SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.   20549

 

FORM 10-K

 

 

 

 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K                   (Not Applicable)

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  o   No ý

 

Securities registered pursuant to Section 12(b) of the Act:          None

 

Securities registered pursuant to Section 12(g) of the Act: Series 1996-B, Class A, Class B.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(c) of the Securities Exchange Act 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý   No o

 

Aggregate market value of voting stock held by nonaffiliates of the registrant.  $  0

 

No documents have been incorporated by reference in this Form 10-K.

 

 

PART I

 

In no action letters issued to a variety of issuers of pass-through securities representing ownership interests in trusts established by financial and retailing institutions, whose principal assets are receivables generated under consumer credit accounts owned by such institutions and transferred to such trusts, the Division of Corporation Finance has stated that it would not raise any objection if the servicer of the trust, on behalf of the trust, files its Annual Report on Form 10-K in accordance with a specified format.  See, e.g., Sears Credit Account Master Trust II (August 24, 1995), Mercantile Credit Card Master Trust (August 23, 1995); Banc One Credit Card Master Trust (May 26, 1995); Household Affinity Credit Card Master Trust I (April 29, 1994); Sears Credit Account Master Trust I (December 23, 1993); First Deposit Master Trust (December 23, 1993); Discover Card Trust 1993 B (April 9, 1993); Prime Credit Master Trust (January 29, 1993); Private Label Credit Card Master Trust (May 20, 1992); and Chase Manhattan Credit Card Trust 1990-A (March 22, 1991).

 

The World Financial Network Credit Card Master Trust (the “Trust”) was formed pursuant to a Pooling and Servicing Agreement dated as of January 17, 1996, first amended and restated as of September 17, 1999, and restated a second time as of August 1, 2001 (the “Pooling Agreement”), between WFN Credit Company, LLC as transferor (“WFNCC”), World Financial Network National Bank, as servicer (“WFNNB” or the “Bank”), and BNY Midwest Trust Company, as Trustee.  The Trust was formed for the purpose of acquiring certain trust assets and issuing asset-backed certificates under the Pooling Agreement and one or more supplements thereto.  The property of the Trust includes receivables arising under private label credit card programs for a number of national retail and catalogue entities.

 

2

 

On May 9, 1996, the Trust issued: $445,500,000 6.70% Class A Asset Backed Certificates, Series 1996-A;  $46,750,000 7.00% Class B Asset Backed Certificates, Series 1996-A; $283,500,000 6.95% Class A Asset Backed Certificates, Series 1996-B, and $29,750,000 7.20% Class B Asset Backed Certificates, Series 1996-B.  On September 17, 1999, the Trust issued $473,400,000 1 Month Libor plus 0.33% variable rate Class A Asset Backed Certificates.  All of the above Certificates are registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended.

 

WFNNB, on behalf of the Trust, has prepared and filed this Annual Report on Form 10-K in substantially the form to which the Division of Corporation Finance, in the no action letters referred to above, has stated that it would not object.

 

ITEM 1.

BUSINESS

 

The Trust acquires credit card receivables (the “Receivables”) originated through a number of private label credit card programs of national retail and catalogue entities.  The Receivables are originated or acquired by the Servicer and subsequently sold to the Transferor, which in turn transfers the Receivables to the Trust pursuant to the Pooling Agreement for the purpose of issuing asset backed certificates.

 

The Trust has issued four series of certificates - Series 1996-A, Series 1996-B, Series 1996-VFC, and Series 1999-A.  The Series 1996-A certificates matured and were paid off in 2001 and the Series 1999-A certificates matured and were paid off in 2002.  The Series 1996-B Class A Certificates, Series 1996-B Class B Certificates and Series 1999-A Class A Certificates were publicly issued.  The Series 1996-B, Class D certificates were sold to Alliance Data Systems Corporation, which is the parent company to the Bank.  The Series 1996-VFC Certificates and Series 1999-A, Class B Certificates have been privately placed.  The Series 1996-VFC certificates were paid off in 2003.  Each outstanding Series includes one or more classes of certificates as well as certain Collateral Interests.  In addition, the Trust has issued to WFNCC the World Financial Network Master Trust Collateral Certificate (the “Collateral Certificate”), which represents an undivided interest in the Receivables.  WFNCC subsequently transferred the Collateral Certificate to the World Financial Network Credit Card Master Note Trust pursuant to a transfer and servicing agreement.  The Transferor is required under the Pooling Agreement to maintain a minimum 4% interest in the Trust Portfolio (6% November through January) (the “Transferor’s Interest”).

