Filed pursuant to Rule 424(b)(4)
Registration No. 333-100102
Prospectus
- --------------------------------------------------------------------------------
$1,000,000,000
GRACECHURCH CARD FUNDING (NO. 2) PLC
Issuer
BARCLAYS BANK PLC
Transferor, Servicer and Trust Cash Manager
$900,000,000 Class A Floating Rate Asset-Backed Notes
$50,000,000 Class B Floating Rate Asset-Backed Notes
$50,000,000 Class C Floating Rate Asset-Backed Notes
Price To Public Underwriting Proceeds To
Class Interest Rate Per Note Discount Per Note Issuer Per Note
- ----- ------------------ --------------- ----------------- ---------------
A One-month USD LIBOR 100% 0.225% $997.75
plus 0.12% annually
B One-month USD LIBOR 100% 0.25% $997.50
plus 0.45% annually
C One-month USD LIBOR 100% 0.35% $996.50
plus 1.15% annually
o The ultimate source of payment on the notes will be collections on
consumer credit and charge card accounts owned by Barclaycard and opened
in the United Kingdom.
o The transaction documents will be governed by the laws of England and
Wales.
o A separate currency swap for each class of the notes will be used to
convert the sterling amounts received from the series 02-1 medium term
note certificate into U.S. dollar amounts for payment on the notes.
Please consider carefully the risk factors beginning on page 15 in this
prospectus.
A note is not a deposit and neither the notes nor the underlying receivables are
insured or guaranteed by any United Kingdom or United States governmental
agency.
The notes offered in this prospectus will be obligations of the issuer only. The
issuer will only have a limited pool of assets to satisfy its obligations on the
notes. The notes will not be obligations of Barclays Bank PLC or any of its
affiliates.
The total price to the public is $1,000,000, the total amount of the
underwriting discount is $2,325,000, and the total amount of proceeds plus
accrued interest and before deduction of expenses is $997,675,000.
We have applied to the UK Listing Authority to have the notes for series 02-1
listed and to the London Stock Exchange plc to have the notes for series 02-1
admitted to trading.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes or determined that this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offence.
- --------------------------------------------------------------------------------
Underwriters of the Class A Notes
BARCLAYS CAPITAL
JPMORGAN LEHMAN BROTHERS SALOMON SMITH BARNEY
Underwriter of the Class B Notes and Class C Notes
BARCLAYS CAPITAL
18 October 2002
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
We include cross-references to captions in this prospectus where you can find
further related discussions. The following table of contents provides the pages
on which these captions are located.
Table Of Contents
Prospectus Summary ........................................................ 6
Series Structure ........................................................ 6
Program Structural Summary .............................................. 7
Structural Diagram of Barclays Bank PLC Securitisation Program .......... 8
The Issuer .............................................................. 9
The Note Trustee, Principal Paying Agent and Agent Bank ................. 9
The Notes ............................................................... 9
Previous Series ......................................................... 9
The Closing Date ........................................................ 10
The MTN Issuer and Initial Investor Beneficiary ......................... 10
The Medium Term Notes Certificate........................................ 10
The Security Trustee .................................................... 10
The Receivables ......................................................... 10
The Initial Transferor, Servicer, Trust Cash Manager and Excess
Interest Beneficiary .................................................. 11
The Receivables Trustee ................................................. 11
The Receivables Trust ................................................... 11
The Investor Certificate ................................................ 11
The Swap Counterparty ................................................... 12
Swap Agreements ......................................................... 12
Optional Early Redemptions .............................................. 12
Notices ................................................................. 12
United Kingdom Tax Status ............................................... 12
United States Federal Income Tax Status ................................. 13
ERISA Considerations for Investors ...................................... 14
Ratings of the Notes .................................................... 14
Application for Admission to the Official List and Admission to Trading . 14
Risk Factors .............................................................. 15
Introduction .............................................................. 31
U.S. Dollar Presentation .................................................. 31
Dollar/Sterling Exchange Rate History ................................... 31
The Issuer ................................................................ 32
Directors and Secretary ................................................. 32
Management's Discussion and Analysis of Financial Condition ............. 33
Use Of Proceeds ......................................................... 33
Expenses Loan Agreement ................................................. 33
The MTN Issuer ............................................................ 34
Capitalisation and Indebtedness ......................................... 34
Directors and Secretary ................................................. 34
Management's Discussion and Analysis of Financial Condition ............. 35
The Receivables Trustee ................................................... 36
Directors and Secretary ................................................. 36
Management and Activities ............................................... 36
Litigation .............................................................. 37
No Financial Change ..................................................... 37
Barclays Bank PLC ......................................................... 38
Business ................................................................ 38
Credit Card Usage in the United Kingdom ................................... 38
Barclaycard and the Barclaycard Card Portfolio ............................ 39
General ................................................................. 39
Description of Experian, part of the Great Universal Stores Group ....... 39
Acquisition and Use of Credit Card Accounts ............................. 39
Description of Processing ............................................... 40
2
Billing and Payment ..................................................... 40
Delinquency and Loss Experience ......................................... 41
Delinquency Experience-Securitised Portfolio ............................ 43
Loss Experience Securitised Portfolio ................................... 44
The Receivables ........................................................... 45
Assignment of Receivables to the Receivables Trustee .................... 45
Redesignation and Removal of Accounts ................................... 47
Discount Option Receivables ............................................. 48
Special Fees and Annual Fees ............................................ 48
Interchange ............................................................. 48
Reductions in Receivables, Early Collections and Credit Adjustments ..... 49
Representations ......................................................... 49
Amendments to Card Agreement and Card Guidelines ........................ 51
Summary of Securitised Portfolio ........................................ 51
Composition by Account Balance -- Securitised Portfolio ................. 52
Composition by Credit Limit -- Securitised Portfolio .................... 52
Composition by Account Age -- Securitised Portfolio ..................... 52
Geographic Distribution of Accounts -- Securitised Portfolio ............ 53
Maturity Assumptions ...................................................... 54
Cardholder Monthly Payment Rates -- Securitised Portfolio ............... 54
Receivables Yield Considerations .......................................... 55
Yield Experience -- Securitised Portfolio ............................... 56
The Receivables Trust ..................................................... 57
General Legal Structure ................................................. 57
The Receivables Trust's Property ........................................ 58
General Entitlement of Beneficiaries to Trust Property .................. 59
Allocation and Application of Collections ............................... 60
Acquiring Additional Entitlements to Trust Property and
Payments for Receivables .............................................. 62
Non-Petition Undertaking of Beneficiaries ............................... 63
Trust Pay Out Events .................................................... 63
Termination of the Receivables Trust .................................... 64
Amendments to the Declaration of Trust and Trust Cash
Management Agreement .................................................. 64
Disposals ............................................................... 64
Trustee Payment Amount .................................................. 65
Servicing Of Receivables and Trust Cash Management ........................ 66
General -- Servicing .................................................... 67
General -- Trust Cash Management ........................................ 67
Servicing and Trust Cash Manager Compensation ........................... 67
Termination of Appointment of Servicer .................................. 68
Termination of Appointment of Trust Cash Manager ........................ 70
Series 02-1 ............................................................... 72
General ................................................................. 72
Beneficial Entitlement of the MTN Issuer to Trust Property
other than in respect of the Excess Interest .......................... 72
Allocation, Calculation and Distribution of Finance Charge
Collections to the MTN Issuer ......................................... 74
Class A Investor Interest ............................................... 75
Class B Investor Interest ............................................... 77
Class C Investor Interest ............................................... 78
Revolving Period ........................................................ 79
Controlled Accumulation Period .......................................... 79
Regulated Amortisation Period ........................................... 80
Rapid Amortisation Period ............................................... 80
Allocation, Calculation and Distribution of Principal Collections
to the MTN Issuer ..................................................... 81
Postponement of Controlled Accumulation Period .......................... 84
Unavailable Principal Collections ....................................... 85
Shared Principal Collections ............................................ 86
Defaulted Receivables; Investor Charge-Offs ............................. 86
Excess Spread ........................................................... 88
Extra Amount ............................................................ 89
3
Aggregate Investor Indemnity Amount ..................................... 89
Principal Funding Account ............................................... 89
Reserve Account ......................................................... 90
Spread Account .......................................................... 91
Distribution Ledgers .................................................... 92
Trustee Payment Amount .................................................. 92
Qualified Institutions .................................................. 93
Series 02-1 Pay Out Events .............................................. 93
Entitlement of MTN issuer to Series 02-1 Excess Interest ................ 95
Your Payment Flows ...................................................... 96
The Trust Deed ............................................................ 100
The Notes.................................................................. 100
Terms and Conditions of The Notes ......................................... 105
The Swap Agreements ....................................................... 117
General ................................................................. 117
Common Provisions of the Swap Agreements ................................ 118
The Medium Term Note Certificate........................................... 120
Material Legal Aspects of The Receivables ................................. 122
Consumer Credit Act 1974 ................................................ 122
Transfer of Benefit of Receivables ...................................... 123
United Kingdom Taxation Treatment of The Notes ............................ 124
Overview ................................................................ 124
Taxation of US Residents ................................................ 124
Taxation of Interest Paid ............................................... 125
Provision of Information ................................................ 125
Proposed European Union Savings Directive ............................... 125
Other Rules Relating to United Kingdom Withholding Tax .................. 126
Ownership and Disposal, Including Redemption, of the Notes by United
Kingdom Tax Payers .................................................... 126
United Kingdom Inheritance Tax .......................................... 127
Stamp Duty and Stamp Duty Reserve Tax ................................... 127
Taxation of the MTN Issuer and the Issuer ............................... 127
Taxation of Receivables Trustee ......................................... 127
Material United States Federal Income Tax Consequences .................... 128
Overview ................................................................ 128
Tax Status of the Receivables Trust, the MTN Issuer and the Issuer ...... 128
United States Holders ................................................... 129
Non-United States Holders ............................................... 132
Backup Withholding and Information Reporting ............................ 132
ERISA Considerations ...................................................... 132
Enforcement of Foreign Judgements in England and Wales .................... 135
Underwriting .............................................................. 136
United Kingdom .......................................................... 137
General ................................................................. 137
Ratings Of The Notes ...................................................... 138
Experts ................................................................... 138
Legal Matters ............................................................. 139
Reports To Noteholders .................................................... 139
Where You Can Find More Information ....................................... 139
Listing And General Information ........................................... 139
Litigation and Change in Circumstances .................................. 140
Documents Available for Inspection ...................................... 140
Index Of Terms For Prospectus ............................................. 143
Index Of Appendices ....................................................... 147
4
Appendix A -- Report Of Independent Accountants for Gracechurch
Card Funding (No. 2) PLC .................................. A-1
Appendix B -- Balance Sheet of Gracechurch Card Funding (No. 2) PLC ..... B-1
Appendix C -- Notes to Financial Statement .............................. C-1
Appendix D -- Report of Independent Accountants for Barclaycard Funding
PLC and subsidiary ........................................ D-1
Appendix E -- Unaudited Financial Statements of Barclaycard Funding PLC
and subsidiary for the six months ended 14 June 2002 ...... E-1
and 2001
Appendix F -- Notes to Financial Statements for the six months ended
14 June 2002 and 2001 ..................................... F-1
Appendix G -- Report of Independent Accountants of Barclaycard Funding
PLC and subsidiary ........................................ G-1
Appendix H -- Financial Statements of Barclaycard Funding PLC and
subsidiary for the years ended 14 December 2001, 2000
and 1999 .................................................. H-1
Appendix I -- Notes to Financial Statement for the years ended
14 December 2001, 2000 and 1999 ........................... I-1
Appendix J -- Other Series Issued and Outstanding ....................... J-1
5
PROSPECTUS SUMMARY
The following is a brief overview of the key aspects of the class A notes, the
class B notes and the class C notes, which we refer to as the notes. You need to
read all of this prospectus to fully understand the terms of the notes.
SERIES STRUCTURE
Class of Notes Initial Principal Balance % of Total
- -------------- ------------------------- ----------
Class A $ 900,000,000 90%
Class B $ 50,000,000 5%
Class C $ 50,000,000 5%
-------------- ---
Total $1,000,000,000 100%
============== ===
Class A Notes Class B Notes Class C Notes
------------- ------------- -------------
Anticipated Ratings "Aaa" from Moody's and "AAA" "A1" from Moody's and "A" "Baa1" from Moody's and "BBB"
from Standard & Poor's. from Standard & Poor's. from Standard & Poor's.
Credit Enhancement Subordination of the class B Subordination of the class C Spread Account.
notes and class C notes. notes.
Interest Rate: One-month USD LIBOR, plus One-month USD LIBOR, plus One-month USD LIBOR, plus
0.12 per cent. annually, 0.45 per cent. annually, 1.15 per cent. annually,
except for the first except for the first except for the first
interest period, where interest period, where interest period, where
LIBOR will be based on the LIBOR will be based on the LIBOR will be based on the
linear interpolation of linear interpolation of linear interpolation of
one-month and two-month one-month and two-month one-month and two-month
USD LIBOR. USD LIBOR. USD LIBOR.
Interest Accrual Method: Actual/360. Actual/360. Actual/360.
Interest Payment Dates: The 15th day of each calendar The 15th day of each The 15th day of each calendar
month. calendar month. month.
First Interest Payment Date: December 2002 interest December 2002 interest December 2002 interest
payment date. payment date. payment date.
Scheduled Redemption Date: October 2007 interest payment October 2007 interest October 2007 interest payment
date. payment date. date.
Legal Final Redemption Date: October 2009 interest payment October 2009 interest October 2009 interest payment
date. payment date. date.
Clearance/Settlement: DTC/Euroclear/ Clearstream, DTC/Euroclear/ Clearstream, DTC/Euroclear/
Luxembourg. Luxembourg. Clearstream, Luxembourg.
Minimum Denomination: $1,000. $1,000. $1,000.
Tax Treatment: Debt for United States Debt for United States Debt for United States
federal income tax purposes, federal income tax purposes, federal income tax purposes,
subject to the important subject to the important subject to the important
considerations contained in considerations contained in considerations contained in
"Material United States "Material United States "Material United States
Federal Income Tax Federal Income Tax Federal Income Tax
Consequences". Consequences". Consequences".
ERISA Eligible: Yes, subject to the important Yes, subject to the Yes, subject to the important
considerations in "ERISA important considerations in considerations in "ERISA
CONSIDERATIONS". "ERISA CONSIDERATIONS". CONSIDERATIONS".
6
PROGRAM STRUCTURAL SUMMARY
The following is a brief summary description of the Barclaycard securitisation
program, of which your notes will form a part.
Barclaycard, a division of Barclays Bank PLC, has previously assigned all of its
present and future beneficial interest in receivables in designated revolving
credit and charge card accounts owned by Barclaycard and opened in the United
Kingdom. Only the receivables were assigned. The accounts were retained by
Barclaycard.
The receivables were assigned to a special purpose company, incorporated in
Jersey, Channel Islands, acting as receivables trustee. The receivables trustee
holds the receivables on trust for Barclaycard, as transferor beneficiary and
excess interest beneficiary, and a special purpose subsidiary of Barclays called
the "MTN issuer", as investor beneficiary. Barclaycard will transfer its
entitlement to receive excess interest attributable to series 02-1 to the MTN
issuer.
The receivables trustee may issue multiple series of investor certificates to
the MTN issuer. Each series of investor certificates will represent an undivided
beneficial interest in the receivables trust. They will entitle the MTN issuer
to payments of interest and principal payable from collections on the
receivables.
The MTN issuer will finance its acquisition of an undivided beneficial interest
in the receivables trust, evidenced by the issuance of each series of investor
certificates, by issuing series of limited recourse medium term notes or
certificates to individual issuers and credit enhancement providers, if any. The
limited recourse nature of the medium term notes or certificates will ensure
that the MTN issuer is only ever liable under a series of medium term notes or
certificates for payments of principal and interest equal to what is paid under
the corresponding series of investor certificates.
The issuers, in turn, will finance their purchases of each series of medium term
notes or certificates by issuing series of notes to investors. Your series of
notes, series 02-1, will be the second series of notes issued under this
program.
7
STRUCTURAL DIAGRAM OF BARCLAYS BANK PLC SECURITISATION PROGRAM
----------------------------------------
| BARCLAYS BANK PLC |
| (initial transferor, servicer, trust |
| cash manager, excess interest |
| beneficiary)* |
----------------------------------------
|
| Stage (1): True Sale
|
----------------------------------------
| GRACECHURCH |
| RECEIVABLES TRUSTEE |
| LIMITED |
| (receivables trustee) |
-------------------/\-------------------
/ \
/ \ Stage (2): Declaration of Trust and
/ \ Trust Cash Management Agreement
/ \
-------------- ------------
| TRANSFEROR | | INVESTOR | Stage (3): Series
| INTEREST | | INTEREST | Trust Supplements
-------------- ------------
| | | |
| | | |
V V V V
--------------------------- ----------------
| BARCLAYS BANK | | BARCLAYCARD | Stage (4): Security
| PLC | | FUNDING PLC | Trust Deed and MTN Cash
| (transferor beneficiary | | (MTN Issuer) | Management Agreement
--------------------------- ----------------
/ | \___
- | \___
/ | \___
- | \___
/ | \
------------- ------------- ------------
Stage (5): Limited | SERIES | | SERIES | | SERIES |
Recourse MTN's | 99-1 MTNS | | 02-1 MTNC | | 3 MTNC(S) |
------------- ------------- ------------
| | / \
| | / \
| | / \
V V V V
- ---------------- ---------------- ---------------- ---------------- ---------- ------------
| BARCLAYS | | GRACECHURCH | | GRACECHURCH | | BARCLAYS | | ISSUER | | ENHANCE- |
| BANK PLC |<-->| CARD FUNDING | | CARD FUNDING |<-->| BANK PLC | | NO. 3 | | MENT |
| (swap | | (No. 1) PLC | | (No. 2) PLC | | (swap | ---------- | PROVIDER |
| counterparty | | (issuer) | | (issuer) | | counterparty | | | (if any) |
- ---------------- ---------------- ---------------- ---------------- | ------------
| | |
| | |
| | |
V V V
Stage (6): Note --------------- --------------- ----------------
Issue | Series 99-1 | | Series 02-1 | | ISSUER NO. 3 |
| Noteholders | | Noteholders | | NOTEHOLDERS |
--------------- --------------- ----------------
* Barclays Bank PLC will transfer excess interest attributable to series 02-1
to the MTN issuer pursuant to an agreement between beneficiaries.
8
THE ISSUER
Gracechurch Card Funding (No.2) PLC is a public limited company incorporated in
England and Wales. Its registered office is at 54 Lombard Street, London EC3P
3AH. Its telephone number is +44 (0)207 699 5000.
The issuer is a newly created special purpose company. The purpose of the issuer
is to issue the notes which represent its asset-backed debt obligations. The
issuer will not engage in any unrelated activities.
This prospectus including the appendices comprises listing particulars given in
compliance with the listing rules made by the UK Listing Authority under Part VI
of the Financial Service and Markets Act 2000 for the purposes of giving
information about the issuer and the notes. The issuer accepts responsibility
for the information contained in this document. To the best of the knowledge and
belief of the issuer, which has taken all reasonable care to ensure that such is
the case, the information contained in this document is in accordance with the
facts and does not omit anything likely to affect the import of such
information. The issuer accepts responsibility accordingly.
THE NOTE TRUSTEE, PRINCIPAL PAYING AGENT AND AGENT BANK
The note trustee, principal paying agent and agent bank is The Bank of New York,
London Branch. The note trustee will act as trustee for the noteholders under
the trust deed. The principal paying agent will make payments on the notes. The
agent bank will calculate the interest rate on the notes. The Bank of New York,
London Branch's address is One Canada Square, London E14 5AL, United Kingdom.
Its telephone number is +44 (0)207 570 1784.
THE NOTES
In this document, we are offering three classes of notes:
o floating rate class A notes with an initial principal balance of
$900,000,000.
o floating rate class B notes with an initial principal balance of
$50,000,000.
o floating rate class C notes with an initial principal balance of
$50,000,000.
The notes represent asset-backed debt obligations of the issuer. The notes are
secured by payments received by the issuer from the series 02-1 medium term note
certificate and payments received from the swap counterparty. The issuer's
ability to make these payments will ultimately be dependent upon collections
Barclaycard receives on the receivables.
We will issue the notes under the trust deed. The notes will also be subject to
a paying agency and agent bank agreement. The security for the notes will be
created under a deed of charge between the issuer and the note trustee. The
terms of the notes will be contained in the trust deed, the paying agency and
agent bank agreement and the deed of charge.
The class B notes will be subordinated to the class A notes. The class C notes
will be subordinated to both the class A notes and the class B notes.
If there is an event of default under the notes, the note trustee, on your
behalf, can appoint a receiver of the issuer who would continue to collect
amounts paid by the MTN issuer under the series 02-1 medium term note
certificate. The note trustee would also be able to sell the series 02-1 medium
term note certificate. In addition, the note trustee may give an enforcement
notice to the issuer declaring the notes to be immediately due and payable. A
declaration that the notes have become immediately due and payable will not, of
itself, accelerate the timing or amount of redemption of the notes.
In this prospectus, we will refer to the owners of interests in the class A
notes, the class B notes and the class C notes as the class A noteholders, the
class B noteholders and the class C noteholders, respectively, and together as
the noteholders.
PREVIOUS SERIES
One previous series of notes have been issued by a previous note issuer,
Gracechurch Card Funding (No 1) PLC, in relation to the receivables trust. The
previous series, called series 99-1, was issued on 23 November 1999. Series 99-1
is described in more detail at Appendix J.
The proceeds of the series 99-1 notes were used by the previous note issuer to
purchase, respectively, corresponding series of medium term notes issued in
three classes, which we shall refer to as the "series 99-1 medium term notes",
issued by the MTN issuer. The series 99-1 medium term notes issued by the MTN
issuer were called the class A medium term note, the class B medium term note
and the class C
9
medium term notes respectively. The MTN issuer invested the proceeds from the
issue of the series 99-1 medium term notes in the receivables trust by paying
the proceeds to the receivables trustee and becoming an investor beneficiary
with an aggregate investor interest in the receivables trust. This aggregate
investor interest entitles the MTN issuer to payments arising out of its
entitlement to receivables in the receivables trust.
The class A medium term note, the class B medium term note and the class C
medium term note are each secured in favour of a trustee for the benefit of the
secured creditors in relation to the class A notes, the class B notes and the
class C notes of series 99-1. The security for each class of notes issued for
series 99-1 is the class A medium term note, the class B medium term note and
the class C medium term note, respectively. The security for the notes issued
for series 99-1 will not be cross-collateralised with the security for your
notes.
THE CLOSING DATE
We will issue the notes on or about 24 October 2002.
THE MTN ISSUER AND INITIAL INVESTOR BENEFICIARY
The MTN issuer is Barclaycard Funding PLC, a public limited company incorporated
in England and Wales. Its registered office is located at 54 Lombard Street,
London EC3P 3AH. The MTN issuer is a subsidiary of Barclays.
The MTN issuer was established to issue series of secured limited recourse
medium term notes certificates under a programme.
THE MEDIUM TERM NOTE CERTIFICATE
On the closing date, the MTN issuer will sell to the issuer one limited recourse
medium term note certificate issued as a series under its medium term note or
certificate programme. This limited recourse medium term note certificate, in
the amount of the sterling equivalent of $1,000,000,000, using the fixed
exchange rate in the swap agreements, will be called the series 02-1 medium term
note certificate.
The issuer will make payments of interest and principal on the class A notes,
the class B notes and the class C notes from payments of interest and principal
made by the MTN issuer on the series 02-1 medium term note certificate,
including MTN additional interest payments, and from amounts paid by the swap
counterparty. The issuer will also make payment of the deferred subscription
price in respect of the series 02-1 medium term note certificate out of
unutilised MTN additional interest payments received by it.
If an event of default occurs under the series 02-1 medium term note
certificate, the security trustee, on behalf of the issuer as holder of the
series 02-1 medium term note certificate, may appoint a receiver of the MTN
issuer who would continue to collect amounts paid on the investor certificate.
The security trustee would also be able to sell the investor certificate. In
addition, the security trustee may give an enforcement notice to the MTN issuer
declaring the series 02-1 medium term note certificate to be immediately due and
payable. A declaration that the series 02-1 medium term note certificate has
become immediately due and payable will not, of itself, accelerate the timing or
amount of redemption of the series 02-1 medium term note certificate.
THE SECURITY TRUSTEE
The security trustee is The Bank of New York, London Branch. The security
trustee will act as trustee for the holder of the series 02-1 medium term note
certificate under the security trust deed and MTN cash management agreement.
THE RECEIVABLES
The receivables consist of amounts charged by cardholders to designated
MasterCard* and VISA* revolving credit and charge card accounts of Barclaycard
originated or acquired in the United Kingdom for the acquisition of merchandise,
services and cash advances. The receivables also include the periodic finance
charges and fees charged to the credit and charge card accounts and interchange.
- ----------
* MasterCard and VISA are US federally registered servicemarks of MasterCard
International Inc. and VISA USA Inc. and are registered trademarks in the
United Kingdom of MasterCard International Inc. and VISA International
Service Association.
10
THE INITIAL TRANSFEROR, SERVICER, TRUST CASH MANAGER, MTN CASH MANAGER AND
EXCESS INTEREST BENEFICIARY
Barclays Bank PLC originates or acquires the credit and charge card receivables
through its business unit, Barclaycard. Barclaycard's principal place of
business is located at 1234 Pavilion Drive, Northampton NN4 7SG, United Kingdom.
Barclaycard has previously transferred its present and future interest in the
credit and charge card receivables to the receivables trustee.
Barclaycard is the initial transferor of the receivables trust.
Barclaycard currently services the receivables in the receivables trust.
Barclaycard may not resign as servicer, but may be terminated and a successor
servicer may be appointed in its place if a servicer default occurs. In the
future additional transferors, if any, may act as co-servicers.
Barclaycard was also appointed as the initial trust cash manager to manage the
bank accounts of the receivables trustee for each series of investor
certificates. Barclaycard may not resign as trust cash manager, but may be
terminated and a successor trust cash manager may be appointed in its place if a
trust cash manager default occurs. In the future additional transferors, if any,
may act as co-trust managers.
Barclaycard will be the excess interest beneficiary of the receivables trust,
but will transfer its entitlement to the portion of the excess interest
attributable to series 02-1 to the MTN issuer under an agreement between
beneficiaries.
Barclays Bank PLC has also been appointed as MTN cash manager pursuant to the
security trust deed and the MTN cash management agreement dated 23 November
1999. The MTN cash manager may not resign unless its activities are no longer
permissible under the applicable law. No such resignation shall become effective
until a successor MTN cash manager shall have assumed the responsibilities and
obligations of the MTN cash manager.
Barclays Bank PLC is a bank incorporated in England and Wales and has a long
term unsecured debt rating of Aa1 by Moody's and AA by Standard and Poor's. Its
head office is located at 54 Lombard Street, London EC3P 3AH, United Kingdom. It
is regulated in the United Kingdom by the Financial Services Authority. Its
telephone number is +44 (0)207 699 5000.
THE RECEIVABLES TRUSTEE
Gracechurch Receivables Trustee Limited, the receivables trustee, is a private
limited liability company incorporated under the laws of Jersey, Channel Islands
on 29 September, 1999. Its registered office is located at 26 New Street, St.
Helier, Jersey JE2 3RA. The shares of the receivables trustee are held by a
professional trustee company -- not affiliated with Barclays -- as trustee on
trust for charitable purposes. This means that any profits received by the
receivables trustee, after all amounts have been paid on the investor
certificates and in meeting the costs and expenses of the receivables trustee,
will be available to be dividended to the trustee for distribution to charities
in Jersey selected at the discretion of the receivables trustee. The payments on
your notes will not be affected by this arrangement. The receivables trustee
acts as trustee of the receivables trust.
THE RECEIVABLES TRUST
The receivables trust was established on 1 November, 1999 under the terms of a
declaration of trust under which Barclays and the MTN issuer each received an
undivided interest in the trust property equal to the proportion of their
contributions to the receivables trust. The declaration of trust was amended and
restated by a declaration of trust and trust cash management agreement on 23
November, 1999. The declaration of trust and trust cash management agreement
will be supplemented by series supplements for each series of investor
certificates issued by the receivables trust.
The receivables trustee has been established for the purpose of acquiring credit
and charge card receivables of Barclaycard and any additional transferors and to
hold those receivables and the collections from them on trust for the
beneficiaries under the terms of the receivables trust set out in the
declaration of trust and trust cash management agreement and to make payments on
the investor certificates. The receivables trustee may issue other series of
investor certificates, representing undivided beneficial interests in the
receivables trust, from time to time. The receivables trustee may not engage in
any unrelated activities.
11
THE INVESTOR CERTIFICATE
The MTN issuer will pay the proceeds of the series 02-1 medium term note
certificate to the receivables trustee to acquire a separate, undivided
beneficial interest in the receivables trust. This undivided beneficial interest
will be the second series of the receivables trust and will be represented by
the investor certificate. The receivables trustee may issue other series of
investor certificates from time to time.
The MTN issuer will make payments of principal and interest on the series 02-1
medium term note certificate from payments made on the investor certificate. The
payments on the investor certificate will be made from payments of principal and
interest on the receivables.
The receivables trustee will be entitled to use the proceeds of the investor
certificate paid to it by the MTN issuer -- together with monies paid to it by
the other beneficiaries of the receivables trust -- to accept an offer by the
transferor to assign to the receivables trustee the present and future
receivables generated by the designated credit and charge card accounts of the
transferor.
The investor certificate will entitle the MTN issuer to receive payment of a
designated portion of collections of the credit and charge card receivables
assigned by the transferor to the receivables trustee. The MTN issuer will use
those collections for the redemption of the series 02-1 medium term note
certificate.
If a pay out event occurs, the rapid amortisation period or the regulated
amortisation period may begin, which could cause an early redemption of your
notes. If Barclays as the transferor beneficiary or the excess interest
beneficiary were to become insolvent, the receivables trustee may be required to
liquidate the receivables. In addition, some breaches of representations made by
the transferor will require the transferor to repurchase the receivables.
