      53,894
                                                          ---------    ---------    ---------

FINANCING ACTIVITIES
  Proceeds (payments) from short-term borrowings, net...      5,443       (5,808)     (22,900)
                                                          ---------    ---------    ---------
Net cash (used in) provided by financing activities.....      5,443       (5,808)     (22,900)
                                                          ---------    ---------    ---------
  Net (decrease) increase in cash and cash
     equivalents........................................    (17,161)     (67,940)     110,993
  Cash and cash equivalents -- beginning of year........    193,304      261,244      150,251
                                                          ---------    ---------    ---------
  Cash and cash equivalents -- end of year..............  $ 176,143    $ 193,304    $ 261,244
                                                          =========    =========    =========




  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,
                                                              ----------------------------------
                                                                2001         2000         1999
                                                              ---------    ---------    --------
                                                                        (IN THOUSANDS)
                                                                               
NET INCOME..................................................  $142,061     $118,149     $86,255
Other comprehensive income (loss), net of tax:
  Foreign currency translation adjustments..................      (333)          20          --
  Income tax effect.........................................        --         (348)       (188)
                                                              --------     --------     -------
                                                                  (333)        (328)       (188)
  Net unrealized gain (loss) on investment securities
     available-for-sale arising during the year.............     6,011        5,383      (4,278)
  Income tax effect.........................................    (2,342)      (2,220)      1,731
                                                              --------     --------     -------
                                                                 3,669        3,163      (2,547)
  Reclassification adjustment for net (gain) loss
     realized on investment securities available-for-sale...    (1,874)        (162)      1,299
  Income tax effect.........................................       730           66        (547)
                                                              --------     --------     -------
                                                                (1,144)         (96)        752
                                                              --------     --------     -------
  Other comprehensive income (loss).........................     2,192        2,739      (1,983)
                                                              --------     --------     -------
COMPREHENSIVE INCOME........................................  $144,253     $120,888     $84,272
                                                              ========     ========     =======




                     MASTERCARD INTERNATIONAL INCORPORATED



             CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY





                                                           ACCUMULATED
                                                              OTHER
                                                          COMPREHENSIVE    RETAINED
                                                          INCOME (LOSS)    EARNINGS     TOTAL
                                                          -------------    --------    --------
                                                                     (IN THOUSANDS)
                                                                              
BALANCE AT JANUARY 1, 1999..............................     $   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
Net income..............................................          --        142,061     142,061
Other comprehensive income..............................       2,192             --       2,192
                                                             -------       --------    --------
BALANCE AT DECEMBER 31, 2001............................     $ 3,937       $602,724    $606,661
                                                             =======       ========    ========




  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 2001 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 investment income 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 the equity method 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.



     Special purpose entities ("SPE's") are typically set-up for a single,
discrete purpose. SPE's are not operating entities and usually have no employees
and a limited life. The legal documents that govern the SPE transaction describe
how the cash earned on the assets held in the SPE must be allocated to the
investors and other parties that have rights to these cash flows. MasterCard is
the lessee in one synthetic lease transaction for the Winghaven facility that
was structured by creating an SPE ("lessor") which constructed and owns the
facility (see Note 9 to the Financial Statements and the discussion on Liquidity
and Capital Resources in the Management's Discussion & Analysis). The decision
whether or not to consolidate the SPE, or record the facility, depends not only
on the applicable accounting principles for SPE's and the treatment of the lease
as operating or capital, but also on a determination regarding the nature and
amount of the investments made by third parties to the SPE. Consideration is
given, for example, to whether a third party has made substantive equity
investment in the SPE; which party has voting rights; who makes decisions about
the assets in the SPE;


                                       F-9


                     MASTERCARD INTERNATIONAL INCORPORATED



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                 (IN THOUSANDS)



and who is at risk for loss. The SPE is not consolidated because, under the
applicable accounting principles, MasterCard does not exercise control over the
risks and rewards of the assets in the SPE.



     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. The Company's revenue is comprised 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. 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.



     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 ("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.



     MasterCard has strategic arrangements with certain members, which provide
for fee rebates when the member meets certain transaction hurdles. Such rebates
are calculated on a monthly basis 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 -- In general, advertising and promotional items are
expensed at the time the event occurs. Included in advertising and promotional
expenses are payments to members primarily in exchange for members' efforts to
promote the MasterCard brand. Such payments to members that represent an
identifiable benefit to MasterCard with a fair value that can be determined are
treated as a promotional expense by MasterCard in the period incurred.



     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
owns 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


                                       F-10

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


recognized in other income and expense and a corresponding offset is recorded in
compensation expense. Investment securities are evaluated for other than
temporary impairment on an ongoing basis.



     Settlement due to/due from members -- The Company operates systems for
clearing and settling payment transactions among its members. Net settlements
are generally cleared daily among members by wire transfer or other bank
clearing means. However, some transactions may not settle until subsequent
business days, resulting in amounts due from and due to members.



     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.



     Intangible assets -- Intangible assets are comprised of capitalized
software costs, goodwill, franchise rights and other intangible assets.
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. Shareholder franchise rights 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.



     Certain computer software costs are capitalized under 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.



     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
Statement of Financial Accounting Standards ("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 the Company's businesses except its Mondex International
operations, for which the local currency is the functional currency. Where the
U.S. dollar is considered the functional currency, monetary assets and


                                       F-11


                     MASTERCARD INTERNATIONAL INCORPORATED



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                 (IN THOUSANDS)



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.



3.  INVESTMENT SECURITIES



     The amortized cost and estimated fair value of investment securities
available-for-sale are as follows:





                                                            GROSS UNREALIZED
                                                AMORTIZED   ----------------
DECEMBER 31, 2001                                 COST      GAINS    LOSSES    FAIR VALUE
-----------------                               ---------   ------   -------   ----------
                                                                   
Municipal bonds...............................  $443,398    $9,029   $(1,337)   $451,090
                                                ========    ======   =======    ========






                                                            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 December 31, 2001, is as follows:





                                                              AMORTIZED
                                                                COST      FAIR VALUE
                                                              ---------   ----------
                                                                    
Due within 1 year...........................................  $  8,672     $  8,806
Due after 1 year through 5 years............................   401,632      409,115
Due after 5 years through 10 years..........................    33,094       33,169
                                                              --------     --------
                                                              $443,398     $451,090
                                                              ========     ========




     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 December 31, 2001 and 2000, 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.


                                       F-12


                     MASTERCARD INTERNATIONAL INCORPORATED



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                 (IN THOUSANDS)



     Components of investment income are as follows for each of the years ended
December 31:





                                                           2001      2000      1999
                                                          -------   -------   -------
                                                                     
Interest income.........................................  $23,123   $23,811   $19,083
Dividend income.........................................    3,034     2,799     3,571
Investment securities available-for-sale:
Gross realized gains....................................    1,994       306        63
Gross realized losses...................................     (120)     (144)   (1,362)
Trading securities:
Unrealized (losses) gains, net..........................   (8,659)      382     4,170
Realized gains, net.....................................    1,582     2,524     5,310
All other investment income.............................    1,296       702     1,347
                                                          -------   -------   -------
Total investment income.................................  $22,250   $30,380   $32,182
                                                          =======   =======   =======




4.  PROPERTY, PLANT AND EQUIPMENT



     Property, plant and equipment consist of the following at December 31:





                                                                2001        2000
                                                              ---------   ---------
                                                                    
Equipment...................................................  $ 263,889   $ 222,693
Building and land...........................................     80,898      71,166
Furniture and fixtures......................................     41,307      57,446
Leasehold improvements......................................     29,901      48,741
                                                              ---------   ---------
                                                                415,995     400,046
Less accumulated depreciation and amortization..............   (256,253)   (252,753)
                                                              ---------   ---------
                                                              $ 159,742   $ 147,293
                                                              =========   =========




     For the years ended December 31, 2001, 2000 and 1999, depreciation and
amortization expense aggregated $43,014, $40,951 and $36,665 respectively.



     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:





                                                          2001      2000       1999
                                                         -------   -------   --------
                                                                    
CURRENT
Federal................................................  $83,755   $68,650   $ 74,702
State and local........................................    6,434     8,505      8,192
Foreign................................................      889     2,350      1,959
                                                         -------   -------   --------
                                                          91,078    79,505     84,853
DEFERRED
Federal................................................   (1,523)    2,200    (20,770)
State and local........................................    1,323       377     (1,307)
                                                         -------   -------   --------
                                                            (200)    2,577    (22,077)
                                                         -------   -------   --------
Total tax provision....................................  $90,878   $82,082   $ 62,776
                                                         =======   =======   ========




     For the year ended December 31, 2001, domestic operations contributed
approximately $252,000 to earnings before income taxes and foreign operations
resulted in a loss before income taxes of approximately $19,000.



     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:





                                                              2001   2000   1999
                                                              ----   ----   ----
                                                                   
Federal statutory tax rate..................................  35.0%  35.0%  35.0%
State tax, net of Federal benefit...........................   2.2    3.1    3.0
Foreign tax effect, net of Federal benefit..................   2.1    2.5    3.7
Non-deductible expenses and other differences...............   2.4    2.9    3.1
Tax-exempt income...........................................  (2.7)  (2.5)  (2.7)
                                                              ----   ----   ----
Effective tax rate..........................................  39.0%  41.0%  42.1%
                                                              ====   ====   ====



                                       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)
                                          ------------------------------------------------
                                                   2001                      2000
                                          ----------------------    ----------------------
                                          CURRENT    NON-CURRENT    CURRENT    NON-CURRENT
                                          -------    -----------    -------    -----------
                                                                   
Accrued liabilities.....................  $18,549     $    501      $23,322      $   501
Changes in tax methods..................   (4,635)          --       (4,490)      (4,490)
Deferred compensation and benefits......    1,246       56,227          974       42,076
Excess foreign losses...................       --        9,343           --       12,487
Gains/losses included in comprehensive
  income................................   (3,077)         593       (1,465)         463
Intangible assets.......................       --       18,864           --       13,699
Prepaid state tax credits...............      160        7,326          176        8,050
Property, plant and equipment...........       --      (22,390)          --       (6,583)
Other items.............................      452        2,233         (375)       2,111
Valuation allowance.....................       --       (6,162)          --       (8,339)
                                          -------     --------      -------      -------
                                          $12,695     $ 66,535      $18,142      $59,975
                                          =======     ========      =======      =======




     The valuation allowance relates primarily to the ability to recognize tax
benefits associated with foreign operations. The valuation allowance was $5,335
at December 31, 1999. The valuation allowance increased in years in which
additional foreign losses were incurred but tax benefits could not be recognized
and decreased in years in which losses were recognized.



     Cash paid for income taxes for the years ended December 31, 2001, 2000 and
1999 was $41,703, $81,854 and $83,406, 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, that
satisfies the U.S. Internal Revenue Service's funding standards.



     At December 31, 2001 and 2000, 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:





                                                                2001        2000
                                                              --------    --------
                                                                    
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.....................  $ 84,630    $ 56,779
Service cost................................................    10,094       9,854
Interest cost...............................................     6,089       5,619
Plan Amendments.............................................    (2,185)         --
Actuarial (gain) or loss....................................     2,136      17,675
Benefits paid...............................................    (3,139)     (5,297)
                                                              --------    --------
Benefit obligation at end of year...........................  $ 97,625    $ 84,630
                                                              ========    ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year..............  $ 47,878    $ 42,850
Adjustment..................................................        --         (44)
Actual return on plan assets................................       (14)      2,128
Employer contributions......................................    19,002       8,241
Benefits paid...............................................    (3,139)     (5,297)
                                                              --------    --------
Fair value of plan assets at end of year....................  $ 63,727    $ 47,878
                                                              ========    ========
RECONCILIATION OF FUNDED STATUS
Funded status...............................................  $(33,898)   $(36,752)
Unrecognized actuarial (gain) or loss.......................    14,892       9,951
Unrecognized transition (asset).............................       (32)       (148)
Unrecognized prior service cost.............................    (3,105)     (1,372)
                                                              --------    --------
Accrued cost................................................  $(22,143)   $(28,321)
                                                              ========    ========




     Net pension expense included the following components for the years ended
December 31:





                                                         2001       2000       1999
                                                        -------    -------    -------
                                                                     
Service cost..........................................  $10,094    $ 9,854    $ 8,562
Interest cost.........................................    6,089      5,619      3,685
Expected return on plan assets........................   (3,856)    (2,775)    (2,455)
Amortization of prior service cost....................     (452)      (223)      (132)
Amortization of transition (asset)....................     (116)      (116)      (116)
Recognized actuarial loss.............................    1,065      1,513        823
                                                        -------    -------    -------
Net periodic cost.....................................  $12,824    $13,872    $10,367
                                                        =======    =======    =======




     Assumptions used to measure the accumulated and projected benefit
obligation included a weighted average discount rate of 7.25 percent and 7.75
percent for 2001 and 2000, respectively. An assumed rate of increase in future
compensation levels for both 2001 and 2000 was 7.0 percent, and an expected
long-term rate of return on plan assets was 8.5 percent for both 2001 and 2000.
At December 31, 2001 and 2000, the accrued cost was recorded on the balance
sheet within accrued expenses and other liabilities. The net periodic cost was a
component of general and administrative expense in the statement of income for
the year ended December 31, 2001, 2000, and 1999.


                                       F-16


                     MASTERCARD INTERNATIONAL INCORPORATED



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                 (IN THOUSANDS)



     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 $19,905, $17,180 and $16,125 and 2001, 2000 and 1999, respectively.
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 members. 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 his or her shares, appreciation that is forfeited is returned to
MasterCard. In 1999, VAP was replaced by an Executive Incentive Plan ("EIP")
arrangement. Although contributions to VAP have been discontinued effective
1999, plan assets remain intact and participants are entitled to the net
appreciation on the portfolio of securities in accordance with plan provisions.
The Company's liability related to the VAP at December 31, 2001 and 2000 was
$9,582 and $15,871, respectively, and the (income)/expense was ($6,114), $499
and $5,707 for the years ending December 31, 2001, 2000 and 1999, respectively.



     MasterCard's EIP effective January 1999, is a performance unit plan, in
which 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. 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 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 the three- and five-year periods from the date of grant. The Company's
liability related to EIP at December 31, 2001 and December 31, 2000 was $76,135
and $45,307, respectively, and the expense was $31,536, $29,682 and $17,910 for
the years ending December 31, 2001, 2000 and 1999, 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



     For plan years prior to 2001, 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 grew with an annual credit (twelve hundred dollars) and an
interest credit (3%). Upon retirement, the account was 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 did not fund its future retiree medical obligation.


                                       F-17


                     MASTERCARD INTERNATIONAL INCORPORATED



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                 (IN THOUSANDS)



     Also for plan years prior to 2001, 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 was provided for all grandfathered employees.



     Effective July 1, 2001, MasterCard modified 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 became funded when the new
design was implemented as these accounts are vested and are portable subaccounts
within MasterCard's pension plan.



     In adopting SFAS 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. For the years end December
31, 2001 and 2000, the unamortized balance was $6,952 and $7,532, respectively.



     The following table presents the status of the Company's postretirement
benefit plan at December 31:





                                                                2001        2000
                                                              --------    --------
                                                                    
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.....................  $ 25,455    $ 17,895
Service cost................................................     1,706       2,309
Interest cost...............................................     1,692       1,657
Plan amendments.............................................       909          --
Actuarial (gain) or loss....................................    (2,476)      3,766
Benefits paid...............................................      (280)       (172)
                                                              --------    --------
Benefit obligation at end of year...........................  $ 27,006    $ 25,455
                                                              ========    ========
CHANGE IN PLAN ASSETS
Employer contributions......................................  $    280    $    172
Benefits paid...............................................      (280)       (172)
                                                              --------    --------
Fair value of plan assets at end of year....................  $     --    $     --
                                                              ========    ========
RECONCILIATION OF FUNDED STATUS
Funded status...............................................  $(27,006)   $(25,455)
Unrecognized actuarial (gain)...............................    (8,778)     (6,850)
Unrecognized transition obligation..........................     6,376       6,955
Unrecognized prior service cost.............................       840          --
                                                              --------    --------
Accrued cost................................................  $(28,568)   $(25,350)
                                                              ========    ========



                                       F-18

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


     The Company's postretirement benefit plan is currently unfunded. Net
periodic postretirement benefit cost for the years ended December 31, 2001, 2000
and 1999 included the following components:





                                                            2001      2000      1999
                                                           ------    ------    ------
                                                                      
Service cost.............................................  $1,706    $2,309    $2,162
Interest cost............................................   1,692     1,657     1,243
Amortization of prior service cost.......................      69        --        --
Amortization of transition obligation....................     579       580       580
Recognized actuarial gain................................    (548)     (284)     (324)
                                                           ------    ------    ------
Net periodic cost........................................  $3,498    $4,262    $3,661
                                                           ======    ======    ======




     Assumptions used in determining the postretirement defined benefit
obligation included a weighted average discount rate of 7.25 percent and 7.75
percent for 2001 and 2000, respectively, and a rate of increase in future
compensation levels of 7.0 percent for both 2001 and 2000. At December 31, 2001
and 2000, the accrued cost was recorded on the balance sheet within accrued
expenses and other liabilities. The net periodic cost was a component of general
and administrative expenses in the statement of income for the year ended
December 31, 2001, 2000 and 1999.



