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MasterCard
Annual Report
2013
ACHIEVING OUR VISION
A WORLD BEYOND CASH

Table of contents

  • Page 1
    ACH I E V I NG OU R V I S I ON A W O R L D B EYON D C A S H MasterCard Annual Report 2013

  • Page 2
    ... Class A and Class B common shares, which was effected in the form of a common stock dividend distributed on January 21, 2014. 2 GDV generated by Maestro and Cirrus cards is not included. The data for GDV is provided by MasterCard customers and includes information with respect to MasterCard-branded...

  • Page 3
    ... our data analytics, loyalty solutions and fraud detection and protection services. When you're a technology company in the payments industry, every transaction is important. We made new investments in our processing capabilities, including the recent acquisition of Provus, a provider of issuer and...

  • Page 4
    ... AND SECURITY For more than 45 years, MasterCard has been an industry leader in safeguarding cardholder data. It's what consumers expect and what they deserve. As a founder and early proponent of EMV technology, our strategy to fight payments fraud relies heavily on enabling chip-based payments...

  • Page 5
    ... 2000 Purchase Street Purchase, NY (Address of principal executive offices) 10577 (Zip Code) (914) 249-2000 (Registrant's telephone number, including area code) Title of each Class Name of each exchange on which registered Class A common stock, par value $0.0001 per share New York Stock Exchange...

  • Page 6
    ... Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. . Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 7
    ... processing systems and other services; account data breaches; reputation damage from increases in fraudulent activity; the challenges resulting from rapid technological developments in the payments industry; the effect of adverse currency fluctuation; acquisition, entry into new businesses...

  • Page 8
    ... solutions and services using our family of well-known brands, including MasterCard®, Maestro® and Cirrus®. We also provide value-added offerings such as loyalty and reward programs, information services and consulting. Our network is designed to ensure safety and security for the global payments...

  • Page 9
    ...scrutiny and other legal challenges, particularly with respect to interchange fees. See "Risk FactorsLegal and Regulatory Risks" in Part I, Item 1A of this Report. Payment Services and Solutions We provide transaction processing and a wide range of payment-related products and services to enable the...

  • Page 10
    ... settlement process. Interchange fees can be a significant component of the merchant discount rate, and therefore of the costs that merchants pay to accept electronic payments. These fees are currently subject to regulatory, legislative and/or legal challenges in a number of jurisdictions. See "Risk...

  • Page 11
    ... both their risk and the cards issued to their customers. Payment gateways, including: (1) DataCash® and MasterCard Internet Gateway Service (MiGs), which offer a single interface to provide e-commerce merchants with the ability to process secure payments and offer value-added solutions, including...

  • Page 12
    ... and travel, concierge and cardholder protection insurance in some regions. Debit. We support a range of payment solutions that allow our customers to provide consumers with convenient access to funds in deposit and other accounts. Our debit and deposit access programs can be used to make purchases...

  • Page 13
    ...procurement process and provide corporations with additional transactional detail. SmartData, a MasterCard-powered tool that provides information reporting and expense management capabilities. Procurement, travel, purchasing, fleet and other payment programs for government entities. Credit and debit...

  • Page 14
    ... their issuer using a unique, personal code; MasterCard Site Data Protection Service®, which assists customers, merchants and third-party service providers in protecting commercial sites from hacker intrusions and subsequent account data compromises; Fraud Rule Manager, our suite of fraud detection...

  • Page 15
    ...rewards, access to a global airline lounge network, global and local concierge services, a wide range of individual insurance coverages, emergency card replacement, emergency cash advance services and a 24-hour cardholder service center to provide information related to benefits and rewards programs...

  • Page 16
    ... we authorize the use of our trademarks in connection with our customers' issuing and merchant acquiring businesses. In addition, we own a number of patents and patent applications relating to payments solutions, transaction processing, smart cards, contactless, mobile, electronic commerce, security...

  • Page 17
    ... issue both MasterCard and Visa-branded payment products, and we compete with Visa for business on the basis of individual portfolios or programs. In addition, a number of our customers issue American Express and/or Discover-branded payment cards in a manner consistent with a four-party system. We...