THE SWAP COUNTERPARTY
The swap counterparty for the notes will be Barclays Bank PLC acting through
Barclays Capital, its investment banking division in the United Kingdom. The
swap counterparty's address is 5 The North Colonnade, Canary Wharf, London E14
4BB, United Kingdom.
SWAP AGREEMENTS
Barclaycards' cardholders will make payments to Barclaycard in pounds sterling.
Accordingly, payments on the investor certificate and the series 02-1 medium
term note certificate will also be made in sterling. So that you can receive
payments on your notes in United States dollars, the issuer will enter into a
swap agreement with the swap counterparty.
Under the swap agreement for the notes, the issuer will pay to the swap
counterparty the sterling amounts received on the series 02-1 medium term note
certificate, less certain amounts representing the issuer's costs and expenses
and required earnings and less MTN additional interest payments not required to
pay amounts owing to the swap counterparty, and the swap counterparty will
convert those sterling amounts into dollars.
OPTIONAL EARLY REDEMPTIONS
The issuer has the option to redeem all of the remaining notes when their
principal balance is reduced to less than 10 per cent. of their original
principal balance.
If an optional early redemption occurs, you will receive a final distribution
equal to the entire unpaid principal balance of your notes plus any accrued and
unpaid interest.
NOTICES
Any notices that are required to be given by the term of your notes will be
deemed to be validly given if they are published in the Financial Times or
another leading English language daily newspaper in London.
UNITED KINGDOM TAX STATUS
Subject to important qualifications and conditions set out under "United Kingdom
Taxation Treatment of the Notes", including as to final documentation and
assumptions, Clifford Chance LLP, as special UK tax advisers, are of the opinion
that:
o U.S. persons who have no connection with the United Kingdom will not be
subject to United Kingdom taxation in respect of payment of principal and
interest on the notes as described more fully in the section of this
prospectus headed "United Kingdom Taxation Treatment of the Notes";
12
o If and for so long as the notes are listed on the Official List of the UK
Listing Authority and admitted to trading on the London Stock Exchange no
UK withholding tax will be required in respect of payments on the notes; if
these conditions are not satisfied UK withholding tax at the current rate
of 20 per cent. may be required in respect of these payments;
o No UK stamp duty or stamp duty reserve tax is payable on the issue of the
global notes or on the issue or transfer of an individual note certificate;
o The MTN issuer and the issuer will be subject to UK corporation tax, at a
maximum rate of currently 30 per cent., on the profit reflected in their
respective profit and loss accounts as increased by the amounts of any
non-deductible expenses or losses. The profit in the profit and loss
account should not exceed 0.01 per cent. of the principal amount
outstanding on the medium term notes or certificates in the case of the MTN
issuer, or on the notes in the case of the issuer. Examples of
non-deductible expenses and losses may include, for the MTN issuer: (1)
amounts paid by the MTN issuer to the receivables trustee to cover the
receivables trustee's fees and expenses, and (2) any losses of principal
which cannot be met out of excess spread; and for the issuer, certain
expenses relating to cash management; and
o The receivables trustee will have no UK tax liabilities and accordingly,
the receivables trustee will have no liability to UK tax in relation to
amounts which it receives on behalf of the MTN issuer or amounts which it
is obliged to pay to the MTN issuer.
Subject to finalisation of documents, including those which are exhibits to the
registration statement of which this prospectus forms a part, in a form
satisfactory to them and which is not inconsistent with the descriptions in this
prospectus, Clifford Chance LLP, as special UK tax advisers, expect to give an
opinion at closing by reference to the final documentation and based on certain
assumptions listed in that opinion, which will cover in detail the matters
referred to under this heading "--United Kingdom Tax Status". See "Risk Factors:
Taxable Nature of the MTN Issuer and Issuer Could Cause a Loss on Your Notes".
UNITED STATES FEDERAL INCOME TAX STATUS
As is further described herein, Orrick, Herrington & Sutcliffe LLP, special U.S.
tax counsel, is of the opinion that each of the receivables trust, the MTN
issuer and the issuer will not be subject to US federal income tax.
The issuer intends to treat the notes as debt for US federal income tax
purposes. Each noteholder, by holding a beneficial interest in a note, will
agree to conform to that treatment. However, no ruling will be obtained from the
IRS on the characterisation of the notes for federal income tax purposes.
Special U.S. tax counsel is of the opinion that, although there is no governing
authority addressing the classification of securities similar to the notes,
under current law, the notes will be treated as indebtedness for U.S. federal
income tax purposes. Unlike a tax ruling, an opinion of special U.S. tax counsel
is not binding on the IRS, and no assurance can be given that the
characterisation of the notes as debt would prevail if the issue were challenged
by the IRS. United States holders (as described in "Material United States
Federal Income Tax Consequences") of notes that are treated as equity in the
issuer, particularly the class C notes, are likely to be treated as owning
shares in a passive foreign investment company.
If the notes were treated as equity in a passive foreign investment company, in
particular, the class C notes, all or a portion of both distributions and gains
on the notes generally would be taxable to the holder as ordinary income, and
would be taxable at the highest marginal rates applicable to current and prior
years during the holding period. Further, all or a portion of the distributions
could be subject to the additional interest charge tax. This interest charge
regime may be avoided by an investor treated as owning equity in a passive
foreign investment company if that investor makes an effective qualified
electing fund, or QEF, election; however, as a technical matter, a QEF election
generally may only be made if the passive foreign investment company provides
certain information to its investors, and the issuer does not intend to do so.
Alternatively, it may be possible for an investor to avoid the interest charge
regime applicable to equity in a passive foreign investment company by making an
election to account for its investment using a mark-to-market method of tax
accounting, under which the investor would take into account accrued gains and
losses on its investment in the notes during the tax years to which they relate,
treating all related income and loss as ordinary income and loss. However, the
applicability of the mark-to-market election is dependent upon certain facts --
such as the frequency of secondary market trading of the notes -- as to which
there is uncertainty and, accordingly, as to which no assurance is possible.
Should neither of the foregoing elections effectively be made, investors whose
13
notes were treated as equity would be subject to the tax rules applicable to
investors in passive foreign investment companies described above.
Special U.S. federal income tax counsel to the issuer, Orrick, Herrington and
Sutcliffe LLP, has prepared and reviewed the summary of federal income tax
consequences in this prospectus and renders the United States federal income tax
opinions contained in this prospectus.
See "Material United States Federal Income Tax Consequences".
ERISA CONSIDERATIONS FOR INVESTORS
Subject to important considerations described under "ERISA Considerations" in
this prospectus, the notes are eligible for purchase by persons investing assets
of employee benefit plans or individual retirement accounts.
RATINGS OF THE NOTES
Each class of notes will be rated by Moody's Investors Services Limited and
Standard & Poor's Ratings Group. In this prospectus, we will refer to Moody's
Investors Services Limited as Moody's and Standard & Poor's Ratings Group as
Standard & Poor's, both of which we will refer to together as the rating
agencies.
On issue, the issuer expects the notes to be assigned the following ratings:
Class A Class B Class C
------- ------- -------
Moody's Aaa A1 Baa1
Standard & Poor's AAA A BBB
APPLICATION FOR ADMISSION TO THE OFFICIAL LIST AND ADMISSION TO TRADING
The issuer has applied to have the notes listed on the Official List of the UK
Listing Authority and admitted to trading on the London Stock Exchange. The
issuer expects the notes to be approved for listing on or about 24 October 2002.
14
RISK FACTORS
You should carefully consider the following risk factors before deciding to
invest in the notes offered by this prospectus.
YOU MAY NOT BE ABLE TO SELL There currently is no secondary market for the
YOUR NOTES notes. The underwriters expect, but are not
obligated, to make a market in the notes. If
no secondary market develops, you may not be
able to sell your notes prior to maturity. We
cannot offer any assurance that one will
develop or, if one does develop, that it will
continue.
ALLOCATIONS OF CHARGED-OFF We anticipate that the servicer will charge
RECEIVABLES COULD REDUCE off or write off as uncollectable some of the
YOUR PAYMENTS receivables. Each class of investor interest
in the receivables trust will be allocated a
portion of those charged-off receivables. If
the amount of charged-off receivables
allocated to the investor interest exceeds the
amount of funds available to cover those
charge-offs, the investor interest will be
reduced. This could cause the holders of the
notes to not receive the full amount of
principal and interest due to them. Any loss
will be borne by the noteholders in the order
of subordination of the notes, with the class
C notes bearing the first losses, followed by
the class B notes and finally the class A
notes. See "Series 02-1: Defaulted
Receivables; Investor Charge-Offs".
THE CLASS B NOTES AND THE The class B notes are subordinated in right of
CLASS C NOTES BEAR payment of principal and interest to the class
ADDITIONAL RISK BECAUSE A notes. Principal payments to the class B
THEY ARE SUBORDINATED noteholders will not be made until the class A
noteholders are paid in full. On each payment
date interest is paid to the class A
noteholders before payments of interest are
made to the class B noteholders. This could
cause the class B noteholders not to receive
the full amount of principal or interest due
to them.
The class C notes are subordinated in right of
payment of principal and interest to the class
A notes and the class B notes. Principal
payments to the class C noteholders will not
be made until the class A noteholders and the
class B noteholders are paid in full. On each
payment date interest is paid to the class A
noteholders and the class noteholders before
payments of interest are made to the class C
noteholders. This could cause the class C
noteholders not to receive the full amount of
principal or interest due to them.
INABILITY OF NOTEHOLDERS TO Some series 02-1 pay out events will cause the
RECEIVE THE FULL PERCENTAGE OF start of the regulated amortisation
ALLOCATION OF PRINCIPAL period rather than the rapid amortisation
COLLECTIONS DURING THE period. During a regulated amortisation
REGULATED AMORTISATION PERIOD period, all of the principal collections
COULD DELAY PAYMENTS ON YOUR allocated to the investor interest may not be
NOTES OR CAUSE A LOSS ON YOUR used to make payments of principal to the MTN
NOTES issuer as they would be during a rapid
amortisation period. Instead, principal
payments to the MTN issuer -- and thus
ultimately on your notes -- will be limited to
the controlled deposit amount. This could
cause you to receive payments of principal
slower than you would during a rapid
amortisation period. Since some of the series
02-1 pay out events that result in the start
of a regulated amortisation period are caused
by a deterioration in the performance of the
receivables, a delay in the principal payments
on your notes could expose you to an increased
risk of losses on your notes or a delay in
payment on your notes.
15
GROUPING OF THE MTN ISSUER WITH Contractual provisions will be contained in
BARCLAYS FOR TAX PURPOSES COULD the security trust deed and cash MTN
JEOPARDISE THE BANKRUPTCY REMOTE management agreement and the other agreements
STATUS OF THE MTN ISSUER CAUSING to which the MTN issuer is a party by which
AN EARLY REDEMPTION OF YOUR NOTES the other parties to those agreements agree
OR A LOSS ON YOUR NOTES not to take any actions against the MTN issuer
that might lead to its bankruptcy.
Furthermore, the MTN issuer will be
contractually restricted from undertaking any
business other than in connection with the
financings described in this prospectus. In
particular, the MTN issuer will be expressly
prohibited from incurring any additional
indebtedness, having any employees, owning any
premises and establishing or acquiring any
subsidiaries. Together, these provisions
ensure that the likelihood of the MTN issuer
becoming insolvent or bankrupt is remote.
Notwithstanding the steps that have been and
may be taken to ensure that the insolvency of
the MTN issuer will be remote, the MTN issuer
is included in the Barclays group registration
for VAT purposes. As a company included in
that group registration, broadly, it will be
liable, on a joint and several basis with all
other companies in the VAT group registration,
for the VAT liability of the representative
member of the VAT group -- Barclays Banc PLC
-- arising only during the MTN issuer's period
of membership. Accordingly, these secondary
liabilities for VAT could increase the
likelihood of the MTN issuer becoming
insolvent. In addition, there are provisions
in the UK tax code that are designed to enable
the UK Inland Revenue to collect corporation
tax from one member of a group where another
member of the group has failed to discharge
certain taxes due and payable by it within a
specified time period.
If the MTN issuer were required to pay any VAT
due from the representative member of the
Barclays VAT group or to become liable for
corporate tax liabilities of another member in
the Barclays group, which the MTN issuer was
unable to meet, the UK HM Custom & Excise or
Inland Revenue could seek to put the MTN
issuer in insolvency. This could cause an
early redemption of your notes or a loss on
your notes.
ISSUANCE OF ADDITIONAL SERIES The MTN issuer has issued one previous series
MAY ADVERSELY AFFECT YOUR RIGHTS and may issue new series of medium term notes
BY DILUTING YOUR VOTING POWER or certificates in connection with the
issuance of other series of investor
certificates. The holder of the medium term
notes or certificates of each series --
including the issuer -- may require the MTN
issuer, as investor beneficiary, to take
action or direct actions to be taken under the
declaration of trust and trust cash management
agreement or a supplement. However, the
consent or approval of holders of a percentage
of the total principal balance of the medium
term notes or certificates of all series might
be necessary to require or direct those
actions. These actions include terminating the
appointment of the servicer under the
beneficiaries servicing agreement or the trust
cash manager under the declaration of trust
and trust cash management agreement. Thus, the
holder of any new series of medium term notes
or certificates will have voting rights that
will reduce the percentage interest of the
issuer as holder of the series 02-1 medium
term note certificate. Holders of medium term
notes or certificates of other series -- or
persons with the power to direct their actions
-- may have interests that do not coincide
with the interests of the issuer -- or the
persons with the power to direct the issuer.
This may restrict your ability to ultimately
direct the MTN issuer to take the actions
referred to above.
16
INSOLVENCY OF THE TRANSFEROR MAY None of the MTN issuer, the receivables
RESULT IN AN INABILITY TO trustee or the issuer has undertaken or will
REPURCHASE RECEIVABLES undertake any investigations, searches or
other actions to verify the details of the
receivables -- other than steps taken by the
issuer to verify the details of the
receivables that are presented in this
prospectus -- or to establish the
creditworthiness of any cardholder on the
designated accounts. The MTN issuer,
receivables trustee and the issuer will rely
solely on the representations given by the
transferor to the receivables trustee about
the receivables, the cardholders on the
designated accounts, the designated accounts
and the effect of the assignment of the
receivables.
If any representation made by the transferor
about the receivables proves to have been
incorrect when made, the transferor will be
required to repurchase the affected
receivables from the receivables trustee. If
the transferor becomes bankrupt or insolvent,
the receivables trustee may be unable to
compel the transferor to repurchase
receivables, and you could incur a loss on
your notes or an early redemption of your
notes.
INSOLVENCY OF THE ISSUER, THE MTN The ability of each of the issuer, the MTN
ISSUER OR THE RECEIVABLES TRUSTEE issuer and the receivables trustee to meet its
COULD CAUSE AN EARLY REDEMPTION obligations under the notes, the series 02-1
OF YOUR NOTES OR A LOSS ON YOUR medium term note certificate and the
NOTES receivables securitisation agreement and the
declaration of trust and trust cash management
agreement will depend upon their continued
solvency.
A company that has assets in the United
Kingdom will be insolvent if its liabilities
exceed its assets or if it is unable to pay
its debts as they fall due. Each of the
issuer, the MTN issuer and the receivables
trustee have been structured so that the
likelihood of their becoming insolvent is
remote. Each of these entities will be
contractually restricted from undertaking any
business other than in connection with the
financings described in this prospectus. They
each will be expressly prohibited from
incurring any additional indebtedness, having
any employees, owning any premises and
establishing or acquiring any subsidiaries.
Contractual provisions will be contained in
each of the agreements to which they are a
party that will prohibit the other parties to
those agreements, other than your notes, from
taking any actions against these entities that
might lead to their bankruptcy. Together,
these provisions help ensure that the
likelihood of any of these entities becoming
insolvent or bankrupt is remote.
Notwithstanding these actions, it is still
possible that the issuer, the MTN issuer or
the receivables trustee could become
insolvent. If this were to occur, you could
suffer a loss on your notes or an early
redemption of your notes.
RECENT AMENDMENTS TO THE UNITED Significant changes to the United Kingdom
KINGDOM INSOLVENCY REGIME COULD insolvency regime have recently been enacted,
DELAY PAYMENTS TO NOTEHOLDERS IN although not all of these provisions have yet
AN INSOLVENCY PROCEEDING been brought into effect. In particular, the
Insolvency Act 2000 will, when the relevant
provisions are brought into force, allow
certain "small" companies, which are defined
by reference to certain financial and other
tests, as part of the company voluntary
arrangement procedure, to obtain a moratorium
protection -- statutory freeze -- from their
creditors for a period of 28 days with the
option for the creditors to extend the
moratorium for a further two months. If
protection for a moratorium period is granted
in relation to a company, no insolvency
procedures may be commenced in relation to
that
17
company, any security created by that company
over its property cannot be enforced, and no
other legal process can be taken in relation
to that company during such period except with
the consent of the court. However, a company
may continue to make payments in respect of
its debts if there are reasonable grounds for
believing such payments will benefit that
company and the payment is approved by either
a moratorium committee of the creditors of
that company or by a nominee of that company
appointed under the provisions of the
Insolvency Act 2000.
The issuer is unlikely to be regarded as a
small company within the meaning of the
Insolvency Act 2000 as currently drafted. The
Secretary of State for Trade and Industry may
by regulation in the future modify the
eligibility requirements for the applicability
of the Insolvency Act 2000, including the
modification of the definition of small
company so that the issuer would come within
the ambit of these provisions of the
Insolvency Act 2000. The Secretary of State
has also proposed draft regulations excluding
the applicability of these provisions to
companies entering into certain types of
financial arrangements. These draft
regulations are not yet settled and may or may
not be enacted.
Although such a moratorium could delay
enforcement proceedings against the issuer
this would be for a maximum period of only
three months. In addition, even if a
protection period were granted in relation to
the issuer, it could obtain approval to
continue to make payments in accordance with
the documents to which it is a party.
Nonetheless, no assurance can be given that
the implementation of these provisions, and
the possible imposition of such a moratorium,
will not be detrimental to the interests of
the noteholders.
POTENTIAL AMENDMENTS TO UNITED Administrative Receivership
KINGDOM ADMINISTRATIVE
RECEIVERSHIP COULD BE DETRIMENTAL Under the current insolvency regime in the
TO NOTEHOLDERS United Kingdom, a company or any of its
creditors may petition for the company to go
into administration. One of the effects of the
presentation of a petition for a company to go
into administration, and the subsequent making
of an administration order, is that there is a
moratorium upon any enforcement action being
taken by the holder of any security without
the leave of the court. An administrator also
has the power, with the leave of the court, to
sell property that is subject to any security
other than a floating charge, free from that
security, on condition that the net proceeds
of them are applied towards discharging the
sum secured by the security. Property that is
the subject of a floating charge may be sold
by the administrator without the requirement
of obtaining the leave of the court, but the
charge holder will retain the same priority in
respect of any property representing the
property disposed of as he would have had in
respect of the property sold.
The appointment of an administrator can be
blocked by the appointment of an
administrative receiver, being a receiver of
the whole or substantially the whole of a
company's property appointed pursuant to a
floating charge or a floating charge together
with other charges, a qualifying floating
charge. Under the current law, we anticipate
that, if any third party were to petition for
the administration of the issuer, the note
trustee would be directed to enforce the
security created under the deed of charge, and
the note trustee would accelerate the notes.
18
Two White Papers published by the United
Kingdom government in July 2001 and January
2002, respectively entitled "Productivity and
Enterprise -- Insolvency -- A Second Chance"
and "Enterprise Bill: An update on the
Corporate Insolvency Proposals", set out in
broad terms proposals for the reform of the
insolvency process. These proposals have now
been set out in the Enterprise Bill which was
introduced to Parliament on 25 March 2002 and
is expected to receive Royal Assent during
October or November 2002. Part of the reforms
includes a change to the existing United
Kingdom insolvency regime by prohibiting the
appointment by a holder of a qualifying
floating charge of an administrative receiver,
subject to certain exceptions including an
exception for substantial capital markets
arrangements, and replacing this power with a
right to appoint an administrator under a
reformed administration procedure. These
reforms will also prevent the holder of a
qualifying floating charge from being able to
block either the appointment of an
administrator by a company or its directors, a
new procedure which is part of the reforms or
the making of an administration order on the
petition of any other creditor.
Accordingly, but subject to the following
paragraphs, if these proposals are put into
effect in their current form, it is likely
that a security trustee would be unable to
appoint an administrative receiver to an
issuer that had provided a qualifying floating
charge in order to avoid it going into
administration. However, pursuant to the deed
of charge, each secured creditor of the issuer
has undertaken to the note trustee for itself
and on behalf of each other secured creditor,
including the noteholders, that such party
will not take any corporate action or other
steps or legal proceedings for the winding up,
dissolution or re-organisation or for the
appointment of a receiver, administrator,
administrative receiver, trustee, liquidator,
sequestrator or similar officer of the issuer
or of any or all of the revenues and assets of
the issuer or participate in any ex parte
proceedings nor seek to enforce any judgement
against the issuer.
Grandfathering
The relevant provisions of the Enterprise
Bill, once enacted, will be brought into force
by order of the Secretary of State for Trade
and Industry and will apply to any floating
charge created on or after the date appointed
by the Secretary of State in that order. The
Enterprise Bill also provides that the
Secretary of State may make a further order or
orders to curtail this or any other exception
from the prohibition on the appointment of an
administrative receiver. The Enterprise Bill
has now completed the Committee stage of the
House of Commons during which the Government
accepted an amendment which would ensure that
the appointed date of the inception of the
prohibition will not pre-date the legislation.
It would appear, therefore, that the security
created under the deed of charge will benefit
from the grandfathering provided in the
Enterprise Bill such that the prohibition will
not apply to the security or the deed of
charge.
However, even if the security under the deed
of charge does not benefit from a
grandfathering provision, the Enterprise Bill
contains certain exceptions to the prohibition
on the appointment of an administrative
receiver, and these include an exception in
respect of certain transactions in the capital
markets. As currently drafted, the capital
markets exception will apply to, and therefore
allow administrative receivers to be appointed
19
pursuant to, debentures issued in connection
with capital market arrangements where a party
incurs or is expected to incur a debt of at
least (pound)50 million and a rated, listed or
traded capital market investment is issued. If
enacted in its current form, it is very likely
that the capital markets exception would apply
to the security granted under the deed of
charge. However, the Bill is subject to
further comment, scrutiny and Parliamentary
reading and may be enacted in an alternate
form or not at all, and there is a risk that,
if the security granted under the deed of
charge is not grandfathered, such security may
fall outside the capital markets exception as
finally enacted.
Ring Fencing
The Enterprise Bill also proposes a new
Section 176A to be inserted into the
Insolvency Act 1986 which will provide that,
on an insolvency, a certain proportion of
realisations in an amount to be determined in
respect of certain classes of assets subject
to a floating charge shall be set aside for
the benefit of ordinary unsecured creditors.
Subsections (9) and (10) of the proposed
Section 176A provide that this setting aside,
or ring fencing, of floating charge
realisations shall not apply in relation to a
floating charge which was created prior to the
relevant provision of the Enterprise Bill
being brought into force. This has the effect
of ensuring that the ring fencing provisions
will not be retrospective as the date which
determines whether the obligation to set aside
applies on insolvency will be the date on
which the floating charge is created.
There is a possibility that the reforms
proposed by the Enterprise Bill may be brought
into force in a piecemeal fashion. However, on
the assumption that the ring fencing
provisions set out in Section 176A are subject
to the grandfathering provisions set out in
Subsections (9) and (10), it is unlikely that
the former will be brought into force without
the latter.
We are not in a position to determine whether
the Enterprise Bill, or the proposed changes
to the English insolvency regime contained
therein, will be enacted; or, if they are
enacted, whether they would have a detrimental
effect on investors in the notes or would
affect transactions entered into or to be
entered into by the issuer.
APPLICATION OF THE CONSUMER The primary statute dealing with consumer
CREDIT ACT 1974 MAY IMPEDE credit in the United Kingdom is the Consumer
COLLECTION EFFORTS AND COULD Credit Act 1974. The Consumer Credit Act
CAUSE EARLY REDEMPTION OF YOUR applies to the transactions occurring on the
NOTES OR A LOSS ON YOUR NOTES designated accounts and, in whole or in part,
to the credit or charge card agreements. This
may have consequences for your investment in
the notes, because of the possible
unenforceability of, or possible liabilities
for misrepresentation or breach of contract
in relation to, an underlying credit or charge
card agreement.
If a credit or charge card agreement has not
been executed or modified in accordance with
the Consumer Credit Act, it may be
unenforceable against a cardholder without a
court order -- and in some instances may be
completely unenforceable. As is common with
many other UK credit card issuers, some of
Barclaycard's credit and charge card
agreements do not comply in all respects with
the Consumer Credit Act or other related
legislation. As a result, these agreements may
be unenforceable by Barclaycard against the
cardholders without a court order. The
transferor gives no guarantee that a court
order could be obtained if required. With
respect to those credit or charge card
agreements
20
which may not be compliant, such that a court
order would not be obtained, the transferor
estimates that this would apply to less than 1
per cent. of the aggregate principal
receivables in the designated accounts on 30
June, 2002. Barclaycard does not anticipate
any material increase in the percentage of
these receivables in the securitised
portfolio. The accounts that do not comply
with the Consumer Credit Act are still legal,
valid and binding obligations of the
cardholder and it will still be possible to
collect payments and demand arrears from
cardholders who are falling behind with their
payments. The transferor will have no
obligation to repay or account to a cardholder
for any payments received by a cardholder
because of this non-compliance with the
Consumer Credit Act. However, if losses arise
on these accounts, they will be written off
and borne by the investor beneficiary and
transferor beneficiary based on their
interests in the receivables trust.
Transactions involving the use of a credit
card in the United Kingdom may constitute
transactions under debtor-creditor-supplier
agreements for the purposes of section 75 of
the Consumer Credit Act. A
debtor-creditor-supplier agreement includes an
agreement by which the creditor, with
knowledge of its purpose, advances funds to
finance the debtor's purchase of goods or
services from a supplier.
Section 75 of the Consumer Credit Act provides
that if a supplier breaches a contract between
the supplier and a cardholder in a transaction
under a debtor-creditor-supplier agreement, or
if the supplier makes a misrepresentation
about the contract, the creditor may also be
liable to the cardholder for the breach or
misrepresentation. An example of a supplier's
breach of contract would include the supplier
selling the cardholder merchandise that is
defective or unsuitable for its purpose. In
these circumstances, the cardholder may have
the right to reduce the amount owed to the
transferor under his or her credit or charge
card account. This right would survive the
sale of the receivables to the receivables
trustee. As a result, the receivables trustee
may not receive the full amount otherwise owed
by a cardholder. However, the creditor will
not be liable where the cash price of the item
or service supplied underlying the claim is
less than (pound)100 or greater than
(pound)30,000.
The receivables trustee has agreed on a
limited recourse basis to indemnify the
transferor for any loss suffered by the
transferor from a cardholder claim under
section 75 of the Consumer Credit Act. This
indemnity cannot exceed the original
outstanding principal balance of the affected
charges on a designated account.
The receivables trustee's indemnity will be
payable only from and to the extent of excess
spread on the receivables. Any amounts that
the transferor recovers from the supplier will
reduce the transferor's loss for purposes of
the receivables trustee's indemnity. This is
described under "Series 02-1: Aggregate
Investor Indemnity Amount". The transferor
will have rights of indemnity against
suppliers under section 75 of the Consumer
Credit Act. The transferor may also be able to
charge-back the transaction in dispute to the
supplier under the operating regulations of
VISA or MasterCard.
If the transferor's loss for purposes of the
receivables trustee's indemnity exceeds the
excess spread available to satisfy the loss,
the transferor interest in the receivables
trust will be reduced by the amount of the
excess loss.
21
These consequences could result in you
incurring a loss on your investment or an
early redemption of your notes.
FAILURE TO NOTIFY CARDHOLDERS OF The transfer by the transferor to the
THE TRANSFER OF RECEIVABLES COULD receivables trustee of the benefit of the
DELAY OR REDUCE PAYMENTS ON YOUR receivables is governed by English law and
NOTES does not give the receivables trustee full
legal title to the receivables. Notice to the
cardholders of the transfer would perfect the
legal title of the receivables trustee to the
receivables. The receivables trustee has
agreed that notice of the transfer will not be
given to cardholders unless the transferor's
long-term senior unsecured indebtedness as
rated by Moody's, Standard & Poor's or Fitch
were to fall below Baa2, BBB or BBB,
respectively. The lack of notice has several
legal consequences that could delay or reduce
payments on your notes.
Until notice is given to a cardholder, the
cardholder will discharge his or her
obligation under the designated account by
making payment to the transferor.
Prior to the insolvency of the transferor,
unless notice was given to a cardholder who is
a depositor or other creditor of the
transferor, equitable set-offs may accrue in
favour of the cardholder against his or her
obligation to make payments to the transferor
under the designated account. These rights may
result in the receivables trustee receiving
reduced payments on the receivables. The
transfer of the benefit of any receivables to
the receivables trustee will continue to be
subject both to any prior equities that a
cardholder had and to any equities the
cardholder may become entitled to after the
transfer. Where notice of the transfer is
given to a cardholder, however, some rights of
set-off may not arise after the date notice is
given.
Failure to give notice to the cardholder means
that the receivables trustee would not take
priority over any interest of a later
encumbrancer or transferee of the transferor's
rights who has no notice of the transfer to
the receivables trustee. This could lead to a
loss on your notes.
Failure to give notice to the cardholder also
means that the transferor or the cardholder
can amend the card agreement without obtaining
the receivables trustee's consent. This could
adversely affect the receivables trustee's
interest in the receivables, which could lead
to a loss on your notes.