     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 2001. The rate was assumed to decrease gradually to 5.5 percent by
2006 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...........................    $2,820         $(2,337)
Service and interest cost components........................       440            (362)




8. DEBT



     At December 31, 2001, the Company had a $1.2 billion ($1 billion at
December 31, 2000) 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. Commitment and other fees
associated with this credit facility totaled $1,513, $1,279 and $1,055 for each
of the years ended December 31, 2001, 2000 and 1999, 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, 2001, 2000 and 1999.
The fair value of the Notes is estimated at $80,418 and $78,117 at December 31,
2001 and 2000, 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, 2001.


                                       F-19

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


     In the normal course of business, the Company operates systems for clearing
and settling payment transactions among its members. Net settlements are
generally cleared daily among members by wire transfer or other bank clearing
means, via settlement cash accounts. However, some transactions may not settle
until subsequent business days due to varying local currency settlement value
date intervals and other timing differences. These timing differences result in
amounts due to MasterCard by members or amounts due to members from MasterCard
for a duration normally ranging from one to four calendar days and are included
in the balance sheet of MasterCard International as settlement due to/due from
members. The net impact of the settled transactions was the main contributor to
net settlement cash account overdraft positions of $9,531 and $4,088 at December
31, 2001 and 2000, respectively, which have been recorded in other current
liabilities.



     Cash paid for interest during the years ended December 31, 2001, 2000 and
1999 was $5,963, $5,750 and $5,593, respectively.



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 located in O'Fallon,
Missouri. 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 (the "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 Secured Notes and any returns to equity-holders. 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 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 after August 31, 2006. In conjunction with the lease agreement,
the Company executed a Guarantee of 85.15 percent of the Secured Notes
outstanding totaling $127,187 as of December 31, 2001. Additionally, upon the
occurrence of specific events of default, the Company will guarantee repayment
of the total outstanding principal and interest on the Secured Notes and take
ownership of the building. At December 31, 2001, the impact of consolidating the
special purpose entity and recording its assets on MasterCard's balance sheet
would result in $154 million in debt for the Company and $8 million of minority
interest relating to the equity in the Trust held by a third party. For the year
ended December 31, 2001, net income would have been reduced by depreciation in
the amount of $3 million after tax. Furthermore, instead of the 2001 rent
expense of $4 million ($11 million annually after 2001) to the Trust, MasterCard
would record interest expense and minority interest in the same amount.
Consequently, EBIDTA would have increased by approximately $4 million in 2001
($11 million annually after 2001) while cash flow would remain unaffected.



     Global rental expense for the Company's office space aggregated
approximately $22,110, $16,254 and $18,940 for the years ended December 31,
2001, 2000 and 1999, respectively. Rental of computer equipment, communications
lines, and office equipment aggregated $31,685, $29,794 and $31,096 for the
years ended December 31, 2001, 2000 and 1999, respectively.


                                       F-20

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


     The future minimum payments under non-cancelable operating leases for
office buildings and equipment, sponsorships, licensing and other agreements at
December 31, 2001 are as follows:





                                                                       SPONSORSHIP,
                                                                       LICENSING &
                                         TOTAL      OPERATING LEASE       OTHER
                                        --------    ---------------    ------------
                                                              
2002..................................  $ 82,595       $ 24,046          $ 58,549
2003..................................    41,763         22,137            19,626
2004..................................    32,077         19,630            12,447
2005..................................    29,013         17,988            11,025
2006..................................    18,376         16,946             1,430
Thereafter............................    35,318         35,318                --
                                        --------       --------          --------
Total.................................  $239,142       $136,065          $103,077
                                        ========       ========          ========




     The Company has guaranteed the payment of settlement obligations between
members in the event that a member institution failed to settle their
transactions. See Note 13 for a description of settlement credit risk.



     The Company has also guaranteed the payment of MasterCard branded travelers
cheques outstanding. The Company had outstanding travelers cheques of $1,441,970
and $1,480,279 at December 31, 2001 and 2000, respectively. MasterCard has
obtained an unlimited guarantee in the amount of $1,368,526 and $1,399,663 at
December 31, 2001 and 2000, 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 $8,684,
$8,909 and $8,876 to Maestro for the years ended December 31, 2001, 2000 and
1999, 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 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
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


                                       F-21

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


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 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 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.



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

                                       F-22

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


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 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 report, 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


                                       F-23

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


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.



     MasterCard believes that it is not currently possible to estimate the
impact, if any, that the ultimate resolution of these matters will have on its
results of operations, financial position or cash flows. MasterCard's policy is
to accrue probable estimated legal fees in defending these claims.



11. MONDEX



     On February 21, 1997, the Company entered into 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 have
the right to obtain licenses in regions in which they operate to participate in
the


                                       F-24

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


MXI electronic cash system and to participate in other applications of the MXI
technology in chip-based programs.



     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 February 21, 1997. The excess of
purchase price over book value, which approximated fair value, was recorded as
an intangible asset.



     In a separate transaction on February 21, 1997, 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 Mondex technology in territories that remained
unsold at the time of the agreement. As of December 31, 2001, the company has
received all payments for franchise sales due under this right. From the sale of
franchises, MasterCard received $6,937, $3,626 and $18,993 in 2001, 2000 and
1999, respectively.



     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 purchase method
and, accordingly, the investments are accounted for on a consolidated basis. See
Note 12 for a discussion of the impairment of the asset.



     On June 29, 2001, the Company purchased all the outstanding minority shares
of MXI with a fair value of $981 for $4,084, consisting of $115 for 80,535
common and preferred shares of MXI and $3,969 in acquisition costs, resulting in
goodwill of $3,103. Such goodwill was written off during 2001 under the guidance
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." See Note 12 for a discussion of the
impairment of the asset. The Company now owns 100% of MXI and, accordingly, is
no longer responsible for assessments under the agreement entered into in 1997.



12. INTANGIBLE ASSETS



     The following table sets forth net intangible assets at December 31:





                                                                2001        2000
                                                              --------    --------
                                                                    
Capitalized Software........................................  $128,439    $ 79,629
Goodwill....................................................    31,572      28,469
Shareholder franchise rights................................    48,427      49,527
Other.......................................................    10,328      10,328
                                                              --------    --------
                                                               218,766     167,953
Less:
Accumulated amortization....................................   (91,742)    (62,734)
Accumulated impairment......................................   (30,270)    (23,943)
                                                              --------    --------
                                                              $ 96,754    $ 81,276
                                                              ========    ========




     Amortization expense related to intangible assets was $29,272, $19,291 and
$14,839 in 2001, 2000 and 1999, 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, were amortized on a
straight-line basis over seven years. During 2001, 2000 and 1999, the Company
evaluated the recoverability of these


                                       F-25

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


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 impairment losses of $3,224, $8,609 and $15,334 for the years ended
December 31, 2001, 2000, and 1999, respectively. On December 20, 2001, Mondex
Asia sold franchise rights with a carrying value of $1,100 for $1,100. At
December 31, 2001, the entire balance of shareholder franchise rights had been
fully amortized, impaired or sold.



     The acquisition of a 51 percent ownership interest in 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 acquisition of the
minority interest in MXI on June 29, 2001, resulted in approximately $3,103 of
goodwill, which was fully impaired in 2001 due to limited projected cash flows
from future operations.



     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.



     The Company enters into foreign exchange contracts to minimize the risk
associated with anticipated revenues and expenses, and assets and liabilities
denominated in foreign currencies. MasterCard's forward contacts by notional
amounts and estimated fair values of these contracts at December 31 are as
follows:





                                                     2001                      2000
                                            ----------------------    ----------------------
                                                        ESTIMATED                 ESTIMATED
                                            NOTIONAL    FAIR VALUE    NOTIONAL    FAIR VALUE
                                            --------    ----------    --------    ----------
                                                                      
Forwards
  Commitments to purchase foreign
     currency.............................  $10,622        $ 11       $60,275      $(1,427)
  Commitments to sell foreign currency....    2,505         (12)       43,416          291




     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, 2001 and 2000. Foreign
exchange forward, option and swap contracts are used for economic hedges that do
not qualify for hedge accounting.



     The currencies underlying the forward exchange commitments consist
primarily of U.K. pounds, Sterling, Singapore dollar, Hong Kong dollar, Japanese
yen, and Indian rupee. The fair value of off-balance sheet financial instruments
generally reflects the estimated amounts that the Company would receive or pay
to


                                       F-26

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


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, travelers
cheques outstanding, and 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 generally 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
$1,342,572 and $1,125,511 at December 31, 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 member credit exposure at December 31, 2001 and
2000, after consideration of collateral and guarantees, amounted to $8,225,054
and $7,921,109, respectively. MasterCard member net credit exposure had
concentrations of 65% and 58% in North America and 18% and 28% in Europe at
December 31, 2001 and December 31, 2000, respectively. The Company also reviews
the credit worthiness of members, 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, 2001 and 2000 was $1,368,526 and
$1,399,663, respectively. MasterCard has obtained an unlimited guarantee from a
financial institution in order to mitigate its exposure to outstanding travelers
cheques for that issuer.



     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 considered 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.


                                       F-27

                     MASTERCARD INTERNATIONAL INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)


     The following geographic data represents revenues based on the geographic
locations of the Company's customers for each years ended:





                                                              DECEMBER 31,
                                                 --------------------------------------
                                                    2001          2000          1999
                                                 ----------    ----------    ----------
                                                                    
United States..................................  $1,170,756    $1,050,145    $  933,367
Asia/Pacific...................................     207,754       185,564       159,595
Latin America/Caribbean........................     177,725       138,150       119,591
Europe.........................................     134,100       121,129       114,246
Canada.........................................      46,105        44,691        34,047
Middle East/Africa.............................      37,408        31,536        28,309
                                                 ----------    ----------    ----------
Total Revenue..................................  $1,773,848    $1,571,215    $1,389,155
                                                 ==========    ==========    ==========




     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
(i) integrate MasterCard and Europay International S.A. into a single global
entity and (ii) to convert MasterCard to a private share corporation by merging
MasterCard with an affiliate of a newly formed stock holding company, MasterCard
Incorporated. 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 14, 2002, the registration
statement of MasterCard Incorporated on Form S-4 became effective under the
Securities Act of 1933, as amended.


                                       F-28


                           EUROPAY INTERNATIONAL S.A.

                       CONSOLIDATED FINANCIAL STATEMENTS

                                       F-29


                       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. (the "Company")
and its subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for the two years 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 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
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 years ended December 31, 2001 and 2000, and the
determination of consolidated shareholders' equity and consolidated financial
position at December 31, 2001 and 2000, to the extent summarized in Note 19 to
the consolidated financial statements.


PricewaterhouseCoopers Reviseurs d'Entreprises
represented by

Yves Vandenplas

Brussels, Belgium

April 17, 2002


                                       F-30



                           EUROPAY INTERNATIONAL S.A.



                          CONSOLIDATED BALANCE SHEETS


                                (IN E THOUSANDS)





                                                                          AS OF DECEMBER 31,
                                                                          ------------------
                                                               NOTES       2001       2000
                                                              --------    -------    -------
                                                                            
ASSETS
NON CURRENT ASSETS
Intangible assets...........................................     4         22,069      8,825
Fixed assets................................................     5         34,046     34,133
Financial assets............................................     6          1,943      2,029
                                                                          -------    -------
  Total Non Current Assets..................................               58,058     44,987
                                                                          -------    -------
CURRENT ASSETS
Amounts receivable within one year
  Trade debtors.............................................               37,490     45,915
  Other amounts receivable..................................   8, 16      129,177     46,619
                                                                          -------    -------
     Total amounts receivable within one year...............              166,667     92,534
Investments and deposits....................................     9          9,000      1,852
Cash at bank and in hand....................................     10        85,960    112,117
Deferred charges and accrued income.........................                4,060      2,679
                                                                          -------    -------
  Total Current Assets......................................              265,687    209,182
                                                                          -------    -------
          TOTAL ASSETS......................................              323,745    254,169
                                                                          =======    =======
CAPITAL AND RESERVES AND LIABILITIES
CAPITAL AND RESERVES
Issued Capital..............................................               17,611     17,611
Consolidated reserves.......................................     7         35,800     23,628
Consolidation difference....................................     6            383        383
Cumulative translation adjustment...........................                  268        235
                                                                          -------    -------
  Total Capital and Reserves................................               54,062     41,857
                                                                          -------    -------
MINORITY INTEREST...........................................     11         3,060      2,619
                                                                          -------    -------
PROVISION FOR LIABILITIES AND CHARGES.......................  5, 9, 15      3,579      2,301
                                                                          -------    -------
DEFERRED TAX................................................     16         4,817      2,792
                                                                          -------    -------
CREDITORS
Amounts payable within one year
  Bank overdrafts...........................................     10        63,618     37,789
  Suppliers.................................................     14        78,209     63,587
  Taxes.....................................................     16        19,288      2,150
  Remuneration and social security..........................     15        13,518      9,932
  Other amounts payable.....................................     12        82,918     89,749
                                                                          -------    -------
     Total amounts payable within one year..................              257,551    203,207
Accrued charges and deferred income.........................                  170      1,149
Amounts payable after one year..............................     13           506        244
                                                                          -------    -------
  Total Creditors...........................................              258,227    204,600
                                                                          -------    -------
TOTAL CAPITAL AND RESERVES AND LIABILITIES..................              323,745    254,169
                                                                          =======    =======




  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-31



                           EUROPAY INTERNATIONAL S.A.



                       CONSOLIDATED STATEMENTS OF INCOME


                                (IN E THOUSANDS)





                                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                                    ----------------------------------
                                                            NOTES     2001       2000         1999
                                                            -----   --------   --------   ------------
                                                                                          (UNAUDITED)
                                                                              
OPERATING INCOME
Revenue...................................................   17     401,900    364,806      298,206
Capitalization of intangible assets.......................    4       7,737      7,822           --
Other operating income....................................            4,275      3,041        1,041
                                                                    -------    -------      -------
  Total operating income..................................          413,912    375,669      299,247
                                                                    -------    -------      -------
OPERATING EXPENSES
Services and other goods..................................   17     328,464    282,387      226,776
Remuneration, social security and pension costs...........   15      63,991     58,902       50,741
Depreciation and amortization expense.....................  4, 5     13,320     11,143        9,275
Bad debt expense..........................................               --         29          270
Increase/(decrease) in provisions for liabilities and
  charges.................................................   15        (227)       127           --
Other operating expenses..................................   14       3,438      4,858        4,864
                                                                    -------    -------      -------
  Total operating expenses................................          408,986    357,446      291,926
                                                                    -------    -------      -------
OPERATING PROFIT..........................................            4,926     18,223        7,321
FINANCIAL INCOME/(EXPENSE)
Interest income...........................................            1,338      1,072        1,131
Net other financial income/(expense)......................    9      22,487       (543)       6,855
Interest expense..........................................           (2,266)      (172)        (280)
                                                                    -------    -------      -------
  Net financial income....................................           21,559        357        7,706
                                                                    -------    -------      -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.............           26,485     18,580       15,027
EXTRAORDINARY INCOME/(CHARGES)
Adjustments to amounts written off financial assets.......    6          --        184           --
Net gain/(loss) on disposal of fixed assets...............    5        (170)      (300)        (411)
Net use/(establishment) of provisions for liabilities and
  charges.................................................  5, 15    (2,087)    (1,353)          --
Other extraordinary charges...............................             (642)        --           --
                                                                    -------    -------      -------
  Net extraordinary income/(charges)......................           (2,899)    (1,469)        (411)
                                                                    -------    -------      -------
PROFIT FOR THE FINANCIAL PERIOD BEFORE TAXATION...........           23,586     17,111       14,616
INCOME TAXES..............................................   16     (10,734)    (7,447)      (6,721)
                                                                    -------    -------      -------
NET INCOME................................................           12,852      9,664        7,895
NET INCOME/(LOSS) FROM EQUITY INVESTEES, NET OF TAX.......    6        (239)      (158)          --
MINORITY INTEREST, NET OF TAX.............................   11        (441)      (253)        (254)
                                                                    -------    -------      -------
NET INCOME ATTRIBUTABLE TO THE GROUP......................           12,172      9,253        7,641
                                                                    =======    =======      =======




  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-32



                           EUROPAY INTERNATIONAL S.A.