  • Page 18
    ... program designed to prevent our payment network from being used to facilitate money laundering and other illicit activity. Our AML compliance program is comprised of policies, procedures and internal controls, including the designation of a compliance officer, and is designed to address these legal...

  • Page 19
    ...Delaware non-stock (or membership) corporation that was formed in November 1966. In May 2006, we completed a plan for a new ownership and governance structure for MasterCard Incorporated (including an initial public offering of a new class of common stock (the "IPO")). For more information about our...

  • Page 20
    ... of surcharging by merchants for products that are subject to regulated interchange rates; (4) the prohibition of rules that prevent an issuer from "co-badging" (that is, putting a competing brand on its credit or debit cards); and (5) the separation of brand and processing in terms of legal form...

  • Page 21
    ... Canada, to address issues related to interchange rates, transparency of acceptance costs, premium payment product and merchant discount rates. In 2013, the United Kingdom passed legislation to create a new regulatory body that would have the authority to regulate payment systems, and the government...

  • Page 22
    ...two unaffiliated payments networks. The regulations also provide that an issuer or payments network may not inhibit the ability of any person that accepts or honors a debit or prepaid card to direct the routing of the card transaction for processing over any network enabled on the card. In July 2013...

  • Page 23
    ... risk factor in "Risk Factors - Legal and Regulatory Risks" in this Part I, Item 1A with respect to government actions that may prevent us from competing effectively against providers of domestic payment services in certain countries. As a result, the risks created by any one new law or regulation...

  • Page 24
    ...Factors - Legal and Regulatory Risks" in this Part I, Item 1A, with respect to government actions which may prevent us from competing effectively against providers of domestic payments services in certain countries. Issuer Practice Legislation and Regulation - Our financial institution customers are...

  • Page 25
    ... number of payment cards and devices issued and could increase our costs. We are subject to regulations related to privacy, data protection and information security in the jurisdictions in which we do business. These regulations could result in negative impacts to our business. Due to recent account...

  • Page 26
    ... proceedings, central bank activity and legislative activity. Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative payments systems, operate end-to-end payments systems with direct connections to both merchants and consumers. These...

  • Page 27
    ... and results of operations. We generate revenue from the fees that we charge issuers and acquirers for providing transaction processing and other payment-related services and from assessments on the dollar volume of activity on cards and other devices carrying our brands. In order to increase...

  • Page 28
    ... global payments industry, including MasterCard. Some large merchants have supported the legal, regulatory and legislative challenges to interchange fees that MasterCard has been defending, including the U.S. merchant litigations as to which the Company recently entered into a settlement agreement...

  • Page 29
    ... States and a select number of other jurisdictions, most in-country (as opposed to crossborder) transactions conducted using MasterCard, Maestro and Cirrus cards are authorized, cleared and settled by our customers or other processors. Because we do not provide domestic processing services in these...

  • Page 30
    ... reduce or eliminate payment card marketing or increase requests for greater incentives or greater cost stability. Our customers may decrease spending for value-added services. Government intervention, including the effect of laws, regulations and/or government investments in our customers, may have...

  • Page 31
    ... cardholders whole if an issuer defaults on its obligation to safeguard unspent prepaid funds. Our MasterCard, Maestro and Cirrus-branded gross legal settlement exposure, which is primarily estimated using the average daily card volume during the quarter multiplied by the estimated number of days to...

  • Page 32
    ... maintain an information security program, a business continuity program and insurance coverage, and our processing systems incorporate multiple levels of protection, in order to address or otherwise mitigate these risks. We also test our systems to discover and address any potential vulnerabilities...

  • Page 33
    ... actions. We routinely encounter account data compromise events, some of which have been high profile, involving merchants and third-party payment processors that process, store or transmit payment card data, which affect millions of MasterCard, Visa, Discover, American Express and other types of...

  • Page 34
    ...and the related expense) could be transacted in a non-functional currency or valued based on a currency other than the functional currency of the entity generating the revenues. Resulting exchange gains and losses are included in our net income. Our risk management activities provide protection with...

  • Page 35
    ... the announcement of new products or service enhancements by us or our competitors; announcements related to litigation, regulation or legislative activity; potential acquisitions by us of other companies; and developments in our industry. Our organizational documents and Delaware law contain terms...