COMPETITION IN THE UK CREDIT The credit and charge card industry in the
CARD INDUSTRY COULD LEAD TO United Kingdom is highly competitive. There is
EARLY REDEMPTION OF YOUR NOTES increased competitive use of advertising,
target marketing and pricing competition in
interest rates and cardholder fees as both
traditional and new card issuers seek to
expand or enter the UK market and compete for
customers.
New card issuers may rely on customer loyalty
and may have particular ways of reaching and
attracting customers. For example, major
supermarket retailers are promoting the use of
their own cards through extensive in-store
campaigns and low introductory interest rates.
Also, in the last few years a number of new
card issuers have entered the UK market from
the United States and have sought to build
market share primarily through aggressive
pricing. As a result of this competition,
certain competitors offer cards to selected
customers at lower interest rates than those
offered by Barclaycard.
This competitive environment may affect the
originator's ability to originate new accounts
and generate new receivables. If the rate at
which new receivables are generated declines
significantly
22
and if the transferor is unable to nominate
additional accounts or product lines for the
receivables trust, a series 02-1 pay out event
could occur. A series 02-1 pay out event could
result in an early redemption of your notes.
SOCIAL, LEGAL, POLITICAL AND Changes in card use, payment patterns, amounts
ECONOMIC FACTORS AFFECT CARD of yield on the card portfolio generally and
PAYMENTS AND ARE UNPREDICTABLE the rate of defaults by cardholders may result
from a variety of social, legal, political and
economic factors in the United Kingdom. Social
factors include changes in public confidence
levels, attitudes toward incurring debt and
perception of the use of credit and charge
cards. Economic factors include the rate of
inflation, the unemployment rate and relative
interest rates offered for various types of
loans. Political factors include lobbying from
interest groups, such as consumers and
retailers, and government initiatives in
consumer and related affairs. For example,
there is a current United Kingdom Office of
Fair Trading examination of whether the levels
of interchange paid by retailers are too high,
and the outcome of this examination cannot be
predicted, but could adversely affect the
yield on UK credit card portfolios. The
European Commission has also conducted an
examination of the level of cross-border
interchange within the European Union and its
findings could lead to a reduction in the
level of interchange to be paid by retailers
in the future. We are unable to determine and
have no basis on which to predict accurately
whether, or to what extent, social, legal,
political or economic factors will affect the
future use of credit, default rates, the yield
on the card portfolio generally or cardholder
repayment patterns.
A CHANGE IN THE TERMS OF THE Only the receivables arising under the
RECEIVABLES MAY ADVERSELY AFFECT designated accounts are transferred to the
THE AMOUNT OR TIMING OF receivables trustee. The originator will
COLLECTIONS AND MAY CAUSE AN continue to own those accounts. As the owner
EARLY REDEMPTION OF YOUR NOTES OR of the accounts, the originator retains the
A DOWNGRADE OF YOUR NOTES right to change the terms of the accounts. For
example, the originator could change the
monthly interest rate, increase or reduce the
credit limits on the accounts, reduce or
eliminate fees on the accounts or reduce the
required minimum monthly payment.
The originator may change the terms of the
accounts to maintain its competitive position
in the UK credit and charge card industry.
Changes in interest and fees could lower the
amount of finance charge receivables generated
by those accounts. This could cause a pay out
event to occur, which might cause an early
redemption of your notes. This could also
cause a reduction in the credit ratings on
your notes.
PRINCIPAL ON YOUR NOTES MAY BE The receivables in the receivables trust may
PAID EARLIER THAN EXPECTED be paid at any time and we cannot assure you
CREATING A REINVESTMENT RISK that new receivables will be generated or will
TO YOU OR LATER THAN EXPECTED be generated at levels needed to maintain the
receivables trust. To prevent the early
redemption of the notes, new receivables must
be generated and added to the receivables
trust or new accounts must be nominated for
the receivables trust. The receivables trust
is required to maintain a minimum amount of
receivables. The generation of new receivables
or receivables in new accounts is affected by
the originator's ability to compete in the
current industry environment and by customers
changing borrowing and payment patterns. If
there is a decline in the generation of new
receivables or new accounts, you may be repaid
your principal before the expected date.
One factor that affects the level of finance
charge and principal collections is the extent
of convenience usage. Convenience use means
that the cardholders pay their account
balances in full on
23
or prior to the due date. The cardholder,
therefore, avoids all finance charges on his
or her account. An increase in the convenience
usage by cardholders would decrease the
effective yield on the accounts and could
cause a pay out event and therefore possibly
an early redemption of your notes.
No premium will be paid upon an early
redemption of your notes. If you receive
principal on your notes earlier than expected,
you may not be able to reinvest the principal
at a similar rate of return.
Alternatively, a decrease in convenience usage
may reduce the principal payment rate on the
accounts. This could result in you receiving
the principal on your notes later than
expected.
CREDIT ENHANCEMENT MAY BE Credit enhancement for your notes is limited.
INSUFFICIENT TO PREVENT A The only assets that will be available to make
LOSS ON YOUR NOTES payment on your notes are the assets of the
issuer pledged to secure payment of your
notes. If problems develop with the
receivables, such as an increase in losses on
the receivables, or if there are problems in
the collection and transfer of the receivables
to the trust, or if the swap counterparty
fails to make payments on the swap agreement,
it is possible that you may not receive the
full amount of interest and principal that you
would otherwise receive.
ISSUANCE OF ADDITIONAL SERIES BY Series 02-1 is the second series created
THE RECEIVABLES TRUSTEE ON BEHALF within the receivables trust. Series 99-1 was
OF THE RECEIVABLES TRUST MAY the first series created within the
ADVERSELY AFFECT PAYMENTS ON receivables trust. Additional series may from
YOUR NOTES time to time be created within the receivables
trust. Any new series of investor certificates
-- and medium term notes or certificates and
notes -- will also be payable from the
receivables in the receivables trust. The
principal terms of any new series of investor
certificates will be contained in a new series
supplement to the declaration of trust and
trust cash management agreement. The terms of
a new series contained in the new supplement
to the declaration of trust and trust cash
management will not be subject to your prior
review or consent.
The principal terms of a new series may
include methods for determining investor
percentages and allocating collections,
provisions creating different or additional
security or other credit enhancement for the
new series, provisions subordinating the new
series to other series, and other amendments
or supplements to the declaration of trust and
trust cash management agreement that apply
only to the new series. It is a condition to
the issuance of a new series that each rating
agency that has rated any debt ultimately
payable from a prior series of investor
certificates that is outstanding -- including
your notes -- confirms in writing that the
issuance of the new series will not result in
a reduction or withdrawal of its rating.
However, the terms of a new series could
adversely affect the timing and amounts of
payments on any other outstanding series,
including series of which your notes are a
part.
CREDIT QUALITY OF THE RECEIVABLES The transferor may designate additional credit
TRUST'S ASSETS MAY BE ERODED BY or charge card accounts as designated accounts
THE ADDITION OF NEW ACCOUNTS and offer the receivables trustee an
WHICH COULD ADVERSELY AFFECT assignment of the receivables arising under
COLLECTIONS OF RECEIVABLES the additional accounts. The transferor may be
required at times to nominate additional
accounts as designated accounts. These
accounts may include accounts that were
originated or acquired using criteria that are
different from those applicable to the
accounts from which receivables were
originally assigned to the receivables
trustee. For example, they could be originated
at a different date
24
with different underwriting standards, or they
could be acquired from another institution
that used different underwriting standards.
Consequently, there can be no assurance that
accounts that become designated accounts in
the future will have the same credit quality
as the designated accounts on the closing
date. This could adversely affect collections
on the receivables.
INTEREST RATE PAYABLE ON THE In line with the rest of the UK market,
SERIES 02-1 MEDIUM TERM NOTE Barclaycard may apply differential interest
CERTIFICATE MAY INCREASE WITHOUT rates to each product offering, some of which
A CORRESPONDING CHANGE IN CARD may be fixed for predetermined periods. The
RATES POTENTIALLY CAUSING A LOSS majority of the designated accounts have
ON YOUR NOTES OR EARLY REDEMPTION monthly interest rates that are constant,
OF YOUR NOTES except for Barclaycard's ability to change the
interest rate at its discretion. The interest
rate paid on the series 02-1 medium term note
certificate will be based on the London
interbank offered rate for deposits in
sterling, which changes from time to time.
Accordingly, the interest payable on the MTN
could increase without a corresponding
increase in the amount of finance charge
collections. If this occurred, you could
suffer a loss on your notes or a pay out event
could occur causing an early redemption of
your notes.
COMMINGLING OF COLLECTIONS WITH Collections from cardholders for the
TRANSFEROR MAY DELAY OR REDUCE designated accounts and other Barclaycard
PAYMENTS ON YOUR NOTES cardholders will initially be paid to an
operating account of the transferor. The
transferor has declared a trust over the
operating account in favour of the receivables
trustee for collections that are deposited in
it. Collections on the designated accounts
will be transferred to the trustee collection
account within two business days of being
identified.
For the limited time that collections on the
designated accounts are in the operating
account, they may be commingled with other
funds of the transferor or future
beneficiaries and they may be untraceable.
Consequently, if the transferor were to become
insolvent, there may be a delay in the
transfer of collections to the receivables
trustee if the transferor -- or a liquidator
or administrator of the transferor --
attempted to freeze the operation of the
operating account pending completion of any
rights of tracing. This could ultimately cause
a delay or reduction in the payments you
receive on your notes.
IF THE TRANSFEROR OPTS TO TREAT The transferor may opt to cause a percentage
A PORTION OF PRINCIPAL of receivables that would otherwise be treated
RECEIVABLES AS FINANCE CHARGE as principal receivables to be treated as
RECEIVABLES, AN EARLY REDEMPTION finance charge receivables. If the transferor
OF YOUR NOTES COULD OCCUR OR were to exercise this option, it could prevent
COULD BE DELAYED a pay out event from occurring because of a
reduction of the portfolio yield, which could
delay an early redemption of your notes at a
time when the performance of the receivables
is deteriorating. Once this option is
exercised, the transferor may also reduce the
percentage or stop using the percentage at any
time. However, this option, if exercised, will
reduce the aggregate amount of principal
receivables, which may increase the likelihood
that the transferor will be required to
designate additional accounts from which
receivables will be assigned to the
receivables trustee. If the transferor were
unable to designate additional accounts, a pay
out event could occur and you could receive
payments of principal on your notes before you
expect them.
IF OPTIONAL EARLY REDEMPTION When the total principal balance of the notes
OCCURS, IT WILL RESULT IN AN is reduced to less than 10 per cent. of their
EARLY REDEMPTION OF YOUR NOTES original principal balance, the issuer has the
CREATING A REINVESTMENT RISK option to redeem the notes in full. This early
redemption may result in an early return of
your investment. No premium will be
25
paid in the event of an exercise of the early
redemption option. If you receive principal on
your notes earlier than expected, you may not
be able to reinvest the principal at a rate of
return similar to that on your notes.
IF CARDHOLDERS ARE CONCENTRATED If the receivables trust has a high
IN A GEOGRAPHIC REGION, ECONOMIC concentration of receivables from cardholders
DOWNTURN IN THAT REGION MAY located in a single region, an economic
ADVERSELY AFFECT COLLECTIONS OF downturn in that region may have a magnified
RECEIVABLES adverse effect on the receivables trust
because of that concentration. This prospectus
contains a geographic breakdown of accounts
and the amount of receivables generated in the
regions of the United Kingdom. See "The
Receivables: Geographic Distribution of
Accounts -- Securitised Portfolio".
As determined from postcode information for
the location of cardholders as of 23 September
2002, the three largest concentrations of
cardholders as at 30 June 2002 were London
representing 18.6 per cent. of total
outstanding balances, the South East of
England with 16.6 per cent. of total
outstanding balances and the East on England
with 11.6 per cent. of total outstanding
balances. No other region currently accounts
for more than 10 per cent. of the outstanding
balance of the receivables. These
concentration levels may change in the future.
We are not aware of any existing adverse
economic conditions affecting any of these
regions that would be material to you. Future
adverse economic conditions affecting any of
these regions or any of the other regions,
however, could adversely affect the
performance of the receivables which could
result in a loss on your notes.
ADOPTION OF THE EURO BY THE Before your notes have matured, the euro could
UNITED KINGDOM WOULD HAVE become the lawful currency of the United
UNCERTAIN EFFECTS ON YOUR NOTES Kingdom. If that were to happen, all amounts
payable on the series 02-1 medium term note
certificate -- including the sterling payments
owed to the swap counterparty on the swap
agreements but not any dollar payments made by
the swap counterparty to the issuer -- may
become payable in euro. If the series 02-1
medium term note certificate is outstanding
when the euro becomes the lawful currency of
the United Kingdom, we intend to make payments
on the series 02-1 medium term note
certificate and the swap agreements according
to the then market practice of payment on
debts or, as the case may be, swaps. We are
uncertain what effect, if any, the adoption of
the euro by the United Kingdom may have on
your notes.
ADOPTION OF PROPOSED EUROPEAN On 13 December 2001, the European Union
UNION SAVINGS TAX DIRECTIVE COULD Council of Economic and Finance Ministers
CAUSE WITHHOLDING TAX TO BE approved the text of a proposed new draft
APPLIED TO PAYMENTS ON THE NOTES directive regarding the taxation of savings
income. Subject to a number of important
conditions being met, it is proposed that
member states of the European Union will be
required to provide to the tax authorities of
another member state details of payments of
interest or other similar income paid by a
person within its jurisdiction to an
individual resident in that other member
state, subject to the right of Belgium,
Luxembourg and Austria to opt instead for a
withholding system for a transitional period
in relation to such payments.
The proposed directive is not yet final, and
may be subject to further amendment and/or
clarification. Consequently, it is not
possible to predict what effect, if any, the
adoption of the directive would have on the
notes or on payment of principal or interest
on the notes.
26
TAXABLE NATURE OF THE MTN ISSUER As explained in "Prospectus Summary: United
AND THE ISSUER COULD CAUSE A Kingdom Tax Status" above, the MTN issuer
LOSS ON YOUR NOTES and the issuer will be liable to UK
corporation tax at the current rate of 30 per
cent. on the profit reflected in their
respective profit and loss accounts as
increased to take account of any
non-deductible expenses or losses; which
profit before any such increase is not
expected to exceed 1 basis point of the
principal amount outstanding on the medium
term notes and the certificates and the notes
respectively.
If the taxable profits of the MTN issuer or
the issuer are greater than expected, because
either the profit shown in the profit and loss
account is greater than 1 basis point of the
principal amount outstanding, or
non-deductible expenses or losses are greater
than expected, the MTN issuer or the issuer,
as the case may be, will be subject to
corporation tax on the greater amount at the
maximum rate of currently 30 per cent., and
you could suffer losses on your notes as a
result.
In order for the closing of the sale of the
notes to occur, an opinion must be obtained
from UK tax advisers covering the matters
described under the heading "Prospectus
Summary: United Kingdom Tax Status" above, and
in particular confirming the expected tax
treatment of the MTN issuer and the issuer and
analysing in detail the sorts of expenses
which either entity can incur which may not be
deductible. Subject to finalisation of
documents including those which are exhibits
to the registration statement of which this
prospectus forms a part in a form which is
satisfactory to them and not inconsistent with
the descriptions set out in the body of this
prospectus, Clifford Chance LLP, as special UK
tax advisers, expect to deliver this closing
tax opinion to the appropriate rating
standard.
An opinion of UK tax advisers, however, is not
binding on the courts, and no specific
transaction rulings on this issue will be
obtained from the UK Inland Revenue. In
addition, there is no case law authority on a
number of features of the transactions that
raise difficult questions.
LIMITED NATURE OF CREDIT RATINGS Each credit rating assigned to your notes
ASSIGNED TO YOUR NOTES reflects the rating agency's assessment only
of the likelihood that interest and principal
will be paid to you by the final redemption
date, not that it will be paid when expected
or scheduled. These ratings are based on the
rating agencies' determination of the value of
the receivables, the reliability of the
payments on the receivables, the
creditworthiness of the swap counterparty and
the availability of credit enhancement.
The ratings do not address the following:
o the likelihood that the principal or
interest on your notes will be redeemed or
paid, as expected, on the scheduled
redemption dates;
o the possibility of the imposition of United
Kingdom or European withholding tax;
o the marketability of the notes, or any
market price; or
o that an investment in the notes is a
suitable investment for you.
A rating is not a recommendation to purchase,
hold or sell notes.
RATINGS CAN BE LOWERED OR Any rating agency may lower its rating or
WITHDRAWN AFTER YOU PURCHASE withdraw its rating if, in the sole judgement
YOUR NOTES of the rating agency, the credit quality of
the notes has declined or is in question. If
any rating assigned to your
27
notes is lowered or withdrawn, the market
value of your notes may be reduced.
The issuer has the right, but not the
obligation, to direct the swap counterparty to
assign the swap agreements to a replacement
swap counterparty if the long-term credit
rating of the swap counterparty is withdrawn
or reduced below "Aa3" by Moody's or its
short-term credit rating is reduced below
"A-1+" by Standard & Poor's and the swap
counterparty has not remedied the event under
the terms of the swap agreement. We cannot
assure you, however, that the issuer will be
able to find a replacement swap counterparty
and assign the swap agreements in this event
or that the ratings of your notes will not be
withdrawn or reduced in this event.
TERMINATION OF THE SWAP A swap agreement may be terminated, but only
AGREEMENTS COULD RESULT IN AN if the issuer has been directed to do so by
EARLY REDEMPTION OF YOUR NOTES the relevant noteholders, if as a result of a
change in applicable law, withholding taxes
would be imposed -- by any jurisdiction -- on
payments to the issuer under the series 02-1
medium term note certificate or on any
payments made or required to be made to the
issuer by the swap counterparty or by the
issuer to the swap counterparty under the swap
agreement and there are not any reasonable
measures that the swap counterparty or the
issuer can take to avoid their imposition. In
addition, a swap agreement may be terminated,
but only if the issuer has been directed to do
so by the relevant noteholders, if as a result
of a change in applicable law, the issuer or
any paying agent has or will become obligated
to deduct or withhold amounts from payments on
the related class of notes to be made to any
of the related noteholders on the next
interest payment date, for any tax, assessment
or other governmental charge imposed by the
United Kingdom or any political subdivision or
taxing authority of the United Kingdom on the
payments and there are no reasonable measures
the issuer can take to avoid the tax or
assessment.
A payment default by the swap counterparty or
a default in the payment in respect of
interest by the issuer to the swap
counterparty, if funds are available to the
isser to make that payment, will result in a
termination of a swap agreement. The swap
agreements may also terminate following a
material breach in a representation or
covenant by the swap counterparty, the
insolvency of the issuer or the swap
counterparty or changes in law resulting in
illegality.
The swap agreement may also be terminated if
certain other events described under "The Swap
Agreements: Common Provisions of the Swap
Agreements" occur.
The termination without replacement of any of
the swap agreements will result in an event of
default under the notes and a pay out event
that results in a rapid amortisation period.
We cannot assure you that any of the swap
agreements will not terminate prior to the
payment in full of the principal balance of
your notes. If any of the swap agreements
terminates prior to the payment in full of the
principal balance of your notes, you could
receive payments of principal on your notes
before you expect them.
28
WITHHOLDING TAXES ON SWAP The issuer and the swap counterparty will each
PAYMENTS OR YOUR NOTES OR represent and warrant in each swap agreement
THE SERIES 02-1 MEDIUM TERM that, under current applicable law, each of
NOTE CERTIFICATE MAY REDUCE them is entitled to make all payments required
THE AMOUNT YOU ARE PAID ON to be made by them under the swap agreement
YOUR NOTES free and clear of, and without deduction for
or on account of, any taxes, assessments or
other governmental charges -- which we refer
to as withholding taxes. However, neither the
issuer nor the swap counterparty will be
required to indemnify the other party for any
withholding taxes imposed on payments under a
swap agreement as a result of a change in
applicable law.
If any withholding taxes -- by any
jurisdiction -- would be imposed on payments
to the issuer under the series 02-1 medium
term note certificate or any payments made
or required to be made by the swap
counterparty to the issuer or by the issuer to
the swap conterparty under a swap agreement as
a result of a change in applicable law and the
obligation to deduct or withhold cannot be
avoided by the swap counterparty or the
issuer, the issuer may terminate the swap
agreement, but only if the issuer has been
directed to do so by the relevant noteholders.
If the relevant noteholders do not elect to
terminate the swap agreement, then MTN
additional interest payments, to the extent
available, will be converted at the spot
exchange rate into US dollars to cover the
shortfall in the payments to the noteholders
caused by the amount withheld. If MTN
additional interest payments are not
sufficient to cover the shortfall, then
payments to first the class C noteholders,
second the class B noteholders and finally the
class A noteholders will be reduced by the
amount withheld that is not covered by MTN
additional interest payments.
In addition, if any UK withholding taxes would
be imposed on any payments made or required to
be made by the issuer or any paying agent on
any class of notes, the issuer will terminate
the relevant swap agreement if the issuer has
been directed to do so by the relevant
noteholders. If the relevant noteholders do
not elect to terminate the swap agreement,
then payments to that class of noteholders
will be reduced pro rata by any amount
withheld for any withholding taxes.
PAYMENT OF AN EARLY TERMINATION If a swap agreement is terminated before its
PAYMENT TO THE SWAP COUNTERPARTY scheduled termination date, the issuer or the
MAY REDUCE PAYMENTS ON YOUR NOTES swap counterparty may be liable to make an
early termination payment to the other party.
The amount of any early termination payment
will be based on the market value of the
terminated swap agreement. This market value
will be computed on the basis of market
quotations of the cost of entering into a swap
transaction with the same terms and conditions
that would have the effect of preserving the
respective full payment obligations of the
parties. Any early termination payment could,
if the sterling/dollar exchange rate has
changed significantly, be substantial.
Any early termination payment made by the
issuer to the swap counterparty under a swap
agreement will be made first from MTN
additional interest payments and second from
repayments of principal on the series 02-1
medium term note certificate equal to the
amount of principal repayments received by the
issuer on the series 02-1 medium term note
certificate. That could cause the sterling
amounts available for conversion to dollars,
and possibly your payments, to be reduced --
perhaps substantially. If the amount of
available MTN additional interest payments and
29
repayments of principal on the series 02-1
medium term note certificate is insufficient
to pay the early termination payment under the
relevant swap agreement, the balance of the
early termination payment will be paid to the
extent that such amounts are available on the
next interest payment date together with
interest. See "The Swap Agreements".
YOU WILL NOT RECEIVE PHYSICAL Unless the global note certificates are
NOTES, WHICH MAY CAUSE DELAYS IN exchanged for individual note certificates,
DISTRIBUTIONS AND HAMPER YOUR which will only occur under a limited set of
ABILITY TO PLEDGE OR RESELL THE circumstances, your beneficial ownership of
NOTES the notes will only be registered in
book-entry form with DTC, Euroclear or
Clearstream, Luxembourg. The lack of physical
notes could, among other things:
o result in payment delays on the notes
because we will be sending distributions on
the notes to DTC, Euroclear or Clearstream,
Luxembourg instead of directly to you;
o make it difficult for you to pledge or
otherwise grant security over the notes if
physical notes are required by the party
demanding the pledge or other security; and
o hinder your ability to resell the notes
because some investors may be unwilling to
buy notes that are not in physical form.
30
INTRODUCTION
You can find a listing of the pages where terms used in this prospectus are
defined under the caption "Index Of Terms For Prospectus" beginning on page 143.
U.S. DOLLAR PRESENTATION
Unless this prospectus provides a different rate, the translations of pounds
sterling into dollars have been made at the rate of 0.6389, which is the closing
price on 2 October 2002 for the dollar/sterling exchange rate as displayed on
the Bloomberg Service under USD-GBP Currency HP. Using this rate does not mean
that pound sterling amounts actually represent those U.S. dollar amounts or
could be converted into U.S. dollars at that rate.
References throughout this document to "(pound)", "pounds", "sterling" or
"pounds sterling" are to the lawful currency of the United Kingdom of Great
Britain and Northern Ireland. References in this document to "U.S.$", "$" "U.S.
dollars" or "dollars" are to the lawful currency of the United States of
America.
The following table sets forth the history of the dollar/pound sterling exchange
rates for the five most recent years.
DOLLAR/STERLING EXCHANGE RATE HISTORY(1)
Year ended 31 December
----------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Last(2) ................ 0.6875 0.6698 0.6180 0.6025 0.6078
Average(3) ............. 0.6943 0.6609 0.6183 0.6035 0.6102
High ................... 0.7282 0.7153 0.6451 0.6200 0.6329
Low .................... 0.6650 0.6047 0.5972 0.5843 0.5843
- ------
Notes
(1) Data obtained from Bloomberg USD-GBP "CRNCY" HP screen (Mid London
Composite).
(2) Last is the closing exchange rate on the last business day of each of the
periods indicated.
(3) Average is the average daily exchange rate during the periods indicated.
31
THE ISSUER
The issuer was formed in England and Wales on 29 July 2002 under the name of
Sunnytrail PLC with registered number 4497894 as a public company with limited
liability under the Companies Acts 1985 and 1989, which is also the primary
legislation under which the issuer operates. It passed a special resolution to
change its name to Gracechurch Card Funding (No. 2) PLC on 18 September, 2002.
Its registered office and principal place of business are located at 54 Lombard
Street, London EC3P 3AH, United Kingdom.
The Company was incorporated with an authorised share capital of (pound)50,000,
comprising 50,000 ordinary shares of (pound)1 each. Two ordinary shares were
allotted for cash, and fully paid, on incorporation. On 2 October 2002, 49,998
ordinary shares were allotted each quarter paid. 49,999 shares are held by
Gracechurch Card (Holdings) Limited and one share is held by a share trustee
under the terms of a share declaration of trust. It has a fiscal year end date
of 31 December. There is no loan capital, borrowing, other indebtedness,
contingent liabilities or guarantees as at the date of this prospectus in
respect of this company.
The issuer was formed principally to:
o issue the notes;
o enter into all financial arrangements in order to issue the notes;
o purchase the series 02-1 medium term note certificate; and
o enter into all the documents necessary to purchase the series 02-1 medium
term note certificate.
DIRECTORS AND SECRETARY
The following sets out the directors of the issuer and their business
addresses and principal activities. Because the issuer is organised as a special
purpose company and will be largely passive, it is expected that the directors
of the issuer in that capacity will participate in its management to a limited
extent.
Name Nationality Business Address Principal Activities
- ---- ----------- ---------------- --------------------
Richard Francis Sommers ........ British 1234 Pavilion Drive, Finance Director,
Northampton NN4 7SG Barclaycard
Timothy Gaffney ................ British 1234 Pavilion Drive, Treasury Manager,
(alternate director) Northampton NN4 7SG Barclaycard
SFM Directors Limited .......... British Blackwell House, Director of special
Guildhall Yard, London purpose companies
EC2V 5AE
SFM Directors (No. 2) Limited .. British Blackwell House, Director of special
Guildhall Yard, London purpose companies
EC2V 5AE
The directors of SFM Directors Limited and SFM Directors (No. 2) Limited are
Jonathan Keighley and James Macdonald. Their principal activities include the
provision of directors and corporate management services to structured finance
transactions as directors on the boards of SFM Directors Limited and SFM
Directors (No. 2) Limited. The business addresses of the directors of SFM
Directors Limited and SFM Directors (No. 2) Limited are Blackwell House,
Guildhall Yard, London EC2V 5AE.
Barcosec Limited will provide the issuer with general secretarial, registrar and
company administration services. The fees of Barcosec Limited for providing such
services will be included in the MTN Issuer Costs Amounts. See "Series 02-1:
Allocation, Calculation and Distribution of Finance Charge Collections to the
MTN issuer".
The secretary of the issuer:
Name Business Address
Barcosec Limited 54 Lombard Street, London EC3P 3AH
The net proceeds of the sale of the notes will be used by the issuer to purchase
the series 02-1 medium term note certificate. The issuer will be prohibited by
the trust deed and the terms and conditions of the notes from engaging in
business other than:
o the business described in this prospectus;
o preserving and exercising its rights under the notes, the deed of charge,
the paying agency and agent bank agreement, the trust deed, the expenses
loan agreement, the swap agreements, the corporate services agreement and
the underwriting agreements for the notes; and
32
o purchasing the series 02-1 medium term note certificate.
The issuer's ability to incur, assume or guarantee debt will also be restricted
by the trust deed and the terms and conditions of the notes.
Barclays does not own, directly or indirectly, any of the share capital of the
issuer.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
SOURCES OF CAPITAL AND LIQUIDITY
The issuer's source of capital will be the net proceeds of the offering of the
notes.
The issuer's primary sources of liquidity will be payments of interest and
principal on the series 02-1 medium term note certificate and borrowings under
the expenses loan agreement.
RESULTS OF OPERATIONS
As of the date of this prospectus, the issuer does not have an operating
history. Because the issuer does not have an operating history, we have not
included in this prospectus any historical or pro forma ratio of earnings to
fixed charges. The earnings on the series 02-1 medium term note certificate, the
interest costs of the notes and the related operating expenses will determine
the issuer's results of operations in the future. The income generated on the
series 02-1 medium term note certificate will be used to pay principal and
interest on the notes.
LITIGATION
There are no, nor since the issuer's incorporation on 29 July 2002 have there
been any, legal or arbitration proceedings, including any proceedings that are
pending or threatened of which the issuer is aware, which may have, or have had
in the recent past, covering at least the previous 12 months, a significant
effect on the issuer's financial position.
FINANCIAL POSITION
The report of the issuer's reporting accountants, PricewaterhouseCoopers, and
its balance sheet are set out at pages A-1 and B-1. The issuer has not traded
since its incorporation on 29 July 2002. There has been no material adverse
change in the financial position or prospects of the issuer since its date of
incorporation. There has been no significant change in the financial or trading
position of the issuer since its date of incorporation.