                            SUPPLEMENTAL DISCLOSURE


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                (IN E THOUSANDS)





                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                               2001       2000         1999
                                                              -------    -------    -----------
                                                                                    (UNAUDITED)
                                                                           
OPERATING ACTIVITIES
Profit for the financial period before taxation.............   23,586     17,111       14,616
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..................   13,320     11,143        9,275
     Net (gain)/loss on disposals of fixed assets...........      170        300          411
  Changes in operating assets and liabilities:
     Trade debtors..........................................    8,425     (5,396)       7,986
     Other amounts receivable...............................  (82,558)   (33,161)      (6,932)
     Deferred charges and accrued income....................   (1,381)     8,272          761
     Security deposits......................................     (120)     1,028         (169)
     Suppliers..............................................   14,622      1,122        8,706
     Taxes paid.............................................    8,429     (4,868)      (5,911)
     Remuneration and social security.......................    3,586      2,550        1,389
     Other amounts payable..................................   (6,831)    64,440       10,910
     Accrued charges and deferred income....................     (979)    (2,366)       2,651
     Provision for liabilities and charges..................    1,278      2,061           --
                                                              -------    -------      -------
Net cash provided by/(used in) operating activities.........  (18,453)    62,052       43,693
                                                              -------    -------      -------
INVESTING ACTIVITIES
  Acquisitions of intangible assets.........................   (8,251)    (2,001)      (3,698)
  Capitalization of intangible assets.......................  (10,426)    (7,822)          --
  Acquisitions of fixed assets..............................   (8,202)   (13,761)      (9,839)
  Proceeds from sales of fixed assets.......................      232        548        3,805
  Investment in affiliates..................................       --         (5)         (92)
  Investment in short term cash deposits....................   (9,000)        --       (6,951)
  Proceeds from maturity of short term cash deposit.........       --      6,951           --
  Investment in foreign currency option.....................       --     (1,852)          --
  Proceeds from maturity of investment in foreign currency
     option.................................................    1,852         --           --
                                                              -------    -------      -------
Net cash used in investing activities.......................  (33,795)   (17,942)     (16,775)
                                                              -------    -------      -------
FINANCING ACTIVITIES
  Net change in bank overdrafts.............................   25,829     37,052          469
  Payment of short-term bank loan...........................       --         --      (19,831)
  Net change in amounts payable after one year..............      262     (2,289)          --
                                                              -------    -------      -------
Net cash provided by/(used in) financing activities.........   26,091     34,763      (19,362)
                                                              -------    -------      -------
Net increase/(decrease) in cash at bank and in hand.........  (26,157)    78,873        7,556
Cash at bank and in hand at beginning of year...............  112,117     33,244       25,688
                                                              -------    -------      -------
Cash at bank and in hand at end of year.....................   85,960    112,117       33,244
                                                              =======    =======      =======




  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       F-33



                           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
EUROPAY 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




3. 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.


                                       F-34


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



     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, monthly and quarterly based on transaction volumes. These fees are
recognized as revenue when 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.



     Europay 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 in
revenue in the same period as the revenue is recorded.



FOREIGN CURRENCY TRANSLATION



     The euro (E) 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



     Europay has strategic agreements with certain members, which include costs
to obtain the member's commitment to perform under the terms and over the period
of time defined in the agreement. These costs are

                                       F-35


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



capitalized when incurred and amortized over the remaining term of the agreement
using the straight-line method. Eligible direct internal and external costs
related to the application development and testing stages of internally
developed software are capitalized, and, upon completion are amortized using the
straight-line method over a three year estimated useful life. All other
intangible assets, which consist primarily of purchased software, 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
EPSNet computer network.....................................         2 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 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.



4. INTANGIBLE ASSETS





                                                                  CONCESSIONS,
                                                 SOFTWARE AND       PATENTS,       ADVANCE
                                                   KNOW-HOW      LICENSES, ETC.    PAYMENTS    TOTAL
                                                 ------------    --------------    --------    ------
                                                                                   
ACQUISITION COST
As at December 31, 2000........................     27,114           1,823             --      28,937
Movements during the period:
  Acquisitions, including fixed assets, own
     production................................     10,426           5,030          3,221      18,677



                                       F-36


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)





                                                                  CONCESSIONS,
                                                 SOFTWARE AND       PATENTS,       ADVANCE
                                                   KNOW-HOW      LICENSES, ETC.    PAYMENTS    TOTAL
                                                 ------------    --------------    --------    ------
                                                                                   
  Sales and disposals..........................        (20)             --             --         (20)
  Transfers from one heading to another........     (1,823)             --             --      (1,823)
                                                    ------           -----          -----      ------
As at December 31, 2001........................     35,697           6,853          3,221      45,771
                                                    ------           -----          -----      ------
ACCUMULATED AMORTIZATION AND AMOUNTS WRITTEN
  DOWN
As at December 31, 2000........................     18,289           1,823             --      20,112
Movements during the period:
  Amortization expense.........................      4,776             642             --       5,418
  Written down after sales and disposals.......         (5)             --             --          (5)
  Transfers from one heading to another........     (1,823)             --             --      (1,823)
                                                    ------           -----          -----      ------
As at December 31, 2001........................     21,237           2,465             --      23,702
                                                    ------           -----          -----      ------
NET CARRYING VALUE AT DECEMBER 31, 2001........     14,460           4,388          3,221      22,069
                                                    ======           =====          =====      ======




     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 in 2000 and in doing so recognized income for the same amount,
which is included in the 2000 Consolidated Statement of Income under
capitalization of intangible assets. The EMV intangible assets have been
contributed in their entirety as part of a capital contribution to a joint
venture as described in Note 6 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 from January 1, 2000. Capitalized software amounting to E1,192
and related amortization expense of E9 should have been recognized in the
consolidated financial statements 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 E7,737 and
E7,553 in the years ended December 31, 2001 and 2000, respectively. Amortization
expense related to this capitalized software amounted to E2,691 and E602 in 2001
and 2000, respectively.



     Europay capitalized costs amounting to E5,030 and advance payments
amounting to E3,221, which were incurred to obtain members' commitment to
perform under the terms and over the period of time defined in strategic
agreements entered into with the members, in the year ended December 31, 2001.
Amortization related to these capitalized costs amounted to E642 for the year
ended December 31, 2001.



     Computer related assets with an acquisition cost and accumulated
amortization of E1,823 were reclassified to fixed assets (see Note 5).


                                       F-37

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)


5. 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........    3,624          4,047          266          29          236       8,202
  Sales and disposals................       --         (1,814)         (36)     (5,618)          --      (7,468)
  Transfers from one heading to
     another.........................      482          1,823           --          --         (482)      1,823
                                        ------         ------        -----      ------       ------      ------
As at December 31, 2001..............   43,860         32,073        4,454       2,603          236      83,226
                                        ------         ------        -----      ------       ------      ------
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............................    2,880          4,100          620         302           --       7,902
  Written down after sales and
     disposals.......................       --         (1,445)         (18)     (5,618)          --      (7,081)
  Transfers from one heading to
     another.........................       --          1,823           --          --           --       1,823
                                        ------         ------        -----      ------       ------      ------
As at December 31, 2001..............   18,869         26,106        3,376         829           --      49,180
                                        ------         ------        -----      ------       ------      ------
NET CARRYING VALUE AT DECEMBER 31,
  2001...............................   24,991          5,967        1,078       1,774          236      34,046
                                        ======         ======        =====      ======       ======      ======




     Computer related assets with an acquisition cost and accumulated
amortization of E1,823 were reclassified from intangible assets (see Note 4).



     Assets under construction in relation to the expansion and renovation of
Europay's Waterloo premises in order to accommodate current and future
organizational and operational requirements amounting to E236 and E482 are
included in the Consolidated Balance Sheets at December 31, 2001 and 2000,
respectively. Assets under construction amounting to E482 and E2,655 were put
into use and as such transferred to buildings during the years ended December
31, 2001 and 2000, respectively.



     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.



     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 E30,444 and E24,313 at December 31, 2001 and
2000, respectively. Rent expense related to this lease amounted to E4,217,
E4,717 and E5,231 in 2001, 2000 and 1999, respectively.



     During 1999 Europay rented personal computer equipment required for its
activities under operating lease agreements. Rent expense related to these lease
agreements amounted to E1,717 in 1999. 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 operating lease
agreements. In 2001 the terms of these operating lease agreements were changed
from 4 to 3 1/2 years. Total expense related to these


                                       F-38


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



lease agreements, including insurance, fuel and maintenance amounted to E2,811,
E2,634 and E2,185 in 2001, 2000 and 1999, respectively.



     Europay also rents office buildings and equipment under operating lease
agreements. Total rents related to these lease agreements amounted to E5,553,
E4,774 and E5,614 in 2001, 2000 and 1999, respectively. Europay provided E422
for the cost of terminating of an operating lease agreement for an office
building, the liability for which is included as part of the provisions for
liabilities and charges in the Consolidated Balance Sheet at December 31, 2001
and the cost is included as part of the net establishment of provisions for
liabilities and charges in the Consolidated Statement of Income for the year
then ended.



     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
----                                      ---------    -----------    -----------    ------
                                                                         
2002....................................   11,873         1,821          1,630       15,324
2003....................................    7,932         1,238          1,626       10,796
2004....................................      432           672          1,431        2,535
2005....................................       --            68          1,427        1,495
2006 & after............................       --            --          3,356        3,356
                                           ------         -----         ------       ------
          Total.........................   20,237         3,799          9,470       33,506
                                           ======         =====         ======       ======



                                       F-39


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



6. FINANCIAL ASSETS





                                                                   ENTERPRISES
                                                                    ACCOUNTED
                                                                    FOR USING
                                                                   THE EQUITY
                                                                     METHOD       OTHER     TOTAL
                                                                   -----------    ------    ------
                                                                                
1.   INVESTMENTS IN AFFILIATES
     ACQUISITION COST
     As at December 31, 2000.....................................     1,871           --     1,871
     Movements during the period:
       Acquisitions..............................................        --           --        --
       Translation differences...................................        81           --        81
                                                                      -----       ------    ------
     As at December 31, 2001.....................................     1,952           --     1,952
                                                                      -----       ------    ------
     CAPITAL AND RESERVES OF THE ENTERPRISES
     Movements during the period:
       Share in the result for the financial period..............      (239)          --      (239)
       Other movements in the capital and reserves...............       (47)          --       (47)
                                                                      -----       ------    ------
     Net movements during the period.............................      (286)          --      (286)
                                                                      -----       ------    ------
     NET CARRYING VALUE AS AT DECEMBER 31, 2001..................     1,666           --     1,666
                                                                      -----       ------    ------
2.   SECURITY DEPOSITS
     NET CARRYING VALUE AT THE END OF THE YEAR
     As at December 31, 2000.....................................        --          158       158
     Movements during the period:
       Additions.................................................        --          158       158
       Reimbursements............................................        --          (39)      (39)
                                                                      -----       ------    ------
     As at December 31, 2001.....................................        --          277       277
                                                                      -----       ------    ------
     TOTAL.......................................................     1,666          277     1,943
                                                                      =====       ======    ======




     Europay has a 33% interest in EMVCo, LLC ("EMVCo"), which it accounts for
on an equity basis. EMVCo was established as a Delaware (U.S.) limited liability
company 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. In 2000 Europay's
interest in EMVCo was increased by the contribution of additional intellectual
property valued at E269 (see Note 4).



     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


                                       F-40


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



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, 2000.....................  383
Movements during the period:
  Adjustment as described above.............................   --
                                                              ---
Net carrying value at December 31, 2001.....................  383
                                                              ===




     The Consolidated Balance Sheets include receivables from Maestro of E947
and E345 and payables to Maestro of E2,189 and E1,874 at December 31, 2001 and
2000, respectively. The Consolidated Income Statements include amounts of
E5,773, E4,878 and E4,128 representing Europay's share of the net costs incurred
by Maestro in 2001, 2000 and 1999, respectively.



7. CONSOLIDATED RESERVES





                                                              AT DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
Consolidated reserves at beginning of year..................  23,628    14,375
  Movements during the period:
     Net income attributable to the Group...................  12,172     9,253
                                                              ------    ------
  Consolidated reserves at end of year......................  35,800    23,628
                                                              ======    ======




8. OTHER AMOUNTS RECEIVABLE



     Other amounts receivable consists of the following.





                                                               AT DECEMBER 31,
                                                              -----------------
                                                               2001       2000
                                                              -------    ------
                                                                   
Recoverable VAT.............................................    6,925     5,282
Settlement accounts receivable..............................   99,582    39,303
Income taxes receivable.....................................   22,304     1,314
Other.......................................................      366       720
                                                              -------    ------
          Total other amounts receivable....................  129,177    46,619
                                                              =======    ======




     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 12 for
Euro D0 settlement payables.



     The income taxes receivable at December 31, 2001 includes a receivable
amounting to E16,878 related to a disputed tax assessment from the Belgian tax
authorities which is further described in Note 16.



9. INVESTMENTS AND DEPOSITS



     Europay had short-term deposits at December 31, 2001 of E6,500 and E2,500
at 3% and 3.4%, respectively, that matured on January 2, 2002.


                                       F-41


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



     At December 31, 2001 Europay had signed forward exchange contracts to hedge
projected U.S. dollar denominated expenses in 2002. Premiums and discounts on
the forward exchange contracts are amortized pro rata from the contract date to
the maturity date.



     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. The reversal of this provision upon maturity of
the option in January 2001 is included in net other financial income/(expense)
in the Consolidated Statement of Income for the year December 31, 2001.



     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.



     The notional and estimated fair values of the outstanding derivative
contracts at December 31, 2001 and 2000 are as follows:





                                             AT DECEMBER 31, 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.........................  118,122       4,935            --          --




10. CASH AT BANK AND IN HAND AND BANK OVERDRAFTS



     Cash at bank and in hand consists of the following:





                                                               AT DECEMBER 31,
                                                              -----------------
                                                               2001      2000
                                                              ------    -------
                                                                  
Cash........................................................  28,341     73,234
Member security deposits....................................  57,619     38,883
                                                              ------    -------
          Total cash at bank and on hand....................  85,960    112,117
                                                              ======    =======




     Cash includes E23,226 of cash on Europay's settlement bank accounts from
Euro D0 (described in Note 8 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 December 31,
2001 the applicable interest rates were 3.67% on euro deposits and 1.87% 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
12). The increase from 2000 to 2001 is primarily due to the addition of new
members in Eastern Europe.


                                       F-42


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



     The bank overdrafts and loans consist of the following:





                                                              AT DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
Overdraft on corporate bank accounts........................      36         2
Overdraft on settlement bank accounts.......................  63,582    37,787
                                                              ------    ------
          Total bank overdrafts.............................  63,618    37,789
                                                              ======    ======




     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 December
31, 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 months:     Euribor + 0.125%




     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 had no borrowings on these credit lines at December 31, 2001 or
December 31, 2000.



11. 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,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
15% interest in the capital of EPSS.........................  1,562     1,562
Minority share in the profits of EPSS
  Accumulated results.......................................  1,057       804
  Result for the year.......................................    441       253
                                                              -----     -----
Total minority interest.....................................  3,060     2,619
                                                              =====     =====




12. OTHER AMOUNTS PAYABLE



     Other amounts payable consists of the following.





                                                              AT DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
Settlement accounts payable, see note 8.....................  24,434    47,577
Liability for member security deposits, see note 10.........  57,619    38,883
Loans from Members..........................................      --     2,533
Other.......................................................     865       756
                                                              ------    ------
          Total other amounts payable.......................  82,918    89,749
                                                              ======    ======



                                       F-43


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



13. LONG TERM LIABILITIES



     The balance of E506 at December 31, 2001 represents an invoice for a
sponsorship campaign that is payable in 2003, and the balance of E244 at
December 31, 2000 represents an invoice for a sponsorship campaign that is
payable in 2002.



14. COMMITMENTS AND CONTINGENCIES



     In addition to the future lease payments summarized in Note 5, Europay has
entered into sponsorship and marketing contractual obligations, which are
estimated to be payable in the following years:





YEAR
----
                                                           
2002........................................................  25,342
2003........................................................  12,056
2004........................................................   1,273
2005........................................................     123
2006 & after................................................     123
                                                              ------
          Total.............................................  38,917
                                                              ======




     Europay received a claim from a member alleging that an error in the
technical set up of this member caused the member to incur a loss in revenues
amounting to approximately E1,500. Based on the facts and circumstances of this
matter Europay has established a provision for the potential settlement of the
claim of E739, which is included in suppliers in the Consolidated Balance Sheet
at December 31, 2001 and in other operating expenses in the Consolidated
Statement of Income for the year then ended.



15. AVERAGE NUMBER OF PERSONS EMPLOYED AND PERSONNEL CHARGES





                                                           YEARS ENDED DECEMBER 31,
                                                     ------------------------------------
                                                      2001        2000           1999
                                                     ------    -----------    -----------
                                                                              (UNAUDITED)
                                                                     
PERSONNEL BY CATEGORY
Employees:
  Based in Belgium.................................     542         560            526
  Based outside of Belgium.........................      88          87            102
                                                     ------      ------         ------
Total employees....................................     630         647            628
Management personnel...............................       8           8              8
                                                     ------      ------         ------
  Average number of persons employed...............     638         655            636
                                                     ======      ======         ======
REMUNERATION, SOCIAL SECURITY AND PENSIONS.........  63,991      58,902         50,741
                                                     ======      ======         ======




     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. These
obligations were settled in 2001 resulting in a use of provisions for
liabilities and charges amounting to E1,353 and a charge to operating expenses
for the same amount in the Consolidated Statement of Income for the year ended
December 31, 2001.


                                       F-44

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)


     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 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 the 2001
corporate performance evaluation variable pay costs of E5,461 were accrued at
December 31, 2001.



     In 2001, Europay established and began executing a comprehensive
restructuring plan in order to prepare the organization and operations for the
planned integration with MasterCard Incorporated described in Note 18 below. The
plan provides for the involuntary termination of staff functions on specified
dates over the term of the plan. Europay agreed an involuntary employee
severance package for the plan with its Works Council, and communicated the
package to all staff. In 2001, Europay notified all staff whose function will be
terminated prior to the end of 2002 in writing that their position will be
terminated as a result of the plan, including the expected termination date.
Based on the terms of the involuntary employee severance package and a
probability analysis of staff terminations defined in the plan to the end of
2002, Europay provided E2,742 for estimated involuntary employee severance
costs. In addition, Europay provided E275 for obligations arising from separate
severance agreements with employees. The liabilities for both severance
provisions are included as part of the provisions for liabilities and charges in
the Consolidated Balance Sheet at December 31, 2001 and the costs are included
in extraordinary income/(charges) in the Consolidated Statement of Income for
the year then ended.