  • Page 36
    .... Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties As of December 31, 2013, MasterCard and its subsidiaries owned or leased 126 commercial properties. We own our corporate headquarters, a 472,600 square foot building located in Purchase, New York. There is no outstanding debt on...

  • Page 37
    ...Related Stockholder Matters and Issuer Purchases of Equity Securities The number of shares and per share amounts below have been retroactively restated to reflect the ten-for-one stock split of the Company's Class A and Class B common shares, which was effected in the form of a common stock dividend...

  • Page 38
    ... stock. The Company's repurchase activity during the fourth quarter of 2013 consisted of open market share repurchases and is summarized in the following table: Average Price Paid per Share (including commission cost) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs...

  • Page 39
    Item 6. Selected Financial Data The statement of operations data presented below for the years ended December 31, 2013, 2012 and 2011, and the balance sheet data as of December 31, 2013 and 2012, were derived from the audited consolidated financial statements of MasterCard Incorporated included in ...

  • Page 40
    ... 13% and 10% in 2013 and 2012, primarily driven by increased growth in dollar volume of activity on cards carrying our brands and the number of transactions processed by the Company. In 2013 and 2012, both volume-based revenue (domestic assessments and cross-border volume fees) and transaction-based...

  • Page 41
    The following table provides a summary of our operating results for the years ended December 31, 2013, 2012 and 2011: For the Years Ended December 31, 2013 2012 2011 Percent Increase (Decrease) 2013 2012 (in millions, except per share data and percentages) Net revenue ...$ Operating expenses ......

  • Page 42
    ... points when compared to 2011. In addition, changes in foreign currency exchange rates directly impact the calculation of gross dollar volume ("GDV") and gross euro volume ("GEV"), which are used in the calculation of our domestic assessments, cross-border volume fees and volume related rebates...

  • Page 43
    ... regional processing systems. Settlement is facilitating the exchange of funds between parties. • Connectivity fees are charged to issuers and acquirers for network access, equipment and the transmission of authorization and settlement messages. These fees are based on the size of the data being...

  • Page 44
    ... and rewards solutions fees are charged to issuers for benefits provided directly to consumers with MasterCard-branded cards, such as insurance, assistance for lost cards, locating ATMs and rewards programs. Program management services provided to prepaid card issuers consist of foreign exchange...

  • Page 45
    ... of our net revenue for the years ended December 31, 2013, 2012 and 2011 were as follows: For the Years Ended December 31, 2013 2012 1 Percent Increase (Decrease) 2013 2012 2011 1 (in millions, except percentages) Domestic assessments ...$ Cross-border volume fees...Transaction processing fees...

  • Page 46
    ... expense increased in 2013 compared to 2012 and in 2012 compared to 2011. The increase in 2013 and 2012 was primarily due to an increase in the number of employees to support the Company's strategic initiatives. Professional fees consist primarily of third-party services, legal costs to defend...

  • Page 47
    ... programs, investment related expenses and increased meeting and travel expenses to support business and strategy development efforts. The 2012 increase in other expenses versus 2011 was primarily due to increased costs associated with loyalty and rewards programs and the acquisition of Access...

  • Page 48
    ... in 2013. The effective tax rate for 2012 was lower than the effective tax rate for 2011 primarily due to discrete benefits related to additional export incentives and the conclusion of tax examinations in certain jurisdictions, as well as a larger benefit from the domestic production activities...

  • Page 49
    ... Company guarantees the settlement of many of the MasterCard, Cirrus and Maestro branded transactions between our issuers and acquirers. See Note 19 (Settlement and Other Risk Management) to the consolidated financial statements in Part II, Item 8 of this Report for a description of these guarantees...

  • Page 50
    ... of investment securities. Net cash used in financing activities for the years ended December 31, 2013 and 2012 was primarily related to the repurchase of the Company's Class A common stock and dividend payments to our stockholders. The table below shows a summary of the balance sheet data at...

  • Page 51
    ..., legal requirements, price, and economic and market conditions. On December 10, 2013, our Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to $3.5 billion of its Class A common stock. During January 2014, the Company exhausted its purchases under...

