SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 33-79186-01
SEARS CREDIT ACCOUNT MASTER TRUST II
(Exact name of registrant as specified in its charter)
Illinois Not Applicable
(State of Organization) (I.R.S. Employer Identification No.)
c/o Sears Receivables Financing Group, Inc.
3711 Kennett Pike
Greenville, Delaware 19807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302)888-3176
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange on which
Title of each class each class is to
to be so registered be registered
None Not Applicable
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
7.00% Class A Series 1994-1 Master Trust Certificates
7.25% Class B Series 1994-1 Master Trust Certificates
7.25% Class A Series 1994-2 Master Trust Certificates
7.60% Class B Series 1994-2 Master Trust Certificates
8.10% Class A Series 1995-2 Master Trust Certificates
8.30% Class B Series 1995-2 Master Trust Certificates
7.00% Class A Series 1995-3 Master Trust Certificates
7.25% Class B Series 1995-3 Master Trust Certificates
6.25% Class A Series 1995-4 Master Trust Certificates
6.35% Class B Series 1995-4 Master Trust Certificates
6.05% Class A Series 1995-5 Master Trust Certificates
6.20% Class B Series 1995-5 Master Trust Certificates
6.20% Class A Series 1996-1 Master Trust Certificates
6.35% Class B Series 1996-1 Master Trust Certificates
6.50% Class A Series 1996-2 Master Trust Certificates
6.65% Class B Series 1996-2 Master Trust Certificates
7.00% Class A Series 1996-3 Master Trust Certificates
7.10% Class B Series 1996-3 Master Trust Certificates
6.45% Class A Series 1996-4 Master Trust Certificates
6.65% Class B Series 1996-4 Master Trust Certificates
(Title of Class)
Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
<PAGE>
PART I
Item 1.Business
The Sears Credit Account Master Trust II (the "Trust") was
formed pursuant to the Pooling and Servicing Agreement dated as of
July 31, 1994 (the "Pooling and Servicing Agreement") among Sears,
Roebuck and Co. ("Sears") as Servicer, its wholly-owned subsidiary,
Sears Receivables Financing Group, Inc. ("SRFG") as Seller, and
Bank of America Illinois as trustee (the "Trustee"). The Trust's
only business is to act as a passive conduit to permit investment
in a pool of retail consumer receivables.
Item 2.Properties
The property of the Trust includes a portfolio of receivables
(the "Receivables") arising in selected accounts under open-end
credit plans of Sears (the "Accounts") and all monies received in
payment of the Receivables. At the time of the Trust's formation,
and on certain Addition Dates thereafter, Sears sold and
contributed to SRFG, which in turn conveyed to the Trust, all
Receivables existing under the Accounts as of the end of certain of
Sears regular billing cycles ending in September and November 1989,
June 1990, January, February, October and November 1991, December
1992, February 1993, February 1994 and February and June 1995 and
all Receivables arising under the Accounts from time to time
thereafter until the termination of the Trust. Information related
to the performance of the Receivables during 1996 is set forth in
the ANNUAL STATEMENT filed as Exhibit 21 to this Annual Report on
Form 10-K.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Investor Certificates are held and delivered in book-entry
form through the facilities of The Depository Trust Company
("DTC"), a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended.
The sole definitive Investor Certificate is held by CEDE and Co.,
the nominee of DTC.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 12. Security Ownership of Certain Beneficial Owners and
Management
As of March 15, 1997, 100% of the Investor Certificates were
held in the nominee name of CEDE and Co. for beneficial owners.
SRFG, as of March 15, 1997, owned 100% of the Seller
Certificate, which represented beneficial ownership of a residual
interest in the assets of the Trust as provided in the Pooling and
Servicing Agreement.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Exhibits:
21. 1996 ANNUAL STATEMENT prepared by the
Servicer.
28. ANNUAL INDEPENDENT ACCOUNTANTS' REPORTS
pursuant to Section 3.06 of the Pooling
and Servicing Agreement.
(a) Agreed Upon Procedures Letter.
(b) Annual Servicing Letter.
(b) Reports on Form 8-K:
Current reports on Form 8-K are filed on or before
the Distribution Date each month (on, or the first
business day after, the 15th of the month). The
reports include as an exhibit, the MONTHLY INVESTOR
CERTIFICATEHOLDERS' STATEMENT. Current Reports on
Form 8-K were filed on October 15, 1996, November
15, 1996, and December 16, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
Sears Credit Account Master Trust II
(Registrant)
By: Sears Receivables Financing Group, Inc.
(Originator of the Trust)
By: /S/GARY D. FARRAR
Gary D. Farrar
Vice President, Administration
Dated: March 27, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No.
21. 1996 ANNUAL STATEMENT prepared by the
Servicer.