16. TAXATION



     The reconciliation of the 2001, 2000 and 1999 income tax charges compared
to the statutory rate of 40.17% is as follows:





                                                           YEARS ENDED DECEMBER 31,
                                                     ------------------------------------
                                                      2001        2000           1999
                                                     ------    -----------    -----------
                                                                              (UNAUDITED)
                                                                     
Consolidated profit for year before taxation.......  23,586      17,111         14,616
                                                     ======      ======         ======
Taxes at statutory rate of 40.17%..................   9,474       6,873          5,871
Adjusted for the tax effect of:
  Disallowed expenses..............................     925         656            735
  Penalties for insufficient tax prepayments.......      --           1            115
  Non-taxable reversal of investment loss
     provision.....................................      --         (74)            --
  Non-taxable (profit)/loss in consolidated
     subsidiary....................................      (5)          5             --
  Tax adjustments..................................     340         (13)            --
  Tax surplus for prior years......................      --          (1)            --
                                                     ------      ------         ------
Tax charge for the year............................  10,734       7,447          6,721
                                                     ======      ======         ======
Effective tax rate.................................    45.5%       43.5%          46.0%
                                                     ======      ======         ======




     Included in the consolidated tax charge for the years ended December 31,
2001 and 2000 is deferred tax amounting to E2,025 and E2,792, respectively,
related to the capitalization of internally developed software, net of related
amortization expense for the year.



     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


                                       F-45

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)


additional tax liability of E16,878, including penalties and interest, in
connection with Europay's tax returns for 1997 and 1998. In accordance with
Belgian GAAP Europay recorded a tax liability for E16,878 upon receipt of the
assessment notice, which is included in taxes in the Consolidated Balance Sheet
at December 31, 2001.



     Europay intends to continue to vigorously contest this matter and on
February 27, 2002 filed a protest with the regional tax director in accordance
with applicable administrative tax procedures. Therefore, in accordance with
Belgian GAAP a receivable of E16,878 has been recorded to reflect the amount in
dispute. This receivable is included in other amounts receivable in the
Consolidated Balance Sheet at December 31, 2001.



     If Europay's deductions of such costs in 1999, 2000 and 2001 are similarly
challenged, this could result in a further additional tax liability of up to
approximately E16.9 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 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.



17. 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 E126,878, E126,606 and E111,925 in 2001, 2000
and 1999, respectively.



     (b) Europay is responsible for funding MasterCard's Europe region costs
plus an agreed profit margin. Total MasterCard Europe region charges of
E123,460, E103,868 and E83,172 in 2001, 2000 and 1999, 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 in
advertising and marketing costs related to European members' brand migration
activities in 1999. These costs are included in services and other goods in the
1999 Consolidated Statement of Income. Europay re-billed MasterCard and recorded
related revenues for the full amount of these costs.



     The Consolidated Balance Sheets include receivables from MasterCard of E573
and E2,401 and payables to MasterCard of E4,131 and E11,955 at December 31, 2001
and 2000, respectively.



18. 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 and class B common stock of MasterCard Incorporated (the
"integration").


                                       F-46

                           EUROPAY INTERNATIONAL S.A.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                (IN E THOUSANDS)


     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 and
class B 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 17 above will be
terminated.



     As of April 17, 2002 the conversion and integration have not occurred.



19. 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.



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-47


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



            RECONCILIATION OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS


                   (IN E THOUSANDS EXCEPT EARNINGS PER SHARE)





                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                              NOTES     2001      2000
                                                              -----    ------    ------
                                                                        
Net Income Attributable to the Group as reported under
  Belgian GAAP..............................................           12,172     9,253
U.S. GAAP adjustments:
  Pensions..................................................   (a)        395      (558)
  Capitalization of borrowing costs, net....................   (c)        (52)      (35)
  Depreciation of fixed assets..............................   (d)       (672)      508
  Internally developed software costs, net..................   (e)       (391)     (227)
  Financial instruments.....................................   (f)      2,445    (1,600)
  Leases, net...............................................   (g)        526       691
  Capitalization of intangible assets.......................   (h)        465       513
  Financial assets..........................................   (i)         --       255
  Licensing fee revenue recognition.........................   (j)       (818)     (845)
                                                                       ------    ------
Net U.S. GAAP adjustments before deferred taxes.............            1,898    (1,298)
  Deferred taxes: effects of differences in methodology and
     adjustments............................................   (b)       (596)      802
                                                                       ------    ------
Net income under U.S. GAAP before cumulative effect of
  change in accounting principle............................           13,474     8,757
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 Attributable to the Group under U.S. GAAP........           12,927     5,657
                                                                       ======    ======
Earnings per share in accordance with U.S. GAAP:............   (k)
  Basic and diluted.........................................              129        57
Weighted average number of shares outstanding (in thousands
  of shares):
  Basic and diluted.........................................              100       100

Net income per U.S. GAAP....................................           12,927     5,657
Other Comprehensive income, net of tax:
  Financial instruments.....................................   (f)      5,058        --
  Translation adjustment....................................                9        15
                                                                       ------    ------
  Total other comprehensive income..........................            5,067        15
                                                                       ------    ------
Comprehensive income under U.S. GAAP........................   (l)     17,994     5,672
                                                                       ======    ======



                                       F-48


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



              RECONCILIATION OF CONSOLIDATED SHAREHOLDER'S EQUITY





                                                                   AT DECEMBER 31,
                                                              -------------------------
                                                              NOTES     2001      2000
                                                              -----    ------    ------
                                                                        
Total shareholders' equity reported under Belgian GAAP......           54,062    41,857
U.S. GAAP adjustments:
  Pensions..................................................   (a)        692       297
  Deferred taxes............................................   (b)     (5,292)   (4,696)
  Capitalization of borrowing costs, net....................   (c)      2,362     2,414
  Depreciation of fixed assets..............................   (d)      5,896     6,568
  Internally developed software costs, net..................   (e)        565       956
  Financial instruments.....................................   (f)      5,903    (1,600)
  Leases, net...............................................   (g)      4,356     3,830
  Capitalization of intangible assets.......................   (h)       (126)     (567)
  Financial assets..........................................   (i)       (184)     (184)
  Licensing fee revenue recognition.........................   (j)     (1,663)     (845)
                                                                       ------    ------
Net U.S. GAAP adjustments before cumulative effect of
  changes in accounting principle...........................           12,509     6,173
                                                                       ------    ------
Shareholders' equity under U.S. GAAP before cumulative
  effect of changes in accounting principle.................           66,571    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................................................
                                                                       ------    ------
Shareholders' equity under U.S. GAAP........................           62,924    44,930
                                                                       ======    ======




         MOVEMENTS IN SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP





                                                                       AT DECEMBER 31,
                                                                       ----------------
                                                                        2001      2000
                                                                       ------    ------
                                                                        
Balance, beginning of year..................................           44,930    39,258
Net income..................................................           12,927     5,657
Other comprehensive income:
  Financial instruments.....................................   (f)      5,058        --
  Translation adjustment....................................                9        15
                                                                       ------    ------
  Total other comprehensive income..........................            5,067        15
                                                                       ------    ------
Balance, end of year........................................           62,924    44,930
                                                                       ======    ======




     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-49


                           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,
                                                              --------------
                                                              2001     2000
                                                              -----    -----
                                                                 
Service cost................................................  1,971    1,963
Interest cost...............................................    569      482
Expected return on plan assets..............................   (605)    (551)
Amortization of transition obligation.......................    117      117
Amortization of net (gain)/loss.............................   (143)    (179)
Amortization of prior service cost..........................     92       92
                                                              -----    -----
Net periodic benefit cost...................................  2,001    1,924
                                                              =====    =====




     Changes in the projected benefit obligation and plan assets during the year
were as follows:



                    CHANGES IN PROJECTED BENEFIT OBLIGATION





                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
Benefit obligation at beginning of year.....................  10,914     9,228
Service cost................................................   1,971     1,963
Interest cost...............................................     569       482
Actuarial (gains)/losses....................................     415       205
Benefits paid...............................................    (943)     (964)
                                                              ------    ------
Benefit obligation at end of year...........................  12,926    10,914
                                                              ======    ======




                             CHANGES IN PLAN ASSETS





                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                                  
Fair value of plan assets at beginning year.................  11,597    10,437
Actual return on plan assets................................     527       758
Employer contributions......................................   2,395     1,366
Benefits paid...............................................    (943)     (964)
                                                              ------    ------
Fair value of plan assets, end of year......................  13,576    11,597
                                                              ======    ======



                                       F-50


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



     The funded status under U.S. GAAP for Europay's defined benefit pension
plan is as follows:



                                 FUNDED STATUS





                                                                 YEARS ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                   
Fair value of plan assets...................................   13,576     11,597
Projected benefit obligation................................  (12,926)   (10,914)
                                                              -------    -------
Funded status...............................................      650        683
Unrecognized net actuarial (gain) loss......................   (1,704)    (2,342)
Unrecognized prior service cost.............................      418        510
Unrecognized transition amount..............................    1,328      1,446
                                                              -------    -------
Prepaid (accrued) benefit cost..............................      692        297
                                                              =======    =======




     The weighted-average assumptions used to determine pension cost for
Europay's defined benefit pension plan were as follows:





                                                               YEARS ENDED
                                                              DECEMBER 31,
                                                              -------------
                                                              2001     2000
                                                              ----     ----
                                                                 
Discount rate...............................................  5.25%    5.50%
Expected rate of return on plan assets: on financing
  funds.....................................................  5.25%    5.50%
Expected rate of return on plan assets: on mathematical
  reserves..................................................  4.75%    4.75%
Expected rate of compensation increase......................  4.25%    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.



  (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.


                                       F-51


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (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 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) 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.



     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


                                       F-52


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



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 year ended December 31,
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 9, Europay had entered into forward currency hedge
contracts at December 31, 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 year ended December 31, 2001,
E5,058 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 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.



     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 were removed from the
balance sheet and a gain of E27 was recorded in the third quarter of 2001. Going
forward, under the new lease term, the existing leases have been 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. Further, Europay
recognizes its proportionate share of expenses associated with the amortization
of "know-how" recorded by the joint venture. See Note 4 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-53


                           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 4 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 recognized 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 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.



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.


                                       F-54


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



     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 E126,878 and
E126,606, net of a reduction in MasterCard costs included in services and other
goods of E123,460 and E103,868 for the years ended December 31, 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:





                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                   
Net cash provided by/(used in) operating activities.........  (11,414)    65,234
Net cash used in investing activities.......................  (40,195)   (22,321)
Net cash provided by financing activities...................   25,452     35,960
                                                              -------    -------
Net increase/(decrease) in cash and cash equivalents........  (26,157)    78,873
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......   85,960    112,117
                                                              =======    =======




Recently Issued Accounting Standards



of the 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 for accounting periods
commencing as 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 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 has
assessed the impact of this new standard at January 1, 2002 and there is no
impact 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


                                       F-55


                           EUROPAY INTERNATIONAL S.A.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                (IN E THOUSANDS)



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-56


                                                                         ANNEX A

                          AGREEMENT AND PLAN OF MERGER

                         DATED AS OF FEBRUARY 13, 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 February 13,
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 February 13, 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 qualified in the manner provided in the Charter
and Bylaws of the Surviving Corporation, or as otherwise provided by law.

     Section 1.6. Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation determines that any deeds, bills of sale, assignments,
assurances or any other acts or things are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, properties or assets
of Merger Sub by reason of, or as a result of, the Merger, or (b) otherwise to
carry out the purposes of this Agreement, then the Surviving Corporation and its
proper officers and directors shall be authorized to execute and deliver, in the
name and on behalf of Merger Sub, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of Merger Sub, all such other
acts and things necessary or desirable to vest, perfect or confirm any and all
right, title or interest in, to or under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out the purposes of this
Agreement.

     Section 1.7. MC Parent Charter. It shall be a condition precedent to the
consummation of the Merger that at the Effective Time of the Merger the
certificate of incorporation of MC Parent (the "MC PARENT CHARTER") and bylaws
of MC Parent (the "MC PARENT BYLAWS") shall be amended and restated to read
substantially in the forms set forth in EXHIBIT D and EXHIBIT E hereto,
respectively.

                                   ARTICLE II

                             EFFECTS OF THE MERGER

     Section 2.1. Effect on Membership.

     (a) Conversion of MCI Membership Interests. At the Effective Time, each of
the issued and outstanding principal, association and travelers cheque
membership interests in MCI shall be converted by virtue of the Merger,
automatically and without any action on the part of the holders thereof, into a
Class A Membership Interest in MCI and a number of fully paid and nonassessable
shares of MC Parent class A common stock, $.01 par value per share (the "MC
PARENT CLASS A STOCK"), and fully paid and nonassessable shares of MC Parent
class B common stock, $.01 par value per share ("MC PARENT CLASS B STOCK"),
equal to 0.046527 shares of MC Parent Class A Stock and 0.0088623 shares of MC
Parent Class B Stock for each vote held by such member according to the current
MCI global proxy formula as of September 30, 2000, for which the total votes
were 1,294,660,941; and immediately thereafter, and as an integral part of the
integrated series of transactions contemplated by this Agreement and the
Integration Agreement, the shares of MC Parent Class A Stock and MC Parent Class
B Stock shall be reallocated in accordance with Section 1.3 of the Integration
Agreement.

     (b) Conversion of MC Parent Membership Interests. At the Effective Time, MC
Parent's membership in Merger Sub shall be converted by virtue of the Merger,
automatically and without any action on the part of the holder thereof, into one
MCI Class B membership.

                                       A-2


                                  ARTICLE III

                                 MISCELLANEOUS

     Section 3.1. Termination. This Agreement may be terminated and abandoned by
action of the Board of Directors of each of MCI, Merger Sub and MC Parent at any
time prior to the Effective Time, whether before or after approval by the
members of MCI, the members of Merger Sub and the stockholders of MC Parent, to
the extent shares of stock have been issued.

     Section 3.2. Approval. The respective obligation of each party to effect
the Merger is subject to approval by at least a majority of the votes cast at a
meeting of the members of MCI at which a quorum is present. The requisite
approval of the member of Merger Sub has been obtained.

     Section 3.3. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):

     (a)if to MCI, Merger Sub or MC Parent:

        MasterCard International Incorporated
        2000 Purchase Street
        Purchase, New York 10577-2509
        Fax: (914) 249-4262
        Attn: General Counsel

        with a copy to:

        Clifford Chance Rogers & Wells LLP
        200 Park Avenue
        New York, New York 10166
        Fax: (212) 878-8375
        Attn: Kathleen L. Werner

     Section 3.4. Amendments. The Boards of Directors of each of MCI, Merger Sub
and MC Parent may amend this Agreement at any time prior to the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
provided that an amendment made subsequent to the adoption of the Agreement by
the members of Merger Sub, the members of MCI and the shareholders of MC Parent,
to the extent shares of stock have been issued, shall not: (1) alter or change
the amount or kind of memberships, shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
memberships of any class or series thereof of any of Merger Sub, MCI or MC
Parent, (2) materially alter or change any term of the Charter to be effected by
the Merger or (3) alter or change any of the terms and conditions of this
Agreement, in each case if such alteration or change would adversely affect the
holders of any memberships of either Merger Sub or MCI or any shareholder of MC
Parent.

     Section 3.5. Counterparts.  This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement.

     Section 3.6. Entire Agreement; No Third-Party Beneficiaries.  This
Agreement and the other agreements entered into in connection with the
transactions (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and (b) are not intended to
confer upon any person other than the parties hereto any rights or remedies.

     Section 3.7. GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

                                       A-3


     IN WITNESS WHEREOF, each of MCI, Merger Sub and MC Parent has executed this
Agreement and Plan of Merger, or has caused this Agreement and Plan of Merger to
be executed on its behalf by a representative duly authorized, all as of the day
and year first above written.

                                          MASTERCARD INTERNATIONAL INCORPORATED


                                          By: /s/ ROBERT W. SELANDER

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

                                              Name: Robert W. Selander


                                              Title: President and Chief
                                              Executive Officer


                                          MASTERCARD INCORPORATED


                                          By: /s/ ROBERT W. SELANDER

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

                                              Name: Robert W. Selander


                                              Title: President and Chief
                                              Executive Officer


                                          MASTERCARD MERGER SUB, INC.


