MasterCard Incorporated Reports Second Quarter Financial Results

-- Net earnings of $0.74 per share, or $101 million, excluding special items

-- Net loss of $2.30 per share, or $310 million, including special items

-- Net revenue up 9.7% to $846 million

-- Gross Dollar volume up 16.4%, purchase volume up 17.5%

MasterCard Incorporated (NYSE:MA) today announced performance forthe second quarter of 2006. The company reported net income of $101million, or $0.74 per share, excluding special items, and a net lossof $310 million, or $2.30 per share, including special items.

Net revenue for the quarter was $846 million, a 9.7% increaseversus the same period in 2005. Currency fluctuations had a negligibleimpact on revenue growth for the quarter.

Fueling the higher revenue in the second quarter was growth inMasterCard's gross dollar volume (GDV), which increased 16.4%, on alocal currency basis, to $485 billion; a 17.7% increase in the numberof transactions processed; and a restructuring of cross-bordertransaction fees which was implemented in April 2006. Worldwidepurchase volume rose 17.5%, on a local currency basis, during thequarter to $351 billion driven by increased cardholder spending on agrowing number of MasterCard cards. As expected, significant rebatesand incentives in the quarter, which included a large debit portfolioconversion from a competitive brand, partially offset gross revenuegrowth. As of June 30, 2006, the company's customer banks had issued796 million MasterCard cards, an increase of 11.2% percent over thesame period in 2005.

Special items for the quarter included:

-- The donation of approximately 13.5 million shares of Class A common stock to the MasterCard Foundation that occurred simultaneously with the company's initial public offering in May 2006. The impact of this non-cash, non-recurring donation resulted in a $395 million expense that is not deductible for tax purposes;

-- A $23 million reserve recorded for litigation settlements; and

-- $7 million in interest income earned on the IPO proceeds ultimately used for redemption of shares of Class B common stock.

The company's net income and earnings per share, excluding specialitems, are non-GAAP financial measures that are reconciled to theirmost directly comparable GAAP measure in the accompanying financialtables.

"Our solid operational performance for the quarter demonstratesthat through our strengths as a franchisor, processor and advisor, weare successfully delivering on our commitment to bring our customersinnovative products and value-added services to help them enhance theprofitability of their payments businesses," said Robert W. Selander,MasterCard president and chief executive officer.

"Our customers around the world are increasingly recognizingMasterCard as their brand of choice because of the strength of ourunified global organization, advanced transaction processing network,powerful brand and our ability to provide them with unique paymentsolutions," he said. "This quarter's strong performance in emergingmarkets such as our Latin America and South Asia/Middle East Africaregions illustrates our ability to displace paper-based forms ofpayment by bringing the benefits of electronic payments to everycorner of the world."

Total operating expenses increased 93.4%, to $1.1 billion, duringthe quarter compared to the same period in 2005. This increase wasprimarily driven by the contributions to the MasterCard Foundation, anincrease in advertising and market development expenses related to thesponsorship of the 2006 FIFA World Cup, and an increase in personnelexpenses to support the company's strategic initiatives. Currencyfluctuations had a negligible impact on expense growth for thequarter.

Total other income/(expense) was $13 million in the second quarter2006 versus ($5) million in last year's second quarter. The increasewas driven by interest income from higher cash balances related toproceeds received from the IPO, as well as increases in interest ratesand dividends received.

MasterCard's effective tax rate was significantly impacted by theshare donation to the MasterCard Foundation. Excluding the impact ofthe share donation, the effective tax rate would have been 33.6% and34.0%, in the three and six months ended June 30, 2006, respectively,down from the comparable periods in 2005. The rates in 2006 were lowerthan 2005 primarily due to favorable tax audit developments and thetax benefit related to qualified domestic production activities asallowed under the American Jobs Creation Act of 2004. The company'seffective tax rate, excluding the impact of the share donation, is anon-GAAP financial measure that is reconciled to the most directlycomparable GAAP measure in the accompanying financial tables.

Commenting on the company's financial performance, Chris A.McWilton, MasterCard's chief financial officer, noted that "During thesecond quarter, MasterCard continued to deliver solid revenue growthand good operating margins reflecting our globally competitivebusiness model. Our capital position remains strong with $2.1 billionof cash, cash equivalents and available-for-sale securities."

