MasterCard 2008 Annual Report Download - page 119

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
Commencing on the fourth anniversary of the IPO, each share of Class B common stock will be convertible,
at the holder’s option, into a share of Class A common stock on a one-for-one basis. Additionally, if at any time,
the number of shares of Class B common stock outstanding is less than 41% of the aggregate number of shares of
Class A common stock and Class B common stock outstanding, Class B stockholders will in certain
circumstances be permitted to acquire an aggregate number of shares of Class A common stock in the open
market or otherwise, with acquired shares thereupon converting into an equal number of shares of Class B
common stock so that holders of Class B common stock could own up to 41% of the aggregate number of shares
of Class A common stock and Class B common stock outstanding at such time. Shares of Class B common stock
are non-registered securities that may be bought and sold among eligible holders of Class B common stock
subject to certain limitations.
Stock Repurchase Program
In April 2007, the Company’s Board of Directors authorized a plan for the Company to repurchase up to
$500,000 of its Class A common stock in open market transactions during 2007. On October 29, 2007, the
Company’s Board of Directors amended the share repurchase plan to authorize the Company to repurchase an
incremental $750,000 (aggregate for the entire repurchase program of $1,250,000) of its Class A common stock
in open market transactions through June 30, 2008. As of December 31, 2007, approximately 3,922 shares of
Class A common stock had been repurchased at a cost of $600,532. During 2008, the Company repurchased
approximately 2,819 shares of Class A common stock at a cost of $649,468, completing its aggregate authorized
share repurchase program of $1,250,000. The Company records the repurchase of shares of common stock at cost
based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reduction
to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding
shares.
The MasterCard Foundation
In connection and simultaneous with the IPO, the Company issued and donated 13,497 newly authorized
shares of Class A common stock to The MasterCard Foundation (the “Foundation”). The Foundation is a private
charitable foundation incorporated in Canada that is controlled by directors who are independent of the Company
and its principal members. In connection with the donation, the Company recorded an expense of $394,785 in the
second quarter of 2006, which was determined based on the IPO price per share, less a marketability discount of
25%. Under the terms of the donation, the Foundation can only resell the donated shares beginning on the fourth
anniversary of the IPO to the extent necessary to meet charitable disbursement requirements dictated by
Canadian tax law. Under Canadian tax law, the Foundation is generally required to disburse at least 3.5% of its
assets not used in administration each year for qualified charitable disbursements. However, the Foundation
obtained permission from the Canadian tax authorities to defer the giving requirements for up to ten years. The
Foundation, at its discretion, may decide to meet its disbursement obligations on an annual basis or to settle
previously accumulated obligations during any given year. The Foundation will be permitted to sell all of its
remaining shares beginning twenty years and eleven months after the consummation of the IPO. Additionally,
during each of the years ended December 31, 2007 and 2006, the Company donated $20,000 in cash to the
Foundation for an aggregate of $40,000.
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