  • Page 52
    ... opt outs are not fixed and determinable and the Company has made a payment into escrow to fund the U.S. merchant class litigation or has a corresponding equal amount presented in settlement due from customers. See Note 18 (Legal and Regulatory Proceedings) to the consolidated financial statements...

  • Page 53
    ... available at the time. As additional information becomes available, the Company reassesses the potential liability related to its pending claims and litigation and may revise its estimates. Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which...

  • Page 54
    ...indicators of impairment exist. In the fourth quarter of 2012, the Company early adopted new Financial Accounting Standards Board (FASB) guidance that simplifies how an entity tests indefinite-lived intangible assets for impairment, allowing a qualitative assessment to be performed, which is similar...

  • Page 55
    ... Financial Instrument Summary Terms 2013 2014 2015 2016 2017 (in millions) Municipal securities ...Corporate securities ...U.S. Government and Agency securities ...Taxable short-term bond funds ...Asset-backed securities. . Auction rate securities . . Other ...Total ...1 Fixed / Variable...

  • Page 56
    ... agreement. See Note 12 (Debt) to the consolidated financial statements in Part II, Item 8 of this Report for additional information on the Company's current and prior credit facilities. We had no borrowings under the current or prior credit facilities at December 31, 2013 or 2012. Equity Price Risk...

  • Page 57
    ...Page MasterCard Incorporated As of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 Management's Report on Internal Control Over Financial Reporting...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheet ...Consolidated Statement of...

  • Page 58
    ... assessment, MasterCard's internal control over financial reporting was effective as of December 31, 2013. The effectiveness of MasterCard's internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting...

  • Page 59
    ...] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of MasterCard Incorporated: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of MasterCard...

  • Page 60
    ..., 2013 2012 (in millions, except share data) ASSETS Cash and cash equivalents ...$ Restricted cash for litigation settlement ...Investment securities available-for-sale, at fair value ...Accounts receivable...Settlement due from customers ...Restricted security deposits held for customers...Prepaid...

  • Page 61
    MASTERCARD INCORPORATED CONSOLIDATED STATEMENT OF OPERATIONS For the Years Ended December 31, 2013 2012 (in millions, except per share data) 2011 Net Revenue ...$ Operating Expenses General and administrative ...Advertising and marketing ...Depreciation and amortization ...Provision for litigation...

  • Page 62
    MASTERCARD INCORPORATED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Years Ended December 31, 2013 2012 (in millions) 2011 Net Income ...$ Other comprehensive income (loss): Foreign currency translation adjustments ...Defined benefit pension and postretirement plans ...Income tax effect...

  • Page 63
    ...97) of tax ...Cash dividends declared on Class A and Class B common stock, $0.06 per share...(76) Purchases of treasury stock ...Share-based payments ...Conversion of Class B to Class A common stock ...Balance at December 31, 2011...Net income ...Activity related to noncontrolling interests ...Other...

  • Page 64
    MASTERCARD INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended December 31, 2013 2012 (in millions) 2011 Operating Activities Net income ...$ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...Share-based payments ...

  • Page 65
    ... services through a family of well-known brands, including MasterCard, Maestro and Cirrus. The Company also provides value-added offerings such as loyalty and reward programs, information services and consulting. The Company's network is designed to ensure safety and security for the global payments...

  • Page 66
    ... information accumulated by our systems or reported by our customers. The Company's revenue is based on the volume of activity on cards that carry the Company's brands, the number of transactions processed or the nature of other payment-related products and services. Volume-based revenue (domestic...

  • Page 67
    ... - MasterCard's rules guarantee the settlement of many of the MasterCard, Cirrus and Maestro-branded transactions between its issuers and acquirers. Settlement exposure is the outstanding settlement risk to customers under MasterCard's rules due to the difference in timing between the payment...

  • Page 68
    ... legally restricted deposits, contracts entered into with others, or the Company's statements of intention with regard to particular deposits. In December 2012, the Company made a payment into a qualified cash settlement fund related to its U.S. merchant class litigation. The Company has presented...