 

The Bank services the receivables pursuant to the Pooling Agreement and is compensated for acting as the servicer.

 

ITEM 2.

PROPERTIES

 

There is nothing to report with regard to this item.

 

ITEM 3.

LEGAL PROCEEDINGS

 

There is nothing to report with regard to this item.

 

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

There is nothing to report with regard to this item.

 

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PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

To the knowledge of the Bank and the Trust, there is an over the counter market in the Trust’s Series 1996-B, Class A and Class B Certificates.  The frequency of such transactions varies from year to year.

 

ITEM 6.

SELECTED FINANCIAL DATA

 

The selected financial data has been omitted since the required information is included in the financial statements.

 

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The Pooling and Servicing Agreement was amended and restated a second time as of August 1, 2001, between WFN Credit Company, LLC as transferor (the “Transferor”), World Financial Network National Bank as servicer (the “Servicer”), and BNY Midwest Trust Company as trustee (the “Trustee”).  As of August 1, 2001, the Trust issued the World Financial Network Credit Card Master Trust Collateral Certificate (the “Collateral Certificate”) to WFN Credit Company, LLC, which in turn assigned the Collateral Certificate to the World Financial Network Master Note Trust.  The World Financial Network Master Note Trust subsequently issued certain asset backed notes.

 

The Trust has sold four series of certificates representing an undivided interest in the Trust Portfolio.  In addition, the Trust has sold certain Collateral Interests in the Trust Portfolio as well as the Collateral Certificate.  The Transferor is required under the Pooling Agreement to maintain a minimum 4% interest in the Trust Portfolio (6% November through January).  The following series of certificates have been issued by the Trust and are outstanding as of December 31, 2002 (dollars in thousands):

 

Description		$ Issued			% of Trust Portfolio
Series 1996-B, Class A		$	283,500		11.4	%
Series 1996-B, Class B		29,750			1.2	%
Series 1996-B, Class D		8,861			0.4	%
Series 1996-VFC		261,000			10.5	%
Collateral Certificate		1,730,058			69.4	%

 

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The Series 1996-B, Class A and Class B certificates have been distributed to the public under prospectuses dated April 9, 1996.

 

The Bank is the originator of the receivables, continues to service the receivables for the Trust and receives a fee for providing such servicing.  Under the Pooling Agreement, new receivables generated under the specified proprietary credit card programs are required to be sold to the Trust on a daily basis.  If there are insufficient new receivables to maintain the required minimum receivables level in the Trust, principal collections are retained by the Trust for the benefit of the certificateholders or until new receivables are available for purchase.

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

To manage our direct risk from market interest rates, we actively monitor the interest rates to minimize the impact that changes in interest rates have on the fair value of assets and cash flow.  To achieve this objective, we manage our exposure to fluctuations in market interest rates through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements.  In addition, we have entered into derivative financial instruments, interest rate swaps, to mitigate our interest rate risk and to effectively lock the interest rate on a portion of our variable rate debt.  However, at December 31, 2002 all derivative instruments had been terminated in conjunction with the 2002 maturity and pay out of the related Series 1999-A certificates.

