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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period from October 24, 2002 to December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-50139
FIRST NATIONAL MASTER NOTE TRUST
(Exact name of registrant as specified in its charter)
Nebraska
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1620 Dodge Street, Stop Code 3198, Omaha, Nebraska 68197-3198
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(402) 341-0500
-----------------------------------------------------------
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class
Series 2002-1 Asset Backed Notes, Class A Notes
Series 2002-1 Asset Backed Notes, Class B Notes
Series 2002-1 Asset Backed Notes, Class C Notes
Indicate by check mark whether the 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 (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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the 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. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES [ ] NO [X]
Aggregate market value of voting stock held by non-affiliates of the
Registrant: $ 0.
DOCUMENTS INCORPORATED BY REFERENCE
No documents have been incorporated by reference into this Form 10-K.
TABLE OF CONTENTS
PART I
Item 1. Business 1
Item 2. Properties 1
Item 3. Legal Proceedings 2
Item 4. Submission of Matters to a Vote of Security Holders 2
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters 2
Item 6. Selected Financial Data 2
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 3
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 3
Item 8. Financial Statements and Supplementary Data 3
Item 9. Changes in and Disagreements With Accountants on Accounting
And Financial Disclosure 11
PART III
Item 10. Directors and Executive Officers of the Company 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and Management 11
Item 13. Certain Relationships and Related Transactions 12
Item 14. Controls and Procedures 12
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12
SIGNATURES
CERTIFICATION
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).
First National Master Note Trust (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 was formed for the purpose of issuing, from time to time,
asset-backed notes under the Master Indenture dated as of October 24, 2002 (as
supplemented from time to time, the "Indenture") between the Trust and The Bank
of New York (the "Indenture Trustee") and one or more supplements thereto. The
property of the Trust includes, and will include, a portfolio of receivables
and/or collateral certificates representing a beneficial interest in receivables
(collectively, the "Receivables") generated from time to time by certain
designated eligible VISA and Mastercard credit card accounts (collectively, the
"Accounts") owned by First National Bank of Omaha, all monies due or to become
due in payment of the Receivables, all proceeds of such Receivables and any
series credit enhancement provided for any particular series or class of notes.
On October 24, 2002, the Trust issued: $332,000,000 Series 2002-1 Asset
Backed Notes, Class A Notes, $31,000,000 Series 2002-1 Asset Backed Notes, Class
B Notes and $37,000,000 Series 2002-1 Asset Backed Notes, Class C Notes. These
notes were publicly issued pursuant to the prospectus supplement dated October
16, 2002 and the prospectus, dated October 16, 2002.
On December 30, 2002 the Trust issued $136,125,000 Series 2002-2
Floating Rate Class A Asset Backed Notes and $13,875,000 Series 2002-2 Floating
Rate Class B Asset Backed Notes. These notes were privately placed.
On March 20, 2003, the Trust issued: $415,000,000 Series 2003-1 Asset
Backed Notes, Class A Notes, $38,750,000 Series 2003-1 Asset Backed Notes, Class
B Notes and $46,250,000 Series 2003-1 Asset Backed
Notes, Class C Notes. These notes were publicly issued pursuant to the
prospectus supplement dated March 13, 2003 and the prospectus, dated March 13,
2003.
ITEM 2. Properties.
The property of the Trust includes, and will include, a portfolio of
receivables and/or collateral certificates representing a beneficial interest in
Receivables generated from time to time by certain designated eligible Accounts
owned by First National Bank of Omaha, all monies due or to become due in
payment of the Receivables, all proceeds of such Receivables and any series
credit enhancement provided for any particular series or class of notes.
Pursuant to the Indenture and indenture supplements under which the Trust's
notes are issued, and the related amended and restated pooling and servicing
agreement and transfer and servicing agreement, each month the servicer prepares
a monthly report (the "Monthly Report") containing information regarding the
Trust's notes and assets for the related due period and the related payment
dates for the notes. First National Bank of Omaha, as servicer, has executed the
Annual Servicer's Certificate regarding its servicing activities which is
attached hereto as Exhibit 99.1.
