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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X (ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-- ACT OF 1934 (FEE REQUIRED)
For the period from February 2, 1997 through January 31, 1998.
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 and Class B and Series 1996-B, Class A and Class B Certificates.
Indicated 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.
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
between World Financial Network National Bank, as transferor and servicer
("WFNNB"), and The Bank of New York, 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. Subsequently, such Certificates were 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 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
(the "Pooling Agreement") between World Financial Network National Bank
(the "Bank"), as transferor (the "Transferor") and as servicer (the "Servicer"),
and the Bank of New York, as trustee (the "Trustee"). The Bank sold to the
Trust approximately $1.3 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 three series of certificates - Series 1996-A,
Series 1996-B and Series 1996-VFC. The Series 1996-A and Series 1996-B
certificates have been distributed to the public. The Series 1996-VFC
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
7% interest in the Trust Portfolio (9% 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.
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 and Series 1996-B 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 between World Financial Network National Bank, as seller
(the "Seller"), Transferor and Servicer and The Bank of New York, as
trustee (the "Trustee"). The Seller sold to the Trust approximately
$1.3 billion of receivables arising from certain proprietary credit card
programs.
The Trust has sold three 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 7% interest in the Trust
Portfolio (9% November through January). The following series of
certificates has been issued by the Trust as of January 31, 1998 (dollars in
thousands):
% of Trust
Description $ Issued Portfolio
-------------------- --------------- --------------
Series 1996 A, Class A $445,500 33.9%
Series 1996 A, Class B 46,750 3.6%
Series 1996 B, Class A 283,500 21.6%
Series 1996 B, Class B 29,750 2.3%
Series 1996-VFC 284,000 21.6%
The Series 1996-A and Series 1996-B certificates have been distributed to the
public under prospectuses dated April 9, 1996.
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
propriety 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Cross Reference Sheet
- -------------------------------------------------------------------------------
Caption Page
- -------------------------------------------------------------------------------
Independent Auditors' Report II-1
Statements of Assets and Liabilities Arising
from Cash Transactions as of January 31, 1998
and February 1, 1997 II-2
Statements of Distributable Income Arising
From Cash Transactions for the years ended
January 31, 1998 and February 1, 1997 II-3
Notes to Financial Statements II-4
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 January 31, 1998 and February 1, 1997, 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 generally accepted auditing
standards. 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, these financial statements were prepared on the cash
basis of accounting, which is a comprehensive basis of accounting other than
generally accepted accounting principles.
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 January 31, 1998 and February 1, 1997, 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
April 27, 1998
II-1
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
- ------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
As of As of
Assets January 31, 1998 February 1, 1997
------ ________________ ________________
Cash Available for Distribution $276,285 $267,739
Credit Card Receivables 1,312,574 1,321,243
---------- ----------
TOTAL ASSETS $1,588,859 $1,588,982
========== ==========
Liabilities
-------------
Income to be Distributed $276,285 $267,739
Asset-backed Certificates:
Series 1996-A 492,250 492,250
Series 1996-B 313,250 313,250
Series 1996-VFC 284,000 265,750
Collateral Interest 143,714 135,321
Transferor's Interest 79,360 114,672
-------- ----------
TOTAL LIABILITIES $1,588,859 $1,588,982
========== ==========
See accompanying Notes to Financial Statements.
II-2
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
- ------------------------------------------------------------------------------
STATEMENTS OF DISTRIBUTABLE INCOME ARISING FROM CASH TRANSACTIONS
(in thousands of dollars)
For The For The
Year Ended Year Ended
January 31, 1998 February 1, 1997
---------------- ----------------
Distributable Income
- ---------------------
Allocable to Principal $2,514,524 $2,562,474
Allocable to Interest 286,516 284,478
---------- ----------
Total Distributable Income $2,801,040 $2,846,952
========== ==========
Income Distributed
- ------------------
Distribution of Principal to
Purchase New Receivables $2,264,449 $2,320,408
Interest Paid on Asset Backed Certificates 68,855 62,854
Servicing Fees 20,649 20,596
Distribution to Purchase New Receivables
For Amounts Previously Written-Off 105,126 76,201
Distribution on Transferor's Interest 65,676 99,154
---------- ----------
Income Distributed 2,524,755 2,579,213
---------- ----------
Excess of Distributable Income
over Income Distributed (Distributed
February 17, 1998 and 1997 respectively) $ 276,285 $ 267,739
========== ==========
See accompanying Notes to Financial Statements.