Year-to-Date 2006 Results

For the six months ended June 30, 2006, MasterCard reported netincome of $227 million, or $1.68 per share, excluding the impact ofthe special items described above. Including the impact of the specialitems, the company reported a net loss of $184 million, or $1.36 pershare.

Net revenue for the six months ended June 30, 2006 was $1.6billion, a 10.8% increase versus the same period in 2005. Currencyfluctuations negatively impacted this growth by approximately 1%.

Total operating expenses increased 54.3%, to $1.7 billion, for thesix-month period compared to the same period in 2005. Currencyfluctuations reduced this growth by approximately 1% in theyear-to-date period.

Total other income/(expense) was $24 million for the six-monthperiod versus ($12) million for the same period in 2005. This changewas driven by a $26 million increase in investment income, includingthe $7 million special item earned on IPO proceeds. Interest expensealso decreased by $8 million due to a refund of interest assessed inconnection with an audit of the company's federal income tax returnand a reduction of interest reserve requirements related to thecompany's tax reserves.

Second Quarter Results Conference Call Details

On Wednesday, August 2, the company will host a conference call todiscuss its second quarter financial results beginning at 9:00 a.m.EDT.

The dial-in information for this call is 800-299-7098 (within theUS) and 617-801-9715 (outside the US) and the passcode is 64899002. Areplay of the call will be available through August 9. The replay canbe accessed by dialing 888-286-8010 (within the US) and 617-801-6888(outside the US) and using passcode 65688882.

The live call and the replay, along with supporting materials, canalso be accessed through the company's website at www.mastercard.com.

About MasterCard Incorporated

MasterCard Incorporated advances global commerce by providing acritical economic link among financial institutions, businesses,cardholders and merchants worldwide. As a franchisor, processor andadvisor, MasterCard develops and markets payment solutions, processesclose to 14 billion transactions each year, and providesindustry-leading analysis and consulting services to financialinstitution customers and merchants. Through its family of brands,including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard servesconsumers and businesses in more than 210 countries and territories.For more information go to www.mastercard.com.

Forward-Looking Statements

Statements in this press release which are not historical facts,including statements about MasterCard's plans, strategies, beliefs andexpectations, are forward-looking and subject to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995.Forward-looking statements speak only as of the date they are made.Accordingly, except for the company's ongoing obligations under theU.S. federal securities laws, the company does not intend to update orotherwise revise the forward-looking information to reflect actualresults of operations, changes in financial condition, changes inestimates, expectations or assumptions, changes in general economic orindustry conditions or other circumstances arising and/or existingsince the preparation of this press release or to reflect theoccurrence of any unanticipated events. Such forward-lookingstatements include, without limitation:

-- the company's commitment to bring its customers innovative products and value-added services to enhance the profitability of their payments businesses;

-- the company's ability to provide unique payment solutions;

-- the company's ability to displace paper-based forms of payment through the benefits of electronic payments; and

-- the company's continued strong capital position.

Actual results may differ materially from such forward-lookingstatements for a number of reasons, including those set forth in thecompany's filings with the Securities and Exchange Commission (SEC),including the company's Annual Report on Form 10-K for the year endedDecember 31, 2005, the company's Quarterly Reports on Form 10-Q andCurrent Reports on Form 8-K that it has filed with the SEC during2006, as well as reasons including difficulties, delays or theinability of the company to achieve its strategic initiatives setforth above. Factors other than those listed above could also causethe company's results to differ materially from expected results.
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(In thousands, except per share data)

Revenues, net $846,489 $771,867 $1,584,942 $1,430,105
Operating Expenses
General and
administrative 365,161 319,187 712,998 625,803
Advertising and market
development 307,066 231,578 489,749 403,257
Litigation settlements 23,250 - 23,250 -
Charitable
contributions to the
MasterCard Foundation 400,285 - 400,285 -
Depreciation and
amortization 24,693 28,666 49,913 57,096
----------- ----------- ----------- -----------
Total operating
expenses 1,120,455 579,431 1,676,195 1,086,156
----------- ----------- ----------- -----------
Operating income
(loss) (273,966) 192,436 (91,253) 343,949
----------- ----------- ----------- -----------
Other Income (Expense)
Investment income, net 28,999 13,479 49,691 23,528
Interest expense (16,068) (17,477) (26,708) (34,333)
Other income
(expense), net 443 (1,044) 595 (1,555)
----------- ----------- ----------- -----------
Total other income
(expense) 13,374 (5,042) 23,578 (12,360)
----------- ----------- ----------- -----------
Income (loss) before
income taxes (260,592) 187,394 (67,675) 331,589
Income tax expense 49,868 67,146 116,041 118,047
----------- ----------- ----------- -----------
Net Income (Loss) $(310,460) $120,248 $(183,716) $213,542
=========== =========== =========== ===========