USE OF PROCEEDS
The net proceeds of the issue of the notes will be $997,675,000. The fees and
commissions payable on the issue of the notes in an amount equal to $2,325,000
will be deducted from the gross proceeds of the issue. The issuer will use its
reasonable endeavours to make a drawing under the expenses loan agreement of at
least an amount equal to the fees and commissions payable on the notes. The
issuer will use the net proceeds of the issue of the notes converted into
sterling under the swap agreements together with the drawing under the expenses
loan agreement to purchase the series 02-1 medium term note certificate from the
MTN issuer on or about 24 October 2002 -- called the "closing date".
EXPENSES LOAN AGREEMENT
On the closing date, the issuer -- as borrower -- will enter into a loan
agreement with Barclays -- as lender -- under which Barclays will lend to the
issuer up to a maximum amount of (pound)3,200,000 to be used by the issuer to
meet its costs and expenses relating to issuing the notes. This loan agreement
is called the "expenses loan agreement". The amount outstanding under the
expenses loan agreement will bear interest at the rate of one-month sterling
LIBOR plus a margin of 1.35 per cent. per annum. The payment of interest under
the expenses loan agreement will be paid monthly on each distribution date. To
the extent the issuer has insufficient funds left after making all payments of
principal and interest on the notes, the amount of that interest will be
deferred until the next distribution date. The principal amount outstanding
under the expenses loan agreement will not fall due for repayment until all
principal, interest and other amounts due on the notes have been paid in full.
The principal amount outstanding under the expenses loan agreement will be
repaid out of amounts received by the issuer on the series 02-1 medium term note
certificate, which will include MTN additional interest amounts.
33
THE MTN ISSUER
The MTN issuer was formed in England and Wales on 13 August, 1990 as Barshelfco
(No. 28) Limited, with registered number 2530163, as a company with limited
liability under the Companies Acts 1985 and 1989, which is the primary
legislation under which the MTN issuer operates. It re-registered as a public
limited company and changed its name to Barclaycard Funding PLC on 19 October,
1999. Its registered office and principal place of business are located at 54
Lombard Street, London EC3P 3AH, United Kingdom.
The MTN issuer has a fiscal year end of 14 December.
The MTN issuer was formed principally to:
o issue medium term notes or certificates from time to time in series;
o enter into the financial arrangements to issue the medium term notes
or certificates;
o purchase series of investor certificates from time to time representing a
beneficial interest in the receivables trust; and
o enter into the documents and exercise its powers connected to the above.
The MTN issuer has not engaged in any activities since its incorporation other
than the above.
The total authorised and issued share capital of the MTN issuer is
(pound)50,000.
Barclays holds 75 per cent. of the issued share capital of the MTN issuer,
representing 51 per cent. of the issued voting share capital and a 49 per cent.
entitlement to distributable profits. The remaining share capital is held by the
Royal Exchange Trust Company Limited.
The annual accounts of the MTN issuer for the last three financial years have
been audited.
CAPITALISATION AND INDEBTEDNESS
The unaudited capitalisation and indebtedness of the MTN issuer as at the date
of this prospectus, adjusted for the series 02-1 medium term note certificate to
be issued, is as follows:
SHARE CAPITAL
Total authorised and issued share capital (pound)50,000
LOAN CAPITAL
Loan Capital (issued 23 November 1999)
(pound)546,345,000 series 99-1 class A floating rate
medium term note due 2002 (pound)546,345,000
(pound)30,352,500 series 99-1 class B floating rate
medium term note due 2002 (pound)30,352,500
(pound)30,352,500 series 99-1 class C floating rate
medium term note due 2002 (pound)30,352,500
LOAN CAPITAL (NOW BEING ISSUED)
(pound)638,900,000* series 02-1 floating rate
medium term note certificate due 2009 (pound)638,900,000*
* This amount is the sterling equivalent of $1,000,000,000, converted using the
exchange rate referred to under "U.S. Dollar Presentation". The actual sterling
principal amount of the series 02-1 medium term note certificate will be the
sterling equivalent of $1,000,000,000, using the fixed exchange rate in the swap
agreements.
There are no other outstanding loans or subscriptions, allotments or options in
respect of the MTN issuer. There are no guarantees, unsecured or guaranteed
issued loan capital or contingent liabilities in respect of the MTN issuer.
There is no goodwill in the balance sheet of the MTN issuer, nor will any
goodwill need to be written off upon the issue of the series 02-1 medium term
note certificate.
DIRECTORS AND SECRETARY
The following sets out the directors of the MTN issuer and their business
addresses and principal activities. Because the MTN issuer is organised as a
special purpose company and will be largely passive, it is expected that the
directors of the MTN issuer in that capacity will participate in its management
to a limited extent.
34
Name Nationality Business Address Principal Activities
- ---- ----------- ---------------- --------------------
Richard Francis Sommers ... British 1234 Pavilion Drive, Finance Director,
Northampton NN4 7SG Barclaycard
Bryan Donald Needham ...... British Guildhall House, Trust Official
81-87 Greshom Street,
London EC2V 7QE
Peter Michael Hills ....... British Guildhall House, Trust Official
81-87 Greshom Street,
London EC2V 7QE
Barcosec Limited .......... British 54 Lombard Street, Director
London EC3P 3AH
Barometers Limited ........ British 54 Lombard Street, Director
London EC3P 3AH
Timothy Gaffney ........... British 1234 Pavilion Drive, Treasury Manager,
(alternate director) Northampton NN4 7SG Barclaycard
The secretary of the MTN issuer is:
Name Business Address
- ---- ----------------
Barcosec Limited 54 Lombard Street, London EC3P 3AH
The directors of Barcosec Limited and Barometers Limited are Alison Bibby, Ciara
Gilleece, Patrick Gonslaves, Carolyn Ladd, Deirdre Parry, Geoffry Smith and
Sarah Waine. Their principal activities include the provision of corporate
secretarial services to the Barclays group. The business addresses of the
directors of Barcosec Limited and Barometers Limited are 54 Lombard Street,
London EC3P 3AH.
The initial subscription proceeds of the sale of the series 02-1 medium term
note certificate will be used by the MTN issuer to acquire a certificate
representing a beneficial interest in series 02-1 of the receivables trust --
called the "investor certificate" The deferred subscription price payable for
the series 02-1 medium term note certificate will be used by the MTN issuer to
pay deferred consideration to Barclaycard for the transfer of its entitlement to
receive excess interest attributable to series 02-1.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
SOURCES OF CAPITAL AND LIQUIDITY
The MTN issuer's source of capital are the proceeds of the offerings from time
to time of the medium term notes or certificates.
The MTN issuer's primary source of liquidity are payments of principal and
interest on the series of investor certificates.
RESULTS OF OPERATIONS
This prospectus does not include any historical or pro forma ratio of the MTN
issuer's earnings to fixed charges. The earnings on its interest in the trust
property, the interest costs of the issuer term advances it pays to the issuer
pursuant to the series 02-1 medium term note certificate, the interest costs of
the previous term advances it pays to the previous issuer pursuant to the series
99-1 medium term notes and the related operating expenses are the principal
components of the MTN issuer's results of operations. The income generated on
its interest in the trust property will be used to pay interest and repay
principal on the series 02-1 medium term notes certificate to the issuer and on
the series 99-1 medium term note certificate to the previous issuer.
LITIGATION
There are no, nor since the MTN Issuer's incorporation on 13 August 1990 have
there been any, legal or arbitration proceedings, including any proceedings that
are pending or threatened of which the MTN issuer is aware, which may have, or
have had in the recent past, covering at least the previous 12 months, a
significant effect on the MTN issuer's financial position.
NO FINANCIAL CHANGE
The reports of the MTN issuer's reporting accountants, PricewaterhouseCoopers
and its financial statements are set out beginning on pages D-1, E-1, G-1 and
H-1. There has been no material adverse change in the financial position or
prospects of the MTN issuer since the date of incorporation. There has been no
significant change in the financial or trading position of the MTN issuer which
has occurred since its date of incorporation.
35
THE RECEIVABLES TRUSTEE
The receivables trustee was formed under the laws of Jersey, Channel Islands on
29 September 1999. Its registered office is at 26 New Street, St Helier, Jersey
JE2 3RA and you can inspect its memorandum and articles of association at the
offices of Clifford Chance LLP at 200 Aldersgate Street, London EC1A 4JJ, United
Kingdom.
All of the issued share capital of the receivables trustee is held by a trust
company formed in Jersey, Bedell Cristin Trustees Limited, on the terms of a
general charitable trust.
The receivables trustee was formed principally to:
o act as a trustee of the receivables trust;
o purchase and accept transfer of the receivables from the transferor;
o issue series of investor certificates from time to time on behalf of the
receivables trust; and
o enter into transaction documents incidental to or relating to those
activities.
DIRECTORS AND SECRETARY
Bedell Cristin Trust Company Limited, a company formed under the laws of Jersey,
provides the receivables trustee with company secretarial, registrar and company
administration services. Its fees for providing these services are included in
the fees paid to the receivables trustee. See the section "The Receivables
Trust: Trustee Payment Amount".
The following sets out the directors of the receivables trustee and their
business addresses and principal activities. The receivables trustee is
organised as a special purpose company and is largely passive, engaging only in
the types of transactions described in this prospectus. The receivables trustee
is managed and controlled by its directors in Jersey; however it is expected
that it will require only a small amount of active management.
Name Nationality Business Address Principal Activities
- ---- ----------- ---------------- --------------------
Richard Francis Sommers British 1234 Pavilion Drive, Finance Director
Northampton NN4 7SG
Michael Henry Richardson British 26 New Street, St. Advocate of the Royal
Helier, Jersey JE2 3RA Court of Jersey
Richard Charles Gerwat British 26 New Street, St. Advocate of the Royal
Helier, Jersey JE2 3RA Court of Jersey
Two of the directors of the receivables trustee are also directors of Bedell
Cristin Trustees Limited and Bedell Cristin Trust Company Limited and partners
in the law firm Bedell Cristin.
The directors of the receivables trustee do not have a specific term of office
but each may be removed by a resolution passed at a shareholders' meeting.
Barclays Bank PLC does not own, directly or indirectly, any of the share capital
of the receivables trustee.
MANAGEMENT AND ACTIVITIES
The receivables trustee has been established specifically to act as trustee of
the receivables trust. Its activities are restricted by the declaration of trust
and trust cash management agreement and the related supplements.
Since it was formed, the receivables trustee has:
o engaged in activities incidental to the declaration of the receivables
trust;
o obtained the necessary consumer credit licence and data protection
registrations in the United Kingdom and/or Jersey;
o authorised and executed the documents that it is a party to in order to
establish the receivables trust;
o purchased and accepted transfers of the receivables from the transferors;
o issued certificates to beneficiaries in respect of their interests in the
receivables trust;
o established and maintained a register of the entitlements of beneficiaries
under the receivables trust;
o engaged in activities incidental to the transfer to it of receivables
under the designated accounts; and
36
o authorised and executed the other documents to which it is party.
The receivables trustee has not engaged in any activities since its
incorporation other than the above and matters incidental to the above.
The receivables trustee has made a number of covenants in the declaration of
trust and trust cash management agreement, including that it will not without
the prior written consent of each of the beneficiaries of the receivables trust:
o carry on any business other than as trustee of the receivables trust and
will not engage in any activity or do anything at all except:
(1) hold and exercise its rights in the trust property of the
receivables trust and perform its obligations for the receivables
trust's property;
(2) preserve, exercise and enforce any of its rights and perform and
observe its obligations under the declaration of trust and trust
cash management agreement, the receivables sale agreement, the
master definitions schedule, each supplement and each other related
document, including any documents secured directly or indirectly by
a series of investor certificates issued under the receivables
trust, any mandate and other agreement about a Trust Account or a
bank account in which the receivables trustee has a beneficial
interest, the trust section 75 indemnity, and any other document
contemplated by and executed in connection with any of the preceding
documents. We refer to these documents collectively as "relevant
documents";
(3) pay dividends or make other distributions to the extent required by
applicable law;
(4) use, invest or dispose of any of its property or assets in the
manner provided in or contemplated by the relevant documents; and
(5) perform any and all acts incidental to or otherwise necessary in
connection with (1), (2), (3) or (4) above;
o incur any debt other than debt that is described by this prospectus or a
supplement or contemplated by the relevant documents;
o give any guarantee or indemnity in respect of any debt;
o create any mortgage, charge, pledge, lien or other encumbrance securing
any obligation of any person or other type of preferential arrangement
having similar effect, over any of its assets, or use, invest, sell or
otherwise dispose of any part of its assets, including any uncalled
capital, or undertaking, present or future, other than as expressly
contemplated by the relevant documents;
o consolidate or merge with any other person or convey or transfer its
properties or assets to any person;
o permit the validity or effectiveness of the receivables trust to be
supplemented, amended, varied, terminated, postponed or discharged --
other than as expressly contemplated in the declaration of trust and trust
cash management agreement or in any supplement;
o have any subsidiary; or
o have an interest in any bank account other than a Trust Account and its
own bank account opened for the purpose of receiving and making payments
to be made otherwise than in its capacity as receivables trustee --
including paying the servicing fee to the servicer or cash management fee
to the trust cash manager and the annual fee due to Bedell Cristin Trust
Company Limited for the provision of corporate services to the receivables
trustee.
LITIGATION
There are no, nor since the receivables trustee's incorporation on 29 September
1999 have there been any, legal or arbitration proceedings, including any
proceedings that are pending or threatened of which the receivables trustee is
aware, which may have, or have had in the recent past, covering at least the
previous 12 months, a significant effect on the receivables trustee's financial
position.
NO FINANCIAL CHANGE
There has been no material adverse change to the financial position or prospects
of the receivables trustee since the date of incorporation. There has been no
significant change in the financial or trading position of the receivables
trustee which has occurred since its date of incorporation.
37
BARCLAYS BANK PLC
Barclays Bank PLC will perform the following roles in connection with the
issuance of the notes:
o initial transferor;
o servicer;
o cash manager for the receivables trust and the medium term notes and
certificates;
o transferor beneficiary and excess interest beneficiary;
o swap counterparty;
o lender under expenses loan agreement; and
o an underwriter.
BUSINESS
Barclays Bank PLC is a public limited company registered in England and Wales
under number 1026167. The liability of the members of Barclays Bank PLC is
limited. It has its registered and head office at 54 Lombard Street, London EC3P
3AH. Barclays Bank PLC was incorporated on 7 August, 1925 under the Colonial
Bank Act 1925 and on 4 October, 1971 was registered as a company limited by
shares under the Companies Acts 1948 to 1967. Under the Barclays Bank Act 1984,
on 1 January, 1985, Barclays Bank PLC was re-registered as a public limited
company and its name was changed from "Barclays Bank International Limited" to
"Barclays Bank PLC".
Barclays Bank PLC and its subsidiary undertakings are, together, called the
Barclays group. The Barclays group is an international financial services group
engaged primarily in banking, investment banking and asset management. In terms
of assets employed, it is one of the largest financial services groups in the
United Kingdom. The Barclays group also operates in many other countries around
the world and is a leading provider of co-ordinated global services to
multinational corporations and financial institutions in the world's main
financial centres. The whole of the issued ordinary share capital of Barclays
Bank PLC, is owned by Barclays PLC which is the ultimate holding company of the
Barclays group.
The short-term unsecured debt obligations of Barclays Bank PLC are rated A-1+ by
Standard and Poor's, P-1 by Moody's and F1+ by Fitch Ratings Limited and the
long-term unsecured debt obligations of Barclays Bank PLC are rated AA by
Standard & Poor's, Aa1 by Moody's and AA+ by Fitch Ratings Limited.
As of 30 June, 2002, the Barclays group had total assets of (pound)389,753
million total net loans and advances of (pound)256,866 million, total deposit of
(pound)254,719 million, and shareholders' funds or shareholders' equity of
(pound)15,124(1) million The profit before taxation of the Barclays group for
the half-year ended 30th June 2002 was (pound)1,749 million after charging net
provisions for bad and doubtful debs of (pound)713 million. As at 31 December,
2001, Barclays Bank PLC and its subsidiaries had total assets of (pound)356,649
million total net loans and advances of (pound)228,382 million, total deposits
of (pound)254,719 million, and shareholders' funds or shareholders' equity of
(pound)16,380 million(1).
The annual report on Form 20-F for the year ended 31 December, 2001 and the
interim report on Form 6-K for the semi-annual period ended 30 June, 2002 of
Barclays PLC and Barclays Bank PLC are on file with the Securities and Exchange
Commission. Barclays will provide, without charge to each person to whom this
prospectus is delivered, on the request of that person, a copy of the Form 20-F
and Form 6-K referred to in the previous sentence. Written requests should be
directed to: Barclays Bank PLC, 54 Lombard Street, London, EC3P 4AH, England,
Attention: Barclays Group Corporate Secretariat.
Neither the class A notes, the class B Notes nor the class C notes will be
obligations of Barclays Bank PLC, Barclays PLC or any of their affiliates.
Credit Card Usage In The United Kingdom
The United Kingdom credit card market is the largest and most developed in
Europe. The total population of the United Kingdom is 58 million with the adult
population accounting for about 60 per cent. of this. It is estimated that 48
per cent. of the adult British population holds at least one credit card.
- --------
1. Following the issue of UITF Abstract 33, Reserve Capital Instruments are now
treated as forming part of undated loan capital rather than as part of
shareholders funds. The change in presentation results in an adjustment to the
audited prior year numbers. The impact at 31 December 2001 would be to reduce
shareholder funds by (pound)1,872 million.
38
The total number of credit, charge and corporate cards in issue in the UK has
grown steadily since 1976 and exceeded 50 million in 2001. Of these, about 66
per cent. carried the VISA service mark and 31per cent. the MasterCard service
mark, with the remainder comprised of corporate and charge cards.
The number of cards issued has grown by 33 million since 1993 to about 58
million today. The rate of increase accelerated in 1994 and has continued to do
so as the credit and charge card sector grows and diversifies. Purchases in the
UK, in the twelve months to August 2002, totalled almost (pound)117 billion. UK
card borrowings have more than doubled since 1994, and were approximately
(pound)41billion at the end of 2001.
UK consumers use their card in a variety of ways. Figures from a trade
organisation in England show that in the year to June 2002, the average
transaction was for about (pound)62. About 52 per cent. of these transactions
were in relation to retail sales, compared with 12 per cent. in the travel
sector, 12 per cent. on motoring and 5 per cent. in hotels.
BARCLAYCARD AND THE BARCLAYCARD CARD PORTFOLIO
GENERAL
Barclaycard, a division of Barclays Bank PLC, is one of the UK's leading credit
card issuers. In addition, Barclaycard issues cards in a number of European
countries, offers fixed term unsecured loans in the UK and is one of the UK's
largest merchant acquirers. Barclaycard is based in Northampton, England and has
in excess of 4000 employees in the UK and the rest of Europe. In 1966,
Barclaycard issued the UK's first credit card and as of 30th June 2002
Barclaycard, on a managed basis, had (pound)10,378,476,094 of gross customer
receivables in the UK and the rest of Europe, including consumer loans. Of this
amount, (pound)7,584,620,845 were MasterCard and VISA credit and charge card
receivables originated in the UK and included in the receivables trust.
Barclaycard offers over 30 credit card products and services to individual and
corporate customers. The average UK customer has had a Barclaycard for in excess
of 10 years. An enabling Bill has been introduced to the UK Parliament by
Barclays following its acquisition of Woolwich Plc. If enacted, this would
faciliate a reorganisation of Barclays group's legal structure, involving,
depending on Barclays determining in the future to use all or any of the powers
that would be conferred by the Bill, the transfer of certain undertakings and
parts of undertakings within the Barclays group. The undertakings could include
Barclaycard, which is a division of Barclays Bank PLC.
The receivables being securitised come from transactions made by MasterCard and
VISA card accountholders.
A cardholder may use his or her card for both purchases and cash advances. A
purchase is when cardholders use their cards to acquire goods or services. A
cash advance is when cardholders use their cards to get cash from a financial
institution or automated teller machine or use credit card cheques issued by
Barclaycard drawn against their credit lines. Cardholders may draw against their
credit lines by transferring balances owed to other creditors to their
Barclaycard accounts.
See "Servicing of Receivables and Trust Cash Management" for a description of
how Barclaycard services receivables included in the securitisation. Barclaycard
undertakes all the processing and administering of accounts making use of
external suppliers as appropriate. In particular, initial datacapture of
applicants is undertaken by Equifax , an outsource partner of Barclaycard, and
cardholder payment processing is undertaken for Barclaycard by Experian, part of
the Great Universal Stores Group, a company not affiliated with Barclaycard.
DESCRIPTION OF EXPERIAN, PART OF THE GREAT UNIVERSAL STORES GROUP
Barclaycard is a party to an agreement with Experian, under which they provide
Barclaycard with certain processing services. Under this agreement, Experian
collects and processes all postal remittances arising from Barclaycard's credit
and charge card portfolio through facilities located in Bolton, England. The
Great Universal Stores Group has been providing these services to Barclaycard
since February 1996.
ACQUISITION AND USE OF CREDIT CARD ACCOUNTS
Barclaycard uses a brand led value driven marketing strategy to focus new
origination campaigns. This process is assisted by the use of financial
forecasting models for each method it uses to solicit cardholders. The main way
Barclaycard recruits its customers is by introductions from Barclays branches,
but it also uses targeted mailing, media inserts and the internet. In the
future, the internet may
39
increase substantially as a means of recruiting new cardholders, although we are
unable to predict how cardholders recruited in this way will perform relative to
those recruited by traditional means.
When received, credit application details are screened by a combination of
system based checking, external credit bureau data and manual verification,
where appropriate.
Barclaycard uses a range of application scorecards to assess the credit quality
of new account applications, each of which are tailored towards different market
segments. Scorecards are derived using a combination of factors including
Barclays account history, annual income, time in and place of residence, current
employment and credit bureau data. A proprietary cash flow model is used to help
determine the acceptance score levels for each scorecard. Acceptance score
levels are reviewed at least quarterly by committee.
Barclaycard aims to maximise enterprise value through managing the relationship
between volumes and margins. Recent yield experience reflects adjustments to
interest rate discounts and fee waiver thresholds to optimise this position.
The initial limit of an account is determined using credit score and income
matrices. Initial limits are set at comparatively low levels. Limits are
increased in a controlled and regular manner using behaviour score and credit
bureau data. Behaviour scoring was introduced in 1989 and is one of the key
tools used by Barclaycard in risk management and underpins all risk decisions
applied to accounts once they have been opened. Barclaycard currently use
behaviour scorecards developed in conjunction with Fair, Isaacs International UK
Corporation, an independent firm experienced in developing credit scoring
models.
The behaviour scorecards are monitored using retrospective sampling which allows
a comparison of actual to expected performance over predetermined time periods.
This analysis allows the effectiveness of the scorecards to be measured on a
regular basis, and underpins the decisions on scorecard development.
Credit limits are adjusted based upon Barclaycard's continuing evaluation of an
account holder's credit behaviour and suitability using Triad V, the latest
account management system developed by the Fair, Isaacs Companies.
Each cardholder has a card agreement with Barclaycard governing the terms and
conditions of their MasterCard or VISA account. Under each card agreement,
Barclaycard is able, if it gives advance notice to the cardholder, to add or
change any terms, conditions, services or features of the MasterCard or VISA
accounts at any time. This includes increasing or decreasing periodic finance
charges, or minimum payment terms. Each card agreement enables Barclaycard to
apply charges to current outstanding balances as well as to future transactions.
Barclaycard regularly reviews its credit and charge card agreement forms to
determine their compliance with applicable law and the suitability of their
terms and conditions. If they need to be updated or amended, this will be done
on a timetable consistent with the issues identified.
DESCRIPTION OF PROCESSING
Barclaycard settlement systems have links to VISA and MasterCard to enable
cardholder transactions to be transferred. Barclaycard also acquires
transactions from merchants. Transactions acquired in this way relating to
Barclaycard cardholders are passed to the card account processing systems
directly rather than via VISA or MasterCard.
BILLING AND PAYMENT
Barclaycard generates and mails monthly statements to cardholders which give
details of the transactions for that account.
Cardholders get up to 56 days interest free on purchases.
At the moment, cardholders must make a monthly minimum payment which is at least
equal to the greater of :
o 2 per cent. -- on platinum and gold, and 2.5 per cent. -- on classic -- of
the statement balance; and
o the stated minimum payment, which is currently (pound)5.
Notwithstanding the above, in the case of the Premier Card, Barclaycard's charge
card product, cardholders must pay the statement balance in full, which is
collected via direct debit 14 days after the date of the statement.
Certain eligible cardholders may be given the option to take a payment holiday.
40
Barclaycard charges late and over-limit fees as well as charges for returned
cheques and returned direct debits. Charges may also be made, to a lesser
extent, for copy statements and copy vouchers. Whilst Barclaycard does not
charge an annual fee on all products, annual fees can be up to (pound)80 on
those products on which an annual fee is charged. Barclaycard also assesses a
cash advance fee which is 2 per cent. of the cash advance with a minimum of
(pound)2, except that the Initial Visa card has a cash advance fee which is 2.5
per cent. of the cash advance with a minimum of (pound)2.50.
The finance charges on purchases assessed monthly are calculated by multiplying
the account's average daily purchase balance over the billing period by the
applicable monthly rate. Finance charges are calculated on purchases from the
date the purchase is debited to the relevant account. Monthly periodic finance
charges are not assessed on purchases if all balances shown in the billing
statement are paid by the date they are due. This is usually 25 days after the
billing date.
The finance charges on cash advances assessed monthly are calculated by
multiplying the account's average daily balance of cash advances over the
billing period by the applicable monthly rate. Finance charges are calculated on
cash advances from the date of the transaction -- except for cash advances by
use of credit card cheques, where finance charges are usually calculated from
the date the transaction is debited to the relevant account.
The interest rates on Barclaycard's credit card accounts may be changed by
Barclaycard and are not currently linked to any index. This is market practice
in the United Kingdom. At the moment, the standard annual percentage rate of
charge on accounts ranges from 9.9 to 24.9 per cent. Barclaycard may sometimes
offer temporary promotional rates. Barclaycard also offers activation programmes
and other incentives.
Pricing decisions are based upon:
o actual and anticipated movements in underlying interest rates;
o marketing strategies and recruitment campaigns; and
o competitive environment.
English law does not prescribe a maximum rate that may be charged as interest
for a debt. However, the obligation to make interest payments will not be
enforceable to the extent that the interest rate is extortionate. An interest
rate will be extortionate if it requires the debtor or a relative of the debtor
to make payments -- whether unconditionally or on certain contingencies -- which
are grossly exorbitant, or which otherwise grossly contravene ordinary
principles of fair dealing. Barclaycard believes that the interest rates charged
on its cards do not contravene any laws relating to extortionate credit
agreements.
DELINQUENCY AND LOSS EXPERIENCE
An account is contractually delinquent if the minimum payment is not received by
the due date indicated on the customer's statement. An account does not actually
become delinquent until a new customer statement is sent following a missed
payment on the account. Once an account is recognised as delinquent a
determination is made of the timing and type of initial contact. This initial
contact is typically between 0 and 60 days after an account becomes delinquent
and may be by statement, letter, telephone or any other appropriate method of
contact. The basis for determining the timing of initial contact may include the
age of the account, the amount outstanding, the past account performance and
behaviour score, and any information that is available from external credit
bureaus or Barclays Bank.
Efforts to deal with delinquent receivables occur at each stage of delinquency.
Activities include statement messages, telephone calls, formal letters, SMS Text
Messages, calling cards, tele-messages and e-mail. This process is normally
completed after anywhere between 120 and 180 days of delinquency, at which point
an account is charged-off. Accounts are automatically charged off at 180 days of
delinquency unless there is specialist activity in place. An account may be
charged off before it is 180 days delinquent. This decision is based upon an
assessment of the likelihood of recovery and rehabilitation of the individual
account and may occur at any point in the process. In certain circumstances, in
particular where notification of bankruptcy or death is received, charge-off is
immediate. In addition, there are instances where accounts are not charged-off
after 180 days of delinquency because of the presence of "specialist
activities". Specialist activities include insurance claims, authorised user
disputes, voucher disputes and complaints.
Once charged-off, the receivables are typically assigned to debt collection
agencies to maximise recoveries. Post charge-off account rehabilitation may
occur where improved credit circumstances and
41
significant recovery occurs. However, charging privileges can only be
re-instated once the cardholder has been accepted for a new account.
The following tables set forth the delinquency and loss experience of
Barclaycard's securitised portfolio of VISA and MasterCard credit and charge
card accounts denominated in pounds sterling -- called the "securitised
portfolio" -- for each of the periods shown. The securitised portfolio includes
platinum, gold and classic VISA and MasterCard credit cards and the Premier VISA
charge card. The securitised portfolio currently does not include the portfolio
of credit card accounts acquired by Barclaycard with Barclays PLC's purchase of
Woolwich in October 2000 or the portfolio of credit card accounts purchased from
Providian's UK operations in April 2002. Because the economic environment may
change, we cannot assure you that the delinquency and loss experience of the
securitised portfolio will be the same as the historical experience set forth
below.
Delinquency statistics for 1996, 1997 and 1998 show accounts on repayments
programmes under a separate heading and represent a month end position.
Repayment programmes are arrangements that are made with customers who fall into
financial difficulty and are aimed at managing risk whilst maintaining a
relationship with the customer. Customers on repayment programmes are subject to
minimum regular monthly payments.
Availability of analysis of repayment programmes by delinquency cycle after 1998
means that accounts on repayment programmes are reported as part of the normal
delinquency cycles for 1999, 2000, 2001 and 2002. The delinquency statistics for
these years are obtained from billing cycle information as opposed to month end
positions.