28. ANNUAL INDEPENDENT AUDITOR'S REPORTS
pursuant to Section 3.06 of the Pooling
and Servicing Agreement.
(a) Review of servicing procedures.
(b) Annual Servicing Letter.
Exhibit 21
SEARS CREDIT ACCOUNT MASTER TRUST II
1996 ANNUAL STATEMENT
Pursuant to the terms of the letter issued by the Securities and
Exchange Commission dated June 30, 1995 (granting relief
to he Trust from certain reporting requirements of the Securities
Exchange Act of 1934, as amended), aggregated information
regarding the performance of Accounts and payments to Investor
Certificateholders in respect of the Due Periods related to the
twelve Distribution Dates which occurred in 1996 is set forth below.
1) The total amount of the distribution to Investor
Certificateholders during 1996, per $1,000 interest $63.89
2) The amount of the distribution set forth in paragraph
1 above in respect of interest on the Investor
Certificates, per $1,000 interest................. $63.89
3) The amount of the distribution set forth in paragraph
1 above in respect of principal on the Investor
Certificates, per $1,000 interest.................. $0.00
4) The aggregate amount of Collections of Principal
Receivables processed during the related Due
Periods............................................$4,219,835,615.68
5) The aggregate amount of Collections of Finance
Charge Receivables processed during the
related Due Periods................................$1,339,570,517.23
6) The aggregate amount of Collections of
Principal Receivables processed during the
related Due Periods which were allocated
in respect of the Investor Certificates.... $3,047,057,033.29
7) The aggregate amount of Collections of Finance
Charge Receivables processed during the
related Due Periods which were allocated in
respect of the Investor Certificates............... $970,527,059.77
8) The aggregate amount of Collections of
Principal Receivables processed during the
related Due Periods which were allocated
in respect of the Seller Certificate...............$1,172,778,582.39
9) The aggregate amount of Collections of Finance
Charge Receivables processed during the
related Due Periods which were allocated in
respect of the Seller Certificate.................. $369,043,457.42
10)The excess of the Investor Charged-Off Amount
over the sum of (i) payments in respect of the
Available Subordinated Amount and (ii) Excess
Servicing, if any (an "Investor Loss"), per
$1,000 interest................................... $0.00
11)The aggregate amount of Investor Losses in
the Trust as of the end of the day on December
16,1996, per $1,000 interest....................... $0.00
12)The total reimbursed to the Trust from
the sum of the Available subordinated
Amount and Excess Servicing, if any, in
respect of Investor Losses, per $1,000
interest........................................... $0.00
13)The amount of the Investor Monthly Servicing
Fee payable by the Trust to the Servicer......... $100,071,180.89
14)The Controlled Amortization Amount Shortfall, as
of the end of the reportable year................. $0.00
Exhibit 28(a)
March 26, 1997
Ms. Alice M. Peterson Mr. John G. Finley
Vice President and Treasurer Vice President
Sears, Roebuck and Co. First National Bank of Chicago
3333 Beverly Road as Trustee
Hoffman Estates, Illinois 60179 One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
At your request, we have applied certain agreed-upon procedures enumerated
below to the accounting records of Sears, Roebuck and Co. ("Sears") relating
to the servicing procedures performed by Sears as Servicer for Sears Credit
Account Master Trust II (the "Trust") formed pursuant to the Pooling and
Servicing Agreement dated July 31, 1994, as amended (the "Agreement"). This
engagement to apply agreed-upon procedures was performed in accordance with
standards established by the American Institute of Certified Public
Accountants. The sufficiency of the procedures is solely the responsibility
of the specified users of the report. Consequently, we make no
representation regarding the sufficiency of the procedures described below
either for the purpose for which this report has been requested or for any
other purpose.
For purposes of this letter, we have read each of the Monthly Servicer
Certificates forwarded by Sears as Servicer to the Trustee pursuant to
section 3.04(b) of the Agreement during the calendar year ended December 31,
1996 (the "Certificates"). We have also performed the following procedures
which were applied, as indicated, with respect to the Certificates:
a. We compared the amounts appearing in "Section 1: Total Trust
Information," as set forth in the Certificates, to the applicable month's
Portfolio Monitoring and Monthly Cash Flow Allocations Report (the "PMR") and
found such amounts to be in agreement. Company officials have advised us
that the PMR's have been prepared utilizing information obtained from the NPT
811-02 Month End Recap by Pool Report generated from the Company's Bank Sold
System.
b. We have performed the following additional procedures with respect
to the amounts appearing in the respective items below related to each
applicable Series, as set forth in the Certificates:
Item Procedure
- ----- ---------
i."The aggregate amount of We proved the mathematical accuracy
Series Additional Allocable of the amounts as set forth in the
Amounts during the related Certificates based on information
Due Period is equal to" obtained from the PMR for the
applicable month.