Basic Net Income
(Loss) per Share $(2.30) $.89 $(1.36) $1.58
=========== =========== =========== ===========

Basic Weighted average
shares outstanding 135,252 134,969 135,127 134,969
=========== =========== =========== ===========

Diluted Net Income
(Loss) per Share $(2.30) $.89 $(1.36) $1.58
=========== =========== =========== ===========

Diluted Weighted
average shares
outstanding 135,252 134,969 135,127 134,969
=========== =========== =========== ===========

MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, December 31,
2006 2005
------------ ------------
(In thousands, except
share data)

ASSETS
Cash and cash equivalents $1,209,856 $545,273
Investment securities, at fair value:
Trading 17,824 22,472
Available-for-sale 853,592 714,147
Accounts receivable 410,321 347,754
Settlement due from members 241,230 211,775
Restricted security deposits held for
members 111,168 97,942
Prepaid expenses 185,577 167,209
Other current assets 132,200 121,326
------------ ------------
Total Current Assets 3,161,768 2,227,898
Property, plant and equipment, at cost (less
accumulated depreciation of $392,322 and
$373,319) 227,900 230,614
Deferred income taxes 229,085 225,034
Goodwill 208,131 196,701
Other intangible assets (less accumulated
amortization of $309,034 and $272,913) 272,310 273,854
Municipal bonds held-to-maturity 193,940 194,403
Prepaid expenses 198,331 201,132
Other assets 150,474 150,908
------------ ------------
Total Assets $4,641,939 $3,700,544
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $202,816 $185,021
Settlement due to members 205,688 175,021
Restricted security deposits held for
members 111,168 97,942
Obligations under U.S. merchant lawsuit and
other litigation settlements -- current 212,630 189,380
Accrued expenses 754,768 850,657
Other current liabilities 76,353 58,682
------------ ------------
Total Current Liabilities 1,563,423 1,556,703
Deferred income taxes 64,408 61,188
Obligations under U.S. merchant lawsuit and
other litigation settlements 436,484 415,620
Long-term debt 229,580 229,489
Other liabilities 226,418 263,776
------------ ------------
Total Liabilities 2,520,313 2,526,776
Commitments and Contingencies
Minority interest 4,620 4,620
Stockholders' Equity
Class A common stock, $.0001 par value;
authorized 3,000,000,000 shares, 79,631,922
and no shares issued and outstanding,
respectively 8 -
Class B common stock, $.0001 par value;
authorized 1,200,000,000 shares, 55,337,407
and 134,969,329 shares issued and
outstanding, respectively 6 14
Class M common stock, $.0001 par value,
authorized 1,000,000 shares, 1,572 and no
shares issued and outstanding, respectively - -
Additional paid-in capital 3,302,298 974,605
Retained earnings (accumulated deficit) (1,263,102) 145,515
Accumulated other comprehensive income, net
of tax:
Cumulative foreign currency translation
adjustments 87,290 50,818
Net unrealized loss on investment
securities available-for-sale (6,835) (2,543)
Net unrealized gain (loss) on derivatives
accounted for as hedges (2,659) 739
------------ ------------
Total accumulated other comprehensive
income, net of tax 77,796 49,014
------------ ------------
Total Stockholders' Equity 2,117,006 1,169,148
------------ ------------
Total Liabilities and Stockholders' Equity $4,641,939 $3,700,544
============ ============

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months
Ended June 30,
-----------------------
2006 2005
----------- -----------
(In thousands)

