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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the from January 1, 1999 to December 31, 1999.
Commission file number 33-99362
World Financial Network National Bank, on behalf
of World Financial Network Credit Card Master Trust
------------------------------------------------------
(Exact name of registrant as specified in its charter)
United States 34-1610866
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
800 TechCenter Drive
Gahanna, Ohio 43230
(Address of principal executive offices)
(614) 729-4000
(Phone number)
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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Series 1996-A,
Class A, Class B; Series 1996-B, Class A, Class B; and
Series 1999-A Class A.
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 X No ____
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.
Page 1
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PART 1
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, and
amended and restated as of September 17, 1999, between World Financial Network
National Bank, as transferor and servicer ("WFNNB"), and the Harris Trust and
Savings Bank, as Trustee. The Trust was formed for the purpose of acquiring
certain trust assets and issuing asset-based certificates under the 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.
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 such Certificates are registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934,
as amended.
Page 2
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WFNNB, on behalf of the Trust, has prepared and filed this Annual Report on
Form 10-K in substantially the form which the Division of Corporation Finance,
in the no action letters referred to above, has stated that it would not
object to.
ITEM 1. BUSINESS
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,
and amended and restated as of September 17, 1999, (the "Pooling Agreement")
between World Financial Network National Bank (the "Bank"), as transferor
(the "Transferor") and as servicer (the "Servicer"), and the Harris Trust and
Savings Bank, as trustee (the "Trustee"). The Bank sold to the Trust
approximately $1.83 billion of credit card receivables arising in a portfolio
of consumer open end credit card accounts (the "Trust Portfolio"). The Trust
Portfolio includes the private label credit card programs of a number of
national retail and catalogue entities.
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 Class A,
Series 1996-A Class B, Series 1996-B Class A, Series 1996-B Class B and Series
1999-A Class A have been distributed to the public. The Series 1996-A Class D,
and Series 1996-B Class D certificates are held by the Transferor and Servicer,
World Financial Network National Bank. The Series 1996-VFC and Series 1999-A,
Class B certificates have been privately placed. Each outstanding Series
includes one or more classes of certificates as well as certain Collateral
Interests. 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.
Page 3
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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-A, Class A and Class B, Series 1996-B, Class A and
Class B, and Series 1999-A, Class A Certificates, although the frequency of
transactions varies substantially over time.
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 Trust was formed January 17, 1996 pursuant to the Pooling and Servicing
Agreement, as amended and restated as of September 17, 1999, between World
Financial Network National Bank, as seller (the "Seller"), Transferor and
Servicer and The Harris Trust and Savings Bank, as trustee (the "Trustee").
The Seller sold to the Trust approximately $1.83 billion of receivables
arising from certain proprietary credit card programs.
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. 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 as of December 31, 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
% of Trust
Description $ Issued Portfolio
-------------------- --------------- --------------
<S> <C> <C>
Series 1996 A, Class A $445,500 21.0%
Series 1996 A, Class B 46,750 2.2%
Series 1996 A, Class D 13,924 0.7%
Series 1996 B, Class A 283,500 13.4%
Series 1996 B, Class B 29,750 1.4%
Series 1996 B, Class D 8,861 0.4%
Series 1996-VFC 440,000 20.8%
Series 1999 A, Class A 473,400 22.4%
Series 1999 A, Class B 51,600 2.4%
</TABLE>
The Series 1996-A, Class A and Class B and Series 1996-B, Class A and
Class B certificates have been distributed to the public under prospectuses
dated April 9, 1996. The Series 1999-A, Class A certificates have been
distributed to the public under a prospectus dated September 3, 1999.
The Bank is the originator of the receivables and 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 receivable 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.
Page 4
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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, net income 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Cross Reference Sheet
- -------------------------------------------------------------------------------
Caption Page
- -------------------------------------------------------------------------------
<S> <C>
Independent Auditors' Report 6
Statements of Assets and Liabilities Arising
from Cash Transactions as of December 31, 1999
and December 31, 1998 7
Statements of Distributable Income Arising From Cash
Transactions for the year ended December 31, 1999
and the eleven-month period ended December 31, 1998 8
Notes to Financial Statements 9
</TABLE>
Page 5
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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, 1999 and 1998, and the related
statements of distributable income arising from cash transactions for
the year ended December 31, 1999 and the eleven month period ended December
31, 1998. 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, 1999 and 1998, and its distributable income
arising from cash transactions for the respective periods stated above
on the basis of accounting described in Note 1.