                                          By: /s/ ROBERT W. SELANDER

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

                                              Name: Robert W. Selander


                                              Title: President and Chief
                                              Executive Officer


                                       A-4


                                                                         ANNEX B

                    SHARE EXCHANGE AND INTEGRATION AGREEMENT
                                  BY AND AMONG
                            MASTERCARD INCORPORATED,
                     MASTERCARD INTERNATIONAL INCORPORATED,
                                      AND
                           EUROPAY INTERNATIONAL S.A.
                                  DATED AS OF

                               FEBRUARY 13, 2002



                               TABLE OF CONTENTS



                                                                            PAGE
                                                                      
   ARTICLE I  EXCHANGE OF SHARES..........................................   B-2
         1.1  Conversion..................................................   B-2
         1.2  Share Exchange..............................................   B-2
         1.3  Adjustment of Shares........................................   B-2
         1.4  Transition Period; Further Adjustment.......................   B-3
         1.5  Closing.....................................................   B-5
  ARTICLE II  REPRESENTATIONS AND WARRANTIES OF EPI.......................   B-5
         2.1  Organization of EPI.........................................   B-5
         2.2  Authority...................................................   B-5
         2.3  Capitalization..............................................   B-6
         2.4  Subsidiaries................................................   B-6
         2.5  No Conflicts................................................   B-6
         2.6  Governmental Approvals and Filings..........................   B-6
         2.7  Financial Statements........................................   B-7
         2.8  No Undisclosed Liabilities..................................   B-7
         2.9  Taxes.......................................................   B-7
        2.10  Legal Proceedings...........................................   B-8
        2.11  Compliance With Laws and Orders.............................   B-8
        2.12  Real Property...............................................   B-8
        2.13  Intellectual Property Rights................................   B-8
        2.14  Licenses....................................................   B-9
        2.15  Insurance...................................................   B-9
        2.16  Brokers.....................................................   B-9
        2.17  Employee Benefit Plans......................................   B-9
 ARTICLE III  REPRESENTATIONS AND WARRANTIES OF MC GLOBAL AND MCI.........   B-9
         3.1  Organization................................................   B-9
         3.2  Authority...................................................   B-9
         3.3  Capitalization..............................................   B-9
         3.4  No Conflicts................................................  B-10
         3.5  Governmental Approvals and Filings..........................  B-10
         3.6  Financial Statements........................................  B-10
         3.7  Absence of Changes..........................................  B-10
         3.8  No Undisclosed Liabilities..................................  B-11
         3.9  Legal Proceedings...........................................  B-11
        3.10  Compliance With Laws and Orders.............................  B-11
        3.11  Taxes.......................................................  B-11
        3.12  Licenses....................................................  B-11
        3.13  Brokers.....................................................  B-12
  ARTICLE IV  ACTIONS PRIOR TO CLOSING....................................  B-12
         4.1  Regulatory and Other Approvals..............................  B-12
         4.2  Competition Filings.........................................  B-12
         4.3  Preparation of the Registration Statement and the Proxy
              Statement; Members' Meeting.................................  B-12
         4.4  Investigation by MC Global..................................  B-13
         4.5  Alternative Solicitations...................................  B-13
         4.6  Conduct of Business of MC Global and MCI....................  B-13


                                       B-i




                                                                            PAGE
                                                                      
         4.7  Conduct of Business of EPI..................................  B-13
         4.8  Employee Matters............................................  B-13
         4.9  Certain Restrictions........................................  B-14
        4.10  Books and Records...........................................  B-14
        4.11  Notice and Cure.............................................  B-14
        4.12  Fulfillment of Conditions...................................  B-15
   ARTICLE V  CONDITIONS TO OBLIGATIONS OF MC GLOBAL AND MCI..............  B-15
         5.1  Representations and Warranties..............................  B-15
         5.2  Performance.................................................  B-15
         5.3  Officers' Certificates......................................  B-15
         5.4  Orders and Laws.............................................  B-15
         5.5  Regulatory Consents and Approvals...........................  B-16
         5.6  Third Party Consents........................................  B-16
         5.7  Opinion of Counsel..........................................  B-16
         5.8  Charters and Bylaws.........................................  B-16
         5.9  Certificates................................................  B-16
        5.10  Resignations of Directors...................................  B-16
        5.11  Intellectual Property Assignment Agreement..................  B-16
        5.12  Entry into License Agreement................................  B-16
        5.13  MEPUK Share Exchange Agreement..............................  B-16
        5.14  EPI Share Exchange Agreement................................  B-16
        5.15  Registration Statement......................................  B-17
        5.16  Tax Matters.................................................  B-17
  ARTICLE VI  CONDITIONS TO OBLIGATIONS OF EPI............................  B-17
         6.1  Representations and Warranties..............................  B-17
         6.2  Performance.................................................  B-17
         6.3  Officers' Certificates......................................  B-17
         6.4  Orders and Laws.............................................  B-17
         6.5  Regulatory Consents and Approvals...........................  B-17
         6.6  Third Party Consents........................................  B-17
         6.7  Opinion of Counsel..........................................  B-18
         6.8  Charters and Bylaws.........................................  B-18
         6.9  Good Standing Certificates..................................  B-18
        6.10  No Stop Orders..............................................  B-18
        6.11  Merger Agreement............................................  B-18
        6.12  Tax Matters.................................................  B-18
 ARTICLE VII  SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
              AGREEMENTS; POST-CLOSING COVENANTS..........................  B-18
         7.1  Survival of Representations, Warranties, Covenants and
              Agreements..................................................  B-18
         7.2  Post-Closing Covenants......................................  B-19
ARTICLE VIII  TERMINATION.................................................  B-19
         8.1  Termination.................................................  B-19
         8.2  Effect of Termination.......................................  B-19
  ARTICLE IX  DEFINITIONS.................................................  B-20
         9.1  Definitions.................................................  B-20
   ARTICLE X  MISCELLANEOUS...............................................  B-27
        10.1  Notices.....................................................  B-27
        10.2  Entire Agreement............................................  B-28


                                       B-ii




                                                                            PAGE
                                                                      
        10.3  Expenses....................................................  B-28
        10.4  Public Announcements........................................  B-28
        10.5  Confidentiality.............................................  B-28
        10.6  Waiver......................................................  B-28
        10.7  Amendment...................................................  B-28
        10.8  No Third Party Beneficiary..................................  B-29
        10.9  No Assignment; Binding Effect...............................  B-29
       10.10  Headings....................................................  B-29
       10.11  Consent to Jurisdiction and Service of Process..............  B-29
       10.12  Invalid Provisions..........................................  B-29
       10.13  Governing Law...............................................  B-29
       10.14  Counterparts................................................  B-29
       10.15  Incidental Purchases........................................  B-29


                                      B-iii


                                    EXHIBITS



          
EXHIBIT A    Agreement and Plan of Merger
EXHIBIT B    EPI Share Exchange Agreement
EXHIBIT C    MEPUK Share Exchange Agreement
EXHIBIT D    Officers' Certificate of EPI
EXHIBIT E    Certificate of EPI General Manager, Corporate Affairs
EXHIBIT F-1  [Intentionally Deleted]
EXHIBIT F-2  [Intentionally Deleted]
EXHIBIT G    Certificate of Incorporation of MCI
EXHIBIT H    Bylaws of MCI
EXHIBIT I    Certificate of Incorporation of MC Global
EXHIBIT J    Bylaws of MC Global
EXHIBIT K    [Intentionally Deleted]
EXHIBIT L    MCI License Agreement
EXHIBIT M    Officers' Certificate of MC Global and MCI
EXHIBIT N    Secretary's Certificate of MC Global and MCI
EXHIBIT O    [Intentionally Deleted]
EXHIBIT P    Europe Region Countries



                                       B-iv


                    SHARE EXCHANGE AND INTEGRATION AGREEMENT


     This amended and restated SHARE EXCHANGE AND INTEGRATION AGREEMENT (the
"AGREEMENT") is made and entered into as of February 13, 2002, by and among
MasterCard Incorporated, a Delaware corporation ("MC GLOBAL"), MasterCard
International Incorporated, a Delaware non-stock corporation. ("MCI"), and
Europay International S.A., a company limited by shares, organized and existing
under the laws of Belgium ("EPI"). Capitalized terms not otherwise defined
herein have the meanings set forth in Section 9.1.


     WHEREAS, MCI operates a global payments system that supports a family of
proprietary brands including the MasterCard(R) and Cirrus(R) brands;

     WHEREAS, EPI operates a European payments system that supports a family of
proprietary brands including the Eurocard(R), ec eurocheque(R) and ec Picto(R)
brands;

     WHEREAS, MCI and EPI jointly operate a global payments system that supports
the Maestro(R) brand;

     WHEREAS, MCI and EPI are parties to an Alliance Agreement, dated as of
November 14, 1996 (the "ALLIANCE AGREEMENT"), and a Maestro Agreement, dated as
of June 19, 1997 (the "MAESTRO AGREEMENT"), under which EPI was delegated
certain authority to manage the licensing of MCI's brands and Maestro(R) brands,
respectively, to European financial institutions;

     WHEREAS, the Boards of Directors of MCI, MC Global and EPI have each
approved a transaction in which the business, assets and operations of MCI and
EPI will be combined into a single global enterprise, the parent of which will
be known as "MasterCard Incorporated," and immediately thereafter the Alliance
Agreement and the Maestro Agreement will be terminated;

     WHEREAS, the Boards of Directors of MCI and EPI have each approved a term
sheet relating to the transactions provided for in this Agreement, which term
sheet is superseded by this Agreement;

     WHEREAS, MCI and MC Global will consummate a stock conversion (the
"CONVERSION") in accordance with the Agreement and Plan of Merger attached
hereto as Exhibit A, in which all Principal Members of MCI will exchange their
existing Principal Membership Interests in MCI for Class A membership interests
in MCI and for shares of MC Global Class A Stock, par value $.01 per share (the
"MC GLOBAL CLASS A STOCK"), and MC Global Class B Stock, par value $.01 per
share (the "MC GLOBAL CLASS B STOCK");

     WHEREAS, immediately following the Conversion, (i) the shareholders of EPI
(each, an "EPI SHAREHOLDER," and collectively, the "EPI SHAREHOLDERS"), other
than MCI and MasterCard/Europay U.K. Limited, a company limited by shares
organized and existing under the laws of the United Kingdom ("MEPUK"), will
exchange their shares of EPI (the "EPI SHARE EXCHANGE") for shares of MC Global
Class A Stock and MC Global Class B Stock and (ii) simultaneously therewith, the
shareholders of MEPUK (the "MEPUK SHAREHOLDERS") will exchange their shares of
MEPUK for shares of MC Global Class A Stock and MC Global Class B Stock (the
"MEPUK SHARE EXCHANGE") (the EPI Share Exchange and the MEPUK Share Exchange are
collectively referred to as the "SHARE EXCHANGE") as more fully provided herein;

     WHEREAS, the shares of MC Global Class A Stock and MC Global Class B Stock
to be issued to the European Members in the Conversion and the shares of MC
Global Class A Stock and MC Global Class B Stock to be issued to the EPI
Shareholders and the MEPUK Shareholders in the Share Exchange will constitute
33 1/3% of the Outstanding Shares of MC Global; and

     WHEREAS, immediately following the Conversion and the Share Exchange, the
Members Outside Europe will own shares of MC Global Class A Stock and MC Global
Class B Stock that constitute 66 2/3% of the Outstanding Shares of MC Global;

     WHEREAS, for United States federal income tax purposes, the parties intend
that the transactions contemplated by this Agreement and the related documents,
including (i) the Conversion, pursuant to which, in substance, the Principal
Members of MCI will effectively transfer to MC Global the equity rights
                                       B-1



associated with their membership interests, in the form of a Class B membership
interest in MCI, and retain the contractual 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
and (iii) the reallocations of shares of MC Global Class A Stock and MC Global
Class B Stock among the shareholders of MC Global, shall together constitute an
integrated series of transactions consisting solely of transfers of property to
MC Global in exchange for shares of MC Global Class A Stock and MC Global Class
B Stock as described in Section 351(a) of the Code;


     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

                                   ARTICLE I

                               EXCHANGE OF SHARES

     1.1 Conversion.


     (a) At the Closing and immediately prior to the Share Exchange, MCI and MC
Global shall consummate the Conversion. In the Conversion, the existing
Principal Membership Interests held by the Members Outside Europe will be
converted into Class A membership interests in MCI and an aggregate of
56,000,000 shares of MC Global Class A Stock and 10,666,667 shares of MC Global
Class B Stock and the existing Principal Membership Interests held by the
European Members will be converted into Class A membership interests in MCI and
an aggregate of 4,236,788 shares of MC Global Class A Stock and 807,007 shares
of MC Global Class B Stock. In the Conversion, shares of MC Global Class A Stock
and MC Global Class B Stock will be issued in respect of and in proportion to
each of the Principal Membership Interests held by the Members Outside Europe
and the European Members immediately prior to the Conversion. It is understood
in substance that the MC Global Class A Stock and the MC Global Class B Stock
represent the equity rights associated with the existing Principal Membership
Interests and the Class A membership interests represent a continuation of the
contractual rights associated with the existing Principal Membership Interests
pursuant to which each Principal Member acts as a licensee of MCI in accordance
with their existing license agreements with MCI, which license agreements shall
remain in effect in accordance with their terms following the Conversion.


     (b) Following the Conversion, and as an integral part of the integrated
series of transactions contemplated hereby, the shares of MC Global Class A
Stock and MC Global Class B Stock shall be reallocated in accordance with
Section 1.3.

     1.2 Share Exchange.  At the Closing, immediately following the consummation
of the Conversion pursuant to Section 1.1(a), MC Global and the EPI Shareholders
shall consummate the EPI Share Exchange, and MC Global and the MEPUK
Shareholders shall consummate the MEPUK Share Exchange. A total of 19,034,647
shares of MC Global Class A Stock and 3,625,647 shares of MC Global Class B
Stock will be issued to the EPI Shareholders, other than MCI and MEPUK, in the
EPI Share Exchange. Each EPI Shareholder, other than MCI and MEPUK, will
exchange each share of capital stock of EPI held by it for 262.66279 shares of
MC Global Class A Stock and 50.03101 shares of MC Global Class B Stock. A total
of 4,728,565 shares of MC Global Class A Stock and 900,679 shares MC Global
Class B Stock will be issued to the shareholders of MEPUK in the MEPUK Share
Exchange.

     1.3 Adjustment of Shares.

     (a) At the Closing, immediately following the consummation of the
Conversion pursuant to Section 1.1(a) and the Share Exchange pursuant to Section
1.2, and as an integral part of the integrated series of transactions that
includes the Conversion and the Share Exchange, (i) the shares of MC Global
Class A Stock and MC Global Class B Stock held by the Shareholders of Europe
shall immediately be reallocated among each of the Shareholders of Europe so
that each such shareholder will receive such number of shares of MC Global Class
A Stock as is equal to its proportionate share of the European Regional Proxy
Amount as of

                                       B-2


December 31, 2000 multiplied by 28,000,000, and such number of shares of MC
Global Class B Stock, as is equal to its proportionate share of the European
Regional Proxy Amount as of December 31, 2000 multiplied by 5,333,333; and (ii)
the shares of MC Global Class A Stock and MC Global Class B Stock held by the
Shareholders Outside Europe shall immediately be reallocated among each of the
Shareholders Outside Europe so that each such shareholder will receive such
number of shares of MC Global Class A Stock as is equal to its proportionate
share of the Outside Europe Proxy Amount as of December 31, 2000 multiplied by
56,000,000, and such number of shares of MC Global Class B Stock as is equal to
its proportionate share of the Outside Europe Proxy Amount as of December 31,
2000 multiplied by 10,666,667; provided, however, that no fractional shares of
MC Global Class A Stock or MC Global Class B Stock shall be issued or delivered
by MC Global, and any fractional share interests shall be rounded in such manner
as the management of MC Global shall determine in its sole discretion.

     (b) The MC Global Class A Stock to be held by the Shareholders of Europe
immediately following the Conversion and the Share Exchange shall represent 28%,
and the MC Global Class A Stock to be held by the Shareholders Outside Europe
immediately following the Conversion and the Share Exchange shall represent 56%,
of the number of Outstanding Shares of MC Global immediately following the
Conversion and the Share Exchange. The MC Global Class B Stock to be held by the
Shareholders of Europe immediately following the Conversion and the Share
Exchange shall represent 5 1/3%, and the MC Global Class B Stock to be held by
the Shareholders Outside Europe immediately following the Conversion and the
Share Exchange shall represent 10 2/3%, of the number of Outstanding Shares of
MC Global.

     1.4 Transition Period; Further Adjustment.

     (a) The MC Global Class A Stock and the MC Global Class B Stock shall be
subject to the MC Global Charter and the MC Global Bylaws. Among other things,
the MC Global Charter and the MC Global Bylaws provide that any purported
transfer of MC Global Class A Stock and MC Global Class B Stock prior to the
Transition Date that does not comply with the MC Global Charter and the MC
Global Bylaws shall be void.

     (b) As provided in the MC Global Charter and the MC Global Bylaws, as of
the close of business, New York City time, on the Transition Date, each
outstanding share of MC Global Class B Stock, other than any MC Global Class B
Stock that constitutes ec Picto Stock, shall automatically be converted into one
share of MC Global Class A Stock. As an integral part of the integrated series
of transactions that includes the Conversion and the Share Exchange, shares of
MC Global Class A Stock shall then be reallocated among the holders of MC Global
Class A Stock on the Transition Date in accordance with the following:

          (i) First, shares of MC Global Class A Stock shall be allocated to the
     Shareholders of Europe, in the aggregate, and to the Shareholders Outside
     Europe, in the aggregate, in accordance with the following:

             (1) If the European Regional Proxy Amount for the last year of the
        Transition Period is 26% or less, then the Shareholders of Europe shall
        be entitled in the aggregate to an allocation of MC Global Class A Stock
        that represents 26% of the number of Outstanding Shares of MC Global.

             (2) If the European Regional Proxy Amount for the last year of the
        Transition Period is greater than 26% but less than or equal to 28%,
        then the Shareholders of Europe shall be entitled in the aggregate to an
        allocation of MC Global Class A Stock that represents 28% of the number
        of Outstanding Shares of MC Global.