42
DELINQUENCY EXPERIENCE SECURITISED PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
AS OF 30 JUNE 2002 AS OF 31 DECEMBER 2001
----------------------------------- ------------------------------------
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
-------------------- ----------- -------------------- -----------
RECEIVABLES OUTSTANDING (1) . (pound)7,521,906,625 (pound)7,486,117,963
RECEIVABLES DELINQUENT:
30-59 DAYS .................. (pound)162,972,747 2.17% (pound)164,487,985 2.20%
60-89 DAYS .................. 77,138,332 1.03 83,334,997 1.11
90-119 DAYS ................. 48,786,114 0.65 49,872,026 0.67
120-149 DAYS ................ 30,429,994 0.40 30,624,484 0.41
150 DAYS OR MORE ............ 42,161,546 0.56 50,142,971 0.67
------------------ ----------- -------------------- -----------
TOTAL ....................... (pound)361,488,733 4.81% (pound)378,462,463 5.06%
================== =========== ==================== ===========
REPAYMENT PROGRAMME
ACCOUNTS (2) ...............
DELINQUENCY EXPERIENCE SECURITISED PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
AS OF 31 DECEMBER 2000 AS OF 31 DECEMBER 1999
----------------------------------- ------------------------------------
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
-------------------- -------------- -------------------- --------------
RECEIVABLES OUTSTANDING (1) . (pound)7,204,058,226 (pound)6,494,394,988
RECEIVABLES DELINQUENT:
30-59 DAYS .................. (pound)189,371,628 2.63% (pound)168,547,680 2.60%
60-89 DAYS .................. 87,542,594 1.22 77,811,020 1.20
90-119 DAYS ................. 47,189,100 0.66 42,074,473 0.65
120-149 DAYS ................ 32,390,920 0.45 29,214,222 0.45
150 DAYS OR MORE ............ 38,501,570 0.53 66,768,145 1.03
-------------------- ----------- -------------------- -----------
TOTAL ....................... (pound)394,995,812 5.48% (pound)384,415,541 5.92%
==================== =========== ==================== ===========
REPAYMENT PROGRAMME
ACCOUNTS (2) ...............
DELINQUENCY EXPERIENCE SECURITISED PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
AS OF 30 DECEMBER 1998 AS OF 31 DECEMBER 1997
----------------------------------- ------------------------------------
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
-------------------- ----------- -------------------- -----------
RECEIVABLES OUTSTANDING (1) . (pound)5,497,050,076 (pound)4,814,397,271
RECEIVABLES DELINQUENT:
30-59 DAYS .................. (pound)96,181,749 1.75% (pound)62,509,347 1.30%
60-89 DAYS .................. 48,349,021 0.88 25,829,909 0.54
90-119 DAYS ................. 28,976,605 0.53 16,969,010 0.35
120-149 DAYS ................ 19,732,893 0.36 11,538,118 0.24
150 DAYS OR MORE ............ 29,578,486 0.54 31,356,841 0.65
-------------------- -------- -------------------- -----------
TOTAL ....................... (pound)222,818,755 4.05% (pound)148,203,226 3.08%
==================== ======== ==================== ===========
REPAYMENT PROGRAMME
ACCOUNTS (2) ............... (pound)45,265,877 0.82% (pound)21,156,286 0.44%
DELINQUENCY EXPERIENCE SECURITISED PORTFOLIO
- --------------------------------------------------------------------------------
AS OF 31 DECEMBER 1996
-----------------------------------
PERCENTAGE
TOTAL OF TOTAL
RECEIVABLES RECEIVABLES
-------------------- -----------
RECEIVABLES OUTSTANDING (1) . (pound)4,334,904,866
RECEIVABLES DELINQUENT:
30-59 DAYS .................. (pound)53,695,655 1.24%
60-89 DAYS .................. 24,025,270 0.55
90-119 DAYS ................. 16,370,290 0.38
120-149 DAYS ................ 11,011,034 0.25
150 DAYS OR MORE ............ 3,009,934 0.07
-------------------- -----------
TOTAL ....................... (pound)108,112,185 2.49%
==================== ===========
REPAYMENT PROGRAMME
ACCOUNTS (2) ............... (pound)13,284,524 0.31%
- ----------
(1) The receivables outstanding on the accounts consist of all amounts due from
cardholders as posted to the accounts as of the date shown.
(2) Repayment programmes are arrangements that are made with customers who fall
into financial difficulty. They are agreed as part of a customer assistance
tool set which is targeted at managing the risk on those customers who are
in financial difficulty whilst maintaining the customer relationship. They
are subject to minimum regular month payments.
The analysis of delinquency from 1999 until June 2002 is produced from a
management information source which is refreshed at customer billing dates.
Earlier years represent month end positions. Typically month end delinquency
data is lower than billing date data as a number of cardholders delinquent on
the billing date will have made payments by month end, thereby reducing the
balances, particularly in the earlier delinquency cycles.
43
LOSS EXPERIENCE SECURITISED PORTFOLIO
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
30 JUNE 2002(6) 31 DECEMBER 2001 31 DECEMBER 2000
--------------------------- -------------------------- --------------------------
Average receivables outstanding(1) ... (pound)7,247,267,769.37 (pound)7,230,221,276.67 (pound)6,835,091,131.19
Total gross charge-offs(2) ........... 200,368,165.16 275,553,687.11 303,082,666.30
Recoveries(3) ........................ 38,912,408.47 67,564,936.03 64,702,064.51
Total net charge-offs(4) ............. 161,455,756.69 207,988,751.08 238,380,601.79
--------------------------- -------------------------- --------------------------
Total net charge-offs as a
percentage of average receivables
outstanding(5) ....................... 4.46% 2.88% 3.49%
YEAR ENDED YEAR ENDED YEAR ENDED
31 DECEMBER 1999 31 DECEMBER 1998 31 DECEMBER 1997
------------------------- -------------------------- --------------------------
Average receivables outstanding(1) ... (pound)5,830,909,490.75 (pound)4,993,628,117.00 (pound)4,356,173,242.00
Total gross charge-offs(2) ........... 246,344,010.91 176,491,237.00 112,800,299.00
Recoveries(3) ........................ 61,724,736.62 56,731,717.00 49,836,792.00
Total net charge-offs(4) ............. 184,619,274.29 119,759,520.00 62,963,507.00
------------------------- -------------------------- --------------------------
Total net charge-offs as a
percentage of average receivables
outstanding(5) ....................... 3.17% 2.40% 1.45%
YEAR ENDED
31 DECEMBER 1996
--------------------------
Average receivables outstanding(1) ... (pound)4,001,704,984.00
Total gross charge-offs(2) ........... 135,561,945.00
Recoveries(3) ........................ 54,691,252.00
Total net charge-offs(4) ............. 80,870,693.00
--------------------------
Total net charge-offs as a
percentage of average receivables
outstanding(5) ....................... 2.02%
- ----------
(1) Average receivables outstanding is the average monthly receivables balance
during the periods indicated.
(2) Total gross charge-offs are total principal and interest charge-offs
before recoveries and do not include the amount of any reductions in
average receivables outstanding due to fraud, returned goods, customer
disputes or other miscellaneous credit adjustments.
(3) Recoveries include all monies received after charge-off, including any
monies received as a result of any sale or other disposition of
receivables in charged-off accounts.
(4) Total net charge-offs are total gross charge-offs less recoveries.
(5) All percentages shown are annualised.
(6) In the second half of 2001, Barclaycard's policy was charged to charge-off
accounts at 180 days deliquent in all but exceptional circumstances. This,
combined with a more rebust collections strategy which allows for
charge-off direct from earlier deliquency cycles, if negotiations have
clearly failed, has resulted in higher charge-offs in 2002.
44
THE RECEIVABLES
ASSIGNMENT OF RECEIVABLES TO THE RECEIVABLES TRUSTEE
Under the terms of a receivables securitisation agreement dated 23 November 1999
and amended and restated on 7 July 2000 -- which we will call the "receivables
securitisation agreement" -- Barclaycard as the initial transferor offered on 23
November 1999 -- called the "initial closing date" -- to the receivables trustee
an assignment of all receivables that had arisen or would arise in accounts
originated under the designated product lines, where such accounts were in
existence on or before October 1999 -- called the "pool selection date". Under
the terms of a deed of assignment of receivables dated 7 July 2000, called the
"Future Receivables Transfer", Barclaycard as initial transferor assigned to the
receivables trustee all receivables that would arise on all accounts opened on
or after 1 August 2000 on certain product lines designated in the Future
Receivables Transfer. An account of the initial transferor will be designated as
a "designated account" if the account has been originated under and continues to
conform to the credit card and charge card products described in this
prospectus, comes within a product line named in an accepted offer or transfer
and has not been identified on the initial transferor's system as being excluded
from such accepted offer or transfer. Only credit and charge card products
available to the transferor's individual account holders may be designated.
Under the terms of the Future Receivables Transfer whenever Barclays creates a
new product line, Barclays will be able, if it so chooses, to allocate to that
product line one of the codes referred to in the Future Receivables Transfer,
being a code which has not previously been allocated to any product line. By
allocating, or not allocating, one of those codes to the new product line,
Barclays will be able to choose whether or not to nominate the receivables on
that product line as being included in the sale to the receivables trustee. If
Barclays chooses to make a nomination, it will be able to do so by allocating
one of the relevant product line codes to the product line in question. Once one
of the relevant product line codes has been attached to a particular product
line, all receivables arising thereafter on all accounts opened thereafter on
that product line will be included in the sale to the receivables trustee in
accordance with the terms of the receivables securitisation agreement. Further,
where Barclaycard acquires new portfolios of credit card accounts, it can elect
to transfer those portfolios onto one of the product codes referred to in the
Future Receivables Transfer, and if those accounts are eligible, to designate
those accounts and to include the receivables arising on those accounts in the
sale to the receivables trustee.
If for any reason there are receivables from designated accounts that cannot be
assigned to the receivables trustee, the transferor will hold those receivables,
and any collections on those receivables, on trust for the receivables trustee.
These collections will be treated as if the receivables had been properly
assigned.
Under the terms of the receivables securitisation agreement, the transferor also
has the right to select accounts that conform to the conditions in the first
paragraph above and that are not designated and nominate them to be designated
accounts by offering the receivables trustee an assignment of all future and
existing receivables in these accounts. These accounts are called "additional
accounts". An additional account will be treated as a designated account from
the date on which its receivables are offered to the receivables trustee,
assuming that such offer is accepted. This date is called the "addition date".
When additional accounts are nominated the transferor must, amongst other
things:
o provide the receivables trustee with a certificate stating that it is
solvent;
o confirm, in the document that offers to assign the receivables in the
additional accounts to the receivables trustee, that:
(1) the offer of the receivables in the additional accounts meets the
Maximum Addition Amount criteria; or
(2) if the offer does not meet the Maximum Addition Amount criteria, the
rating agencies have confirmed that the designation of additional
accounts will not result in a reduction or withdrawal of the current
rating of any outstanding debt that is secured directly or indirectly
by the receivables in the receivables trust, including your notes.
o obtain a legal opinion addressed to the receivables trustee about any
receivables from a jurisdiction outside of the United Kingdom.
o in relation to a nomination made in accordance with the terms of the Future
Receivables Transfer, obtain a legal opinion addressed to the receivables
trustee in respect of the Future Receivables Transfer in a form
satisfactory to the receivables trustee.
45
Any of these preconditions may be waived by the receivables trustee if the
rating agencies confirm in writing that the waiver will not result in the
reduction or withdrawal of their rating on any related beneficiary debt. At the
time that it is nominated, each additional account must also meet the
eligibility criteria as at the time of its designation. These criteria are
explained in "--Representations" below. Additional accounts may have been
originated or purchased using underwriting standards that are different from the
underwriting standards used by Barclaycard in selecting the original designated
accounts. As a result, additional accounts that are selected in future may not
have the same credit quality.
"Maximum Addition Amount" means, for any addition date, the number of additional
accounts originated by the transferor after the pool selection date and
nominated as additional accounts without prior rating agency confirmation that
would either:
o for any three consecutive monthly periods starting with the monthly period
beginning on the first day of the month before the pool selection date,
exceed 15 per cent. of the number of designated accounts at the end of the
ninth monthly period before the start of such three monthly periods;
o for any twelve-month period, be equal to 20 per cent. of the designated
accounts as of the first day of the twelve-month period, or if later, as of
the pool selection date.
Notwithstanding what we just said, if the total principal balance of receivables
in the additional accounts described in either of the two prior bullet points is
more than either:
(1) 15 per cent. of the total amount of eligible principal receivables
determined as of the later of the pool selection date and the first day of
the third preceding monthly period, minus the amount of eligible principal
receivables in each additional account that was nominated since the later
of the initial closing date and the first day of the third preceding
monthly period -- calculated for each additional account on its addition
date; or
(2) 20 per cent. of the total amount of eligible principal receivables as of
the later of the initial closing date and the first day of the calendar
year in which the addition date occurs, minus the total amount of eligible
principal receivables in each additional account that was nominated since
the later of the initial closing date and the first day of the calendar
year, calculated for each additional account as of its addition date,
then the Maximum Addition Amount will be the lesser of (1) or (2) above.
Every offer of receivables to the receivables trustee under the receivables
securitisation agreement will comprise offers of the following:
o all existing receivables in the designated accounts;
o all future principal receivables under the designated accounts, until the
first to occur of (1) the time a designated account becomes a redesignated
account, (2) the receivables trust is terminated or (3) an Insolvency Event
occurs;
o all future finance charge receivables under those designated accounts that
have accrued on receivables that have been assigned to the receivables
trustee as described in the two prior bullet points;
o if capable of being assigned, the benefit of any guarantee or insurance
policy obtained by the transferor for any obligations owed by a cardholder
on a designated account; and
o the benefit of all amounts representing Acquired Interchange for the
relevant monthly period.
The transferor will ensure that each redesignated account is identified on the
transferor's computer system on the date that a designated account becomes a
redesignated account.
Throughout the term of the receivables trust, the designated accounts from which
the receivables will arise will be the designated accounts plus any additional
accounts designated by the transferor from time to time, minus any redesignated
accounts.
Existing receivables and future receivables arising under the designated
accounts are either principal receivables or finance charge receivables.
"Principal receivables" are receivables that are not finance charge receivables.
Principal receivables are amounts owing by cardholders for the purchase of
merchandise or services and from cash advances, including foreign exchange
commissions charged for merchandise and services payable, or cash advances
denominated in, a currency other than sterling. They are reduced by any credit
balance on the designated account on that day.
46
"Finance charge receivables" are amounts owing from cardholders for transaction
fees, periodic finance charges, special fees and annual fees -- see "--Special
Fees and --Annual Fees" below -- and any interchange and Discount Option
Receivables.
Under the receivables securitisation agreement, each offer of receivables made
by the transferor may be accepted by paying the purchase price for the offered
receivables. If the receivables trustee chooses to accept the offer, payment for
existing receivables has to be made no later than the business day following the
date on which the offer is made. Alternatively, the parties can agree to a
longer period of time for payment. Payment for future receivables that become
existing receivables must be made no later than two business days after the date
of processing for those receivables. Alternatively, the parties can agree to a
longer period if the rating agencies consent. This payment will also include
payment for the assignment of the benefit of Acquired Interchange to the
receivables trustee.
A "business day" is a day other than a Saturday, a Sunday or a day on which
banking institutions in London, England, or New York, New York are authorised or
obliged by law or executive order to be closed.
It was agreed between the transferor and the receivables trustee that, for the
purposes of the offer made on the initial closing date:
(1) the receivables trustee was entitled to use the collections in the
designated accounts before the date that the offer was accepted as if the
offer had been accepted on the initial closing date;
(2) the amount paid on the initial closing date for the designated accounts
equalled the outstanding face amount of all existing principal receivables,
together with an obligation of the receivables trustee to pay for all
future receivables generated on the designated accounts that were part of
the offer on an ongoing, daily basis when those future receivables are
generated.
The payments in (2) are net of any payments made in (1), subject to a minimum of
(pound)1.
The amount payable by the receivables trustee to the transferor if it chooses to
accept an offer or to make payment for any future receivables will be reduced by
the amount of any shortfall in the amount funded by the transferor as a
beneficiary, providing that the Transferor Interest is increased accordingly.
REDESIGNATION AND REMOVAL OF ACCOUNTS
Each designated account will continue to be a designated account until such time
as the transferor reclassifies it as being no longer a designated account --
called a "redesignated account".
A designated account becomes a redesignated account on the date specified by the
transferor. No designated account will become a redesignated account this way
unless (1) it has become a cancelled account, a defaulted account or a zero
balance account or (2) the transferor delivers an officer's certificate
confirming the following conditions are satisfied:
o the redesignation will not cause a pay out event to occur;
o the transferor has represented that its selection procedures for the
selection of designated accounts for redesignation are not believed to have
any material adverse effect on any investor beneficiary;
o the rating agencies have confirmed that the action will not result in a
downgrade in rating of any outstanding debt that is secured directly or
indirectly by the receivables in the receivables trust; and
o the transferor and the servicer can certify that collections equal to the
outstanding face amount of each principal receivable and the outstanding
balance of each finance charge receivable have been received by the
receivables trustee on all receivables assigned for that account other than
any receivables charged off as uncollectable.
A "cancelled account" is a designated account that has had its charging
privileges permanently withdrawn. A "defaulted account" is a designated account
where the receivables have been charged off by the servicer as uncollectable in
line with the credit and charge card guidelines or the usual servicing
procedures of the servicer for similar credit and charge card accounts. A "zero
balance account" is a designated account that has had a nil balance of
receivables for a considerable period of time and has been identified by the
servicer as a zero balance account under the credit and charge card guidelines
or the usual servicing procedures of the servicer.
Redesignated accounts include all accounts that become cancelled accounts,
defaulted accounts and zero balance accounts from the date on which they are
redesignated in any of these ways. The principal
47
receivables that exist before the date of redesignation will be paid for by the
receivables trustee. Any future receivables that come into existence after that
time will not be assigned to the receivables trustee as set out in the
receivables securitisation agreement. No receivable that has been assigned to
the receivables trustee will be reassigned to the transferor except in the
limited circumstances described under the heading "--Representations".
Until money has been received for the assigned receivables that have not been
charged off, a redesignated account will not be identified as having been
removed. The amount identified will be equal to the outstanding face amount of
each principal receivable and finance charge receivable. Once these payments
have been received or any reassignment has occurred, the account will be
identified to indicate that it has become a redesignated account.
DISCOUNT OPTION RECEIVABLES
The transferor may, by giving at least thirty days' prior notice to the
servicer, the receivables trustee and the rating agencies, nominate a fixed or
variable percentage -- called the "Discount Percentage" -- of principal
receivables in the designated accounts. If a Discount Percentage has been
nominated previously, an extension to that period can be applied for in this
way. From the date and for the length of time stated in the notice:
o the amount payable by the receivables trustee to accept an offer of
receivables will be reduced by a percentage amount equal to the Discount
Percentage; and
o percentage of the principal receivables equal to the Discount Percentage
will be treated by the receivables trustee as finance charge receivables.
These are called "Discount Option Receivables".
The nomination of a Discount Percentage or increase in the time it is in place
will be effective only if the rating agencies consent to the proposed nomination
or increase and confirm that it will not result in the downgrade or withdrawal
of the current rating of any debt that is secured directly or indirectly by the
receivables in the receivables trust, including your notes. The transferor must
also provide the receivables trustee with a certificate confirming:
o that the performance of the portfolio of designated accounts, in their
reasonable opinion, is not generating adequate cash flows for the
beneficiaries of the receivables trust and the size of the Discount
Percentage is not intended solely to accelerate distributions to the excess
interest beneficiary; and
o that the transferor is solvent and will remain so following the nomination
or increase.
The transferor may have different reasons to designate a Discount Percentage.
The finance charge collections on the designated accounts may decline for
various reasons or may stay constant. The notes have interest rates that are
variable and that could increase. Any of these variables could cause a Series
02-1 Pay Out Event to occur based in part on the amount of finance charge
collections and the interest rate on the notes. The transferor could avoid the
occurrence of this Series 02-1 Pay Out Event by designating a Discount
Percentage, causing an increase in the amount of finance charge collections. The
transferor, however, is under no obligation to designate a Discount Percentage
and we cannot assure you that the transferor would designate a Discount
Percentage to avoid a Series 02-1 Pay Out Event.
SPECIAL FEES AND ANNUAL FEES
The transferor charges special fees -- currently late and over limit fees -- on
its credit or charge card accounts. These special fees as well as additional
special fees may be assessed at one time or on an ongoing basis. Certain of the
receivables assigned or to be assigned to the receivables trustee include annual
fees on a small number of the designated accounts. Any special fees and annual
fees that are charged on designated accounts are regarded as finance charge
receivables and collections of these special fees are treated as finance charge
collections. The transferor may, however, decide that these special fees or
annual fees will be viewed as principal receivables and collections on them will
be allocated accordingly. This can be done only if the transferor certifies that
it has an opinion from legal counsel that the special fees or annual fees amount
to repayment, for United Kingdom tax purposes, in whole or in part of an advance
to a cardholder.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive fees
called "interchange" as partial compensation, for amongst other things, taking
credit risk and absorbing fraud losses. Under the VISA and MasterCard systems,
interchange is passed from the banks that clear the transactions for
48
merchants to card issuing banks. Interchange fees are calculated as a percentage
of the amount of a credit or charge card transaction for the purchase of goods
or services. This percentage varies from time to time.
On each transfer date the transferor will deposit into the Trustee Collection
Account an amount equal to the interchange received for the preceding monthly
period. This amount is called the "Acquired Interchange". Interchange is
received by Barclaycard on a daily basis and is posted to the general ledger
with a flag identifying the product to which it relates. The amount of Acquired
Interchange applicable to the receivables in the trust is arrived at monthly by
interrogation of the general ledger. All interchange relating to products
included in the trust is extracted and posted to the Trustee Collection Account.
REDUCTIONS IN RECEIVABLES, EARLY COLLECTIONS AND CREDIT ADJUSTMENTS
If a principal receivable that has been assigned to the receivables trustee is
reduced -- for reasons other than because of Section 75 of the Consumer Credit
Act or a credit adjustment -- after the offer date because of set-off,
counterclaim or any other matter between the cardholder and the transferor, and
the transferor has received a benefit, then the transferor will pay an amount
equal to that reduction to the receivables trustee. Similarly, if an existing
receivable has already been assigned and the transferor has received full or
partial payment of that receivable before the date that the receivable was
purportedly assigned, then the transferor will pay the amount of that collection
to the receivables trustee.
If any principal receivable assigned to the receivables trustee is reduced for
credit adjustment reasons after the offer date, then the transferor will pay
that amount to the receivables trustee. A credit adjustment is the outstanding
face amount of a principal receivable that:
o was created by virtue of a sale of merchandise that was subsequently
refused or returned by a cardholder or against which the cardholder has
asserted any defence, dispute, set-off or counterclaim;
o is reduced because the cardholder had received a rebate, refund,
charge-back or adjustment; or
o is fraudulent or counterfeit.
Alternatively, instead of paying these amounts to the receivables trustee, the
transferor can reduce the Transferor Interest by the amount of the credit
adjustment, but not below zero.
REPRESENTATIONS
Each offer of receivables to the receivables trustee under the receivables
securitisation agreement and the Future Receivables Transfer includes
representations by the transferor about the offer or transfer of the existing
receivables and the future receivables. The representations for the existing
receivables were or will be given as of the pool selection date or an addition
date, as applicable, and the representations for the future receivables are
given on the date they are processed, and include, in each case, that:
o unless identified as an ineligible receivable, the receivable is an
eligible receivable and has arisen from an eligible account in the amount
specified in the offer or daily activity report, as applicable;
o each assignment passes good and marketable title for that receivable to the
receivables trustee, together with the benefit of all collections and other
rights in connection with it, free from encumbrances of any person claiming
on it through the transferor to the receivables and, unless such receivable
does not comply with the Consumer Credit Act, nothing further needs to be
done to enforce these rights in the courts of England and Wales, Scotland
or Northern Ireland, or any permitted additional jurisdiction, without the
participation of the transferor, except for payment of any United Kingdom
stamp duty and giving a notice of assignment to the cardholders and subject
to any limitations arising on enforcement in the jurisdiction of the
relevant cardholder;
o the assignment complies with all applicable laws on the date of assignment;
and
If a representation relating to the eligibility criteria given in connection
with any principal receivable proves to be incorrect when made, then the
transferor is obliged to pay the receivables trustee an amount equal to the face
value of that receivable on the following business day. A receivable of this
type will afterwards be treated as an ineligible receivable.
The transferor's obligation to pay amounts due as a result of any breach of a
representation can be fulfilled, in whole or in part, by a reduction in the
amount of the Transferor Interest. The Transferor Interest, however, may not be
reduced below zero. If the transferor meets a payment obligation in this way,
the receivables trustee will have no further claim against the transferor for
the breached representation. However, a breach of a representation may result in
a Series 02-1 Pay Out Event.
49
If:
o all principal receivables arising under a designated account become
ineligible as a result of incorrect representations;
o that account has become a redesignated account; and
o the transferor has complied with the payment obligations for the principal
receivables;
then the transferor can require the receivables trustee to reassign all those
receivables to the transferor.
The receivables trustee has not made and will not make any initial or periodic
examination of the receivables to determine if they are eligible receivables or
if the transferor's representations and warranties are true.
The term "eligible account" means, as of the pool selection date, an addition
date or date on which the account is opened, as applicable, a credit or charge
card account:
o where the cardholder is not a company or partnership for the purposes of
Section 349(2) of the Income and Corporation Taxes Act 1988;
o which, except in the case of a future designated account as defined in any
offer or a relevant account as defined in the Future Receivables Transfer,
was in existence and maintained with the transferor before it became a
designated account;
o which is payable in pounds sterling or the currency of the permitted
additional jurisdiction where the account is in a permitted additional
jurisdiction, as applicable;
o which is governed by one of the transferor's standard form card agreements
or, if it was acquired by the transferor, it is originated on contractual
terms not materially different from that standard form;
o which is governed in whole or in part by the Consumer Credit Act and
creates legal, valid and binding obligations between the transferor and the
cardholder which, except in the case of an account on which restricted
eligible receivables arise, is enforceable, subject to bankruptcy laws,
general principles of equity and limitations on enforcement in any
cardholder jurisdiction and was otherwise created and complies with all
other applicable laws;
o where the cardholder's most recent billing address is located in England,
Wales, Scotland, Northern Ireland, or a permitted additional jurisdiction
or a restricted additional jurisdiction;
o which has not been classified by the transferor as counterfeit, cancelled,
fraudulent, stolen or lost;
o which has been originated or purchased by the transferor;
o which has been operated in all material respects in accordance with the
transferor's policies and procedures and usual practices for the operation
of its credit and charge card business; and
o the receivables in respect of which have not been charged off by the
transferor on the date the account is specified as a designated account.
If all these conditions have not been satisfied, then an account may still be an
eligible account if each rating agency gives their approval.
A "restricted eligible receivable" is a receivable arising on an eligible
account, the terms of which fail to comply with the Consumer Credit Act, such
that a court would have no discretion to grant a court order.
A "defaulted receivable" is any receivable in a defaulted account.
A "permitted additional jurisdiction" is a jurisdiction -- other than England
and Wales, Scotland and Northern Ireland -- agreed by the transferor and the
receivables trustee, and which each rating agency has confirmed in writing that
its inclusion as a permitted additional jurisdiction will not result in its
withdrawing or reducing its rating on any related beneficiary debt.
A "restricted additional jurisdiction" is a jurisdiction -- other than England,
Wales, Scotland and Northern Ireland or a permitted additional jurisdiction --
which together with each other account with a billing address in that
jurisdiction and any other jurisdiction other than England, Wales, Scotland,
Northern Ireland or a permitted additional jurisdiction represent less than 5
per cent. by outstanding receivables balance.
A "notice of assignment" means a notice given to a cardholder of the assignment
of the receivables -- and the benefit of any guarantees -- to the receivables
trustee.
50
An "eligible receivable" means a receivable that:
o has arisen under an eligible account;
o was originated under one of the transferor's standard form credit or charge
card agreements and is governed, in whole or in part, by the Consumer
Credit Act, or else, if the related account was acquired by the transferor,
contractual terms that are materially the same as the standard form
credit or charge card agreements and are governed, in whole or in part, by
the Consumer Credit Act;
o was otherwise created in compliance with all other applicable laws;
o was originated in accordance with the transferor's policies and procedures
and usual practices for its credit and charge card business;
o is not a defaulted receivable as at the offer date or addition date, as
applicable;
o is free of any encumbrances exercisable against the transferor arising
under or through the transferor or any of its affiliates;
o to which the transferor has good and marketable title;
o is the legal obligation of the cardholder, enforceable -- except in the
case of restricted eligible receivables -- in accordance with the terms of
the credit or charge card agreement, subject to bankruptcy, general
principles of equity and limitations on enforcement in any cardholder
jurisdiction; and
o is not currently subject to any defence, dispute, event, set-off,
counterclaim or enforcement order.
As is market practice in the United Kingdom for credit and charge card
securitisation transactions, principal receivables that are delinquent will
still constitute eligible receivables if they comply with the eligibility
requirements. See the table captioned "Delinquency Experience -- Securitised
Portfolio" in "Barclaycard and the Barclaycard Card Portfolio -- Delinquency and
Loss Experience" above for data showing the percentage of delinquent
receivables.
"Ineligible receivables" means principal receivables which arise under a
designated account but which do not comply with all the criteria set out in the
definition of eligible receivables as at the pool selection date or an addition
date, as applicable.
AMENDMENTS TO CARD AGREEMENTS AND CARD GUIDELINES
The transferor may amend the terms and conditions of its standard form card
agreements or change its policies and procedures and usual practices for its
general card business. These amendments may include reducing or increasing the
amount of monthly minimum required payments required or may involve changes to
periodic finance charges or other charges that would apply to the designated
accounts. See "Risk Factors: A Change in the Terms of the Receivables May
Adversely Affect the Amount or Timing of Collections and May Cause an Early
Redemption of Your Notes or a Downgrade of Your Notes".
SUMMARY OF SECURITISED PORTFOLIO
The tables that follow summarise the securitised portfolio by various criteria
as of the billing dates of accounts in the month ending on 30 June 2002, except
for the table headed "Geographic Distribution of Accounts" which contains
geographical information as at 31 August 2002 on the cardholders of the same
accounts. Because the future composition of the securitised portfolio may change
over time, these tables are not necessarily indicative of the composition of the
securitised portfolio at any time after 30 June 2002.
