MasterCard 2010 Annual Report Download - page 123

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
is a private charitable foundation incorporated in Canada that is controlled by directors who are independent of
the Company and its principal members. Under the terms of the donation, the Foundation became able to resell
the donated shares in May 2010 beginning on the fourth anniversary of the IPO and 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.
Ownership and Governance Structure
Equity ownership and voting power of the Company’s shares were allocated as follows as of December 31:
2010 2009
Equity
Ownership
General
Voting
Power
Equity
Ownership
General
Voting
Power
Public Investors (Class A stockholders) 83.5% 89.1% 74.2% 87.7%
Principal or Affiliate Members (Class B stockholders) 6.3% 0.0% 15.4% 0.0%
Foundation (Class A stockholders) 10.2% 10.9% 10.4% 12.3%
Class B Common Stock Conversions
At the annual meeting of stockholders of the Company on June 7, 2007, the Company’s stockholders
approved amendments to the Company’s certificate of incorporation designed to facilitate an accelerated, orderly
conversion of Class B common stock into Class A common stock for subsequent sale prior to May 2010.
Through “conversion transactions,” in amounts and at times designated by the Company, current holders of
shares of Class B common stock who elected to participate were eligible to convert their shares, on a one-for-one
basis, into shares of Class A common stock for subsequent sale or transfer to public investors, within a 30 day
“transitory” ownership period. Holders of Class B common stock were not allowed to participate in any vote of
holders of Class A common stock during this “transitory” ownership period. The number of shares of Class B
common stock eligible for conversion transactions was limited to an annual aggregate number of up to 10% of
the total combined outstanding shares of Class A common stock and Class B common stock, based upon the total
number of shares outstanding as of December 31 of the prior calendar year. In addition, prior to May 31, 2010, a
conversion transaction was not permitted that would have caused the number of shares of Class B common stock
to represent less than 15% of the total number of outstanding shares of Class A common stock and Class B
common stock outstanding.
During 2007, the Company implemented and completed two separate conversion programs in which
11.4 million shares, of an eligible 13.4 million shares, of Class B common stock were converted into an equal
number of shares of Class A common stock and subsequently sold or transferred to public investors.
In February 2008, the Company’s Board of Directors authorized the conversion and sale or transfer of up to
13.1 million shares of Class B common stock into Class A common stock in one or more conversion programs
during 2008. In May 2008, the Company implemented and completed a conversion program in which all of the
13.1 million authorized shares of Class B common stock were converted into an equal number of shares of
Class A common stock and subsequently sold or transferred by participating holders of Class B common stock to
public investors.
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