  • Page 69
    ...as of December 31, 2013 and 2012. Settlement due from/due to customers - The Company operates systems for clearing and settling payment transactions among MasterCard customers. Net settlements are generally cleared daily among customers through settlement cash accounts by wire transfer or other bank...

  • Page 70
    ... 10, 2013, the Board of Directors declared a ten-for-one stock split of the Company's Class A and Class B common shares, which was effected in the form of a common stock dividend distributed on January 21, 2014. Except for the amount of authorized shares and par value, all references to share and...

  • Page 71
    ... year ended December 31, 2011, the dilutive effect of stock options is calculated including the effects of certain equity instruments granted in share-based payment transactions under the two-class method. Unvested share-based payment awards which receive non-forfeitable dividend rights, or dividend...

  • Page 72
    ...-for-one stock split of the Company's Class A and Class B common shares, which was effected in the form of a common stock dividend distributed on January 21, 2014. For the years presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards. 2 Note...

  • Page 73
    ......Taxable short-term bond funds ...Corporate securities ...Asset-backed securities ...Auction rate securities ...Other ...Total ...$ 1 $ $ 267 560 - 1,426 364 - 79 2,696 $ $ - - - - - 11 - 11 $ $ 267 560 - 1,426 364 11 79 2,707 December 31, 2012 Quoted Prices in Active Markets (Level...

  • Page 74
    ... FINANCIAL STATEMENTS - (Continued) The fair value of the Company's available-for-sale municipal securities, U.S. Government and Agency securities, corporate securities, asset-backed securities and other fixed income securities included in the Other category are based on quoted prices for...

  • Page 75
    ..., 2013 and 2012 were as follows: December 31, 2013 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value (in millions) Municipal securities ...$ U.S. Government and Agency securities ...Taxable short-term bond funds ...Corporate securities ...Asset-backed securities ...Auction rate...

  • Page 76
    ... auction succeeds, the issuer redeems the securities or they mature. As of December 31, 2013, the ARS market remained illiquid, but issuer call and redemption activity in the ARS student loan sector has occurred periodically since the auctions began to fail. During 2013, 2012 and 2011, the Company...

  • Page 77
    ... years ...Due after 10 years ...Total...$ Securities due after ten years are primarily ARS. Investment Income: 1,562 1,121 11 13 2,707 $ $ 1,562 1,122 11 12 2,707 Components of net investment income for each of the years ended December 31 were as follows: 2013 2012 (in millions) 2011 Interest...

  • Page 78
    ... directly related to entering into such an agreement are deferred and amortized over the life of the agreement. Investments for which the equity method or historical cost method of accounting is used are recorded in other assets on the consolidated balance sheet. MasterCard's share of net earnings...

  • Page 79
    ... increase in the net carrying amount of capitalized software in 2012 was primarily related to additions in internally developed software, purchased software and acquisitions. Certain intangible assets, including amortizable and unamortizable customer relationships and trademarks and tradenames, are...

  • Page 80
    ... of MasterCard's administration of the short-term reduction in default credit interchange from U.S. issuers. There is a corresponding equal amount presented in settlement due from customers. See Note 18 (Legal and Regulatory Proceedings) for further discussion of the U.S. merchant class litigation...

  • Page 81
    ...or plan funded status. Prior period amounts have been revised to conform to this presentation. The term "Pension Plans" includes the Qualified Plan, the Non-qualified Plan and these international defined benefit pension plans. The Company maintains a postretirement plan providing health coverage and...

  • Page 82
    ... forth the Plans' funded status, key assumptions and amounts recognized in the Company's consolidated balance sheet at December 31: Pension Plans 2013 2012 Postretirement Plans 2013 2012 (in millions) Change in benefit obligation Benefit obligation at beginning of year...$ Service cost ...Interest...

  • Page 83
    ...each of the years ended December 31: 2013 Pension Plans 2012 2011 2013 (in millions) Postretirement Plans 2012 2011 Service cost ...$ Interest cost ...Expected return on plan assets ...Settlement (gain) loss ...Amortization: Actuarial loss (gain) ...Prior service credit ...Net periodic benefit cost...