51
COMPOSITION BY ACCOUNT BALANCE
SECURITISED PORTFOLIO
Percentage of Percentage
Total Number Total Number Total of Total
Account Balance Range of Accounts of Accounts Receivables Receivables
- --------------------- ------------ ------------- ----------- -----------
Credit Balance ..................................... 260,841 3.2% (pd)(15,262,358) (0.2)%
No Balance ......................................... 2,173,328 27.1 0 0.0
(pd)0.01 to (pd)5,000.00 ........................... 5,298,663 66.0 5,240,337,979 70.9
(pd)5,000.01 to (pd)10,000.00 ...................... 266,805 3.3 1,815,851,473 24.6
(pd)10,000.01 to (pd)15,000.00 ..................... 25,918 0.3 294,108,553 4.0
(pd)15,000.01 to (pd)20,000.00 ..................... 2,201 0.0 37,137,048 0.5
(pd)20,000.01 to (pd)25,000.00 ..................... 561 0.0 12,445,486 0.2
(pd)25,000.01 and over ............................. 287 0.0 9,632,732 0.1
--------- ------ ------------- ------
Total .............................................. 8,028,604 100.0% (pd)7,394,250,913 100.0%
========= ====== ============= ======
COMPOSITION BY CREDIT LIMIT
SECURITISED PORTFOLIO
Percentage of Percentage
Total Number of Total Number Total of Total
Credit Limit Range Accounts of Accounts Receivables Receivables
- ------------------ --------------- ------------- ----------- -----------
Up to (pd)1,000.00 ............................ 1,729,307 21.5% (pd)457,693,918 6.2%
(pd)1,000.01 to (pd)2,500.00 .................. 1,962,054 24.4 919,027,351 12.4
(pd)2,500.01 to (pd)5,000.00 .................. 2,645,273 32.9 2,054,681,981 27.8
(pd)5,000.01 to (pd)7,500.01 .................. 939,320 11.7 1,559,728,758 21.1
(pd)7,500.01 to (pd)10,000.00 ................. 521,071 6.5 1,468,096,164 19.9
(pd)10,000.01 to (pd)15,000.00 ................ 194,052 2.4 787,868,764 10.7
(pd)15,000.01 and over ........................ 37,527 0.5 147,153,977 2.0
--------- ----- ------------- -----
Total ......................................... 8,028,604 100.0% (pd)7,394,250,913 100.0%
========= ===== ============= =====
COMPOSITION BY ACCOUNT AGE
SECURITISED PORTFOLIO
Percentage of Percentage
Total Number of Total Number Total of Total
Account Age Accounts of Accounts Receivables Receivables
- ----------- --------------- ------------- ----------- -----------
Not more than 3 months ............................. 232,388 2.9% (pd)92,375,586 1.2%
Over 3 to 6 months ................................. 248,410 3.1 119,201,652 1.6
Over 6 to 9 months ................................. 255,313 3.2 138,975,861 1.9
Over 9 to 12 months ................................ 181,667 2.3 104,781,197 1.4
Over 12 to 15 months ............................... 148,693 1.9 94,277,716 1.3
Over 15 to 18 months ............................... 78,413 1.0 45,109,631 0.6
Over 18 to 21 months ............................... 87,489 1.1 49,372,774 0.7
Over 21 to 24 months ............................... 235,674 2.9 205,289,452 2.8
Over 2 to 3 years .................................. 630,112 7.8 556,990,899 7.5
Over 3 to 4 years .................................. 444,652 5.5 424,599,042 5.7
Over 4 to 5 years .................................. 384,542 4.8 358,160,537 4.8
Over 5 to 10 years ................................. 1,608,238 20.0 1,639,685,339 22.2
Over 10 years ...................................... 3,493,013 43.5 3,565,431,229 48.2
--------- ------ ------------- ------
Total .............................................. 8,028,604 100.0% (pd)7,394,250,913 100.0%
========= ====== ============= ======
52
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
SECURITISED PORTFOLIO
Percentage of Total Percentage
Total Number of Number Total of Total
Region Accounts of Accounts Receivables Receivables
- ------ --------------- ------------------- ----------- -----------
East 931,552 11.6% (pd) 858,962,020 11.6%
East Midlands 469,673 5.8 441,397,423 6.0
London 1,440,138 17.9% 1,374,282,290 18.6
North East 406,682 5.1 376,853,595 5.1
North West 689,803 8.6 650,270,205 8.8
Northern Ireland 55,968 0.7 58,912,602 0.8
Rest of UK 36,460 0.5% 38,179,282 0.5
Scotland 210,149 2.6 232,196,583 3.1
South East 1,277,222 15.9 1,229,036,652 16.6
South West 646,577 8.1 578,865,696 7.8
Wales 344,762 4.3 300,062,029 4.1
West Midlands 630,897 7.9 563,046,248 7.6
Yorkshire and Humberside 458,326 5.7 429,736,514 5.8
Other 250,227 3.1 151,396,421 2.0
Non UK 180,168 2.2 111,053,351 1.5
--------- ------ ------------- ------
Total 8,028,604 100.0% (pd)7,394,250,913 100.0%
========= ====== ============= ======
53
MATURITY ASSUMPTIONS
On each transfer date during the Controlled Accumulation Period an amount equal
to the Controlled Deposit Amount will be deposited in the Principal Funding
Account until the balance of the Principal Funding Account equals the Investor
Interest. Although it is anticipated that principal collections will be
available on each transfer date during the Controlled Accumulation Period to
make a deposit of the Controlled Deposit Amount and that the Investor Interest
will be paid to the MTN issuer on the series 02-1 scheduled redemption date,
allowing the MTN issuer to redeem the series 02-1 medium term note certificate
fully, no assurance can be given that sufficient principal collections will be
available. If the amount required to pay the Investor Interest in full is not
available on the series 02-1 scheduled redemption date, a Series 02-1 Pay Out
Event will occur and the Rapid Amortisation Period will begin.
If a Regulated Amortisation Trigger Event occurs during the Controlled
Accumulation Period, the Regulated Amortisation Period will begin. If any other
Pay Out Event occurs during the Controlled Accumulation Period, the Rapid
Amortisation Period will begin. In each case, any amount on deposit in the
Principal Funding Account will be paid to the MTN issuer for the Investor
Interest on the first payment date relating to the Regulated Amortisation Period
or the Rapid Amortisation Period. In addition, to the extent that the Investor
Interest for each class has not been distributed in full, the MTN issuer will be
entitled to monthly distributions of principal collections during the Rapid
Amortisation Period equal to the Available Investor Principal Collections until
the Investor Interest has been distributed in full or, during the Regulated
Amortisation Period, an amount equal to the Controlled Deposit Amount until the
Investor Interest has been distributed in full. A Pay Out Event occurs, either
automatically or after specified notice, after a Trust Pay Out Event or a Series
02-1 Pay Out Event occurs. See "The Receivables Trust: Trust Pay Out Events" and
"Series 02-1: Series 02-1 Pay Out Events". If a Series 02-1 Pay Out Event
occurs, it will automatically trigger an early redemption event under the series
02-1 medium term note certificate.
The following table presents the highest and lowest cardholder monthly payment
rates for the bank portfolio during any month in the period shown and the
average cardholder monthly payment rates for all months during the periods
shown. These are calculated as a percentage of total opening receivables
balances during the periods shown. The payment rates are based on amounts which
would be deemed payments of principal collections and finance charge collections
for the related accounts.
CARDHOLDER MONTHLY PAYMENT RATES
SECURITISED PORTFOLIO
Year Ended 31 December
Six Months ended ----------------------------------------------
30 June 2002 2001 2000 1999 1998 1997 1996
---------------- ------ ------ ------ ------ ------ ------
Lowest Month ...... 19.61% 20.83% 21.10% 22.01% 25.09% 26.64% 29.27%
Highest Month ..... 25.02% 26.34% 26.09% 28.94% 31.02% 36.47% 39.13%
Monthly Average ... 23.07% 23.43% 23.92% 25.75% 28.80% 32.01% 33.03%
Collections may vary from month to month due to:
o seasonal variations;
o promotional offerings -- such as payment holidays;
o general economic conditions; and
o payment habits of individual cardholders.
There is no guarantee that the future monthly payment rates for the securitised
portfolio will be similar to the historical experience set forth in the table
above or that there will be enough principal collections to deposit the
Controlled Deposit Amount into the Principal Funding Account each month to fully
redeem your notes by the series 02-1 scheduled redemption date. If a Pay Out
Event occurs, the average life and maturity of your notes could be significantly
reduced, since you may start receiving principal distributions before the series
02-1 scheduled redemption date.
Because there may be a slowdown in the payment rate below the payment rates used
to determine the Controlled Deposit Amount or a Pay Out Event may occur which
would start the Rapid Amortisation Period or the Regulated Amortisation Period,
there is no guarantee that the actual number of months elapsed from the closing
date to the final distribution date for your notes will equal the expected
number of months. As described under "Series 02-1: Postponement of Controlled
Accumulation Period", if the
54
servicer shortens the Controlled Accumulation Period there is no guarantee that
there will be enough time to accumulate all amounts necessary to fully pay the
Investor Interest on the series 02-1 scheduled redemption date. See "Risk
Factors: Principal on your Notes May Be Paid Earlier Than Expected Creating a
Reinvestment Risk to You or Later than Expected".
RECEIVABLES YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
portfolio of credit and charge card accounts for the six months ended 30 June
2002 and for each of the calendar years ended 31 December, 2001, 31 December,
2000, 31 December, 1999, 31 December, 1998, 31 December, 1997 and 31 December
1996 are presented in the following tables below, except that the yield for the
calendar years ended 31 December 1999, 31 December 1998, 31 December 1997 and 31
December 1996 are accruals based and the data after 31 December 1999 is cash
based to reflect that calendar year 2000 is the first full year of the
receivables trust.
Prior to the creation of the receivables trust, Barclaycard recorded yield
information on an accruals basis, which includes earned but not necessarily paid
finance charges and fees. A system change to allocate cash in priority against
finance charges ahead of principal was made in October 1999. This resulted in
increased yield in 2000. Cash yields from 2000 onwards include principal and
interest recovered on charged-off accounts, which typically results in higher
cash yields than accrual yields. The yield on both an accrual and a cash basis
will be affected by many factors, including the monthly periodic finance charges
on the receivables, the amount of the annual fees and other fees, changes in the
delinquency rate on the receivables and the percentage of cardholders who pay
their balances in full each month and do not incur monthly periodic finance
charges. For example, the transferor could change the monthly interest rate
applied to the accounts or reduce or eliminate fees on the accounts. See "Risk
Factor: A Change in the Terms of the Receivables May Adversely Affect the Amount
or Timing of Collections and May Cause an Early Redemption or a Downgrade of
Your Notes".
The following tables set forth the revenue for the securitised portfolio of card
accounts. The revenue is comprised of monthly periodic finance charges, card
fees, special fees, annual fees and interchange. These revenues vary for each
account based on the type and volume of activity for each account. See
"Barclaycard and the Barclaycard Card Portfolio".
55
YIELD EXPERIENCE(1)
SECURITISED PORTFOLIO
Year ended 31 December
Six months ended --------------------------------------------------------
30 June 2002 2001 2000 1999
---------------- ---------------- ---------------- ----------------
Finance charges and fees (2)(3).... (pd) 605,056,492 (pd)1,247,138,637 (pd)1,413,692,115 (pd) 892,725,062
Average receivables
outstanding(4)................... (pd)7,247,267,769 (pd)7,230,221,276 (pd)6,835,091,131 (pd)5,830,909,491
Yield from finance charges and
fees(5).......................... 16.84% 17.25% 20.68% 15.31%
Interchange ....................... (pd) 87,848,423 (pd) 186,525,567 (pd) 183,408,157 (pd) 175,240,543
------------- ------------- ------------- -------------
Yield from interchange(6).......... 2.44% 2.58% 2.68% 3.01%
Yield from finance charges, fees
and interchange ................. 19.28% 19.83% 23.37% 18.32%
Year ended 31 December
-------------------------------------------------------
1998 1997 1996
----------------- ----------------- -----------------
finance charges and fees(2)(3)... (pd) 863,715,430 (pd) 759,622,104 (pd) 698,171,896
Average receivables
outstanding(4)................. (pd)4,993,628,117 (pd)4,356,173,242 (pd)4,001,704,984
Yield from finance charges and
fees(5)........................ 17.30% 17.44% 17.45%
Interchange ..................... (pd) 169,283,993 (pd) 164,663,349 (pd) 157,667,176
------------- ------------- -------------
Yield from interchange(6)........ 3.39% 3.78% 3.94%
Yield from finance charges, fees
and interchange ............... 20.69% 21.22% 21.39%
Revenues vary for each account based on type and volume of activity for each
account. See "Barclaycard and the Barclaycard Portfolio"
- ----------
(1) All percentage data are presented on an annualised basis.
(2) Finance charges and fees are comprised of monthly periodic finance charges,
annual fees and other card fees.
(3) Accrued finance charges and fees are presented net of adjustments made
pursuant to Barclaycard's normal servicing procedures.
(4) Average receivables outstanding is the average monthly receivable balance
during the periods indicated.
(5) Yield from finance charges and fees is the result of dividing the
annualised accrued finance charges and fees by the average receivables
outstanding for the period.
(6) Yield from Interchange is the result of dividing annualised revenue
attributable to interchange received during the period by the average
receivables outstanding for the period.
56
THE RECEIVABLES TRUST
GENERAL LEGAL STRUCTURE
The receivables trust was constituted on 1 November 1999 and is a trust formed
under English law by the receivables trustee as trustee and Barclays as trust
cash manager, initial transferor, transferor beneficiary and excess interest
beneficiary. The receivables trust was declared for the financings described in
this prospectus. The terms and conditions of the receivables trust are contained
in the declaration of trust dated 1 November 1999 as amended and restated by the
declaration of trust and trust cash management agreement dated 23 November 1999,
and supplemented by the series supplements to the declaration of trust and trust
cash management agreement, which are governed by English law. This section will
describe to you the material terms of the receivables trust and declaration of
trust and trust cash management agreement. The terms of the declaration of trust
and trust cash management agreement may be varied or added to by executing a
supplement -- but only for the series of investor certificates issued under the
supplement. A precondition to the receivables trustee entering into a supplement
is obtaining confirmation from the rating agencies that entering into the
supplement will not result in any rating agency withdrawing or downgrading its
rating of any debt that is ultimately secured by the receivables in the
receivables trust. Under the declaration of trust and trust cash management
agreement, the receivables trustee holds all of the receivables trust's property
on trust for:
o the initial transferor beneficiary and the excess interest beneficiary as
the initial beneficiaries of the trust; and
o for any other person who may become an additional transferor beneficiary or
additional beneficiary of the trust as allowed by the declaration of trust
and trust cash management agreement.
Other than the excess interest beneficiary and a transferor beneficiary, the two
categories of beneficiary are:
o an investor beneficiary, which may include any investor beneficiary
subordinate to another investor beneficiary as a provider of credit
enhancement; or
o an enhancement provider for a series of investor certificates, if provided
for in the supplement for that series.
The excess interest beneficiary and the initial transferor beneficiary are the
initial beneficiaries of the receivables trust. Any subsidiary of the initial
transferor that, with the prior written consent of all existing beneficiaries of
the receivables trust, accedes to the receivables securitisation agreement as an
additional transferor will upon its accession become an additional transferor
beneficiary of the receivables trust.
By making payments to the receivables trustee as a contribution to the
receivables trust's property, as set out in the declaration of trust and trust
cash management agreement, other persons can form a series of the receivables
trust. These persons are called additional beneficiaries. When payment is made,
the additional beneficiaries will be given a certificate evidencing a beneficial
interest in the receivables trust to show that they are an investor. This
process is called an acquisition and the certificate is called an investor
certificate. When an acquisition takes place a notice will be given that will
list the parties to the acquisition and anyone who is providing credit
enhancement for the series of investor certificates, called an enhancement
provider. A new supplement to the declaration trust and trust cash management
agreement will govern each new series of the receivables trust that is created.
Two types of acquisition may be made:
o the transferor beneficiary, may direct the receivables trustee, in exchange
for tendering the certificate it holds showing its entitlement to the
receivables trust's property -- called the "transferor certificate" -- to
issue a new series of investor certificates and to reissue the transferor
certificate evidencing the transferor's beneficial entitlement to the
receivables trust's property. This is known as a "transferor acquisition".
Series 02-1 will be the second series of investor certificates issued by
the receivables trust and will be created by a transferor acquisition
occurring on the closing date.
o the second type of acquisition which may be made is an investor acquisition
where, if the supplement permits, an investor beneficiary together with the
transferor beneficiary may direct the receivables trustee, in exchange for
tendering their investor certificates and the transferor certificate to
issue one or more new investor certificates and a reissued transferor
certificate. The supplement for series 02-1 does not provide for an
investor acquisition.
57
The receivables trustee will authenticate and deliver a series of investor
certificates only when it has first received:
o a supplement signed by the parties to the new series, including the
receivables trustee and the transferor beneficiary, specifying the
principal terms of the series;
o the credit enhancement, if any, and any agreement by which an enhancement
provider agrees to provide credit enhancement -- series 02-1 has
subordination and the Spread Account as credit enhancement and will not
have an enhancement provider or an enhancement agreement;
o a solvency certificate from the transferor and any additional transferors;
o written confirmation from the rating agencies that the proposed acquisition
will not result in the reduction or withdrawal of their ratings on any
notes issued by the issuer or any other issuer of any series of notes that
is ultimately secured by the receivables in the receivables trust -- called
"related beneficiary debt";
o written confirmation from each additional beneficiary and enhancement
provider, if any, that:
(1) its usual place of abode is in the United Kingdom and it will be
within the charge to United Kingdom corporation tax for all amounts
regarded as interest for UK tax purposes received by it under the
transactions contemplated by the series of investor certificates; or
(2) it is a bank, as defined for purposes of Section 349(3)(a) of the
Income and Corporation Taxes Act 1988, and it will be within the
charge to for United Kingdom corporation tax for all amounts regarded
as interest for UK tax purposes received by it under the series of
investor certificates;
o the existing transferor certificate and, if it is an investor acquisition,
the applicable investor certificates;
o an officer's certificate provided by the transferor certifying either:
(1) that:
o each class of related beneficiary debt issued as part of the
acquisition and described in the related supplement will be rated
in one of the three highest rating categories by at least one
rating agency recognised in the United Kingdom;
o each investor beneficiary -- other than any enhancement provider
-- will have associated with it, either directly or indirectly, a
class of related beneficiary debt; and
o the enhancement for each series will be provided by any
combination of subordination, a letter of credit, a cash
collateral loan, a surety bond, an insurance policy, or a spread
or reserve account funded from excess finance charge collections
ultimately reverting to the excess interest beneficiary or
transferor to the extent not utilised as enhancement, but through
no other means; or
(2) it has determined that, based on legal advice, the acquisition is in
the best interests of the transferor beneficiary and its affiliates.
Each supplement to the declaration of trust and trust cash management agreement
will specify the principal terms for its series of investor certificates,
including the accumulation period or amortisation period for the payment of
principal. For each series these may be of different lengths and begin on
different dates. Enhancement is specific to each series and will be held and
used by the receivables trustee only for the benefit of the relevant series.
Certain series may be subordinated to other series, and classes within a series
may have different priorities. Whether or not a series or class is subordinated
will be set out in the related supplement. Series 02-1 will not be subordinate
to any other series. There will be no limit on the number of acquisitions that
may be performed.
The receivables trustee will not be able to arrange for additional supplements
without obtaining the consent of all the beneficiaries constituting each
existing series. Even if the receivables trustee receives all these consents, no
acquisition will be effective unless the rating agencies confirm that the
additional supplement will not result in the reduction or withdrawal of their
rating of any related beneficiary debt.
THE RECEIVABLES TRUST'S PROPERTY
The property of the receivables trust will include all present and future
receivables located on the Triumph accounting system or any other accounting
system used by the transferor from time to time, arising under all MasterCard
and VISA credit and charge card accounts of Barclaycard's individual cardholders
on designated product lines that have not been identified as non-designated
accounts and that are denominated in pounds sterling with a billing address
within England, Wales, Scotland, Northern
58
Ireland or a permitted additional jurisdiction or a restricted additional
jurisdiction. We refer to these accounts as the "designated accounts". See "The
Receivables: Representations". The receivables have been and will continue to be
assigned to the receivables trustee under the receivables securitisation
agreement between Barclaycard as transferor and the receivables trustee. The
receivables securitisation agreement is governed by English law. Occasionally
some accounts may be removed from the pool of designated accounts. These
accounts we refer to in this prospectus as the "redesignated accounts".
The transferor is required to ensure that any of Barclaycard's credit and charge
card accounts that are to be excluded from or otherwise outside the scope of the
offer or transfer to the receivables trustee under the receivables
securitisation agreement or that are to be removed from the pool of designated
accounts are identified on its computer system prior to the date of offer or the
date of transfer.
The property of the receivables trust will also include:
o all monies due in payment of the receivables under designated accounts from
time to time;
o all proceeds of the receivables and proceeds of any guarantees and
insurance policies for the receivables -- to the extent that they are
capable of assignment -- including proceeds of disposals by the receivables
trustee of charged-off receivables to Barclaycard;
o the benefit of any Acquired Interchange; see "The Receivables:
Interchange";
o all monies on deposit in the Trust Accounts;
o any credit enhancement for the benefit of any series or class of
beneficiary; and
o all monies provided by beneficiaries of the receivables trust to fund the
purchase of receivables, until these monies are applied as intended.
The receivables are divided into eligible receivables and ineligible
receivables. Each investor beneficiary, the excess interest beneficiary and the
transferor beneficiary are beneficially entitled to interests in the pool of
eligible receivables.
The transferor beneficiary is beneficially entitled to the entire pool of
ineligible receivables and is solely entitled to all collections of ineligible
receivables.
The total principal amount of the interest of the investor beneficiary in a
series is called the "investor interest" of that series and reflects that
series' entitlement to principal receivables. The investor beneficiaries'
aggregate entitlement under the receivables trust is called the "aggregate
investor interest" and comprises the aggregate of each entitlement under each
series supplement.
The total amount of the interest of the transferor beneficiary in the
receivables trust is called the "Transferor Interest" and reflects the
transferor beneficiary's entitlement to principal receivables not allocated to
each outstanding series.
GENERAL ENTITLEMENT OF BENEFICIARIES TO TRUST PROPERTY
The transferor beneficiary and each investor beneficiary will acquire undivided
interests in the receivables trust by making payments in favour of the
receivables trustee. Some of the receivables trust's property that will
constitute credit enhancement may be specified as being the beneficial
entitlement of particular beneficiaries or particular series only. The
beneficiaries of the receivables trust are each beneficially entitled to share
in the receivables trust's property and each beneficiary, other than an
enhancement provider, has or will acquire interests in the pool of eligible
receivables -- called the "Eligible Receivables Pool". See "Series 02-1" for a
description of the beneficial entitlement of the issuer to receivables and for a
description of the manner in which collections will be allocated to the issuer.
Under the receivables trust as originally created, the beneficial entitlement of
Barclaycard as the excess interest beneficiary to the property of the
receivables trust at any time was called the "Excess Interest". The Excess
Interest consisted of a beneficial entitlement to the residue of the finance
charge collections and Acquired Interchange for each monthly period after
amounts have been allocated to each beneficiary forming part of that series or
group of series, if applicable, and have been used to make payments to the
enhancement provider, if it is not a beneficiary. These payments will include
amounts deemed to represent finance charge collections as stated in the
supplement for the series.
Because Barclaycard will transfer its entitlement to the portion of the excess
interest attributable to series 02-1 to the MTN issuer, the portion of the
excess interest attributable to series 02-1 will be paid to the MTN issuer.
To understand the beneficial entitlement of the transferor beneficiary and each
additional transferor beneficiary you have to understand the definition of
"Transferor Percentage". The Transferor
59
Percentage is the percentage equal to 100 per cent. less the sum of the
applicable Investor Percentages of each outstanding series.
The aggregate beneficial entitlement of the transferor beneficiary at any time
consists of the following:
o the Transferor Percentage of eligible principal receivables; the Transferor
Percentage is calculated for this purpose using the Floating Investor
Percentage for the Investor Percentage of each series;
o the Transferor Percentage of finance charge receivables; the Transferor
Percentage is calculated for this purpose using the Floating Investor
Percentage as the Investor Percentage for each series;
o all ineligible receivables; and
o all monies held in the Trust Accounts that represent investment earnings on
permitted investments made using monies deposited in those Trust Accounts,
unless something else is provided for in the supplement; the supplement for
series 02-1 does not provide for something else.
"Permitted investments" means the following:
o demand or time deposits, certificates of deposit and other short-term
unsecured debt obligations at or of any institution that has unsecured and
unguaranteed debt obligations of A-1+ and P-1 by Standard & Poor's and
Moody's; and
o short-term unsecured debt obligations -- including commercial paper --
issued or guaranteed by any body corporate whose unsecured and unguaranteed
debt obligations are A-1+ and P-1 by Standard & Poor's and Moody's.
The aggregate beneficial entitlement of the transferor beneficiary to any other
trust property at any time is equal to the proportion that the Transferor
Interest bears to the amount of eligible principal receivables at that time. The
initial transferor beneficiary's and each additional transferor beneficiary's
entitlement to the aggregate beneficial entitlement of the transferor
beneficiary is equal to its proportionate share described in the transferor
certificate.
ALLOCATION AND APPLICATION OF COLLECTIONS
The following accounts have been opened by the receivables trustee at 1234
Pavillion Drive, Northampton, NN4 7SG, England:
o a collection account called the "Trustee Collection Account", which is
where principal collections and finance charge collections are credited;
and
o the acquisition account called the "Trustee Acquisition Account", which is
where amounts are credited that can be used to purchase beneficial
interests in receivables for the investor or transferor beneficiaries.
The Trustee Acquisition Account, the Trustee Collection Account and any
additional bank accounts of the receivables trust that the receivables trustee
may open for particular beneficiaries are collectively called "Trust Accounts".
The receivables trustee will have legal title to the funds on deposit in each
Trust Account.
Collections from cardholders for designated accounts and cardholders for other
card accounts of Barclaycard are initially paid to Barclaycard's bank accounts
before being cleared on a same-day basis to a bank account called the
"Barclaycard Operating Account". The Barclaycard Operating Account is currently
held by Barclaycard at its branch located at 1234 Pavillion Drive, Northampton
NN4 7SG, England. The transferor has declared a trust over the Barclaycard
Operating Account.
All money in the Barclaycard Operating Account will be held on trust for the
receivables trustee and transferred to the Trustee Collection Account within two
business days after processing. All money in the Trustee Collection Account will
be treated as collections from receivables of designated accounts unless it has
been incorrectly paid into the account. Incorrect payments will be deducted from
the appropriate collections on the business day on which the error is notified
to the receivables trustee.
Amounts incorrectly categorised as principal collections of eligible receivables
but which are really collections of ineligible receivables will be given back to
the transferor beneficiary, after making adjustments for errors but before
allocating amounts of principal collections that are property of the receivables
trust. The receivables trustee will treat all money deposited in the Trustee
Collection Account as property of the receivables trust unless notified
otherwise by the trust cash manager.
The Eligible Receivables Pool and the Transferor Interest are increased or
decreased, as applicable, to account for the errors made.
60
Eligible principal receivables in defaulted accounts are allocated between the
transferor beneficiary and each series of investor certificates in accordance
with their respective beneficial entitlements to the property of the receivables
trust at the time the account becomes a defaulted account. Credit adjustments
for principal receivables are allocated to the transferor beneficiary as a
reduction of the Transferor Interest until the Transferor Interest reaches zero.
Ineligible principal receivables in defaulted accounts reduce the transferor's
interest in ineligible receivables -- called the "Transferor Ineligible
Interest" -- until it reaches zero.
Collections that are property of the receivables trust are categorised as:
o principal collections;
o finance charge collections; or
o ineligible collections.
If a Discount Percentage is nominated by the transferor, the Discount Percentage
of principal collections will be treated as finance charge collections. The
transferor has no current intention to nominate a Discount Percentage. See "The
Receivables: Discount Option Receivables".
If the related supplement says so, each series will also be entitled to a
portion of Acquired Interchange. Series 02-1 will be allocated a portion of
Acquired Interchange as described in "Series 02-1". To the extent that any
Acquired Interchange is not allocated to all those series, it will be allocated
to the transferor beneficiary.
Each series will be entitled to receive varying percentages of principal
collections, finance charge collections and receivables in defaulted accounts.
Each of these percentages is called an "Investor Percentage". The transferor
beneficiary will be entitled to its applicable Transferor Percentage of
principal collections and finance charge collections and receivables in
defaulted accounts. The excess interest beneficiary is entitled to finance
charge collections allocated to a series that are not allocated to:
o any other beneficiary, whether or not a member of that series; or
o any enhancement provider, as set out in the supplement relating to that
series.
Each supplement will set out, for its series, the entitlement of each investor
beneficiary to principal collections, finance charge collections and Acquired
Interchange.
The transferor may fulfil any obligation to make payments to the receivables
trustee for principal receivables for which it has breached a warranty by:
o reducing the Transferor Interest -- but not below zero; and
o increasing the Transferor Ineligible Interest.
However, if the Transferor Interest would be reduced below zero, the transferor
must make a similar payment in immediately available funds to the receivables
trustee under the declaration of trust and trust cash management agreement and
the receivables securitisation agreement.
The receivables trustee will pay the trust cash management fee to the trust cash
manager from payments made by the beneficiaries and this amount will be deducted
from the transferor beneficiary's and each series' portion of the finance charge
collections.
