1141391--3/16/2006--MASTERCARD

related topics

{regulation, government, change}

{operation, international, foreign}

{product, market, service}

{system, service, information}

{regulation, change, law}

{financial, litigation, operation}

{cost, contract, operation}

{customer, product, revenue}

{competitive, industry, competition}

{product, liability, claim}

{condition, economic, financial}

{provision, law, control}

{loss, insurance, financial}

{control, financial, internal}

{debt, indebtedness, cash}

{acquisition, growth, future}

Interchange fees are subject to increasingly intense legal and regulatory scrutiny worldwide, which may have a material adverse impact on our revenue, our prospects for future growth and our overall business. If we are found liable in any of the cases brought by American Express or Discover, we may be forced to pay substantial damages. If we are ultimately unsuccessful in any of our various lawsuits relating to our currency conversion practices, our business may be materially and adversely affected. If we are found liable in any of the other litigations that have been brought against us or in any other litigation to which we may be subject in the future, we may be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our revenue and profitability. If we determine in the future that we are required to establish reserves or we incur liabilities for any litigation that has been or may be brought against us, our results of operations, cash flow and financial condition could be materially and adversely affected. Limitations on our business and other penalties resulting from litigation or litigation settlements may materially and adversely affect our revenue and profitability. The payments industry is generally the subject of increasing global regulatory focus, which may impose costly new compliance burdens on us and our customers and lead to decreased transaction volumes through our systems. Existing and proposed regulation in the areas of consumer privacy and data use and security could decrease the number of payment cards issued and could increase our costs. We face increasingly intense competitive pressure on the prices we charge our customers, which may materially and adversely affect our revenue and profitability. Consolidation or other changes affecting the banking industry could result in a loss of business for MasterCard and may create pressure on the prices we charge our customers, which may materially and adversely affect our revenue and profitability. Our revenue would decline significantly if we lose one or more of our most significant customers, which could have a material adverse impact on our business. Merchants are increasingly focused on the costs of accepting card-based forms of payment, which may lead to additional litigation and regulatory proceedings and may increase the costs of our incentive programs, which could materially and adversely affect our profitability. Our operating results may suffer because of substantial and increasingly intense competition worldwide in the global payments industry. We have repealed our Competitive Programs Policy as a result of a final judgment in our litigation with the U.S. Department of Justice, and our business may suffer as a result. We depend significantly on our relationships with our customers to manage our payment system. If we are unable to maintain those relationships, or if our customers are unable to maintain their relationships with cardholders or merchants that accept our cards for payment, our business may be materially and adversely affected. If we are unable to grow our debit business, particularly in the United States, we may fail to maintain and increase our revenue growth. The changes to our governance structure in connection with the ownership and governance transactions could have a material adverse effect on our business relationship with our members. Global economic, political and other conditions may adversely affect trends in consumer spending and in cross-border travel, which may materially and adversely impact our revenue and profitability. As a guarantor of certain obligations of principal members and affiliate debit licensees, we are exposed to risk of loss or illiquidity if any of our members default on their MasterCard, Cirrus or Maestro settlement obligations. Following the ownership and governance transactions, we will no longer have the right to impose special assessments upon the members of MasterCard International, which could leave us exposed to significant losses that could materially and adversely affect our results of operations, cash flow and financial condition, or, in certain circumstances, even cause us to become insolvent. Standard and Poor s Rating Services has announced that they will downgrade our credit rating upon completion of our initial public offering, which will result in an increase of our interest expense for borrowings under our credit facility. Further downgradings of our credit ratings could materially and adversely affect our future ability to obtain funding or materially increase the cost of any additional funding. If our transaction processing systems are disrupted or we are unable to process transactions efficiently or at all, our revenue or profitability would be materially reduced. Account data breaches involving card data stored by us or third parties could adversely affect our reputation and revenue. An increase in fraudulent activity using our cards could lead to reputational damage to our brands and could reduce the use and acceptance of our cards. If we are not able to keep pace with the rapid technological developments in our industry to provide customers, merchants and cardholders with new and innovative payment programs and services, the use of our cards could decline, which would reduce our revenue and income. Adverse currency fluctuations and foreign exchange controls could decrease revenue we receive from our international operations. Competing dynamic currency conversion services could reduce the volume of foreign currency transactions we process or force us to change our pricing or practices, which may materially and adversely affect our business. Our assessment revenues that are based on quarterly GDV are recorded utilizing an estimate of our customers performance. Material changes in our customers performance compared to estimates could require us to restate our financial statements for prior periods, which could have a material adverse impact on our results of operations and stock price. Any acquisitions that we make could disrupt our business and harm our financial condition. We expect to record a significant net loss for the second quarter and full year of 2006 as a result of the donation of shares of our Class A common stock and cash to The MasterCard Foundation, and we may make additional cash donations to the MasterCard Foundation to allow it to meet its annual charitable disbursement requirements during the first four years of its operations. Changes in the regulatory environment may adversely affect our benefit plans.

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1141391--3/16/2006--MASTERCARD_INC