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.
PART II
ITEM 5. Market for the Partnership's Common Equity and Related Stockholder
Matters.
To the best knowledge of the Trust, there are secondary sales of the
Trust's Series 2002-1 Asset Backed Notes, Class A Notes, Series 2002-1 Asset
Backed Notes, Class B Notes and Series 2002-1 Asset Backed Notes, Class C Notes,
although the frequency of transactions varies substantially over time.
Each of the publicly offered classes of notes is represented by one or
more notes registered in the name of Cede & Co. ("Cede"), the nominee of The
Depository Trust Company ("DTC").
ITEM 6. Selected Financial Data.
The selected financial data has been omitted since the required
information is included in the financial statements.
2
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
There is nothing to report with regard to this item.
ITEM 8. Financial Statements and Supplementary Data.
3
FIRST NATIONAL MASTER
NOTE TRUST
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
AND FOR THE PERIOD FROM OCTOBER 24, 2002 TO
DECEMBER 31, 2002 AND INDEPENDENT AUDITORS'
REPORT
4
INDEPENDENT AUDITORS' REPORT
To the First National Master Note Trust and its Note Holders
We have audited the accompanying Statement of Assets and Liabilities of the
First National Master Note Trust (the "Trust") as of December 31, 2002, and the
related Statement of Distributable Income for the period from October 24, 2002
(date of inception) to December 31, 2002. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, these financial statements
are 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 of the Trust at December 31, 2002, and its
distributable income for the period from October 24, 2002 to December 31, 2002,
on the basis of accounting described in Note 1.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
April 10, 2003
5
FIRST NATIONAL MASTER NOTE TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2002
- --------------------------------------------------------------------------------
ASSETS 2002
Cash available for distribution $ 6,675,016
Credit card receivables 500,000,000
------------
Total assets $506,675,016
============
LIABILITIES
Income to be distributed $ 6,675,016
Asset-backed notes:
Series 2002-1 400,000,000
Series 2002-2 100,000,000
------------
Total asset-backed notes 500,000,000
------------
Total liabilities $506,675,016
============
See notes to financial statements.
6
FIRST NATIONAL MASTER NOTE TRUST
STATEMENT OF DISTRIBUTABLE INCOME
PERIOD FROM OCTOBER 24, 2002 (DATE OF INCEPTION) TO DECEMBER 31, 2002
- --------------------------------------------------------------------------------
2002
Distributable Income:
Allocable to principal $ 94,868,601
Allocable to interest 17,920,433
------------
Distributable income 112,789,034
Income Distributed:
Distribution of principal to purchase new receivables 94,868,601
Interest paid on asset-backed notes 1,212,733
Servicing fees 1,161,644
Distribution to purchase new receivables for amounts previously written off 4,917,288
Distribution on transferor's interest 3,953,752
------------
Income distributed 106,114,018
------------
Excess of distributable income over income distributed (distributed January 15, 2003) $ 6,675,016
============
See notes to financial statements.
7
FIRST NATIONAL MASTER NOTE TRUST
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM OCTOBER 24, 2002 (DATE OF INCEPTION) TO DECEMBER 31, 2002
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First National Master Note Trust (the "Trust") was created to acquire
credit card receivables and related assets for the purpose of issuing
asset-backed notes under the Master Indenture dated October 24, 2002
between First National Master Note Trust and The Bank of New York, and one
or more supplements thereto. The property of the Trust includes the
Collateral Certificate ("Collateral Certificate") issued by First Bankcard
Master Credit Card Trust (the "Receivables Trust") representing an
undivided interest in Visa and Mastercard credit card receivables
originated by First National Bank of Omaha (the "Bank"), an affiliate of
the Bank or acquired by the Bank or an affiliate.