The receivables trustee will transfer money daily from the Trustee Collection
Account in the following priority:
(1) the amount of any incorrect payments notified to the receivables trustee
not previously allocated as collections, to the Barclaycard Operating
Account, after which the transferor beneficiary will own the money
absolutely;
(2) the amount of ineligible collections notified to the receivables trustee
not previously allocated as principal collections, to a bank account opened
in the name of the transferor to deposit the cash proceeds of the purchase
price of the receivables, called the "Barclaycard Proceeds Account", after
which the transferor beneficiary will own the money absolutely;
(3) the total amount of principal collections allocated to the investor
interest of any outstanding series, minus the Investor Cash Available for
Acquisition of that series from the Principal Collections Ledger to the
account specified in the supplement for that series;
(4) the total amount of Investor Cash Available for Acquisition and Transferor
Cash Available for Acquisition needed on that day from the ledger of the
Trustee Collection Account for principal collections -- called the
"Principal Collections Ledger" -- to the Trustee Acquisition Account;
61
(5) the Transferor Percentage of finance charge collections and the amount of
Acquired Interchange deposited in the Trustee Collection Account not
allocated to the investor interest of any outstanding series, from the
ledger of the Trustee Collection Account for finance charge collections --
called the "Finance Charge Collections Ledger" -- to the Barclaycard
Proceeds Account, or as the transferor beneficiary may direct, after which
the money will be owned by the transferor beneficiary absolutely; and
(6) each finance charge amount and all Acquired Interchange allocable to any
outstanding series, from the Finance Charge Collections Ledger to any
account that may be specified in the supplement for that series.
ACQUIRING ADDITIONAL ENTITLEMENTS TO TRUST PROPERTY AND PAYMENTS FOR RECEIVABLES
To understand what a revolving period is, see "Series 02-1: Allocation,
Calculation and Distribution of Principal Collections to the MTN issuer".
During the revolving period for a series, the receivables trustee will use the
portion of principal collections allocated to the investor beneficiaries of that
series and which is available to fund the acquisition of the beneficial
entitlement to receivables to pay for the purchase of the beneficial entitlement
to receivables that are eligible. These available principal collections are
called "Investor Cash Available for Acquisition". No Investor Cash Available for
Acquisition will be used to fund ineligible receivables.
On any day a series may be allocated more money for acquisitions than is needed
to purchase existing or future receivables that are eligible and available for a
series to fund. In that case, that series will use the excess Investor Cash
Available for Acquisition to acquire available Transferor Interest from the
transferor beneficiary and, if allowed under its supplement, investor interest
from other designated series. Any money left over will be used to fund
acquisitions on subsequent business days.
The transferor beneficiary will fund the amount payable by the receivables
trustee for all the existing and future receivables that all series are unable
to fund plus the amount of any ineligible receivables that need to be funded.
Consequently, the amount payable by the receivables trustee to the transferor
for all existing and future receivables it is purchasing on any business day
will be funded first by the series to the extent of all of the Investor Cash
Available for Acquisition and then by the transferor beneficiary to the extent
of the Transferor Cash Available for Acquisition. "Transferor Cash Available for
Acquisition" for any day means an amount equal to the Transferor Percentage of
principal collections processed on that day.
On each business day the beneficial interest of each series in the Eligible
Receivables Pool:
o will be decreased by the amount of principal collections allocated to that
series that constitutes Investor Cash Available for Acquisition; and
o will be increased by the amount of Investor Cash Available for Acquisition
used by the receivables trustee to pay for existing and future receivables
and the amount of Investor Cash Available for Acquisition allocated to the
Transferor Interest or the investor interest of other series to increase
the proportion of the beneficial interest of that series.
These changes will not affect the beneficial entitlement of:
o any beneficiary to monies credited to any Trust Account to which it is
beneficially entitled; or
o any series to monies credited to any Trust Account to which the
beneficiaries constituting that series are together beneficially entitled.
On each business day after making all adjustments, the beneficial interest of
the transferor beneficiary in the Eligible Receivables Pool:
o will be decreased by the amount of principal collections and Investor Cash
Available for Acquisition allocated to the transferor beneficiary; and
o will be increased by the amount of Transferor Cash Available for
Acquisition and the increase in the Transferor Interest resulting from the
decrease described in the prior bullet point.
However, any change in the beneficial interest of the transferor beneficiary in
the Eligible Receivables Pool will not affect the beneficial entitlement of the
transferor beneficiary to money credited to any Trust Account to which it is
beneficially entitled.
The investor interest of each series and the beneficial interest in the
receivables trust of each additional beneficiary will increase or decrease as
described in the related supplement.
62
On each business day, after making all adjustments, the Transferor Interest:
o will be decreased by the amount of Transferor Cash Available for
Acquisition not used to pay for new receivables and Investor Cash Available
for Acquisition transferred to the transferor beneficiary by credit to the
Barclaycard Proceeds Account; and
o will be increased by the purchase price payable to the transferor by the
receivables trustee to be funded by the transferor beneficiary.
These changes will not affect the beneficial entitlement of the transferor
beneficiary to money credited to any Trust Account to which it is beneficially
entitled.
Other adjustments to the Transferor Interest are explained in "The Receivables
Trust: Allocation and Application of Collections".
NON-PETITION UNDERTAKING OF BENEFICIARIES
Each beneficiary of the receivables trust, including Barclaycard as transferor
beneficiary and excess interest beneficiary, the transferor, the trust cash
manager and any successor trust cash manager, by entering into a supplement,
will agree with the receivables trustee for itself and as trustee that it will
not attempt to take any action or legal proceedings for the winding up,
dissolution or re-organisation of, or for the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator, sequestrator or
similar officer for, any investor beneficiary, the receivables trustee or the
receivables trust. These parties will also agree not to seek to enforce any
judgements against any of those persons.
TRUST PAY OUT EVENTS
The following is a list of what we refer to in this prospectus as the "Trust Pay
Out Events":
(1) the transferor consents or takes any corporate action to appoint a
receiver, administrator, administrative receiver, liquidator, trustee or
similar officer of it or over all or substantially all of its revenues and
assets;
(2) proceedings are started against the transferor under any applicable
liquidation, insolvency, composition or re-organisation or similar laws for
its winding up, dissolution, administration or re-organisation and the
proceedings are not discharged within 60 days, or a receiver,
administrator, administrative receiver, liquidator, trustee or similar
officer of it or relating to all or substantially all of its revenues and
assets is legally and validly appointed and is not discharged within 14
days;
(3) a duly authorised officer of the transferor admits in writing that the
transferor beneficiary or excess interest beneficiary is unable to pay its
debts when they fall due within the meaning of Section 123(1) of the
Insolvency Act 1986 or the transferor makes a general assignment for the
benefit of or a composition with its creditors or voluntarily suspends
payment of its obligations to generally readjust or reschedule its debt;
(4) the transferor cannot transfer receivables in the designated accounts to
the receivables trust in the manner described in the receivables
securitisation agreement;
(5) the transferor stops being either a resident in the United Kingdom for tax
purposes or liable for United Kingdom corporation tax; or
(6) either:
o a change in law or its interpretation or administration results in the
receivables trustee becoming liable to make any payment on account of
tax -- other than stamp duty payable in the United Kingdom for the
transfer of receivables under the receivables securitisation
agreement; or
o any tax authority asserts a tax liability or takes other actions
against Barclays or any of its subsidiaries in relation to the
transaction which would have an adverse affect on them which is more
than trivial, if Barclays obtains an opinion of counsel stating that
the tax liability would be due. This event will be treated as
occurring when Barclays, as transferor beneficiary, gives written
notice of it to the receivables trustee.
The Trust Pay Out Events in paragraphs (1), (2) and (3) are called "Insolvency
Events". If an Insolvency Event occurs, a pay out event will occur for each
series, each beneficiary within a series and for the transferor beneficiary. If
any other Trust Pay Out Event occurs, a pay out event will occur for each series
and each beneficiary within a series. Trust Pay Out Events will occur without
any notice or other action on the part of the receivables trustee or any
beneficiary, as soon as the event happens.
63
A "Pay Out Event" for series 02-1 means a Trust Pay Out Event or one of the
events listed in "Series 02-1: Series 02-1 Pay Out Events".
After an Insolvency Event, future receivables, other than finance charge
receivables accruing for principal receivables that have been assigned to the
receivables trustee, will no longer be assigned to the receivables trustee. The
receivables trustee will not be entitled to accept any more offers of
receivables after an Insolvency Event. Finance charge receivables accruing on
principal receivables that have been assigned to the receivables trustee before
the Insolvency Event will still be part of the receivables trust's property and
finance charge collections from them will continue to be allocated and applied
as set out in the declaration of trust and trust cash management agreement and
each supplement.
The receivables trustee will notify each beneficiary if an Insolvency Event
occurs and will dispose of the receivables on commercially reasonable terms,
unless within 60 days of that notice beneficiaries representing more than 50 per
cent. of the investor interest of every series, both the transferor beneficiary
and the excess interest beneficiary -- in each case, if not subject to an
Insolvency Event -- and every other person identified in any supplement
disapproves of the liquidation of the receivables and wishes to continue with
the receivables trustee accepting offers and purchasing receivables under the
receivables securitisation agreement. Money from this sale will be treated as
collections on the receivables and will be distributed in accordance with the
provisions of the declaration of trust and trust cash management agreement and
each supplement. See "Series 02-1".
TERMINATION OF THE RECEIVABLES TRUST
If the receivables trust has not already been dissolved after an Insolvency
Event, then the transferor beneficiary can instruct the receivables trustee to
dissolve the receivables trust when:
o the total amount of all of the investor interests is reduced to zero;
o there are no finance charge collections or other trust property allocated
to any beneficiaries other than the transferor beneficiary or the excess
interest beneficiary; and
o no beneficiary is committed to fund payments to the transferor for
purchases of receivables by the receivables trust.
After the receivables trust is dissolved, all of the receivables trust's
property will be controlled by the transferor beneficiary as residual
beneficiary, and the receivables securitisation agreement will be terminated.
For the purposes of Section 1 of the Perpetuities and Accumulations Act 1964,
the duration of the perpetuity period for the receivables trust's property will
be a period ending not later than 80 years from the date of execution of the
declaration of trust and cash management agreement. Any property of the
receivables trust after this period will vest in the current beneficiaries in
accordance with their entitlements to the receivables trust's property at that
date.
AMENDMENTS TO THE DECLARATION OF TRUST AND TRUST CASH MANAGEMENT AGREEMENT
The declaration of trust and trust cash management agreement may be amended with
the prior consent of each related beneficiary. No amendment will be effective
unless each rating agency has confirmed that the amendment will not result in a
reduction or withdrawal of its then current rating of any outstanding related
beneficiary debt.
No investor beneficiary will consent to any proposed amendment unless instructed
to do so by noteholders holding in total not less than two thirds of the medium
term notes or certificates then outstanding of each outstanding series adversely
affected. The investor beneficiary may not consent to any proposed amendment
that would:
o reduce or delay required distributions to any investor beneficiary for the
affected series;
o change the definition or the manner of calculating the investor interest,
the Investor Percentage or the investor default amount of the affected
series or any class of the affected series; or
o reduce the percentage required to consent to any amendment, unless
instructed to do so by all the noteholders of the medium term notes or
certificates then outstanding of the affected series.
DISPOSALS
Beneficiaries may not transfer or dispose of their beneficial entitlements in
the receivables trust or create any encumbrance over its beneficial entitlement,
except that:
64
o the transferor beneficiary or the Excess Interest beneficiary may dispose
of the Transferor Interest or the Excess Interest by transferring all or
substantially all of its properties and assets to any person, if that
person also expressly assumes the duties and obligations of the transferor,
the transferor beneficiary and the excess interest beneficiary under the
relevant documents; after the transfer, the new person will be the person
used to determine if an Insolvency Event has occurred;
o the transferor beneficiary or the excess interest beneficiary may transfer
or create any encumbrance over the whole or any part of the Transferor
Interest or the Excess Interest with the consent of investor beneficiaries
representing in total more than one-half of the total investor interest of
each series; however, the rating agencies must first confirm that the
transfer or encumbrance will not result in a downgrade or withdrawal of its
rating of any outstanding related beneficiary debt; and
o any beneficiary -- except for the transferor beneficiary or the excess
interest beneficiary -- may transfer all or any part of their beneficial
entitlement or grant an encumbrance over their beneficial entitlement with
the prior written consent of the transferor beneficiary, which consent will
not be unreasonably withheld; however, the receivables trustee must first
receive confirmation in writing from the person to whom the transfer will
be made or for whom the encumbrance will be granted or created, that it
complies with the criteria referred to in fifth and sixth of the
prerequisites to the completion of an issuance as referred to in "--General
Legal Structure" above.
The receivables trustee will, upon the direction of all of the beneficiaries, be
authorised to reassign to Barclaycard the beneficial interest in defaulted
receivables for a purchase price equal to the amount received or recovered, if
any, by Barclaycard from those defaulted receivables less the fees, costs and
expenses incurred by Barclaycard in the recovery of that amount.
TRUSTEE PAYMENT AMOUNT
The receivables trustee will be paid its remuneration, which is inclusive of
VAT, and reimbursed any costs and expenses incurred by it in connection with its
duties and activities as receivables trustee, including the part of these costs
and expenses that represents VAT, from being indemnified under the declaration
of trust and trust cash management agreement out of the property of the
receivables trust allocated to the investor beneficiaries. The receivables
trustee will be paid monthly in arrears on each transfer date the amounts
certified by the trust cash manager to the receivables trustee by the end of any
monthly period as being due to it for that monthly period. This payment is
called the "Trustee Payment Amount". The proportion of the Trustee Payment
Amount to be paid by series 02-1 and the MTN issuer is described in "Series
02-1: Trustee Payment Amount".
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SERVICING OF RECEIVABLES AND TRUST CASH MANAGEMENT
GENERAL -- SERVICING
Barclaycard was appointed on the initial closing date by the beneficiaries of
the receivables trust as initial servicer under the terms of the beneficiaries
servicing agreement. Any additional transferor beneficiary or beneficiary must
accede to the beneficiaries servicing agreement. The servicer will service,
administer and manage the receivables and request and receive payments on the
receivables using its usual procedures and normal market practices for servicing
credit and charge card receivables comparable to the receivables in the
designated accounts. The servicer has full power and authority, acting alone or
through any other party properly designated, to undertake all actions concerning
the servicing, administration and management of the receivables it considers
necessary or desirable.
The servicer's duties include carrying out all servicing, administration and
management functions in relation to the receivables and, insofar as the
interests of the beneficiaries are affected, the designated accounts in
accordance with Barclaycard's policies and procedures from time to time and in
accordance with normal market practice, insofar as consistent with Barclaycard's
policy and procedures. These functions include:
o carrying out valuations of receivables on designated accounts for the
purpose of determining whether any receivables should be charged off in
accordance with Barclaycard's credit and charge card guidelines;
o ensuring that the interests of the beneficiaries are taken into account in
making decisions regarding the granting of credit to obligors;
o on its own behalf, preparing and keeping its own records as regards all of
these matters, including in particular but without limitation, the matters
referred to in the first two bullet points above;
o monitoring payments by obligors and notifying obligors of overdue payments;
and
o crediting and debiting obligors' accounts as appropriate.
The servicer will at all times be required to take all practicable steps to:
o ensure that payments made to the transferor by obligors are received into
the Barclaycard Operating Account;
o identify any funds in the Barclaycard Operating Account which are required
to be transferred to the trustee collection account for the benefit of the
beneficiaries; and
o ensure that such funds are so transferred when required.
The servicer will not resign from its obligations and duties as servicer under
the beneficiaries servicing agreement unless its performance is no longer
permitted under applicable law and there is no reasonable action that it could
take to make it permissible. The servicer's resignation will not be effective
until a successor servicer has been properly appointed. Barclaycard, as initial
servicer, performs account processing and administration in-house, but has
subcontracted some cardholder payment processing services, which are undertaken
on Barclaycard's behalf by Experian. See "Barclaycard and the Barclaycard Card
Portfolio: Description of Experian, part of the Great Universal Stores Group".
The servicer will indemnify each investor beneficiary against all reasonable
loss, liability, expense, damage or injury caused by the servicer's fraud,
wilful misconduct or negligence in performing its servicing functions. However,
the servicer will not indemnify any investor beneficiary:
o if any acts or omissions are caused by the negligence, fraud or wilful
misconduct of that investor beneficiary or its agents;
o for any liabilities, costs or expenses of the receivables trust for any
action taken by the receivables trustee at the request of any investor
beneficiary of any series to which that investor beneficiary belongs;
o for any loss, claims or damages that are incurred by any of them acting in
their capacity as beneficiaries, including those resulting from defaulted
accounts; or
o for any liabilities, costs or expenses arising under any tax law, or any
penalties or interest caused by a failure to comply with any tax law,
payable by it in connection with the beneficiaries servicing agreement to
any tax authority.
The directors, officers, employees or agents of the servicer and the servicer
itself will not be under any liability to the receivables trustee, the
receivables trust, the investor beneficiaries, any enhancement
66
provider or any other person under the beneficiaries servicing agreement or any
related provider except in the case of intentional wrongdoing, bad faith or
gross negligence in performing its duties under the beneficiaries servicing
agreement.
Any person into which the servicer may be merged or consolidated, or any person
succeeding to or acquiring the business of the servicer in whole or in part,
after executing a supplemental agreement to the beneficiaries servicing
agreement and the delivery of a legal opinion, will become the successor to the
servicer or co-servicer with the servicer under the beneficiaries servicing
agreement.
GENERAL -- TRUST CASH MANAGEMENT
Barclaycard was appointed on the initial closing date by the receivables trustee
as initial trust cash manager under the terms of the declaration of trust and
trust cash management agreement. The trust cash manager will carry out cash
management functions in relation to the receivables on behalf of the receivables
trustee.
The trust cash manager's duties include but are not confined to:
o making calculations on the allocations of receivables; and
o advising the receivables trustee to transfer money between the Trust
Accounts and to make withdrawals and payments from the Trust Accounts as
set forth in the declaration of trust and trust cash management agreement.
The trust cash manager will not resign from its obligations and duties as trust
cash manager under the declaration of trust and trust cash management agreement
unless its performance is no longer permitted under applicable law and there is
no reasonable action that it can take to remedy the situation. The trust cash
manager's resignation will not be effective until a successor trust cash manager
has been properly appointed.
The trust cash manager will indemnify the receivables trustee and the
receivables trust against all reasonable loss, liability, expense, damage or
injury, in each case including VAT, caused by its fraud, wilful misconduct or
gross negligence in performing its cash management functions. However, the trust
cash manager will not indemnify the receivables trustee:
o if any acts or omissions are caused by the negligence, fraud or wilful
misconduct of the receivables trustee or its agents;
o for any liabilities, costs or other expenses of the receivables trust for
any action taken by the receivables trustee at the request of any investor
beneficiary of any series to which that investor beneficiary belongs;
o for any losses, claims or damages incurred by the receivables trustee in
its capacity as a beneficiary of the receivables trust; or
o for any liabilities or other costs of it or the receivables trust arising
under any tax law or any penalties or interest caused by a failure to
comply with any tax law, payable by it or the receivables trust in
connection with the declaration of trust and trust cash management
agreement to any tax authority.
The directors, officers and other employees and agents of the trust cash manager
and the trust cash manager itself will not be under any liability to the
receivables trustee or the receivables trust or any other person under the
declaration of trust and trust cash management agreement except in the case of
intentional wrongdoing, bad faith or gross negligence in performing its duties
under the declaration of trust and trust cash management agreement.
Any person into which the trust cash manager may be merged or consolidated, or
any person succeeding to or acquiring the business of the trust cash manager in
whole or in part, after executing a supplemental agreement to the declaration of
trust and trust cash management agreement and the delivery of a legal opinion,
will become the successor to the trust cash manager or co-trust cash manager
under the declaration of trust and trust cash management agreement.
SERVICING AND TRUST CASH MANAGER COMPENSATION
The servicer is entitled to receive an annual fee from the beneficiaries for
each monthly period. This fee is called the "servicing fee" and is payable
monthly on each transfer date, to the extent that those monies are available.
Any amounts payable in respect of the servicing fee will be inclusive of VAT, if
any. The servicing fee will be equal to one-twelfth of the product of:
67
o 0.75 per cent., or if Barclays Bank PLC is the servicer, such other
percentage which the rating agencies have confirmed will not result in a
downgrade or withdrawal of the rating of the notes or any related
beneficiary debt and legal counsel has confirmed that such percentage will
not prejudice tax treatment of the receivables trust or the beneficiaries;
and
o the average daily total outstanding face amount of principal receivables
during that monthly period.
The share of the servicing fee payable by the receivables trustee to the
servicer for series 02-1 on any transfer date is called the "investor servicing
fee" and will be equal to
o one-twelfth of the product of:
(1) 0.75 per cent.; or
(2) another percentage agreed with the investor beneficiaries as long as
Barclaycard is the servicer provided that the rating agencies confirm
in writing that the new percentage will not cause them to reduce or
withdraw their then current rating on any related beneficiary debt;
and
o the Adjusted Investor Interest as at the last day of the monthly period
before that transfer date.
On the first transfer date after the closing date the investor servicing fee
will be (pound)687,708.79.
The balance of the servicing fee not payable in respect of series 02-1 or any
other series will be payable by the transferor and is called the "transferor
servicing fee". If the servicer is also the transferor beneficiary in any
monthly period, the transferor servicing fee for that monthly period will not be
payable.
The trust cash manager is entitled to receive a VAT inclusive fee from the
receivables trustee for each monthly period. This fee is called the "trust cash
management fee" and is payable monthly on each transfer date. The trust cash
management fee will be equal to one-twelfth of the product of the sum of the
annual fees in each supplement as being the investor trust cash management fees
for each series.
The share of the trust cash management fee payable by the receivables trustee to
the trust cash manager for series 02-1 on any transfer date for which series
02-1 agrees to indemnify the receivables trustee is called the "investor trust
cash management fee" and will be equal to one-twelfth of (pound)6,000. The trust
cash management fee can be any other amount that the receivables trustee may
agree to as long as Barclaycard is the trust cash manager provided that the
rating agencies confirm in writing that the new amount will not cause them to
reduce or withdraw their then current rating on any related beneficiary debt.
On the first transfer date after the closing date the investor trust cash
management fee will be (pound)854.79.
The balance of the trust cash management fee, in respect of which the
receivables trustee is not indemnified by series 02-1 or any other series, will
be payable by the transferor and is called the "transferor trust cash management
fee". If the trust cash manager is also the transferor beneficiary in any
monthly period, the transferor trust cash management fee for that monthly period
will not be paid.
TERMINATION OF APPOINTMENT OF SERVICER
The appointment of a transferor as servicer under the beneficiaries servicing
agreement and the appointment of any person as joint servicer to replace anyone
then acting as the servicer -- called a "successor servicer" -- will terminate
when a servicer default occurs and is continuing.
"Servicer default" means any one of the following events:
(1) failure on the part of the servicer duly to observe or perform in any
respect any other covenant or agreement of the servicer contained in the
beneficiaries servicing agreement, or any other relevant document, that has
a material adverse effect on the interests of the investor beneficiaries of
any outstanding series; this failure will constitute a servicer default
only if it remains unremedied and continues to have an adverse effect on
the interests of the investor beneficiaries for 60 days after the receipt
of a notice of the failure is given by the investor beneficiaries to the
servicer; if the notice is given by the investor beneficiaries it will be
on the instruction of a group of holders of medium term notes or
certificates representing more than fifty per cent. of the total face value
of the medium term notes or certificates outstanding of any outstanding
series adversely affected;
(2) delegation by the servicer of its duties under the beneficiaries servicing
agreement to any other entity, except as permitted by the beneficiaries
servicing agreement;
(3) any relevant representation, warranty or certification made by the servicer
in the beneficiaries servicing agreement or in any certificate delivered
under the beneficiaries servicing agreement was
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incorrect when made, which has a material adverse effect on the interests
of the investor beneficiaries of any outstanding series; this failure will
only be a servicer default if it remains unremedied and continues to have
an adverse effect on the interests of the investor beneficiaries for 60
days after the receipt of a notice of the failure is given; the notice of
the failure will be given by either (1) the receivables trustee to the
servicer, or (2) the investor beneficiaries to the receivables trustee and
the servicer; if the notice is given by the investor beneficiaries it will
be on the instruction of holders of the series 02-1 medium term note
certificate representing more than fifty per cent. of the total face value
of the series 02-1 medium term note certificate outstanding of any
outstanding series adversely affected;
(4) any of the following:
o the servicer agrees to or takes any corporate action to appoint a
receiver, administrator, administrative receiver, trustee or similar
officer of it or of all of its revenues and assets; or
o an order of the court is made for its winding-up, dissolution,
administration or re-organisation that has remained in force
undischarged or unstayed for 60 days; or
o a receiver, administrator, administrative receiver, trustee or similar
officer of it or all of its revenues and assets, is appointed; and
(5) any of the following:
o a duly authorised officer of the servicer admits in writing that the
servicer is unable to pay its debts as they fall due within the
meaning of Section 123(1) of the Insolvency Act 1986; or
o the servicer makes a general assignment for the benefit of or a
composition with its creditors or it voluntarily suspends payment of
its obligations with a view to the general readjustment or
rescheduling of its indebtedness.
In the case of (1), (2) or (3) above the grace period will be 60 business days.
The grace period is the extra number of days before a servicer default can be
called, allowing the servicer to remedy a servicer default that has been caused
by so-called acts of God or uncontrollable circumstances. These circumstances
are called force majeure events and are listed in the beneficiaries servicing
agreement.
Within two business days after the servicer becomes aware of any servicer
default, the servicer must notify the beneficiaries, each rating agency, the
security trustee and any enhancement provider as soon as possible in writing.
The beneficiaries must give each rating agency notice of any removal of the
servicer or appointment of a successor servicer.
Investor beneficiaries acting on the instructions of holders of medium term
notes or certificates representing in total more than two-thirds of the total
face value of medium term notes or certificates then outstanding of each series
adversely affected by any default by the servicer or the transferor in the
performance of its obligations under the beneficiaries servicing agreement and
any other relevant documents, may waive the default unless it is a failure to
make any required deposits, or payments of interest or principal for the
adversely affected series.
After the servicer receives a termination notice and a successor servicer is
appointed, the duties of acting as servicer of the receivables under the
beneficiaries servicing agreement will pass from the then servicer to the
successor servicer. The beneficiaries servicing agreement contains the
requirements for the transfer of the servicing role, including the transfer of
authority over collections, the transfer of electronic records and the
disclosure of information.
After it receives a termination notice, the servicer will continue to act as
servicer until agreed by it and the beneficiaries. The beneficiaries must try to
appoint a successor servicer that is an eligible servicer.
If the receivables trustee cannot appoint a successor servicer and the servicer
delivers a certificate that says it cannot in good faith cure the servicer
default, then the receivables trustee will start the process of selling the
receivables. The beneficiaries will notify any enhancement providers of the
proposed sale of the receivables by the receivables trustee to a third party and
will provide each enhancement provider an opportunity to bid on purchasing the
receivables.
The proceeds of the sale will be deposited in the Trust Accounts for
distribution to the beneficiaries as set out in the declaration of trust and
trust cash management agreement and the series supplements.
An "eligible servicer" means an entity that, when it is servicer:
o is servicing a portfolio of consumer revolving credit or charge card
accounts or other consumer credit accounts;
o is legally qualified and has the capacity to service the designated
accounts;
69
o is qualified or licensed to use the software that the servicer is then
currently using to service the designated accounts or obtains the right to
use, or has its own, software that is adequate to perform its duties under
the beneficiaries servicing agreement; and
o has, in the opinion of each rating agency, demonstrated the ability to
service, professionally and competently, a portfolio of similar accounts in
accordance with customary standards of skill and care.
TERMINATION OF APPOINTMENT OF TRUST CASH MANAGER
The appointment of the transferor as trust cash manager under the declaration of
trust and trust cash management agreement and the appointment of any person as
joint trust cash manager or to replace anyone then acting as the trust cash
manager -- called a "successor trust cash manager" -- will terminate when a
trust cash manager default occurs.
"Trust cash manager default" means any one of the following events:
(1) any failure by the trust cash manager to direct the making of any payment,
transfer or deposit or to give instructions or notice to the receivables
trustee pursuant to an agreed schedule of collections and allocations; any
failure by the trust cash manager to advise the receivables trustee to make
any required drawing, withdrawal, or payment under any credit enhancement;
these events will be considered failures if they do not happen within five
business days after the date that they were supposed to happen under the
terms of the declaration of trust and trust cash management agreement or
any other relevant document;
(2) failure on the part of the trust cash manager duly to observe or perform in
any respect any other covenant or agreement of the trust cash manager
contained in the declaration of trust and trust cash management agreement,
or any other relevant document, that has a material adverse effect on the
interests of the investor beneficiaries of any outstanding series; this
failure will constitute a servicer default only if it remains unremedied
and continues to have a material adverse effect on the interests of the
investor beneficiaries for 60 days after the receipt of a notice of the
failure is given; the notice of the failure will be given by either (1) the
receivables trustee to the trust cash manager, or (2) the investor
beneficiaries to the receivables trustee and the trust cash manager; if the
notice is given by the investor beneficiaries it will be on the instruction
of a group of holders of medium term notes or certificates representing
more than fifty per cent. of the total face value of the medium term notes
or certificates outstanding of any outstanding series adversely affected;
(3) delegation by the trust cash manager of its duties under the declaration of
trust and trust cash management agreement to any other entity, except as
permitted by the declaration of trust and trust cash management agreement;
(4) any relevant representation, warranty or certification made by the trust
cash manager in the declaration of trust and trust cash management
agreement or in any certificate delivered under the declaration of trust
and trust cash management agreement was incorrect when made, which has a
material adverse effect on the interests of the investor beneficiaries of
any outstanding series; this failure will be a trust cash manager default
only if it remains unremedied and continues to have a material adverse
effect on the interests of the investor beneficiaries for 60 days after the
receipt of a notice of the failure is given; the notice of the failure will
be given by either (1) the receivables trustee to the trust cash manager,
or (2) the investor beneficiaries to the receivables trustee and the trust
cash manager; if the notice is given by the investor beneficiaries it will
be on the instruction of holders of medium term notes or certificates
representing more than fifty per cent. of the total face value of the
medium term notes or certificates outstanding of any outstanding series
adversely affected;
(5) any of the following:
o the trust cash manager agrees to or takes any corporate action to
appoint a receiver, administrator, administrative receiver,
liquidator, trustee or similar officer of it or of all of its revenues
and assets; or
o an order of the court is made for its winding-up, dissolution,
administration or re-organisation that has remained in force
undischarged or unstayed for 60 days; or
o a receiver, administrator, administrative receiver, liquidator,
trustee or similar officer of it or all of its revenues and assets is
appointed; and
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(6) any of the following:
o a duly authorised officer of the trust cash manager admits in writing
that the trust cash manager is unable to pay its debts as they fall
due within the meaning of Section 123(1) of the Insolvency Act 1986;
or
o the trust cash manager makes a general assignment for the benefit of
or a composition with its creditors or it voluntarily suspends payment
of its obligations with a view to the general readjustment or
rescheduling of its indebtedness.