Operating Activities
Net income (loss) $(183,716) $213,542
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 49,913 57,096
Charitable contribution of common stock to
the MasterCard Foundation 394,785 -
Stock-based compensation expense 6,825 -
Impairment of assets 428 1,348
Deferred income taxes (7,370) (12,156)
Other 4,537 4,437
Changes in operating assets and liabilities:
Trading securities 4,648 4,012
Accounts receivable (57,398) (39,854)
Settlement due from members (16,842) (4,648)
Prepaid expenses (14,295) 14,587
Other current assets (5,082) (1,091)
Prepaid expenses, non-current 3,998 (2,520)
Accounts payable 15,818 (3,538)
Settlement due to members 20,014 1,086
Litigation settlement accruals, including
accretion of imputed interest 44,114 8,187
Accrued expenses (85,614) (37,643)
Net change in other assets and liabilities 8,818 (5,566)
----------- -----------
Net cash provided by operating activities 183,581 197,279
----------- -----------
Investing Activities
Purchases of property, plant and equipment (15,670) (18,925)
Capitalized software (15,886) (22,024)
Purchases of investment securities available-
for-sale (1,506,806) (1,265,993)
Proceeds from sales and maturities of
investment securities available-for-sale 1,356,768 1,320,205
Other investing activities (1,403) (265)
----------- -----------
Net cash provided by (used in) investing
activities (182,997) 12,998
----------- -----------
Financing Activities
Cash received from sale of common stock, net
of issuance costs 2,449,910 -
Cash payment for redemption of common stock (1,799,937) -
----------- -----------
Net cash provided by financing activities 649,973 -
----------- -----------
Effect of exchange rate changes on cash and
cash equivalents 14,026 (19,192)
----------- -----------
Net increase in cash and cash equivalents 664,583 191,085
Cash and cash equivalents -- beginning of
period 545,273 328,996
----------- -----------
Cash and cash equivalents -- end of period $1,209,856 $520,081
=========== ===========

MASTERCARD INCORPORATED OPERATING PERFORMANCE

For the 3 Months ended June 30, 2006
------------------------------------------------
GDV Growth Purchase Growth Purchase
All MasterCard Volume Transactions
Credit, Charge and (Billions) (Local)(Billions) (Local) (Millions)
Debit Programs ------------------------------------------------
South Asia / Middle
East Africa $7 49.4% $4 35.2% 68
Asia / Pacific 70 10.1% 40 16.0% 510
Europe 127 14.2% 94 14.1% 1,232
Latin America 29 26.9% 14 30.6% 316
Canada 19 13.8% 16 15.6% 193
United States 232 17.9% 182 18.6% 2,741
Worldwide 485 16.4% 351 17.5% 5,059

MasterCard Credit and
Charge Programs
United States 154 8.8% 129 9.7% 1,483
Worldwide 362 12.0% 279 13.6% 3,469

MasterCard Debit
Programs
United States 78 41.2% 54 47.5% 1,258
Worldwide 124 31.8% 72 36.0% 1,591

For the 3 Months ended June 30, 2006
---------------------------------------------------------
Cash Growth Cash Accounts Cards Acceptance
All Volume Trans- Locations
MasterCard actions
Credit, (Billions)(Local)(Millions)(Millions)(Millions)(Millions)
Charge and
Debit,
Programs ---------------------------------------------------------
South Asia
/ Middle
East Africa $3 78.7% 25 20 23 0.7
Asia /
Pacific 30 3.1% 135 136 149 6.9
Europe 34 14.4% 222 126 139 8.1
Latin
America 15 23.8% 112 66 79 2.1
Canada 3 3.7% 5 27 33 0.7
United
States 50 15.5% 240 317 372 6.3
Worldwide 135 13.6% 738 692 796 24.9

MasterCard
Credit and
Charge
Programs
United
States 25 4.6% 16 232 282
Worldwide 83 6.9% 283 563 655

MasterCard
Debit
Programs
United
States 24 29.3% 224 84 90
Worldwide 52 26.4% 455 130 141

Note that columns in the table above may not add due to rounding;
growth represents change from the comparable year-ago period.

Footnote

Set forth above is information regarding the performance resultsfor the three month period ended June 30, 2006 for the paymentprograms of MasterCard International Incorporated and MasterCardEurope sprl (collectively, "MasterCard"), the principal operatingsubsidiaries of MasterCard Incorporated.

The table sets forth the gross dollar volume ("GDV"), purchasevolume, cash volume and the number of purchase transactions, cashtransactions, accounts, cards and acceptance locations on a regionalbasis for MasterCard(R)-branded and MasterCard Electronic(TM)-brandedcards. Growth rates over prior periods are provided for volume-baseddata.

Debit transactions on Maestro(R) and Cirrus(R) -branded cards,Mondex(R) transactions and other branded transactions are not includedin the preceding tables.