First National Bank of Omaha retains servicing responsibility pursuant to
the Second Amended and Restated Pooling and Servicing Agreement dated as
of October 24, 2002 and the Transfer and Servicing Agreement dated as of
October 24, 2002 and receives annual servicing compensation for acting as
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
of the Receivables Trust and the Trust. The Trust and the Receivables
Trust have no employees.
The financial statements of the Trust are prepared on a cash basis of
accounting. Such financial statements differ 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 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 amounts to be distributed on January 15, 2003, which
represents the distribution of income received by the Trust for the period
October 24 (date of inception) through December 31, 2002.
2. ASSET-BACKED NOTES
The Trust may issue from time to time asset-backed notes in one or more
series, which will consist of one or more classes of notes, secured by the
Collateral Certificate. As of December 31, 2002, the Trust had issued and
had outstanding the following floating rate notes:
DESCRIPTION $ ISSUED % OF TRUST PORTFOLIO
Series 2002-1 $400,000,000 80.00%
Series 2002-2 $100,000,000 20.00%
The Series 2002-1 was publicly issued pursuant to a prospectus supplement
dated October 16, 2002 and the prospectus dated October 16, 2002. Series
2002-2 was privately placed.
8
The following table summarizes the maturity dates and interest rates as of
December 31, 2002:
SERIES 2002-1 SERIES 2002-2
------------------------- -------------------------
Type Term Conduit
Expected Final Distribution Date October 17, 2005 (1) -
Scheduled Class A Payment Date - December 31, 2006 (2)
Interest Rates:
Class A LIBOR + .11 CP + .37
Class B LIBOR + .40 CP + 1.00
Class C LIBOR + 1.12 -
(1) Notes are scheduled to pay down beginning October 1, 2004. However,
the number of months required to pay down Series 2002-1 is dependent
upon the principal collections on the underlying credit card
receivables, as described in Section 4.14 of the Series 2002-1
Indenture Supplement.
(2) Notes will be paid down monthly in an amount equal to 1/12 of the note
principal balance as of December 31, 2005 (the last day of the
revolving period). Class B notes pay down one month in arrears of
Class A notes.
3. PRINCIPAL AND INTEREST PAYMENT
Collections of principal on the receivables are used to make principal
distributions to note holders and to purchase new credit card receivables
on a daily basis.
Collections of finance charge receivables, which include late fees,
non-sufficient funds check fees, annual fees, recoveries of amounts
previously written off and association interchange, are used to pay
interest to the note holders, pay servicing fees, purchase new credit card
receivables equal to amounts written off during the month and maintain
certain reserve and spread accounts. Excess finance charge collections, if
any, are distributed to First National Funding LLC, a subsidiary of the
Bank. The distribution date is the 15th day of each month (or the next
following business day).
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.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the current amount that would
be exchanged between willing parties. Fair value is best determined based
upon quoted market prices. However, in many instances, there are no quoted
market prices for the Trust's various financial instruments. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Accordingly, the
fair value estimates may not be realized in an immediate settlement of the
instrument.
9
The following table presents the carrying amounts and fair values of the
specified assets and liabilities held by the Trust at December 31, 2002.
The information presented is based on pertinent information available to
management as of December 31, 2002. Although management is not aware of
any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued since that
time, and the current estimated fair value of these financial instruments
may have changed since that point in time.
DECEMBER 31, 2002
--------------------------------------
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
Financial assets:
Cash available for distribution $ 6,675,016 $ 6,675,016
Credit card receivables 500,000,000 538,300,000
Financial liabilities:
Income to be distributed $ 6,675,016 $ 6,675,016
Asset-backed notes 500,000,000 500,000,000
The following methods and assumptions were used in estimating fair value
disclosures for the Trust's financial instruments:
CASH AVAILABLE FOR DISTRIBUTION AND INCOME TO BE DISTRIBUTED - The
carrying amounts of these financial instruments approximate fair values
due to the short-term nature of these instruments.