By: /s/ Deloitte & Touche LLP
-----------------------------------
Deloitte & Touche LLP
Columbus, Ohio
March 1, 2000
Page 6
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WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
- ------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
<TABLE>
<CAPTION>
<S> <C> <C>
As of As of
Assets December 31, 1999 December 31, 1998
------ ----------------- -----------------
Cash Available for Distribution $ 292,386 $ 209,309
Credit Card Receivables 2,116,933 1,444,368
--------- ---------
TOTAL ASSETS $2,409,319 $1,653,677
========= =========
Liabilities
-------------
<S> <C> <C>
Income to be Distributed $ 292,386 $ 209,309
Asset-backed Certificates:
Series 1996-A 506,174 492,250
Series 1996-B 322,111 313,250
Series 1996-VFC 440,000 390,000
Series 1999-A 525,000 0
Collateral Interest 226,675 150,214
Transferor's Interest 96,973 98,654
--------- ---------
TOTAL LIABILITIES $2,409,319 $1,653,677
========= =========
</TABLE>
See accompanying Notes to Financial Statements.
Page 7
<PAGE>
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
- ------------------------------------------------------------------------------
STATEMENTS OF DISTRIBUTABLE INCOME ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
<TABLE>
<CAPTION>
For The For The Eleven
Year Ended Month Period Ended
December 31, 1999 December 31, 1998
------------------ ------------------
<S> <C> <C>
Distributable Income
- ---------------------
Allocable to Principal $2,920,475 $2,323,079
Allocable to Interest 387,671 289,434
--------- ---------
Total Distributable Income $3,308,146 $2,612,513
========= =========
Income Distributed
- ------------------
Distribution of Principal to
Purchase New Receivables $2,662,111 $2,136,551
Interest Paid on Asset Backed Certificates 91,367 62,837
Servicing Fees 27,560 19,007
Distribution to Purchase New Receivables
For Amounts Previously Written-Off 110,494 95,004
Distribution on Transferor's Interest 124,228 89,805
--------- ---------
Income Distributed 3,015,760 2,403,204
--------- ---------
Excess of Distributable Income over Income
Distributed (Distributed January 15, 2000
and January 15, 1999 respectively) $ 292,386 $ 209,309
========= =========
</TABLE>
See accompanying Notes to Financial Statements.
Page 8
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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, and amended and restated as of September 17, 1999,
(the "Pooling Agreement") between World Financial Network National Bank
(the "Bank"), as transferor (the "Transferor") and as servicer (the
"Servicer") of receivables (the "Receivables") arising in a portfolio of
consumer open end credit card accounts (the "Trust Portfolio") and the Harris
Trust and Savings Bank, 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.
During 1998, the Trust changed its year end to December 31. Prior to that
change the Trust used a fifty-two/fifty-three week fiscal year that ended on
the Saturday closest to January 31.
The financial statements of the Trust are prepared on a cash basis of
accounting which differs from financial statements prepared in accordance
with generally accepted accounting principles 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, 1999 reflects the amounts to be
distributed on January 15, 2000, which represents the distribution of income
received by the Trust for the period December 1 through December 31, 1999.
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, 1999 the Trust had issued the following certificates,
representing the indicated undivided interest in the Trust Portfolio:
<TABLE>
<CAPTION>
% of Trust
Description $ Issued Porfolio
- ------------------------------- --------- -------------
<S> <C> <C>
Series 1996 A, Class A $445,500 21.0%
Series 1996 A, Class B 46,750 2.2%
Series 1996 A, Class D 13,924 0.7%
Series 1996 B, Class A 283,500 13.4%
Series 1996 B, Class B 29,750 1.4%
Series 1996 B, Class D 8,861 0.4%
Series 1996-VFC 440,000 20.8%
Series 1999 A, Class A 473,400 22.4%
Series 1999 A, Class B 51,600 2.4%
</TABLE>
The Series 1996-A, Class A and Class B and Series 1996-B Class A and
Class B certificates were distributed to the public pursuant to a
Prospectus dated April 9, 1996 and the Series 1999-A, Class A
certificates were distributed to the public pursuant to a Prospectus dated
September 3, 1999. The Series 1996-A, Class D and Series 1996-B, Class D
Page 9
<PAGE>
certificates are held by the Transferor and Servicer, World Financial
Network National Bank. The Series 1999-A, Class B certificates were
privately placed and the Series 1996-VFC class of certificates has been
retained by three conduit banks. Collectively, holders of all Series
are referred to as "Certificateholders."