For purposes of the table: GDV represents purchase volume pluscash volume and includes the impact of balance transfers andconvenience checks; "purchase volume" means the aggregate dollaramount of purchases made (including PIN point-of-sale) withMasterCard-branded cards for the relevant period; and "cash volume"means the aggregate dollar amount of cash disbursements obtained withMasterCard-branded cards for the relevant period. The number of cardsincludes virtual cards, which are MasterCard-branded payment accountsin connection with which functional cards are not generally issued.Acceptance locations include merchant locations, ATMs and otherlocations where cash may be obtained.

The MasterCard payment product is comprised of credit, charge anddebit programs, and data relating to each type of program is includedin the tables. Debit programs include MasterCard-branded debitprograms where the primary means of cardholder validation at the pointof sale is for cardholders either to sign a sales receipt or enter aPersonal Identification Number (PIN).

Information denominated in U.S. dollars is calculated by applyingan established U.S. dollar/local currency exchange rate for each localcurrency in which MasterCard volumes are reported. These exchangerates are calculated on a quarterly basis using the average exchangerate for each quarter. However, MasterCard reports period-over-periodrates of change in GDV, purchase volume and cash volume solely on thebasis of local currency information, in order to eliminate the impactof changes in the value of foreign currencies against the U.S. dollarin calculating such rates of change.

The data set forth in the GDV, purchase volume, purchasetransactions, cash volume and cash transactions columns is derivedfrom information provided by MasterCard members that is subject toverification by MasterCard and partial cross-checking againstinformation provided by MasterCard's transaction processing systems.The data set forth in the accounts, cards and acceptance locationscolumns is derived from information provided by MasterCard members andis subject to certain limited verification by MasterCard. Certaininformation with respect to acceptance locations is provided by thirdparties and has not been independently verified by MasterCard. Alldata is subject to revision and amendment by MasterCard's memberssubsequent to the date of its release.

Volumes for the period indicated in the table above forMasterCard-branded debit programs in the U.S. region and creditprograms in the Asia/Pacific region are higher due to expanded datacollection of PIN point-of-sale volumes.

A portion of the data set forth in the accounts and cards columnsreflects the impact of routine portfolio changes among members andother practices that may lead to over counting of the underlying datain certain circumstances.

The table includes information with respect to MasterCard-brandedtransactions that are not processed by MasterCard and transactions forwhich MasterCard does not earn significant revenues.
Reconciliation to Net Income (Loss) and Earnings (Loss) Per Share

($ million) For the three months For the six months
ended June 30, 2006 ended June 30, 2006

Special As Special As
Actual Items Adjusted Actual Items Adjusted
------ ----- -------- ------ ----- --------
Revenue $846 - $846 $1,585 - $1,585
General Admin. and
Litigation 388 23 a 365 736 23 a 713
Advertising and
Marketing 307 - 307 490 - 490
Charitable
Contributions 400 395 b 5 c 400 395 b 5 c
Operating Income (Loss) (274) 418 144 (91) 418 327
Investment Income 29 (7)d 22 50 (7)d 43
Net Income (Loss) (310) 411 e 101 (184) 411 e 227
Earnings (Loss) Per
Share (2.30) 3.04 e 0.74 (1.36) 3.04 e 1.68

(a) Litigation settlements
(b) Contribution of stock to the MasterCard Foundation
(c) Contribution of cash to the MasterCard Foundation
(d) Interest income on IPO proceeds held for redemption
(e) Net tax effect of all special items is negligible

Reconciliation to Effective Tax Rate

Non-
GAAP Non- GAAP
($ million) GAAP Effective Stock GAAP Effective
Actual Tax Rate Donation Adjusted Tax Rate
------ -------- -------- -------- --------
Three months ended June
30, 2006:
Income (Loss) before
income taxes $(261) 19.1% $395 $134 33.6%
Income tax expense (a) 50 45
------ --------
Net Income (Loss) $(311) $89
====== ========

Six months ended June 30,
2006:
Income (Loss) before
income taxes $(68) 171.5% $395 $327 34.0%
Income tax expense (a) 116 111
------ --------
Net Income (Loss) $(184) $216
====== ========

(a) Income tax expense has been calculated with and without the impact
of the stock donation

For more information about these reconciliations, refer toMasterCard Incorporated's Form 8-K filed with the Securities andExchange Commission on August 2, 2006.