  • Page 84
    .... See Note 1 (Summary of Significant Accounting Policies). Mutual funds (including small cap U.S. equity securities and non-U.S. equity securities) are public investment vehicles valued at quoted market prices, which represent the net asset value of the shares held by the Qualified Plan and are 80

  • Page 85
    ... Plans' assets at fair value as of December 31, 2013 and 2012: December 31, 2013 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value (in millions) Mutual funds: Money market ...$ Domestic small cap equity...

  • Page 86
    ...agreement. Borrowings under the Credit Facility are available to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by the Company's customers. In addition, for business continuity planning and related purposes, the Company...

  • Page 87
    ...of customers of MasterCard. On August 2, 2012, the Company filed a universal shelf registration statement to provide additional access to capital, if needed. Pursuant to the shelf registration statement, the Company may from time to time offer to sell debt securities, preferred stock, Class A common...

  • Page 88
    ...or otherwise transfer any shares of Class A common stock received pursuant to such a conversion. The MasterCard Foundation In connection and simultaneously with its 2006 initial public offering (the "IPO"), the Company issued and donated 135 million newly authorized shares of Class A common stock to...

  • Page 89
    ... the balances of each component of accumulated other comprehensive income (loss) for the years ended December 31, 2013 and 2012 were as follows: Foreign Currency Translation Adjustments Defined Benefit Pension and Other Postretirement Plans, Net of Tax Investment Securities Available-forSale, Net of...

  • Page 90
    ... The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. In 2013, the expected term and the expected volatility were based on historical MasterCard information. In 2012 and 2011, the Company utilized the simplified method for calculating the expected...

  • Page 91
    ... on the New York Stock Exchange of the Company's Class A common stock on the date of grant, adjusted for the exclusion of dividend equivalents. Upon vesting, a portion of the RSU award may be withheld to satisfy the minimum statutory withholding taxes. The remaining RSUs will be settled in shares of...

  • Page 92
    ...against an annually predetermined return on equity goal, with an average return on equity per year over the three-year period commencing on January 1 of the grant year. The initial fair value of each PSU is the closing price on the New York Stock Exchange of the Company's Class A common stock on the...

  • Page 93
    ... 2012 (the "Director Plan"). The Director Plan provides for awards of Deferred Stock Units ("DSUs") to each director of the Company who is not a current employee of the Company. The following table includes additional share-based payment information for each of the years ended December 31: 2013 2012...

  • Page 94
    ...table above for operating leases, sponsorship, licensing and other agreements was accrued. Consolidated rental expense for the Company's leased office space was $38 million, $36 million and $30 million for the years ended December 31, 2013, 2012 and 2011, respectively. Consolidated lease expense for...

  • Page 95
    ... in 2013. The effective tax rate for 2012 was lower than the effective tax rate for 2011 primarily due to discrete benefits related to additional export incentives and the conclusion of tax examinations in certain jurisdictions, as well as a larger benefit from the domestic production activities...

  • Page 96
    ... law in these jurisdictions to utilize net operating losses following a change in control. A reconciliation of the beginning and ending balance for the Company's unrecognized tax benefits for the years ended December 31, is as follows: 2013 2012 (in millions) 2011 Beginning balance ...$ Additions...

  • Page 97
    ... of the payment card industry under U.S. federal antitrust law. The plaintiffs claimed that MasterCard's "Honor All Cards" rule (and a similar Visa rule), which required merchants who accept MasterCard cards to accept for payment every validly presented MasterCard card, constituted an illegal 93

  • Page 98
    ... protection and common law claims against MasterCard and Visa on behalf of putative classes of users of ATM services (the "ATM Consumer Complaints"). The claims in these actions largely mirror the allegations made in the ATM Operators Complaint described above, although these complaints seek damages...

  • Page 99
    ... competition law claims under state law. The complaints allege, among other things, that MasterCard, Visa, and certain financial institutions conspired to set the price of interchange fees, enacted point of sale acceptance rules (including the no surcharge rule) in violation of antitrust laws and...

  • Page 100
    ... settlement agreement provided for a return to the defendants of a portion of the class cash settlement fund based upon the percentage of purchase volume represented by the opt out merchants. This resulted in $164 million from the cash settlement fund being returned to MasterCard in January 2014...