In addition, certain Collateral Interests were issued by the Trust,
representing a 10.7% interest in the Trust Portfolio. Such Collateral
Interests are held by four banks at December 31, 1999 (the "Collateral
Interestholders"). The Transferor is required to maintain a minimum 4%
(6% November through January) interest in the Trust Portfolio (the
"Transferor's Interest"). The rights of the Collateral Interestholders to
receive distributions are subordinate to the rights of the Class A, B and D
Certificateholders and the Transferor's Interest.
NOTE 3. Principal and Interest Payment
Collections of principal are used by the Trust 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 Servicer.
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
Page 10
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financial statements.
NOTE 5. Supplementary Financial Data (unaudited)
The following is a summary of quarterly (the quarter ending December 31, 1998
consists of two months) distributable income arising from cash transactions
(in thousands of dollars):
<TABLE>
<CAPTION>
Servicing Defaulted Transferor's
Quarter Ended Principal Interest Fees Receivables Interest Total
- ------------- --------- -------- --------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
March 31, 1999 $854,170 $27,002 $8,363 $36,290 $38,850 $964,675
June 30, 1999 616,033 20,410 6,374 24,134 29,107 696,058
September 30, 1999 664,356 23,691 6,865 24,833 35,282 755,027
December 31, 1999 785,916 32,309 9,207 38,960 25,994 892,386
--------- ------- ------ ------- ------- ---------
$2,920,475 $103,412 $30,809 $124,217 $129,233 $3,308,146
</TABLE>
<TABLE>
<CAPTION>
Servicing Defaulted Transferor's
Quarter Ended Principal Interest Fees Receivables Interest Total
- ------------- ---------- -------- --------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1998 $675,252 $18,713 $5,778 $29,059 $33,517 $762,319
July 31, 1998 631,423 19,157 5,732 28,023 23,416 707,751
October 31, 1998 614,195 18,605 5,597 28,483 24,314 691,194
December 31, 1998 402,209 13,463 3,977 18,874 12,726 451,249
--------- ------ ------ ------- ------ ---------
$2,323,079 $69,938 $21,084 $104,439 $93,973 $2,612,513
========= ====== ====== ======= ====== =========
</TABLE>
Page 11
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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 estimated to be
$2,144,464,035 (carrying value of $2,116,932,959) as of December 31, 1999 and
$1,471,239,882 (carrying value of $1,444,368,476) as of December 31, 1998,
based on quoted market prices or current market rates for similar securities
with similar remaining maturities and interest rates. (See also Note 7)
NOTE 7: INTEREST SWAPS
In September 1999, the Trust entered into two interest rate swap agreements
with JP Morgan Company ("Morgan") with a notional amount of $525 million. The
interest rate swaps effectively change the Trust's interest rate exposure on
$473.4 million and $51.6 million of securitized acounts receivable to a fixed
rate of approximately 6.40% and 6.41% respectively. The notional amount of
swaps, $525 million as of December 31, 1999 will decrease with a corresponding
decrease of the related securitized receivables. The fair value of the
interest rate swaps was estimated based on the monies the Trust would receive
if they terminated the agreements.
Page 12
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<TABLE>
<CAPTION>
Notional Fair
Amount Variable Rate Fixed Rate Value
(Millions) Swap Period Received Paid (Millions)
---------- -------------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
$473.4 September 17, 1999 through USD-LIBOR-BBA 6.410% $ 3.7
July 17, 2006
$ 51.6 September 17, 1999 through USD-LIBOR-BBA 6.395% $ 0.4
July 17, 2006
</TABLE>
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. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is nothing to report with regard to this item.
ITEM 11. EXECUTIVE COMPENSATION
There is nothing to report with regard to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
There is nothing to report with regard to this item.
Page 13
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is nothing to report with regard to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a) Listed below are the documents filed as part of this report:
Ommitted
b) Reports on Form 8-K:
The following current reports on Form 8-K were filed for the fourth
quarter of 1999:
<TABLE>
<CAPTION>
Monthly Report Date of Report
-------------- --------------
<S> <C>
October 1999 November 15, 1999
November 1999 December 15, 1999
December 1999 January 15, 2000
</TABLE>
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: 3/31/00 By: /s/ Daniel T. Groomes
-------------- --------------------------
Daniel T. Groomes
President
Page 14