ii."The amount of interest We compared the amounts as set
payable to the Class A forth in the Certificates to the
Certificateholders on the applicable month's PMR and found
Current Distribution Date such amounts to be in agreement.
is equal to"
iii."The amount of principal We proved the mathematical accuracy
payable to the Class A of the amounts as set forth in the
Certificateholders on the Certificates based on information
current Distribution Date obtained from the PMR for the
is equal to" applicable month.
iv."The amount of interest We compared the amounts as set
payable to the Class B forth in the Certificates to the
Certificateholders on the applicable month's PMR and found
current Distribution Date such amounts to be in agreement.
is equal to"
v."The amount of principal We proved the mathematical accuracy
payable to the Class B of the amounts as set forth in the
Certificateholders on the Certificates based on information
current Distribution Date obtained from the PMR for the
is equal to" applicable month.
vi."The amount of interest We compared the amounts as set
payable to the Class C forth in the Certificates to the
Certificateholders on the applicable month's PMR and found
current Distribution Date such amounts to be in agreement.
is equal to"
vii."The amount of principal We proved the mathematical accuracy
payable to the Class C of the amounts as set forth in the
Certificateholders on the Certificates based on information obtained
current Distribution Date from the PMR for the applicable month.
is equal to"
viii."The aggregate amount of We proved the mathematical accuracy of
Reallocated Class B Principal the amounts as set forth in the
Collections during the Certificates based on information
related Due Period is obtained from the PMR for the
equal to" applicable month.
ix."The aggregate amount of We proved the mathematical accuracy of the
Reallocated Class C Principal amounts as set forth in the Certificates
Collections during the related based on information obtained from
Due Period is equal to" the PMR for the applicable month.
We were not engaged to, and did not, perform an audit, the objective of which
would be the expression of an opinion on the specified amounts and items
above. Accordingly, we do not express such an opinion. Had we performed
additional procedures, other matters might have come to our attention that
would have been reported to you.
It should be understood that we make no representations regarding questions
of legal interpretation or regarding the sufficiency for your purposes of the
procedures referred to above. Also, such procedures would not necessarily
reveal any material misstatement of the amounts referred to therein.
Further, we have addressed ourselves solely to the foregoing items and
amounts as set forth in the Certificates and make no representations as to
the adequacy of disclosure or regarding whether any material facts have been
omitted.
This letter is intended solely for the information and use of the Board of
Directors and management of Sears, First National Bank of Chicago as Trustee,
and Investor Certificateholders and should not be used for any other purpose.
Very truly yours,
/S/Deloitte & Touche
Chicago, Illinois
March 26, 1996
Exhibit 28(b)
INDEPENDENT ACCOUNTANTS' REPORT
Sears, Roebuck and Co.
Hoffman Estates, Illinois:
We have examined management's assertion included in its representation letter
dated March 26, 1997, that Sears, Roebuck and Co. ("Sears") maintained an
effective internal control structure as of December 31, 1996, insofar as such
structure relates to the servicing and financial reporting procedures
performed by Sears to prevent or detect errors or irregularities in amounts
that would be material in relation to the assets of Sears Credit Account
Master Trust II (the "Trust") formed pursuant to the Pooling and Servicing
Agreement dated July 31, 1994, as amended (the "Agreement").
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the internal control structure as it relates to
servicing and financial reporting procedures performed by Sears, testing and
evaluating the design and operating effectiveness of the internal control
structure, and such other procedures as we considered necessary in the
circumstances. We believe that our examination provides a reasonable basis
for our opinion.
Because of the inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure to future periods are subject to
the risk that the internal control structure may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, management's assertion that Sears maintained an effective
internal control structure as of December 31 1996, insofar as such structure
relates to the servicing and financial reporting procedures performed by
Sears to prevent or detect errors or irregularities in amounts that would be
material in relation to the assets of the Trusts under the Agreement, taken
as a whole, is fairly stated, in all material respects, based upon criteria
established by "Internal Control - Integrated Framework" issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also reviewed management's assertion regarding Sears compliance with
sections 3.02, 4.03, 4.04, 4.05, 4.06 and 8.07 of the Agreement. Our review
was conducted in accordance with standards established by the American
Institute of Certified Public Accountants.
A review is substantially less in scope than an examination, the objective of
which is the expression of an opinion on compliance with such sections.
Accordingly, we do not express such an opinion.
Based on our review, nothing came to our attention which would cause us to
believe that the servicing provided by Sears has not been conducted in
compliance the sections of the Agreement enumerated above.
This letter is intended solely for the information and use of the Board of
Directors and management of Sears, First National Bank of Chicago as Trustee,
and Investor Certificateholders, and should not be used for any other
purpose.
March 26, 1997
/S/Deloitte & Touche
Chicago, Illinois