II-3
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 (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 Bank
of New York, 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 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 January 31, 1998 reflects the amounts to be
distributed on February 17, 1998, which represents the distribution of income
received by the Trust for the period January 1 through January 31, 1998.
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
January 31, 1998 the Trust had issued the following certificates,
representing the indicated undivided interest in the Trust Portfolio:
% of Trust
Description $ Issued Porfolio
- ------------------------------- --------- -------------
Series 1996 A, Class A $445,500 33.9%
Series 1996 A, Class B 46,750 3.6%
Series 1996 B, Class A 283,500 21.6%
Series 1996 B, Class B 29,750 2.3%
Series 1996-VFC 284,000 21.6%
The Series 1996-A and Series 1996-B certificates were distributed to the
public pursuant to a Prospectus dated April 9, 1996. The Series 1996-VFC
class of certificates has been retained by two conduit banks. Collectively,
holders of all Series are referred to as "Certificateholders."
In addition, certain Collateral Interests were issued by the Trust,
representing a 10.9% interest in the Trust Portfolio. Such Collateral
Interests are held by two banks at January 31, 1998 (the "Collateral
Interestholders"). The Transferor is required to maintain a minimum 7%
(9% 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 and B
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
financial statements.
NOTE 5. Supplementary Financial Data (unaudited)
The following is a summary of quarterly distributable income arising from
cash transactions:
(in thousands of dollars):
Servicing Defaulted Transferor's
Quarter Ended Principal Interest Fees Receivables Interest Total
- ------------- ---------- -------- --------- ----------- ----------- -----
May 3, 1997 $652,034 $18,368 $5,693 $30,019 $23,390 $729,504
August 2, 1997 601,943 18,651 5,543 28,513 12,836 667,486
November 1, 1997 600,051 18,514 5,518 28,369 17,625 670,077
January 31, 1998 660,496 20,161 5,975 27,624 19,717 733,973
---------- ------- ------- ------- -------- ----------
$2,514,524 $75,694 $22,729 $114,525 $73,568 $2,801,040
========== ======= ======= ======= ======== ==========
Servicing Defaulted Transferor's
Quarter Ended Principal Interest Fees Receivables Interest Total
- ------------- ---------- -------- --------- ----------- ----------- -----
May 4, 1996 $665,464 $10,974 $5,728 $8,988 $51,006 $742,160
August 3, 1996 621,533 19,856 5,277 21,743 15,326 683,735
November 2, 1996 627,456 18,858 5,681 27,213 22,608 701,816
February 1, 1997 648,021 19,981 5,977 25,716 19,546 719,241
---------- ------- ------- ------- -------- ----------
$2,562,474 $69,669 $22,663 $83,660 $108,486 $2,846,952
========== ======= ======= ======= ======== ==========
II-4
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
approximate current market rates.
The fair value of the asset-backed certificates is estimated to be
$1,340,291,000 (carrying value of $1,312,574,000) as of January 31, 1998 and
$1,325,627,000 (carrying value of $1,321,243,000) as of February 1, 1997,
based on quoted market prices or current market rates for similar securities
with similar remaining maturities and interest rates.
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.
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 1997:
Monthly Report Date of Report
-------------- --------------
November 1997 December 15, 1997
December 1997 January 15, 1998
January 1998 February 17, 1998
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: April 30, 1998 By: /s/ Daniel T. Groomes
----------------- ----------------------------------------
Daniel T. Groomes
Vice President Finance