CREDIT CARD RECEIVABLES - The fair values of the Trust's credit card
receivables have been estimated using two methods: 1) the carrying amounts
of short-term and variable rate loans approximate fair values excluding
certain credit card loans which are tied to an index floor; and 2) for all
other loans, discounting of projected future cash flows. When using the
discounting method, loans are pooled in homogeneous groups with similar
terms and conditions and discounted at a target rate at which similar
loans would be made to borrowers at year end.
ASSET-BACKED NOTES - The carrying amounts of asset-backed notes
approximate the fair values because the notes carry variable interest
rates.
10
ITEM 9. Changes in 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 Company.
Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
ITEM 11. Executive Compensation.
Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
a) Each publicly offered class of the Trust's notes is represented by
one or more certificates registered in the name of Cede, the nominee of
DTC, and an investor holding an interest in such classes of notes is
not entitled to receive a note representing such interest except in
limited circumstances set forth in the Indenture. Accordingly, Cede is
the sole holder of record of such notes, which it holds on behalf of
brokers, dealers, banks, and other direct participants in the DTC
system. Such direct participants may hold notes for their own accounts
or for the accounts of their customers. The name and address of Cede is
Cede & Co., c/o The Depository Trust Company, 55 Water Street, New
York, NY 10041.
11
b) Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
c) Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
ITEM 13. Certain Relationships and Related Transactions.
There is nothing to report with regard to this item.
ITEM 14. Controls and Procedures
Not required by Item 307 of Regulation S-K.
PART IV
ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
a) Listed below are the documents filed as part of this report:
Exhibit 99.1 Annual Servicer's Certificate
Exhibit 99.2 The Monthly Reports for the due periods ending in
November 2002 and December 2002 are incorporated by reference from the
registrant's Current Reports on Form 8-K filed with the Commission on
December 26, 2002, as amended by the Form 8-K/A filed with the
Commission on March 7, 2003, and January 30, 2003, respectively.
Exhibit 99.3 Certification pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.4 Certification pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K:
The following current reports on Form 8-K were filed for the fourth
quarter of 2002:
MONTHLY REPORT DATE OF REPORT
November 2002 December 26, 2002
December 2002 January 30, 2002, as
amended by the Form 8-K/A
filed with the Commission
on March 7, 2003
c) Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
d) Omitted pursuant to the no action letters referred to in the first
paragraph of Item 1 of this report.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 14, 2003 FIRST NATIONAL MASTER NOTE TRUST
By: First National Bank of Omaha,
As Servicer of First National
Master Note Trust
By: /s/ Jean L. Koenck
-----------------------------------
Jean L. Koenck, Vice President
Dated: April 14, 2003 FIRST NATIONAL FUNDING LLC
By: First National Funding Corporation,
Managing Member, as Transferor
By: /s/ Jean L. Koenck
-----------------------------------
Jean L. Koenck,
Senior Vice President
CERTIFICATION
I, Jean L. Koenck, certify that:
1. I have reviewed this annual report on Form 10-K, and all reports on
Form 8-K containing distribution or servicing reports filed in respect of
periods included in the year covered by this annual report of First National
Master Note Trust;
2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made not misleading as of the
last day of the period covered by this annual report.
3. Based on my knowledge, the distribution or servicing information
required to be provided to the trustee by the servicer under the pooling and
servicing, or similar, agreement, for inclusion in these reports is included in
these reports.
4. I am responsible for reviewing the activities performed by the
servicer under the pooling and servicing, or similar, agreement and based upon
my knowledge and the annual compliance review required under that agreement, and
except as disclosed in the reports, the servicer has fulfilled its obligations
under that agreement.
Date: April 14, 2003
/s/ Jean L. Koenck
- -----------------------------------------------------
Jean L. Koenck
Vice President, First National Bank of Omaha