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Cross Reference Sheet

 

Caption

Independent Auditors’ Report

Statements of Assets and Liabilities Arising from Cash Transactions as of December 31, 2002 and December 31, 2001

Statements of Distributable Income Arising From Cash Transactions for the years ended December 31, 2002 and 2001

Notes to Financial Statements

 

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INDEPENDENT AUDITORS’ REPORT

 

To the World Financial Network Credit Card Master Trust

 

We have audited the accompanying statements of assets and liabilities arising from cash transactions of the World Financial Network Credit Card Master Trust (the “Trust”) as of December 31, 2002 and 2001, and the related statements of distributable income arising from cash transactions for the years then ended.  These financial statements are the responsibility of the management of the Trust.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

As described in Note 1 to the financial statements, these financial statements were prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

 

In our opinion, such financial statements present fairly, in all material respects, the assets and liabilities arising from cash transactions of the Trust as of December 31, 2002 and 2001, and its distributable income arising from cash transactions for the years then ended on the basis of accounting described in Note 1.

 

 

By:	/s/ Deloitte & Touche LLP
	Deloitte & Touche LLP
	Columbus, Ohio
	March 28, 2003

 

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WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST

 

STATEMENTS OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS

(in thousands of dollars)

 

		December 31,
		2002			2001
Assets
Cash Available for Distribution		$	458,920		$	373,914
Credit Card Receivables		2,492,387			2,275,302
Total Assets		$	2,951,307		$	2,649,216
Liabilities
Income to be Distributed		$	458,920		$	373,914
Asset-backed Certificates:
Series 1996-B		322,111			322,111
Series 1996-VFC		261,000			286,000
Series 1999-A		—			525,000
Collateral Certificate		1,730,058			900,000
Collateral Interest		75,750			150,750
Transferor’s Interest		103,468			91,441
Total Liabilities		$	2,951,307		$	2,649,216

 

See accompanying Notes to Financial Statements.

 

7

 

WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST

 

STATEMENTS OF DISTRIBUTABLE INCOME ARISING FROM CASH TRANSACTIONS

(in thousands of dollars)

 

		For The Year Ended December 31, 2002			For The Year Ended December 31, 2001
Distributable Income
Allocable to Principal		$	4,439,344		$	3,771,493
Allocable to Interest		613,129			543,204
Total Distributable Income		$	5,052,473		$	4,314,697
Income Distributed
Distribution of Principal to Purchase New Receivables		$	4,029,963		$	3,440,858
Interest Paid on Asset Backed Certificates		113,047			122,846
Servicing Fees		42,761			39,238
Distribution to Purchase New Receivables for Amounts Previously Written-off		216,141			207,228
Distribution on Transferor’s Interest		191,641			130,613
Income Distributed		$	4,593,553		$	3,940,783
Excess of Distributable Income over Income Distributed (Distributed January 15, 2003 and January 15, 2002 respectively)		$	458,920		$	373,914

 

See accompanying Notes to Financial Statements.

 

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WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST

 

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1.         General Information and Accounting Policies

 

The World Financial Network Credit Card Master Trust (the “Trust”) was formed pursuant to a Pooling and Servicing Agreement, dated as of January 17,1996, first amended and restated as of September 17, 1999, and restated a second time as of August 1, 2001 (the “Pooling Agreement”) between WFN Credit Company, LLC, (“WFNCC”) as transferor (the “Transferor”) and World Financial Network National Bank (the “Bank”), as servicer (the “Servicer”) of receivables (the “Receivables”) arising from a portfolio of consumer open end credit card accounts (the “Trust Portfolio”) and BNY Midwest Trust Company, as trustee (the “Trustee”).  The Trust Portfolio includes the private label credit card programs of a number of national retail and catalogue entities.

 

The Bank services the receivables pursuant to the Pooling Agreement and is compensated for acting as the Servicer.  In order to facilitate its servicing functions and minimize administrative burdens and expenses, the Bank retains physical possession of the documents relating to the receivables as custodian for the Trustee.  The Trust has no employees.

 

The financial statements of the Trust are prepared on a cash basis of accounting which differs from financial statements prepared in accordance with accounting principles generally accepted in the United States of America in that interest income and the related assets are recognized when received rather than when earned and distributions to certificateholders are recognized when paid rather than when the obligation is incurred.  The statement of assets and liabilities arising from cash transactions as of December 31, 2002 reflects the amount