  • Page 101
    ...) Maestro SEPA and Intra-Eurozone default interchange fees to debit card payment transactions within the Eurozone. The decision did not impose a fine on MasterCard, but provides for a daily penalty of up to 3.5% of MasterCard's daily consolidated global turnover in the preceding business year...

  • Page 102
    ...cards" rule). Additional Litigations in Europe. In the United Kingdom, beginning in May 2012, a number of retailers have filed claims against MasterCard for unspecified damages with respect to MasterCard's cross-border interchange fees and its U.K. and Ireland domestic interchange fees. In June 2013...

  • Page 103
    ... average daily card volume during the quarter multiplied by the estimated number of days to settle. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company's settlement risk. Customer-reported transaction data and...

  • Page 104
    ... derivatives at the end of the reporting period to its consolidated balance sheet and consolidated statement of operations. As of December 31, 2013, all forward contracts to purchase and sell foreign currency had been entered into with customers of MasterCard. MasterCard's derivative contracts are...

  • Page 105
    ... on the location of the Company's customer that issued the card, as well as the location of the merchant acquirer where the card is being used. Revenue generated in the U.S. was approximately 39%, 39%, and 40% of net revenue in 2013, 2012 and 2011, respectively. No individual country, other than...

  • Page 106
    ... 3,937 2,759 2.20 1,253 2.19 1,258 The number of shares and per share amounts have been retroactively restated to reflect the ten-for-one stock split of the Company's Class A and Class B common shares, which was effected in the form of a common stock dividend distributed on January 21, 2014. 102

  • Page 107
    ..., summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief...

  • Page 108
    ..., Executive Officers and Corporate Governance The information required by this Item with respect to our directors and executive officers, code of ethics, procedures for recommending nominees, audit committee, audit committee financial experts and compliance with Section 16(a) of the Exchange Act...

  • Page 109
    ...of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. MASTERCARD INCORPORATED (Registrant) Date: February 14, 2014 By: /s/ AJAY BANGA Ajay Banga President and Chief Executive...

  • Page 110
    ... Date: February 14, 2014 By: /s/ RIMA QURESHI Rima Qureshi Director Date: February 14, 2014 By: /s/ JOSÉ OCTAVIO REYES LAGUNES José Octavio Reyes Lagunes Director Date: February 14, 2014 By: /s/ JACKSON TAI Jackson Tai Director Date: February 14, 2014 By: /s/ EDWARD SUNING TIAN Edward...

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    ...Agreement between Martina Hund-Mejean and MasterCard International, amended and restated as of December 24, 2012 (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K filed February 14, 2013 (File No. 001-32877)). Description of Employment Arrangement with Gary Flood...

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    ... Company's Quarterly Report on Form 10Q filed August 1, 2012 (File No. 001-32877)). Form of Deferred Stock Unit Agreement for awards under 2006 Non-Employee Director Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed July 31, 2013...

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    ... Inc., Visa International Service Association and MasterCard's customer banks that are parties thereto (incorporated by reference to Exhibit 10.33 to Amendment No.1 to the Company's Annual Report on Form 10-K/A filed on November 23, 2011). MasterCard Settlement and Judgment Sharing Agreement, dated...

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    ... Number Exhibit Description 10.35 Class Settlement Agreement, dated October 19, 2012, by and among MasterCard Incorporated and MasterCard International Incorporated; Visa, Inc., Visa U.S.A. Inc. and Visa International Service Association; the Class Plaintiffs defined therein; and the Customer...

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    ... Markets Ajay Banga President and Chief Executive Officer MasterCard Incorporated Gary J. Flood President, Global Products and Solutions Silvio Barzi 1, 3 Former Senior Advisor and Executive Officer UniCredit Group Ronald E. Garrow Chief Human Resources Officer Martina Hund-Mejean Chief...

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    ... news releases, stock performance, financial reports, recent investments, investment community presentations, corporate governance and other investor information. Contact the MasterCard Board of Directors To communicate with the Board of Directors, any individual directors or any group or committee...

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    ... with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year ended December 31, 2013 (which is included in this annual report), Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that it has filed with the SEC in 2014 MasterCard's forward...

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