             (3) If the European Regional Proxy Amount for the last year of the
        Transition Period is greater than 28%, then the Shareholders of Europe
        shall be entitled in the aggregate to an allocation of MC Global Class A
        Stock that is equal, in percentage terms, to the European Regional Proxy
        Amount for the last year of the Transition Period, up to a maximum
        amount, when taken together with any ec Picto Stock, of 44% of the
        number of Outstanding Shares of MC Global (consisting of the MC Global
        Class A Stock issued to the Shareholders of Europe in the Conversion and
        the Share Exchange (28% of the Outstanding Shares of MC Global), the MC
        Global Class B Stock issued to the Shareholders of Europe in the
        Conversion and Share Exchange (5 1/3% of the Outstanding Shares

                                       B-3


        of MC Global) and the MC Global Class B Stock issued to the Shareholders
        Outside Europe (10 2/3% of the Outstanding Shares of MC Global)).

             (4) Any MC Global Class B Stock that constitutes ec Picto Stock
        shall not be converted into MC Global Class A Stock on the Transition
        Date and shall not be subject to reallocation to the Shareholders
        Outside Europe at such time. Instead, the Shareholders of Europe shall
        hold any ec Picto Stock through the second anniversary of the Transition
        Date.

             (5) The Shareholders Outside Europe shall be entitled in the
        aggregate to an allocation of MC Global Class A Stock that represents
        the remaining number of outstanding shares of MC Global Class A Stock
        after the shares of MC Global Class A Stock and ec Picto Stock have been
        allocated to the Shareholders of Europe in accordance with paragraphs
        (1)-(4) above.

          (ii) Second, in accordance with the MC Global Charter and the MC
     Global Bylaws, all shares of MC Global Class A Stock that have been
     allocated in the aggregate to the Shareholders of Europe and in the
     aggregate to the Shareholders Outside Europe, shall immediately be
     delivered to each of the Shareholders of Europe, on the one hand, and to
     each of the Shareholders Outside Europe, on the other hand, in proportion
     to each such shareholder's proportionate share of the European Regional
     Proxy Amount or the Outside Europe Proxy Amount, as the case may be for the
     last year of the Transition Period.

     (c) At the second anniversary of the Transition Date, each share of ec
Picto Stock shall be converted into one share of MC Global Class A Stock and
shall be allocated to the Shareholders Outside Europe and Shareholders of Europe
depending upon the percentage of ec Picto Volumes that have been converted to
Maestro Volumes by that time and the types of Volumes into which they have been
converted. The shares of MC Global Class A Stock that result from the conversion
of ec Picto Stock shall be allocated in the aggregate to the Shareholders of
Europe in proportion to the percentage of ec Picto Volumes that have actually
been converted to Maestro Volumes by that time, and the balance shall be
allocated to the Shareholders Outside Europe. Those shares of MC Global Class A
Stock allocated to the Shareholders of Europe shall then immediately be
delivered to those individual Shareholders of Europe who were responsible for
the ec Picto Volumes that were actually converted in proportion to the amount of
converted ec Picto Volumes attributable to each of them, and the shares
allocated to the Shareholders Outside Europe shall immediately be delivered to
each of the Shareholders Outside Europe in proportion to each such shareholder's
proportionate share of the Outside Europe Proxy Amount; provided, however, that
no fractional shares of MC Global Class A Stock or MC Global Class B Stock shall
be issued or delivered by MC Global, and any fractional share interests shall be
rounded in such manner as the management of MC Global shall determine in its
sole discretion.

     (d) For purposes of determining the Global Proxy Calculation, the
conversion of Euros into U.S. dollars will be based on the average exchange rate
during the twenty-day period ending on the day prior to the applicable
measurement date (the "PREVAILING EXCHANGE RATE"), provided that during the
Transition Period and for two years thereafter the Prevailing Exchange 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. (the "CURRENCY CONVERSION BAND"). In the event
that the Prevailing Exchange Rate does not fall within the Currency Conversion
Band, the currency conversion rate to convert Euros to U.S. Dollars will be
$.9565 adjusted by the difference between such Prevailing Exchange Rate and the
upper/lower limit of the Currency Conversion Band, as applicable.

     For purposes of determining the Global Proxy Calculation during the
Transition Period and for two years thereafter, amounts denominated in the
currency of a country within the Europe Region other than the Euro shall first
be converted into Euros and subsequently converted into U.S. dollars in
accordance with the previous paragraph.

     (e) Section 2(b) of ARTICLE IV of the MC Global Bylaws provides that,
during the Transition Period, one-third of the Directors of MC Global shall be
representatives of Shareholders of Europe. This provision of the MC Global
Bylaws shall remain in effect during the Transition Period.

     (f) Section 1(c) of Article FIFTH of the MC Global Charter provides that no
holder of capital stock eligible to be voted in the election of directors of MC
Global, together with its affiliates (as defined in the MC
                                       B-4


Global Charter), shall be entitled to exercise voting power in excess of 7% of
the outstanding shares of capital stock entitled to be voted in any election of
directors. This provision of the MC Global Charter shall not be changed during
the Transition Period.

     (g) Any shareholder whose ownership of MC Global Class A Stock is reduced
as a result of the reallocation described in Sections 1.3(a), 1.4(b) and
1.4(c)shall transfer the excess number of shares of MC Global Class A Stock to
MC Global, which shall then deliver shares of MC Global Class A Stock to any
shareholder that is entitled to an additional number of shares of MC Global
Class A Stock as a result of such reallocation.

     1.5 Closing.  The Closing of the transactions under this Agreement will
take place at the offices of Clifford Chance Rogers & Wells LLP, 200 Park
Avenue, New York, New York 10166 (or such other place as the parties may agree
in writing) at 10:00 a.m., New York City time, on the Closing Date.

     (a) At the Closing, following the Conversion:

          (i) the EPI Shareholders and the MEPUK Shareholders will assign and
     transfer to MC Global good and valid title in and to their shares of EPI
     and MEPUK, respectively, free and clear of all Liens, by delivering to MC
     Global a certificate or certificates representing their shares, duly
     endorsed in blank or accompanied by duly executed stock powers endorsed in
     blank;

          (ii) MC Global shall issue to each of the EPI Shareholders and each of
     the MEPUK Shareholders the number of shares of MC Global Class A Stock and
     MC Global Class B Stock to which each is entitled under Sections 1.1, 1.2
     and 1.3; and

          (iii) MCI shall issue to each of the EPI Shareholders (other than
     MEPUK) and each of the MEPUK Shareholders an MCI Class A membership
     interest unless such shareholder has received such Class A membership
     interest in the Conversion.

     (b) Shares of MC Global Class A Stock and MC Global Class B Stock and MCI
Class A membership interests are uncertificated; therefore, the issuance of the
MC Global Class A Stock, MC Global Class B Stock and MCI Class A membership
interests pursuant to the Conversion, the Share Exchange and the reallocation
pursuant to Section 1.3(a) shall be accomplished by registering the issuance on
the books and records of MC Global and MCI, respectively, and delivering
evidence of the issuance to the holders thereof.

     (c) In addition, at the Closing, the parties shall execute and deliver
original counterparts of the certificates and other documents and instruments to
be delivered under Articles V and VI.

                                   ARTICLE II

                     REPRESENTATIONS AND WARRANTIES OF EPI

     EPI represents and warrants to MC Global and MCI as to the matters set
forth below.

     2.1 Organization of EPI.  EPI is a company limited by shares duly organized
and validly existing under the laws of Belgium and has all requisite corporate
power and authority to own, use and lease its Assets and Properties and to
conduct its business as and to the extent presently conducted. EPI is duly
qualified, licensed or admitted to do business in those jurisdictions specified
in Section 2.1(a) of the Disclosure Schedule, which are the only jurisdictions
in which the failure to be qualified, licensed or admitted and in good standing
would have a material adverse effect on the Business or Condition of EPI. The
name of each director and officer of EPI on the date hereof, and the position
with EPI held by each, are listed in Section 2.1(b) of the Disclosure Schedule.
Prior to the execution of this Agreement, EPI has delivered to MC Global true
and complete copies of the certificate or articles of association and bylaws (or
other comparable charter documents) of EPI as in effect on the date hereof.

     2.2 Authority.  EPI has all requisite power and legal capacity to execute
and deliver this Agreement. The execution, delivery and performance by EPI of
this Agreement have been duly and validly authorized by all necessary corporate
and shareholder action. This Agreement has been duly and validly executed and

                                       B-5


delivered by EPI and constitutes a legal, valid and binding obligation of EPI
enforceable against EPI in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

     2.3 Capitalization.  The authorized capital stock of EPI consists of
100,000 capital shares, of which 100,000 have been issued and are outstanding.
The Shares are owned by the EPI Shareholders in the amounts set forth on
Schedule 2.3 of the Disclosure Schedule. The Shares have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
outstanding Options with respect to EPI.

     2.4 Subsidiaries.  Section 2.4 of the Disclosure Schedule lists the name of
each Subsidiary of EPI. Each Subsidiary is a corporation duly organized and
validly existing under the laws of its jurisdiction of organization identified
in Section 2.4 of the Disclosure Schedule, and has all requisite power and
authority to own, use and lease its Assets and Properties and to conduct its
business as and to the extent presently conducted. Each Subsidiary is duly
qualified, licensed or admitted to do business in those jurisdictions specified
in Section 2.4 of the Disclosure Schedule, which are the only jurisdictions in
which the failure to be qualified, licensed or admitted would have a material
adverse effect on the Business or Condition of EPI. Section 2.4 of the
Disclosure Schedule lists for each Subsidiary the amount of its authorized
capital stock, the amount of its outstanding capital stock and the record owners
of such outstanding capital stock. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable, and are owned, beneficially and of record, by EPI or one
or more of its Subsidiaries wholly owned by EPI, free and clear of all Liens.
There are no outstanding Options with respect to any Subsidiary.

     2.5 No Conflicts.  The execution and delivery by EPI of this Agreement do
not, and the performance by EPI of its obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:

          (a) conflict with or result in a violation or breach of any of the
     terms, conditions or provisions of the certificate or articles of
     incorporation or bylaws (or other comparable charter documents) of EPI or
     any Subsidiary;

          (b) subject to obtaining the consents, approvals and actions, making
     the filings and giving the notices disclosed in Section 2.6 of the
     Disclosure Schedule, conflict with or result in a violation or breach of
     any term or provision of any Law or Order applicable to EPI, any Subsidiary
     or any of their respective Assets and Properties; or

          (c) (i) conflict with or result in a violation or breach of, (ii)
     constitute (with or without notice or lapse of time or both) a default
     under, (iii) require EPI or any Subsidiary to obtain any consent, approval
     or action of, make any filing with or give any notice to any Person as a
     result or under the terms of, (iv) result in or give to any Person any
     right of termination, cancellation, acceleration or modification in or with
     respect to, (v) result in or give to any Person any additional rights or
     entitlement to increased, additional, accelerated or guaranteed payments
     under or (vi) result in the creation or imposition of any Lien upon any
     Assets and Properties of EPI or any Subsidiary under, any Contract or
     License to which EPI or any Subsidiary is a party or by which any of their
     respective Assets and Properties is bound, except where the occurrence of
     any circumstance specified in clauses (i) through (vi) above would not have
     a material adverse effect on the Business or Condition of EPI.

     2.6 Governmental Approvals and Filings.  Except as disclosed in Section 2.6
of the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of EPI or any
Subsidiary is required in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby or thereby.

                                       B-6


     2.7 Financial Statements.  Prior to the execution of this Agreement, EPI
has delivered or caused to be delivered to MC Global and MCI true and complete
copies of the following financial statements:

          (a) the audited balance sheets of EPI and its consolidated
     Subsidiaries as of December 31, 1998, December 31, 1999 and December 31,
     2000, and the related audited consolidated statements of operations,
     shareholders' equity and cash flows for each of the fiscal years then
     ended, together with a true and correct copy of the report on such audited
     information by Ernst & Young LLP, EPI's statutory auditors; and

          (b) the unaudited balance sheets of EPI and its consolidated
     Subsidiaries as of September 30, 2000 and 2001, and the related unaudited
     consolidated statements of operations, stockholders' equity and cash flows
     for the nine-month period then ended.

     Except as set forth in the notes thereto, all such financial statements
     were prepared in accordance with International Accounting Standards and
     fairly present the consolidated financial condition and results of
     operations of EPI and its consolidated Subsidiaries as of the respective
     dates of them and for the respective periods covered by them.

          (c) Absence of Changes.  Except for the execution and delivery of this
     Agreement and the transactions to take place pursuant hereto on the Closing
     Date, since the EPI Audited Financial Statement Date there has not been any
     material adverse change, or any event or development which, individually or
     together with other such events, could reasonably be expected to result in
     a material adverse change in the Business or Condition of EPI.

     2.8 No Undisclosed Liabilities.  Except as reflected or reserved against in
the balance sheet included in the EPI Audited Financial Statements or in the
notes thereto, (i) there are no Liabilities against, relating to or affecting
EPI or any Subsidiary or any of their respective Assets and Properties that are
required to be disclosed in the EPI Audited Financial Statements under
International Accounting Standards, other than Liabilities incurred in the
ordinary course of business consistent with past practice which in the aggregate
are not material to the Business or Condition of EPI and (ii) no payments shall
be due to any Person pursuant to any agreement, whether written or oral, as a
result of the acquisition by MC Global of a controlling interest in EPI in the
EPI Share Exchange.

     2.9 Taxes.

          (a) EPI and its Subsidiaries have filed all Tax Returns required to be
     filed by applicable Law, maintained all documents and records relating to
     Taxes as are required to be made or provided or maintained by it and has
     complied in all respects with all legislation relating to Taxes applicable
     to it. All Tax Returns were in all respects (and, as to Tax Returns not
     filed as of the date hereof, will be) true, complete and correct and filed
     on a timely basis. Neither EPI nor any of its Subsidiaries is aware that
     any claim has been made by an authority of a jurisdiction where EPI or any
     of its Subsidiaries does not file Tax Returns that any of EPI or any of its
     Subsidiaries is or may be subject to taxation by that jurisdiction.

          (b) EPI and each Subsidiary has, within the time and in the manner
     prescribed by law, paid (and until the Closing Date will pay within the
     time and in the manner prescribed by law) all Taxes that are due and
     payable.

          (c) EPI and each Subsidiary has established (and until the Closing
     Date will maintain) on its Books and Records reserves adequate to pay all
     Taxes not yet due and payable in accordance with International Accounting
     Standards that are reflected in the EPI Audited Financial Statements to the
     extent required.

          (d) There are no Tax Liens upon the assets of EPI or any Subsidiary
     except Liens for Taxes not yet due.

          (e) Except as disclosed in Section 2.9 of the Disclosure Schedule, no
     audits or other administrative proceedings or court proceedings are
     presently pending with regard to any Taxes or Tax Returns of EPI or

                                       B-7


     any of its Subsidiaries, and no Tax Authority has notified EPI or any of
     its Subsidiaries that it intends to investigate its Tax affairs.

          (f) Notwithstanding the disclosure of any matter on Section 2.9 of the
     Disclosure Schedule pursuant to clause (e) above, EPI and its Subsidiaries
     have complied (and until the Closing Date will comply) in all respects with
     the provisions of applicable law relating to the payment and withholding of
     Taxes, and have, within the time and in the manner prescribed by law,
     withheld and paid over to the proper Governmental or Regulatory Authority
     all amounts required in connection with amounts paid or owing to any
     employee, independent contractor, creditor, shareholder or other third
     party.

     2.10 Legal Proceedings.  Except as disclosed in Section 2.10 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):

          (a) there are no Actions or Proceedings pending or, to the knowledge
     of EPI, threatened against, relating to or affecting EPI or any Subsidiary
     or any of their respective Assets and Properties which (i) could reasonably
     be expected to result in the issuance of an Order restraining, enjoining or
     otherwise prohibiting or making illegal the consummation of any of the
     transactions contemplated by this Agreement or otherwise result in a
     material diminution of the benefits contemplated by this Agreement to MC
     Global and MCI, or (ii) if determined adversely, could reasonably be
     expected to result in (x) any injunction or other equitable relief against
     EPI or any Subsidiary that would interfere in any material respect with its
     business or operations or (y) Losses by EPI or any Subsidiary, individually
     or in the aggregate with Losses in respect of other such Actions or
     Proceedings, exceeding $500,000;

          (b) there are no facts or circumstances known to EPI that could
     reasonably be expected to give rise to any Action or Proceeding that would
     be required to be disclosed pursuant to clause (a) above; and

          (c) there are no Orders outstanding against EPI or any Subsidiary.

Prior to the execution of this Agreement, EPI delivered or caused to be
delivered to MC Global and MCI all responses of counsel for EPI and its
Subsidiaries to auditors' requests for information delivered in connection with
the EPI Audited Financial Statements (together with any updates provided by such
counsel) regarding Actions or Proceedings pending or threatened against,
relating to or affecting EPI or any Subsidiary.

     2.11 Compliance With Laws and Orders.  Neither EPI nor any Subsidiary is or
has at any time within the last five years been, or has received any notice that
it is or has at any time within the last five years been, in violation of or in
default under, in any material respect, any Law or Order applicable to EPI or
any Subsidiary or any of their respective Assets and Properties.

     2.12 Real Property.

          (a) EPI or one of its Subsidiaries has good and marketable fee simple
     title to each parcel of real property included as an asset on the latest
     balance sheet included in the EPI Unaudited Financial Statements, and in
     each case such parcel is free and clear of all Liens, other than Permitted
     Liens.

