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 several series of certificates to investors in registered public transactions and private placements. All of these certificates have matured and been fully paid. 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.
ITEM 2. PROPERTIES
There is nothing to report with regard to this item.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There is nothing to report with regard to this item.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There is nothing to report with regard to this item.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All publicly issued certificates have matured and been fully paid.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
The selected financial data has been omitted since the required information is included in the financial statements.
ITEM 7.
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. All of the certificates, except the Collateral Certificate issued to the WFN Credit Company, LLC, and Collateral Interests have matured and been paid in full as of December 31, 2003. The Transferor was required under the Pooling Agreement to maintain a minimum 4% interest in the Trust Portfolio (6% November through January).
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.
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, 2003 all derivative instruments had been terminated in conjunction with the 2002 maturity and pay out of the related Series 1999-A certificates.
ITEM 8.
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, 2003 and December 31, 2002
Statements of Distributable Income Arising From Cash Transactions for the years ended December 31, 2003 and 2002
Notes to Financial Statements
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, 2003 and 2002, 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, 2003 and 2002, and its distributable income arising from cash transactions for the years then ended, on the basis of accounting described in Note 1.
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WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
STATEMENTS OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
See accompanying Notes to Financial Statements.
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WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
STATEMENTS OF DISTRIBUTABLE INCOME ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
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, 2003 reflects the amounts to be distributed on January 15, 2004, which represents the distribution of income received by the Trust for the period December 1 through December 31, 2003.
NOTE 2. Sale of Certificates
The Trust may issue from time to time asset-backed certificates in one or more Series, which will consist of one or more classes of certificates, representing an undivided ownership interest in the Receivables. As of December 31, 2003 the Trust had issued and had outstanding the following certificates, representing the indicated undivided interest in the Trust Portfolio:
The Collateral Certificate is held by World Financial Network Master Note Trust. Collectively, holders of all Series are referred to as “Certificateholders.”
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NOTE 3. Principal and Interest Payment to Certificateholders
Collections of principal are used by the Trust to make principal distributions with respect to certain series, to restore certain reserve and cash collateral accounts and to purchase new charge card receivables on a daily basis.
Collections of finance charges, which includes late fees, non-sufficient funds check fees and recoveries of amounts previously written-off, are used to pay interest to the Certificateholders, pay servicing fees and to purchase new charge card receivables equal to amounts written-off during the month. Excess finance charge collections, if any, are distributed to the Transferor.
The distribution date is the 15th day of each month (or, if such day is not a business day, the next following business day).
NOTE 4. Federal Income Taxes
The Trust is not taxable as a corporation for Federal income tax purposes. Accordingly, no provision for income taxes is reflected in the accompanying financial statements.
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NOTE 5. Supplementary Financial Data (unaudited)
The following is a summary of distributable income for 2003 and 2002 arising from cash transactions (in thousands of dollars):
NOTE 6: Fair Value of Financial Instruments
The fair value of the Trust’s credit card receivables approximate their carrying value due to the short maturity and average interest rates that approximate current market rates.
The fair value of the asset-backed certificates is $2,431 million (carrying value of $2,424 million) as of December 31, 2003 and $2,392 million (carrying value of $2,389 million) as of December 31, 2002, based on quoted market prices or current market rates for similar securities with similar remaining maturities and interest rates. (See also Note 7)
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NOTE 7: Publicly Issued Certificates
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. The Series 1996-A certificates matured and were fully paid out in 2001, the Series 1996-B certificates matured and were fully paid out in 2003. On September 17, 1999, the Trust issued $473,400,000 1 Month Libor plus 0.33% variable rate Class A Asset Backed Certificates. The Series 1999-A certificates matured and were fully paid out during 2002. All of the above Certificates are registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended.
ITEM 9.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There is nothing to report with regard to this item.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is nothing to report with regard to this item.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
There is nothing to report with regard to this item.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is nothing to report with regard to this item.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is nothing to report with regard to this item.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
No response required pursuant to Instruction to Item 14.
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PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) Listed below are the documents filed as part of this report:
(1) The following exhibits are filed as part of this Annual Report.
Exhibit No.
Description
31.1
Rule 13a-14(a)/15d-14(a) Certifications
31.2
Rule 13a-14(a)/15d-14(a) Certifications
32.1
Rule 13a-14(b)/15d-14(b) Certifications
32.2
Rule 13a-14(b)/15d-14(b) Certifications
99.1
Annual Servicer’s Certificate
b) Reports on Form 8-K:
The following current reports on Form 8-K were filed for the fourth quarter of 2001:
c) Omitted
d) Omitted
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Bank, on behalf of the Trust, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By:
World Financial Network Credit Card
Master Trust
World Financial Network National Bank, as Servicer
Date: March 30, 2004
By:
Daniel T. Groomes
President
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