          (b) EPI or one of its Subsidiaries has a valid and subsisting
     leasehold estate in and the right to quiet enjoyment of the real properties
     leased by it as lessee for the full term of the lease thereof. Each lease
     referred to in paragraph (b) is a legal, valid and binding agreement,
     enforceable in accordance with its terms, of EPI or one of its Subsidiaries
     and of each other Person that is a party thereto and there is no, and
     neither EPI nor any Subsidiary has received notice of any, default (or any
     condition or event which, after notice or lapse of time or both, would
     constitute a default) thereunder.

          (c) No tenant or other party in possession of any of EPI's owned real
     properties has any right to purchase, or holds any right of first refusal
     to purchase, such properties.

     2.13 Intellectual Property Rights.  Section 2.13 of the Disclosure Schedule
contains a list of trademarks, trade names, trademark registrations and
applications, and service marks that are material to the business of EPI and its
Subsidiaries. EPI or a Subsidiary, as indicated, owns the entire right, title
and interest including, without limitation, the right to use and license the
same. EPI and its Subsidiaries have the right to use any software they use which
is material to the running of their business.
                                       B-8


     2.14 Licenses.  EPI and each Subsidiary own or validly hold all Licenses
that are material to its business or operations. Each such License is valid,
binding and in full force and effect; and neither EPI nor any Subsidiary is, or
has received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default) under any such License.

     2.15 Insurance.  The material insurance policies that insure the business,
operations or employees of EPI and its Subsidiaries are in full force and
effect, and are in amounts and have coverages that are reasonable and customary
for Persons engaged in businesses and operations and having Assets and
Properties similar to EPI and its Subsidiaries.

     2.16 Brokers.  Except for Merrill Lynch & Co., whose fees, commissions and
expenses have been paid by EPI, all negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the EPI
Shareholders and EPI directly with MC Global and MCI without the intervention of
any Person on behalf of any EPI Shareholder or EPI in such manner as to give
rise to any valid claim by any Person against MC Global, MCI, EPI or any
Subsidiary for a finder's fee, brokerage commission or similar payment.

     2.17 Employee Benefit Plans.  Section 2.17 of the Disclosure Schedule
contains a list of each plan, agreement or understanding maintained by EPI or
its Subsidiaries for the benefit of the employees of EPI or its Subsidiaries,
which plan, agreement or understanding provides for health or welfare benefits,
retirement income, severance benefits or accident or death benefits or any
similar benefits for such employees (or their dependants and beneficiaries).

                                  ARTICLE III

              REPRESENTATIONS AND WARRANTIES OF MC GLOBAL AND MCI

     MC Global and MCI hereby jointly and severally represent and warrant to EPI
as to the matters set forth below.

     3.1 Organization.  Each of MC Global and MCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, use and
lease its Assets and Properties and to conduct its business as and to the extent
presently conducted. Each of MC Global and MCI is duly qualified, licensed or
admitted to do business and is in good standing in those jurisdictions in which
the ownership, use or leasing of its Assets and Properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for those jurisdictions in which the adverse effects of all
such failures by MC Global or MCI, as applicable, to be qualified, licensed or
admitted and in good standing can in the aggregate be eliminated without
material cost or expense by MC Global or MCI becoming qualified or admitted and
in good standing.

     3.2 Authority.  Each of MC Global and MCI has all requisite corporate power
and legal capacity to execute and deliver this Agreement. The execution,
delivery and performance by each of MC Global and MCI of this Agreement have
been duly and validly authorized by all necessary corporate, shareholder and
member action. This Agreement has been duly and validly executed and delivered
by each of MC Global and MCI and constitutes legal, valid and binding
obligations of each of MC Global and MCI enforceable against MC Global or MCI,
as applicable, in accordance with its terms, except as enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting creditors' rights
generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).

     3.3 Capitalization.  As of the Closing, the authorized capital stock of MC
Global will consist solely of 275 million shares of MC Global Class A Stock, 25
million shares of MC Global Class B Stock and 75 million shares of MC Global
Class C Stock, of which no shares have been issued or are outstanding. The
shares of MC Global Class A Stock and MC Global Class B Stock, when issued at
the Closing in the manner contemplated by Section 1.4, will be validly issued,
fully paid and nonassessable, and will be free and clear of

                                       B-9


all Liens. Except for this Agreement and as disclosed in Section 3.3 of the
Disclosure Schedule, there are no outstanding Options with respect to MC Global
or MCI.

     3.4 No Conflicts.  The execution and delivery by each of MC Global and MCI
of this Agreement do not, the performance by each of MC Global and MCI of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:

          (a) conflict with or result in a violation or breach of any of the
     terms, conditions or provisions of the certificate or articles of
     incorporation or bylaws (or other comparable charter documents) of MC
     Global or MCI, as applicable;

          (b) subject to obtaining the consents, approvals and actions, making
     the filings and giving the notices disclosed in Section 3.5 of the
     Disclosure Schedule, conflict with or result in a violation or breach of
     any term or provision of any Law or Order applicable to MC Global or MCI,
     as applicable, or any of its Assets and Properties; or

          (c) except as disclosed in Section 3.4 of the Disclosure Schedule, (i)
     conflict with or result in a violation or breach of, (ii) constitute (with
     or without notice or lapse of time or both) a default under, (iii) require
     MC Global or MCI, as applicable, to obtain any consent, approval or action
     of, make any filing with or give any notice to any Person as a result or
     under the terms of, (iv) result in or give to any Person any right of
     termination, cancellation, acceleration or modification in or with respect
     to, (v) result in or give to any Person any additional rights or
     entitlement to increased, additional, accelerated or guaranteed payments
     under or (vi) result in the creation or imposition of any Lien upon any
     Assets and Properties of MC Global or MCI, as applicable, under, any
     Contract or License to which MC Global or MCI, as applicable, is a party or
     by which any of its Assets and Properties is bound.

     3.5 Governmental Approvals and Filings.  Except as disclosed in Section 3.5
of the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of MC Global or
MCI is required in connection with the execution, delivery and performance of
this Agreement or any of the Operative Agreements to which it is a party or the
consummation of the transactions contemplated hereby or thereby.

     3.6 Financial Statements.  Prior to the execution of this Agreement, MCI
has delivered or caused to be delivered to EPI true and complete copies of the
following financial statements:

          (a) the audited balance sheets of MCI and its consolidated
     subsidiaries as of December 31, 1998, December 31, 1999 and December 31,
     2000, and the related audited consolidated statements of operations,
     members' equity and cash flows for each of the fiscal years then ended,
     together with a true and correct copy of the report on such audited
     information by PricewaterhouseCoopers LLP, MCI's independent accountants;
     and

          (b) the unaudited balance sheets of MCI and its consolidated
     Subsidiaries as of September 30, 2000 and 2001, and the related unaudited
     consolidated statements of operations, members' equity and cash flows for
     the nine-month period then ended.

Except as set forth in the notes thereto, all such financial statements were
prepared in accordance with U.S. GAAP and fairly present the consolidated
financial condition and results of operations of MCI and its consolidated
Subsidiaries as of the respective dates of them and for the respective periods
covered by them. Except for those Subsidiaries listed in Section 3.6 of the
Disclosure Schedule, the financial condition and results of operations of each
Subsidiary are, and for all periods referred to in this Section 3.6 have been,
consolidated with those of MCI.

     3.7 Absence of Changes.  Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on the Closing
Date, since the MCI Audited Financial Statement Date there has not been any
material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change in the Business or Condition of MCI.

                                       B-10


     3.8 No Undisclosed Liabilities.  Except as reflected or reserved against in
the balance sheet included in the MCI Audited Financial Statements or in the
notes thereto or as disclosed in Section 3.8 of the Disclosure Schedule, there
are no Liabilities against, relating to or affecting MC Global or MCI or any of
their respective Subsidiaries, Assets and Properties that are required to be
disclosed in the MCI Financial Statements under U.S. GAAP, other than
Liabilities incurred in the ordinary course of business consistent with past
practice which in the aggregate are not material to the Business or Condition of
MC Global and MCI.

     3.9 Legal Proceedings.  Except as disclosed in Section 3.9 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):

          (a) there are no Actions or Proceedings pending or, to the knowledge
     of MC Global or MCI, threatened against, relating to or affecting MC Global
     or MCI or any of its Assets and Properties which (i) could reasonably be
     expected to result in the issuance of an Order restraining, enjoining or
     otherwise prohibiting or making illegal the consummation of any of the
     transactions contemplated by this Agreement or otherwise result in a
     material diminution of the benefits contemplated by this Agreement to EPI,
     or (ii) if determined adversely to MC Global or MCI, could reasonably be
     expected to result in (x) any injunction or other equitable relief against
     MC Global or MCI that would interfere in any material respect with its
     business or operations or (y) Losses by MC Global or MCI, individually or
     in the aggregate with Losses in respect of other such Actions or
     Proceedings, exceeding $6,000,000;

          (b) there are no facts or circumstances known to MC Global or MCI that
     could reasonably be expected to give rise to any Action or Proceeding that
     would be required to be disclosed pursuant to clause (a) above; and

          (c) there are no Orders outstanding against MC Global or MCI.

     3.10 Compliance With Laws and Orders.  Except as disclosed in Section 3.10
of the Disclosure Schedule, neither MCI nor any Subsidiary is or has at any time
within the last five years been, or has received any notice that it is or has at
any time within the last five years been, in violation of or in default under,
in any material respect, any Law or Order applicable to MCI or any Subsidiary or
any of their respective Assets and Properties.

     3.11 Taxes.

     (a) MCI has filed all Tax Returns required to be filed by applicable Law,
and has complied in all material respects with all legislation relating to Taxes
applicable to it. All Tax Returns were in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete and correct and
filed on a timely basis.

     (b) MCI has, within the time and in the manner prescribed by law, paid (and
until the Closing Date will pay within the time and in the manner prescribed by
law) all Taxes that are due and payable, except for Taxes, the failure of which
to pay would not reasonably be expected to have a material adverse effect on the
Business or Condition of MC Global or MCI.

     (c) MCI has established (and until the Closing Date will maintain) on its
Books and Records reserves adequate to pay all Taxes not yet due and payable in
accordance with U.S. GAAP that are reflected in the MCI Audited Financial
Statements to the extent required.

     (d) There are no Tax Liens upon the assets of MCI except Liens for Taxes
not yet due.

     (e) MCI has complied (and until the Closing Date will comply) in all
material respects with the provisions of applicable law relating to the payment
and withholding of Taxes.

     3.12 Licenses.  MCI owns or validly holds all Licenses that are material to
its business or operations. Each such License is valid, binding and in full
force and effect; and MCI is not, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any such License.

                                       B-11


     3.13 Brokers.  Except for Credit Suisse First Boston, whose fees,
commissions and expenses are the sole responsibility of MC Global or MCI, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by MC Global or MCI directly with the EPI Shareholders and
EPI without the intervention of any Person on behalf of MC Global or MCI in such
manner as to give rise to any valid claim by any Person against EPI or any EPI
Shareholder for a finder's fee, brokerage commission or similar payment.

                                   ARTICLE IV

                            ACTIONS PRIOR TO CLOSING

     4.1 Regulatory and Other Approvals.

     (a) EPI and its Subsidiaries will (i) take all commercially reasonable
steps necessary or desirable, and proceed diligently and in good faith and use
all commercially reasonable efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
of EPI or any Subsidiary to consummate the transactions contemplated hereby,
(ii) provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as MC Global or MCI or such Governmental
or Regulatory Authorities or other Persons may reasonably request and (iii)
cooperate with MC Global and MCI as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
MC Global and MCI to consummate the transactions contemplated hereby. EPI will
provide prompt notification to MC Global when any such consent, approval,
action, filing or notice referred to in clause (i) above is obtained, taken,
made or given, as applicable, and will advise MC Global of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.

     (b) Each of MC Global and MCI will (i) take all commercially reasonable
steps necessary or desirable, and proceed diligently and in good faith and use
all commercially reasonable efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
of MC Global and MCI to consummate the transactions contemplated hereby, (ii)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as EPI or such Governmental or
Regulatory Authorities or other Persons may reasonably request and (iii)
cooperate with EPI and its Subsidiaries as promptly as practicable in obtaining
all consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
EPI or any Subsidiary to consummate the transactions contemplated hereby. MC
Global will provide prompt notification to EPI when any such consent, approval,
action, filing or notice referred to in clause (i) above is obtained, taken,
made or given, as applicable, and will advise EPI of any communications (and,
unless precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement.

     4.2 Competition Filings.  In addition to the covenants contained in Section
4.1, each of MC Global, MCI and EPI will (a) take promptly all actions necessary
to make the filings required of it under the HSR Act and any similar law or
regulation of the European Union, (b) comply at the earliest practicable date
with any request for additional information received by it from any Governmental
or Regulatory Authorities in the area of competition laws and (c) cooperate in
all respects to assist the others (and their respective shareholders and
members) in connection with any filing under applicable competition laws and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by Governmental or
Regulatory Authorities in the area of competition laws.

     4.3 Preparation of the Registration Statement and the Proxy Statement;
Members' Meeting.

     (a) MC Global shall prepare and file a Registration Statement on Form S-4
covering the shares of MC Global Class A Stock and MC Global Class B Stock to be
issued in the Conversion and the Share Exchange
                                       B-12


(the "REGISTRATION STATEMENT") with the SEC. The Registration Statement will
include a proxy statement relating to the MCI Member Meeting described below
(the "PROXY STATEMENT"). The Proxy Statement also will be used as a disclosure
statement relating to the Share Exchange. MC Global and MCI shall use their
commercially reasonable efforts to (i) respond to any comments of the staff of
the SEC and (ii) have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Conversion and the Share Exchange. MCI will use its commercially reasonable
efforts to cause the Proxy Statement to be mailed to all of the MCI Principal
Members as promptly as practicable after the Registration Statement is declared
effective under the Securities Act and each of the EPI Shareholders and each of
the MEPUK Shareholders has executed and delivered to MC Global and MCI an EPI
Share Exchange Agreement, a form of which is attached hereto as Exhibit B (an
"EPI SHARE EXCHANGE AGREEMENT"), or a MEPUK Share Exchange Agreement, a form of
which is attached hereto as Exhibit C (the "MEPUK SHARE EXCHANGE AGREEMENT").
MCI will notify EPI promptly of the receipt of any comments from the SEC and of
any request by the SEC for amendments or supplements to the Registration
Statement or the Proxy Statement or for additional information and will supply
EPI with copies of all correspondence between MCI or any of its representatives
and the SEC with respect to the Registration Statement or the Proxy Statement.
The information to be provided by each of the parties hereto for inclusion in
the Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the information provided
not misleading, including but not limited to the financial statements (including
the related notes and supporting schedules) which will present fairly the
financial condition and results of operations of the parties and their
respective Subsidiaries at the dates and for the periods indicated.

     (b) MCI will, as soon as practicable following the date of this Agreement,
duly call, give notice of, convene and hold a meeting of the MCI Principal
Members (the "MCI MEMBER MEETING") for the purpose of obtaining the approval of
the Conversion by the MCI Principal Members. MCI covenants that it will, through
its Board of Directors, recommend to the MCI Principal Members approval of the
Conversion and further covenants that the Proxy Statement will include such
recommendation.

     4.4 Investigation by MC Global.  EPI will and will cause its Subsidiaries
to, (a) provide MC Global and MCI and their respective officers, directors,
employees, agents, counsel, accountants, financial advisors, consultants and
other representatives (together, "REPRESENTATIVES") with full access, upon
reasonable prior notice and during normal business hours, to the officers,
employees, agents and accountants of EPI and its Subsidiaries and their Assets
and Properties and Books and Records, and (b) furnish MC Global, MCI and such
other Persons with such information and data concerning the business and
operations of EPI and its Subsidiaries as MC Global, MCI or any of such other
Persons reasonably may request in connection with such investigation and the
preparation of the Registration Statement.

     4.5 Alternative Solicitations.  If EPI or any Subsidiary (or any Person
acting for or on their behalf) (a) receives from any Person (other than MC
Global or MCI) any offer, inquiry or informational request relating to a
proposed Business Combination involving EPI or any Subsidiary of EPI, or (b)
receives any notice from any EPI Shareholder that such EPI Shareholder intends
to sell its Shares, then EPI will promptly, orally and in writing, advise MC
Global of such offer, inquiry or request and deliver a copy of such notice to MC
Global.

     4.6 Conduct of Business of MC Global and MCI.  Prior to the Closing, each
of MC Global and MCI will conduct business in the ordinary course and consistent
with past practice.

     4.7 Conduct of Business of EPI.  Prior to the Closing, EPI will, and will
cause its Subsidiaries to, conduct business in the ordinary course consistent
with past practice.

     4.8 Employee Matters.  Except as may be required by Law, as previously
disclosed to MCI or as agreed by MC Global, EPI will, and will cause its
Subsidiaries to, refrain, from directly or indirectly:

          (a) making any increase in the salary, wages or other compensation of
     any officer, employee or consultant of EPI or any Subsidiary whose annual
     salary, wages or other compensation from EPI is or, after giving to such
     change, would be US$100,000 or more; and

                                       B-13


          (b) adopting, entering into, amending, modifying or terminating
     (partially or completely) any employee benefit or welfare plan.

     4.9 Certain Restrictions.

     (a) Except as otherwise agreed to in writing by MC Global or MCI, EPI will,
and will cause its Subsidiaries to, refrain from:

          (i) amending their certificates or articles of association or bylaws
     (or other comparable charter documents) or taking any action with respect
     to any such amendment or any reorganization, liquidation or dissolution of
     any such corporation;

          (ii) authorizing, issuing, selling or otherwise disposing of any
     shares of capital stock or other equity interests of or any Option with
     respect to EPI or any Subsidiary, or modifying or amending any right of any
     holder of outstanding shares of capital stock or other equity interests of
     or Option with respect to EPI or any Subsidiary;

          (iii) declaring, setting aside or paying any dividend or other
     distribution in respect of the capital stock of other equity interests of
     EPI or any Subsidiary not wholly owned by EPI, or directly or indirectly
     redeeming, purchasing or otherwise acquiring any capital stock or other
     equity interests of or any Option with respect to EPI or any Subsidiary not
     wholly owned by EPI;

          (iv) acquiring or disposing of, or incurring any Lien (other than a
     Permitted Lien) on, any Assets and Properties, other than in the ordinary
     course of business consistent with past practice;

          (v) (i) incurring Indebtedness in an aggregate principal amount
     exceeding E15,000,000 (net of any amounts of Indebtedness discharged during
     such period) other than indebtedness incurred in the ordinary course of
     business in connection with the settlement of payment transactions, or (ii)
     voluntarily purchasing, canceling, prepaying or otherwise providing for a
     complete or partial discharge in advance of a scheduled payment date with
     respect to, or waiving any right of EPI or any Subsidiary under, any
     Indebtedness of or owing to EPI or any Subsidiary (in either case other
     than Indebtedness of EPI or a Subsidiary owing to EPI or a wholly-owned
     Subsidiary);

          (vi) engaging with any Person in any Business Combination;

          (vii) making capital expenditures or commitments for capital
     expenditures in an aggregate amount exceeding E15,000,000; or

          (viii) entering into any agreement or resolving to do or engage in any
     of the foregoing.

     (b) Except as otherwise agreed to in writing by EPI, MC Global and MCI,
will, and will cause their Subsidiaries to, refrain from:

          (i) taking any action with respect to any liquidation or dissolution
     of any such corporation;

          (ii) declaring, setting aside or paying any dividend or other
     distribution in respect of the capital stock of other equity interests of
     MC Global, MCI or any Subsidiary not wholly owned by MC Global or MCI, or
     directly or indirectly redeeming, purchasing or otherwise acquiring any
     capital stock or other equity interests of or any Option with respect to MC
     Global or MCI or any Subsidiary not wholly owned by MC Global or MCI; or

          (iii) engaging with any Person in any Business Combination that is
     material to MC Global or MCI unless that Business Combination is disclosed
     in the Registration Statement.

     4.10 Books and Records.  On the Closing Date, EPI will make available to MC
Global and MCI at the offices of EPI all of the Books and Records, and if at any
time after the Closing any EPI Shareholder or EPI or any Subsidiary discovers in
its possession or under its control any other Books and Records, it will
forthwith deliver such Books and Records to MC Global.

     4.11 Notice and Cure.  Each party (the "DEFAULTING PARTY") will notify the
others (the "NON-DEFAULTING PARTY") promptly in writing of, and
contemporaneously will provide the Non-Defaulting Party
                                       B-14


with true and complete copies of any and all information or documents relating
to, and will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of such Defaulting
Party under this Agreement to be breached or that renders or will render untrue
any representation or warranty of such Defaulting Party contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Each party also will notify the other promptly in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant or
agreement made by such party in this Agreement, whether occurring or arising
before, on or after the date of this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit the other's right to
seek damages, at law and/or at equity, for breaches of any of the foregoing.

     4.12 Fulfillment of Conditions.

     (a) EPI will take all commercially reasonable steps necessary or desirable
and proceed diligently and in good faith to satisfy each other condition to the
obligations of MC Global and MCI contained in this Agreement and will not, and
will not permit EPI or any Subsidiary to, take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.

     (b) Each of MC Global and MCI will take all commercially reasonable steps
necessary or desirable and proceed diligently and in good faith to satisfy each
other condition to the obligations of EPI and the EPI Shareholders contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.

                                   ARTICLE V

                 CONDITIONS TO OBLIGATIONS OF MC GLOBAL AND MCI

     The obligations of each of MC Global and MCI hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in writing in whole or in part by MC Global and
MCI in their sole discretion):

     5.1 Representations and Warranties.  Each of the representations and
warranties made by EPI in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects (except that representations and warranties that are qualified
as to materiality or as to absence of material adverse effect will be true and
correct in all respects) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects (except that
representations and warranties that are qualified as to materiality or as to
absence of material adverse effect will be true and correct in all respects) on
and as of such earlier date.

     5.2 Performance.  EPI shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by EPI or any Subsidiary at or
before the Closing.

     5.3 Officers' Certificates.  EPI shall have delivered to MC Global a
certificate, dated the Closing Date and executed by its Chairman of the Board,
its President or any Executive or Senior Vice President or Managing Director,
substantially in the form and to the effect of Exhibit D or hereto, as
applicable, and a certificate, dated the Closing Date and executed by its
General Manager, Corporate Affairs, substantially in the form and to the effect
of Exhibit E hereto.

     5.4 Orders and Laws.  There shall not be in effect on the Closing Date any
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
which could reasonably be expected to otherwise result in a material diminution
of the benefits of the transactions contemplated by this Agreement to MC Global
and MCI, and there shall not be
                                       B-15


pending or threatened on the Closing Date any Action or Proceeding or any other
action in, before or by any Governmental or Regulatory Authority which could
reasonably be expected to result in the issuance of any such Order or the
applicability of any such Law.

     5.5 Regulatory Consents and Approvals.  All consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties to this Agreement to perform their obligations
under it and to consummate the transactions contemplated hereby and thereby, (a)
shall have been duly obtained, made or given, (b) shall be in form and substance
reasonably satisfactory to MC Global and MCI, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement,
including under competition laws, shall have occurred.

     5.6 Third Party Consents.  All consents (or in lieu thereof waivers) to the
performance by the parties to this Agreement of their obligations under it or to
the consummation of the transactions contemplated hereby as are required under
any Contract to which any party or any of its Subsidiaries is a party or by
which any of their respective Assets and Properties are bound and where the
failure to obtain any such consent (or in lieu thereof waiver) could reasonably
be expected, individually or in the aggregate with other such failures, to
materially adversely affect MC Global and MCI or the Business or Condition of
EPI or otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to MC Global and MCI, (a) shall have
been obtained, (b) shall be in form and substance reasonably satisfactory to MC
Global and MCI, (c) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (d) shall be in full force and effect.

     5.7 Opinion of Counsel.  MC Global and MCI shall have received the opinion
of Sullivan & Cromwell, U.S. counsel to EPI, and Linklaters & Alliance, Belgian
counsel to EPI, dated the Closing Date, in such forms as are reasonably
acceptable to MC Global and MCI.

     5.8 Charters and Bylaws.  A certificate of incorporation and bylaws
substantially in the form of Exhibits G and H, respectively, shall be in effect
as the certificate of incorporation and bylaws of MCI. A certificate of
incorporation and bylaws substantially in the form of Exhibits I and J,
respectively, shall be in effect as the certificate of incorporation and bylaws
of MC Global.

     5.9 Certificates.  EPI shall have delivered to MC Global copies of the
certificates or articles of incorporation (or other comparable corporate charter
documents), including all amendments thereto, of EPI and each Subsidiary
certified by the appropriate official of the jurisdiction of organization.

     5.10 Resignations of Directors.  The members of the boards of directors of
EPI and its Subsidiaries shall have tendered, effective at the Closing, their
resignations as such directors.


     5.11 Intellectual Property Assignment Agreement.  EURO Kartensysteme
EUROCARD und eurocheque GmbH and GZS Gesellschaft for Zahlungssysteme mbH shall
have entered into an Intellectual Property Assignment Agreement with EPI in such
form as is reasonably acceptable to MC Global and MCI and that Agreement shall
be in full force and effect.


     5.12 Entry into License Agreement.  Any member of EPI, including without
limitation each MEPUK Shareholder and EPI Shareholder, that is not, immediately
prior to the Closing, a Principal Member of MCI shall execute and deliver to MCI
an MCI License Agreement in the form of Exhibit L (an "MCI LICENSE AGREEMENT").

     5.13 MEPUK Share Exchange Agreement.  Each MEPUK Shareholder shall have
entered into the MEPUK Share Exchange Agreement, as required by Section 4.3.

     5.14 EPI Share Exchange Agreement.  Each EPI Shareholder other than MCI and
MEPUK shall have entered into an EPI Share Exchange Agreement, as required by
Section 4.3.

                                       B-16


     5.15 Registration Statement.  The Registration Statement shall have become
effective under the Securities Act of 1933, as amended, and shall not be the
subject of any stop order or proceeding by the SEC seeking a stop order.

     5.16 Tax Matters.  MC Global and MCI shall have received the opinion of
Pillsbury Winthrop LLP in form and substance reasonably satisfactory to MC
Global and MCI, or the satisfactory ruling of the Internal Revenue Service, with
respect to the United States federal income tax consequences of the Conversion
and the EPI Share Exchange.

                                   ARTICLE VI

                        CONDITIONS TO OBLIGATIONS OF EPI

     The obligations of EPI hereunder are subject to the fulfillment, at or
before the Closing, of each of the following conditions (all or any of which may
be waived in writing in whole or in part by EPI in its sole discretion):

     6.1 Representations and Warranties.  Each of the representations and
warranties made by MC Global and MCI in this Agreement (other than those made as
of a specified date earlier than the Closing Date) shall be true and correct in
all material respects (except that representations and warranties that are
qualified as to materiality or as to absence of material adverse effect will be
true and correct in all respects) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects (except that
representations and warranties that are qualified as to materiality or as to
absence of material adverse effect will be true and correct in all respects) on
and as of such earlier date.

     6.2 Performance.  MC Global and MCI shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by MC Global and MCI at or
before the Closing.

     6.3 Officers' Certificates.  MC Global and MCI shall have delivered to EPI
a certificate, dated the Closing Date and executed by the Chairman of the Board,
the President or any Senior Executive, Executive or Senior Vice President of MC
Global and MCI, substantially in the form and to the effect of Exhibit M hereto,
and a certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary of MC Global and MCI, substantially in the form and to the
effect of Exhibit N hereto.

     6.4 Orders and Laws.  There shall not be in effect on the Closing Date any
Order or Law that became effective after the date of this Agreement restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to EPI, and there shall not be
pending or threatened on the Closing Date any Action or Proceeding or any other
action in, before or by any Governmental or Regulatory Authority which could
reasonably be expected to result in the issuance of any such Order or the
applicability of any such Law.

     6.5 Regulatory Consents and Approvals.  All consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties to this Agreement to perform their obligations
under it and to consummate the transactions contemplated hereby, (a) shall have
been duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to EPI, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under competition laws,
shall have occurred.

     6.6 Third Party Consents.  All consents (or in lieu thereof waivers) to the
performance by the parties to this Agreement of their obligations under it or to
the consummation of the transactions contemplated hereby as are required under
any Contract to which any party or any of its Subsidiaries is a party or by
which any of
                                       B-17


their respective Assets and Properties are bound and where the failure to obtain
any such consent (or in lieu thereof waiver) could reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect EPI or the Business or Condition of MC Global and MCI or
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement to EPI, (a) shall have been obtained in form and
substance reasonably satisfactory to EPI, (b) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (c)
shall be in full force and effect.

     6.7 Opinion of Counsel.  EPI shall have received the opinion of Clifford
Chance Rogers & Wells LLP, counsel to MC Global and MCI, dated the Closing Date,
in such form as is reasonably acceptable to EPI.

     6.8 Charters and Bylaws.  A certificate of incorporation and bylaws
substantially in the form of Exhibits G and H, respectively, shall be in effect
as the certificate of incorporation and bylaws of MCI. A certificate of
incorporation and bylaws substantially in the form of Exhibits I and J,
respectively, shall be in effect as the certificate of incorporation and bylaws
of MC Global.

     6.9 Good Standing Certificates.  MC Global and MCI shall have delivered to
EPI copies of the certificates or articles of incorporation (or other comparable
corporate charter documents), including all amendments thereto, of MC Global and
MCI and each Subsidiary of MC Global or MCI certified by the appropriate
official of the jurisdiction of organization.

     6.10 No Stop Orders.  The Registration Statement shall have become
effective under the Securities Act of 1933, as amended, and shall not be the
subject of any stop order or proceeding by the SEC seeking a stop order.

     6.11 Merger Agreement.  The Agreement and Plan of Merger by and among MC
Global, MCI and MasterCard Merger Sub, Inc. to effectuate the Conversion shall
have been executed in substantially the form attached hereto as Exhibit A, shall
not have been amended or terminated, and shall have become effective.

     6.12 Tax Matters.  EPI or the applicable EPI Shareholders or MEPUK
Shareholders shall have received an opinion or opinions, in form and substance
reasonably satisfactory to EPI, of recognized tax counsel, or the satisfactory
rulings of the appropriate Tax Authorities, with respect to the tax consequences
of the Conversion and the Share Exchange to the EPI Shareholders and the MEPUK
Shareholders in the United Kingdom and France.

                                  ARTICLE VII

                    SURVIVAL OF REPRESENTATIONS, WARRANTIES,
                COVENANTS AND AGREEMENTS; POST-CLOSING COVENANTS

     7.1 Survival of Representations, Warranties, Covenants and Agreements.  The
representations, warranties, covenants and agreements contained in this
Agreement will survive the Closing (a) indefinitely with respect to the
representations and warranties contained in Sections 2.1, 2.2, 2.3 and 2.5(a)
and 3.1, 3.2, 3.3 and 3.4(a), (b) until 60 calendar days after the expiration of
all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section 2.9,
(c) with respect to each other representation and warranty, until the Transition
Date or (d) indefinitely with respect to each other covenant or agreement
contained in this Agreement, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clause (b), (c)
or (d) above will continue to survive if a notice describing, in reasonable
detail, a claim for indemnification pursuant to the applicable EPI Share
Exchange Agreement or MEPUK Share Exchange Agreement has been given by a party
seeking indemnification to the parties from whom indemnification is being sought
on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved. The parties agree that
claims for indemnification for Loss resulting from a breach of this Agreement
shall be handled in the manner contemplated by the New MCI Bylaws.

                                       B-18


     7.2 Post-Closing Covenants.

     (a) MC Global 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;

     (b) MC Global 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;

     (c) MC Global and MCI confirm that they will not prohibit the use of
Eurocard(R) as a program name so long as it is used in a manner consistent with
any rules of MC Global or MCI concerning the use of program names;

     (d) subject to the approval of technical convergence of European Payment
Systems Services S.A. and MCI's Global Technology and Operations division, it is
the intention of the parties that members will not experience any adverse impact
on pricing or service levels as a result of a convergence; and

     (e) marketing support to the Eurocard(R) brand (e.g., European football
sponsorship) will continue until the European Football Championships in 2004
(Euro 2004) in accordance with the terms and conditions set forth in Section 5
of the Alliance Agreement and notwithstanding its termination.

                                  ARTICLE VIII

                                  TERMINATION

     8.1 Termination.  This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:

          (a) at any time before the Closing, by mutual written agreement of all
     of the parties;

          (b) at any time before the Closing, by EPI, on the one hand, or MC
     Global or MCI, on the other hand, in the event (i) of a material breach
     hereof by the non-terminating party if such non-terminating party fails to
     cure such breach within five Business Days following notification thereof
     by the terminating party or (ii) upon notification of the non-terminating
     party by the terminating party that the satisfaction of any condition to
     the terminating party's obligations under this Agreement becomes impossible
     or impracticable with the use of commercially reasonable efforts if the
     failure of such condition to be satisfied is not caused by a breach hereof
     by the terminating party; or

          (c) at any time after June 30, 2002 by EPI, on the one hand, or MC
     Global or MCI, on the other hand, upon notification to the non-terminating
     party by the terminating party if the Closing shall not have occurred on or
     before such date and such failure to consummate is not caused by a breach
     of this Agreement by the terminating party.

     8.2 Effect of Termination.  If this Agreement is validly terminated
pursuant to Section 8.1, this Agreement will forthwith become null and void, and
there will be no liability or obligation on the part of EPI or MC Global or MCI
(or any of their respective officers, directors, employees, agents or other
representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in Section 10.3
and confidentiality in Section 10.5 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 8.1(b), EPI
will remain liable to MC Global and MCI for any breach of this Agreement by EPI
existing at the time of such termination, and MC Global and MCI will remain
liable to EPI for any breach of this Agreement by MC Global or MCI existing at
the time of such termination, and EPI or MC Global or MCI may seek such
remedies, including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or as are otherwise
available at law or in equity.

                                       B-19


                                   ARTICLE IX

                                  DEFINITIONS

     9.1 Definitions.  As used in this Agreement, the following defined terms
shall have the meanings indicated below:

          "ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
     arbitration or Governmental or Regulatory Authority investigation or audit.

          "ACTUAL ALLOCATION" has the meaning ascribed to it in the definition
     of ec Picto Stock.

          "AFFILIATE" means any Person that directly, or indirectly through one
     of more intermediaries, controls or is controlled by or is under common
     control with the Person specified. For purposes of this definition, control
     of a Person means the power, direct or indirect, to direct or cause the
     direction of the manag