In the case of (1) above the grace period will be 10 business days and in the
case of (2), (3) or (4) above it will be 60 business days. The grace period is
the extra number of days before a trust cash manager default will be effective
allowing the trust cash manager to remedy a trust cash manager default that has
been caused by so-called acts of God or uncontrollable circumstances. These
circumstances are called force majeure events and are listed in the declaration
of trust and trust cash management agreement.
Within two business days after the trust cash manager becomes aware of any trust
cash manager default, the trust cash manager must notify the receivables
trustee, each rating agency, each investor beneficiary and any enhancement
provider as soon as possible in writing. The receivables trustee must give each
investor beneficiary and rating agency notice of any removal of the trust cash
manager or appointment of a successor trust cash manager. The receivables
trustee must give each rating agency notice of any removal of the trust cash
manager.
Investor beneficiaries acting on the instructions of holders of medium term
notes or certificates representing in total more than two-thirds of the total
face value of medium term notes or certificates then outstanding of each series
adversely affected by any default by the trust cash manager or the transferor in
the performance of its obligations under the declaration of trust and trust cash
management agreement and any other relevant documents, may waive the default
unless it is a failure to make any required deposits, or payments of interest or
principal, for the adversely affected series.
After the trust cash manager receives a termination notice and a successor trust
cash manager is appointed, the duties of acting as trust cash manager of the
receivables under the declaration trust and trust cash management agreement will
pass from the then trust cash manager to the successor trust cash manager. The
declaration of trust and trust cash management agreement contains the
requirements for the transfer of the trust cash management role, including the
transfer of authority over collections, the transfer of electronic records and
the disclosure of information.
After it receives a termination notice, the trust cash manager will continue to
act as trust cash manager until a date agreed by the receivables trustee and the
trust cash manager. The receivables trustee must try to appoint a successor
trust cash manager that is an eligible trust cash manager.
If the receivables trustee cannot appoint a successor trust cash manager and the
trust cash manager delivers a certificate that says it cannot in good faith cure
the trust cash manager default, then the receivables trustee will start the
process of selling the receivables. The receivables trustee will notify each
enhancement provider of the proposed sale of the receivables by the receivables
trustee to a third party and will provide each enhancement provider an
opportunity to bid on purchasing the receivables.
The proceeds of the sale will be deposited in the Trust Accounts for
distribution to the beneficiaries as set out in the declaration of trust and
trust cash management agreement and the series supplements.
An "eligible trust cash manager " means an entity that, when it is trust cash
manager:
o is legally qualified and has the capacity to carry out the trust cash
management functions as set forth in the declaration of trust and trust
cash management agreement;
o is qualified or licensed to use the software that the trust cash manager is
then currently using to carry out cash management of the receivables or
obtains the right to use, or has its own, software that is adequate to
perform its duties under the declaration of trust and trust cash management
agreement; and
o has, in the opinion of each rating agency, demonstrated the ability to
professionally and competently act as a trust cash manager in accordance
with customary standards of skill and care.
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SERIES 02-1
GENERAL
The MTN issuer is an investor beneficiary of the receivables trust. Its initial
beneficial interest was conferred under a series supplement called the series
99-1 supplement. The MTN issuer will increase its entitlement under the
receivables trust under a series supplement called the "Series 02-1 Supplement".
The parties to the Series 02-1 Supplement are the receivables trustee and
Barclaycard as the transferor beneficiary, the excess interest beneficiary,
servicer, the trust cash manager and the transferor and the MTN issuer as the
investor beneficiary.
The MTN issuer will increase its beneficial entitlement as investor beneficiary
by paying a sterling amount equivalent to $1,000,000,000 using the fixed
exchange rate contained in the swap agreements to the receivables trustee on the
closing date; we call this amount the "Initial Investor Interest". For purposes
of making calculations about the performance of the undivided beneficial
interest of series 02-1 in the receivables trust, the Investor Interest will be
referable to notional classes called "Class A", "Class B" and "Class C".
The MTN issuer will receive an investor certificate. This investor certificate
will be evidence of the initial investor beneficial interest for series 02-1 in
the receivables trust, calculated as referable to Class A, Class B and Class C,
and will be governed by English law.
The MTN issuer will confirm the following in the Series 02-1 Supplement:
o that its usual place of abode is within the United Kingdom for the purpose
of Section 349 of the Income and Corporation Taxes Act 1988; and
o that it has a business establishment, for the purposes of Section 9 of the
Value Added Tax Act 1994, in the United Kingdom which is either its sole
business establishment, with no other fixed establishment anywhere else in
the world, or is its business or other fixed establishment at which any
services received by it as contemplated in the relevant documents are most
directly used or to be used or, as the case may be, its business or other
fixed establishment which is most directly concerned with any services
supplied by it as contemplated in the relevant documents.
Series 02-1 will be included in group one, which currently includes series 99-1
and will not be subordinated to any other investor beneficiary or series. See
"--Shared Principal Collections" for the ramifications of series 02-1 being
included in group one.
Following execution of the series 02-1 supplement the MTN issuer will acquire
from Barclays Bank PLC as excess interest beneficiary that part of the rights of
Barclays Bank PLC to the excess interest attributable to series 02-1.
BENEFICIAL ENTITLEMENT OF THE MTN ISSUER TO TRUST PROPERTY OTHER THAN IN RESPECT
OF THE EXCESS INTEREST
In order to understand the beneficial entitlement of the MTN issuer to the
property of the receivables trust you will need to understand the following
definitions.
The "Class A Floating Allocation", the "Class B Floating Allocation" and the
"Class C Floating Allocation" will each be calculated the same way and will be
equal to, for each notional class and for each monthly period, the following
fraction expressed as a percentage:
the Adjusted Investor Interest for the relevant notional class
--------------------------------------------------------------
Adjusted Investor Interest
where these amounts are calculated on the close of business on the last day of
the monthly period prior to the transfer date.
The floating allocation for each notional class for the first monthly period
will be calculated as follows:
the Initial Investor Interest for the relevant notional class
-------------------------------------------------------------
Initial Investor Interest
"Class A Initial Investor Interest" means the sterling equivalent of
$900,000,000 using the fixed exchange rate in the swap agreements.
"Class A Investor Interest" means at any time an amount equal to:
(1) the Class A Initial Investor Interest, minus
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(2) the total principal payments made to the MTN issuer for the purposes of
calculation treated as referable to the Class A Investor Interest from the
property of the receivables trust, minus
(3) the total amount of Class A Investor Charge-Offs for all prior transfer
dates, plus
(4) the total amount of any reimbursements of Class A Investor Charge-Offs on
all prior transfer dates.
The Class A Investor Interest, however, may not be reduced below zero.
"Class A Adjusted Investor Interest" means at any time an amount equal to the
Class A Investor Interest minus the balance on deposit in the Principal Funding
Account, but not more than the Class A Investor Interest.
"Class A Investor Charge-Off" means a reduction in the Class A Investor Interest
on any transfer date by the amount, if any, by which the Class A Investor
Default Amount exceeds the total amount of Class A Available Funds, Excess
Spread, Reallocated Class B Principal Collections and Reallocated Class C
Principal Collections, the Class C Investor Interest and the Class B Investor
Interest, in each case available and allocated on that transfer date to fund the
Class A Investor Default Amount.
"Adjusted Investor Interest" means the sum of the Class A Adjusted Investor
Interest, the Class B Adjusted Investor Interest and the Class C Adjusted
Investor Interest.
"Investor Interest" means the sum of the Class A Investor Interest, the Class B
Investor Interest and the Class C Investor Interest.
The Initial Investor Interest equals the sum of the Class A Initial Investor
Interest, the Class B Initial Investor Interest and the Class C Initial Investor
Interest.
"Class B Initial Investor Interest" means the sterling equivalent of $50,000,000
using the fixed exchange rate in the swap agreements.
"Class B Investor Interest" means, at any time, an amount equal to:
(1) the Class B Initial Investor Interest, minus
(2) the total principal payments made to the MTN issuer, for the purposes of
calculation treated as referable to the Class B Investor Interest from the
property of the receivables trust, minus
(3) the total amount of Class B Investor Charge-Offs for all prior transfer
dates, minus
(4) the total amount of Reallocated Class B Principal Collections allocated on
all prior transfer dates that have been used to fund the Class A Required
Amount, excluding any Reallocated Class B Principal Collections that have
resulted in a reduction in the Class C Investor Interest, minus
(5) an amount equal to any reductions in the Class B Investor Interest on all
prior transfer dates to fund the Class A Investor Default Amount, plus
(6) the total amount of Excess Spread allocated and available on all prior
transfer dates to reimburse amounts deducted under (3), (4) and (5) above.
The Class B Investor Interest, however, may not be reduced below zero.
"Class B Adjusted Investor Interest" means, at any time, an amount equal to the
Class B Investor Interest minus the balance on deposit in the Principal Funding
Account of the Class A Investor Interest, but not more than the Class B Investor
Interest.
"Class B Investor Charge-Off" means a reduction in the Class B Investor Interest
on any transfer date by the amount, if any, by which the Class B Investor
Default Amount exceeds the total amount of Excess Spread, Reallocated Class C
Principal Collections and the Class C Investor Interest, in each case available
and allocated on that transfer date to fund the Class B Investor Default Amount.
"Class C Initial Investor Interest" means the sterling equivalent of $50,000,000
using the fixed exchange rate in the swap agreements.
"Class C Investor Interest" means at any time an amount equal to:
(1) the Class C Initial Investor Interest, minus
(2) the total principal payments made to the MTN issuer for the purposes of
calculation treated as referable to the Class C Investor Interest from the
property of the receivables trust, minus
(3) the total amount of Class C Investor Charge-Offs for all prior transfer
dates, minus
(4) the total amount of Reallocated Class B Principal Collections allocable to
the Class C Investor Interest and Reallocated Class C Principal Collections
on all prior transfer dates that have been used to fund the Class A
Required Amount or the Class B Required Amount, minus
73
(5) an amount equal to any reductions in the Class C Investor Interest on all
prior transfer dates to fund the Class A Investor Default Amount and the
Class B Investor Default Amount, plus
(6) the total amount of Excess Spread allocated and available on all prior
transfer dates to reimburse amounts deducted under (3), (4) and (5) above.
The Class C Investor Interest, however, may not be reduced below zero.
"Class C Adjusted Investor Interest" means, at any time, an amount equal to the
Class C Investor Interest minus the balance on deposit in the Principal Funding
Account in excess of the sum of the Class A Investor Interest and the Class B
Investor Interest, but not more than the Class C Investor Interest.
"Class C Investor Charge-Off" means a reduction in the Class C Investor Interest
on any transfer date by the amount, if any, by which the Class C Investor
Default Amount exceeds the amount of Excess Spread available and allocated on
that transfer date to fund the Class C Investor Default Amount.
The beneficial entitlement of the MTN issuer as the investor beneficiary for
series 02-1 to eligible principal receivables -- which includes principal
collections that are the property of the receivables trust but excludes the
amount on deposit in the Principal Funding Account -- is equal to the proportion
that the Adjusted Investor Interest bears to the amount of eligible principal
receivables assigned or purported to be assigned to the receivables trust at any
time. However, the beneficial entitlement for each notional class will not
exceed the Class A Adjusted Investor Interest, the Class B Adjusted Investor
Interest or the Class C Adjusted Investor Interest, as applicable, at any time.
The beneficial entitlement of the MTN issuer as the investor beneficiary for
series 02-1 to finance charge collections during any monthly period is equal to
the proportion that the floating allocation for each notional class bears to the
investor percentage of finance charge collections for such monthly period
credited to the Finance Charge Collections Ledger from time to time during that
monthly period. However, the beneficial entitlement will not exceed the sum of
the monthly required expense amount, the investor servicing fee, the investor
trust cash management fee and the Investor Default Amount for any notional class
of series 02-1 during any monthly period.
The beneficial entitlement of the MTN issuer as the investor beneficiary for
series 02-1 at any time to any other property of the receivables trust not
separately held or segregated for any other beneficiary or series will be equal
to the proportion that the aggregate of the Class A Adjusted Investor Interest,
the Class B Adjusted Investor Interest and the Class C Adjusted Investor
Interest bears to the amount of eligible principal receivables from time to time
assigned or purported to be assigned to the receivables trust. The MTN issuer
will not be entitled to the benefit of any credit enhancement for any notional
class available only for any other beneficiary, series other than series 02-1 or
classes within a series other than series 02-1, except to the extent it is an
investor beneficiary for another series.
The MTN issuer will be beneficially entitled to all monies held in any Trust
Account other than:
o the Trustee Collection Account -- except for the distribution ledger for
each notional class; or
o the Trustee Acquisition Account;
that are expressly segregated by separate account or by ledger entry or
otherwise, as allocated to the MTN issuer.
ALLOCATION, CALCULATION AND DISTRIBUTION OF FINANCE CHARGE COLLECTIONS TO THE
MTN ISSUER
On each day on which collections are transferred to the Trustee Collection
Account during the Revolving Period, the Controlled Accumulation Period and, if
applicable, the Regulated Amortisation Period or the Rapid Amortisation Period,
the receivables trustee will credit to the Finance Charge Collections Ledger for
series 02-1 an amount calculated as follows:
A x B
Where:
A = the Floating Investor Percentage; and
B = the total amount of finance charge collections processed on that date.
"Floating Investor Percentage" means, for any monthly period, the following
fraction expressed as a percentage
A
---------------------
the greater of B or C
74
Where:
A = the Adjusted Investor Interest;
B = the total balance of eligible principal receivables in the receivables trust
plus the Unavailable Principal Collections standing to the credit of the
Principal Collections Ledger
C = the sum of the numerators used to calculate the floating investor
percentages for all outstanding series.
These amounts will be calculated for any monthly period other than the first
monthly period as of the last day of the prior monthly period. For the first
monthly period, they will be calculated as of the closing date. The Floating
Investor Percentage will never exceed 100 per cent.
Notwithstanding the above, for a monthly period in which an addition date
occurs, B in the fraction used to calculate the Floating Investor Percentage
will be:
o for the period from the first day of the monthly period to the addition
date, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger at the close of business on
the last day of the prior monthly period; and
o for the period from the addition date through the last day of the monthly
period, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger on the addition date --
taking into account the eligible principal receivables added to the
receivables trust.
If, in any monthly period the Investor Interest would be zero if the payments to
be made on the distribution date in that monthly period were made on the last
day of the prior monthly period, the Floating Investor Percentage will be zero.
CLASS A INVESTOR INTEREST
To understand the calculations and information delivered by the receivables
trustee regarding the amount of finance charge collections distributable to the
MTN issuer that for the purposes of calculation is treated as referable to Class
A on any transfer date, you need to understand the following definitions and
cash flows.
The "Class A Monthly Required Expense Amount" for any transfer date will be the
sum of the following items:
o the Class A Trustee Payment Amount plus any unpaid Class A Trustee Payment
Amount from previous transfer dates; see "--Trustee Payment Amount";
o the MTN Issuer Costs Amount;
o the Class A Monthly Finance Amount;
o the Class A Deficiency Amount;
o the Class A Additional Finance Amount; and
o the Monthly Loan Expenses Amount.
"Class A Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
- -------------------------- x The Class A Finance Rate x The Class A Debt Amount
365 (366 in a leap year)
The "Class A Finance Rate" for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the
first Calculation Period, the linear interpolation of one-month and two-month
deposits, (b) for the second Calculation Period and any Calculation Period
commencing during the Regulated Amortisation Period, the Rapid Amortisation
Period or on the series 02-1 scheduled redemption date, for one-month deposits,
or (c) for any other interest period, for three-month deposits, in each case for
pounds sterling in the London interbank market, plus 0.12 per cent.
"Class A Deficiency Amount" is the excess, if any, of the Class A Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class A Trustee Payment Amount and the MTN Issuer Costs Amount --
over the funds referable to Class A actually credited to the Class A
Distribution Ledger for payment of the Class A Monthly Required Expense Amount
on that transfer date.
75
"Class A Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period The Class A Finance Rate Any unpaid Class A
- -------------------------- x plus 2.0 per cent. x Deficiency Amount on
365 (366 in a leap year) the prior transfer date
The first "distribution date" or "interest payment date" will be 15th December
2002 or, if that day is not a business day, the next business day after the
15th, and each subsequent distribution date or interest payment date will be the
15th day of each calendar month, or if that day is not a business day, the next
business day after the 15th.
"Calculation Period" means, for any distribution date, the period from and
including the previous distribution date or, in the case of the first
distribution date, from and including the closing date, to but excluding that
distribution date.
"Class A Debt Amount" means the Class A Initial Investor Interest minus the
total principal payments made to the MTN issuer referable to the Class A
Investor Interest from the property of the receivables trust. On the series 02-1
termination date, the Class A Debt Amount will be zero.
"Monthly Loan Expense Amount" means, for any transfer date, the amount equal to
any monthly interest accrual which is due and payable, including any amount
outstanding in respect of previous transfer dates, if any, under the expenses
loan agreement.
"MTN Issuer Costs Amount" means the amounts certified by the security trustee as
being required to pay the fees, costs and expenses of the MTN issuer accrued and
due and payable on a transfer date. This amount includes the fees, costs and
expenses of the security trustee and any receiver appointed pursuant to the
security trust deed and MTN cash management agreement, plus, any fees, costs and
expenses remaining unpaid from previous transfer dates together with any VAT
payable on any of the above items, where relevant.
"Class A Available Funds" for any monthly period equals the sum of the following
amounts credited to the Finance Charge Collections Ledger for that monthly
period:
o the Class A Floating Allocation of finance charge collections allocated to
series 02-1;
o the Class A Floating Allocation of Acquired Interchange allocated to series
02-1;
o for any monthly period during the Controlled Accumulation Period before
payment in full of the Class A Investor Interest, the Principal Funding
Investment Proceeds -- up to a maximum amount equal to the Class A Covered
Amount; see "--Principal Funding Account"; and
o any amounts withdrawn from the Reserve Account; see "--Reserve Account."
The amount of Acquired Interchange allocated to series 02-1 for any monthly
period will be the product of the Acquired Interchange and the Floating Investor
Percentage. This allocated Acquired Interchange will be credited to the Finance
Charge Collections Ledger.
On each transfer date, the receivables trustee will withdraw the Class A
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
(1) the Class A Trustee Payment Amount plus any unpaid Class A Trustee Payment
Amounts from prior transfer dates will be used by the receivables trustee
to satisfy the Trustee Payment Amounts;
(2) the MTN Issuer Costs Amounts will be credited to the Class A Distribution
Ledger;
(3) the sum of the Class A Monthly Finance Amount, the Class A Deficiency
Amount, the Class A Additional Finance Amount and the Monthly Loan Expense
Amount will be credited to the Class A Distribution Ledger;
(4) the class A servicing fee and class A cash management fee and any due and
unpaid class A servicing fees or class A cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable;
(5) an amount equal to the Class A Investor Default Amount will be allocated to
Class A and treated as a portion of Investor Principal Collections
referable to Class A and credited to the Principal Collections Ledger; and
(6) the balance -- called "Class A Excess Spread" -- will be part of Excess
Spread and will be allocated as described in "--Excess Spread".
76
On each distribution date, all amounts credited to the Class A Distribution
Ledger for the amounts in (2) and (3) above will be deposited into the Series
02-1 Distribution Account. The amount in (2) and (3) above is called the "Class
A Monthly Distribution Amount".
The "Series 02-1 Distribution Account" is a bank account in the name of the MTN
issuer that will be used to deposit amounts distributed to the MTN issuer for
the series 02-1 investor certificates from the receivables trust.
The "Class A Distribution Ledger" is a ledger for Class A in the Trustee
Collection Account. See"--Distribution Ledgers".
CLASS B INVESTOR INTEREST
To understand calculations and information delivered by the receivables trustee
regarding the amount of finance charge collections distributable to the MTN
issuer that for the purposes of calculation is treated as referable to notional
Class B on any transfer date, you need to understand the following definitions
and cash flows.
The "Class B Monthly Required Expense Amount" for any transfer date will be the
sum of the following items:
o the Class B Trustee Payment Amount plus any unpaid Class B Trustee Payment
Amounts from previous transfer dates; See "--Trustee Payment Amount";
o the Class B Monthly Finance Amount;
o the Class B Deficiency Amount; and
o the Class B Additional Finance Amount.
"Class B Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
- -------------------------- x The Class B Finance Rate x The Class B Debt Amount
365 (366 for a leap year)
The "Class B Finance Rate" for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the First
Calculation Period, the linear interpolation of one-month and two-month
deposits, (b) for the second Calculation Period and any Calculation Period
commencing during the Regulated Amortisation Period, the Rapid Amortisation
Period or on the series 02-1 scheduled redemption date, for one-month deposits,
or (c) for any other interest period, for three-month deposits, in each case for
pounds sterling in the London interbank market, plus 0.478 per cent.
"Class B Deficiency Amount" is the excess, if any, of the Class B Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class B Trustee Payment Amount -- over the funds referable to Class
B actually credited to the Class B Distribution Ledger for payment of the Class
B Monthly Required Expense Amount on that transfer date.
"Class B Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period The Class B Finance Rate Any unpaid Class B
- -------------------------- x plus 2.0 per cent. x Deficiency Amount on
365 (366 for a leap year) the prior transfer date
"Class B Debt Amount" means the Class B Initial Investor Interest minus the
total principal payments made to the MTN issuer referable to the Class B
Investor Interest from the property of the receivables trust. On the series 02-1
termination date, the Class B Debt Amount will be zero.
"Class B Available Funds" for any monthly period equals the sum of the following
amounts credited to the Finance Charge Collections Ledger for that monthly
period:
o the Class B Floating Allocation of finance charge collections allocated to
series 02-1; and
o the Class B Floating Allocation of Acquired Interchange allocated to series
02-1.
On each transfer date, the receivables trustee will withdraw the Class B
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
(1) the Class B Trustee Payment Amount plus any unpaid Class B Trustee Payment
Amounts from prior transfer dates will be used by the receivables trustee
to satisfy the Trustee Payment Amounts;
77
(2) the sum of the Class B Monthly Finance Amount, the Class B Deficiency
Amount and the Class B Additional Finance Amount will be credited to the
Class B Distribution Ledger;
(3) the class B servicing fee and class B cash management fee and any due and
unpaid class B servicing fees and class B cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable; and
(4) the balance -- called "Class B Excess Spread" -- will be part of Excess
Spread and will be allocated as described in "--Excess Spread".
On each distribution date, all amounts credited to the Class B Distribution
Ledger for the amounts in (2) above -- called the "Class B Monthly Distribution
Amount" -- will be deposited into the Series 02-1 Distribution Account.
The "Class B Distribution Ledger" is a ledger for Class B in the Trustee
Collection Account. See"--Distribution Ledgers".
CLASS C INVESTOR INTEREST
To understand the calculations and information delivered by the receivables
trustee regarding the amount of finance charge collections distributable to the
MTN issuer that for the purposes of calculation is treated as referable to Class
C on any transfer date, you need to understand the following definitions and
cash flows.
The "Class C Monthly Required Expense Amount" will be the sum of the following
items:
o the Class C Trustee Payment Amount plus any unpaid Class C Trustee Payment
Amounts from previous transfer dates; see " -- Trustee Payment Amount";
o the Class C Monthly Finance Amount;
o the Class C Deficiency Amount; and
o the Class C Additional Finance Amount.
"Class C Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
- --------------------------- x The Class C Finance Rate x The Class C Debt Amount
365 (366 for a leap year)
"Class C Deficiency Amount" is the excess, if any, of the Class C Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class C Trustee Payment Amount -- over the funds allocable to Class
C actually credited to the Class C Distribution Ledger for payment of the Class
C Monthly Required Expense Amount on that transfer date.
"Class C Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period The Class C Finance Rate Any unpaid Class C
- -------------------------- x plus 2.0 per cent. x Deficiency Amounts on the
365 (366 in a leap year) prior transfer date
The "Class C Finance Rate" for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the first
Calculation Period, the linear interpolation of one-month and two-month
deposits, (b) for the second Calculation Period and any Calculation Period
commencing during the Regulated Amortisation Period, the Rapid Amortisation
Period or on the series 02-1 scheduled redemption date, for one-month deposits,
or (c) for any other interest period, for three-month deposits, in each case for
pounds sterling in the London interbank market, plus 1.231 per cent.
"Class C Debt Amount" means the Class C Initial Investor Interest minus the
total principal payments made to the MTN issuer referable to the Class C
Investor Interest from the property of the receivables trust. On the series 02-1
termination date, the Class C Debt Amount will be zero.
"Class C Available Funds" for any monthly period equals the sum of the following
amounts credited to the Finance Charge Collections Ledger for that monthly
period:
o the Class C Floating Allocation of finance charge collections allocated to
series 02-1; and
o the Class C Floating Allocation of Acquired Interchange allocated to series
02-1.
On each transfer date, the receivables trustee will withdraw the Class C
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
78
(1) the Class C Trustee Payment Amount plus any unpaid Class C Trustee Payment
Amounts from prior transfer dates will be used by the receivables trustee
to satisfy the Trustee Payment Amounts;
(2) the class C servicing fee and class C cash management fee and any due and
unpaid class C servicing fees or class C cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable; and
(3) the balance will be called "Class C Excess Spread" will be part of Excess
Spread and will be allocated as described in " -- Excess Spread".
On each distribution date, all amounts credited to the Class C Distribution
Ledger for the Class C Monthly Distribution Amount, as described in "--Excess
Spread", will be deposited into the Series 02-1 Distribution Account.
The "Class C Distribution Ledger" is a ledger for Class C in the Trustee
Collection Account. See"--Distribution Ledgers".
REVOLVING PERIOD
The "Revolving Period" for series 02-1 is the period from the closing date to
the start of the Controlled Accumulation Period or, if earlier, the start of the
Rapid Amortisation Period or the Regulated Amortisation Period.
During the Revolving Period, principal collections calculated as referable daily
to the Class A Investor Interest will be used by the receivables trustee as
Shared Principal Collections and, to the extent not used as Shared Principal
Collections, to make payments to the transferor:
o to accept new offers of receivables made by the transferor to the
receivables trustee, and
o to make payments to the transferor for future receivables assigned by the
transferor to the receivables trustee by offers that have already been made
and accepted.
Principal collections calculated as referable to the Class B Investor Interest
and the Class C Investor Interest will be used by the receivables trustee as
described in the previous paragraph on the next following transfer date to the
extent not required to fund shortfalls for the Class A Investor Interest and --
for principal collections calculated as referable to the Class C Investor
Interest -- the Class B Investor Interest.
CONTROLLED ACCUMULATION PERIOD
The "Controlled Accumulation Period" for series 02-1 is the period scheduled to
begin on the close of business on 30 September 2006 and ending when the Investor
Interest is paid in full, unless a Pay Out Event occurs and the Regulated
Amortisation Period or the Rapid Amortisation Period begins. If the Regulated
Amortisation Period or Rapid Amortisation Period begins before the start of the
Controlled Accumulation Period, there will not be a Controlled Accumulation
Period for series 02-1. The start of the Controlled Accumulation Period may be
delayed until no later than the close of business on 31 August 2007. See
"--Postponement of Controlled Accumulation Period".
During the Controlled Accumulation Period the principal collections allocated to
the Investor Interest for series 02-1, up to the Controlled Deposit Amount, will
be accumulated by the receivables trustee in a trust account called the
"Principal Funding Account" for distribution to the MTN issuer as the investor
beneficiary for series 02-1 on the October 2007 distribution date -- called the
"series 02-1 scheduled redemption date". Any principal collections allocated to
the Investor Interest for series 02-1 over the amount that will be deposited in
the Principal Funding Account will be used by the receivables trustee first as
Shared Principal Collections and then to make payments to the transferor as
described above under "--Revolving Period".
The "Controlled Deposit Amount" for any transfer date for the Controlled
Accumulation Period or the Regulated Amortisation Period will be the sterling
equivalent of $83,333,333.34, using the fixed exchange rate in the swap
agreements, which equals the Initial Investor Interest divided by 12, or for a
Regulated Amortisation Period, if greater, may be an amount not exceeding 1/12
of the total sum of all investor interests of all series in group one -- except
Companion Series -- that are scheduled to be in their revolving periods. If the
start of the Controlled Accumulation Period is delayed as described in
"--Postponement of Controlled Accumulation Period", the Controlled Deposit
Amount will be greater than the sterling equivalent of $83,333,333.34. This
higher amount will be determined by the servicer based on the principal payment
rates on the designated accounts and on the investor interests of series in
group one -- except Companion Series -- that are scheduled to be in their
revolving periods. In any case,
79
during the Controlled Accumulation Period, the Controlled Deposit Amount will be
the amount that, if deposited in the Principal Funding Account on each transfer
date for the Controlled Accumulation Period, will cause the balance of the
Principal Funding Account to equal the Investor Interest on the series 02-1
scheduled redemption date. The Controlled Deposit Amount for any transfer date
will include the amount of any shortfall in payment of the Controlled Deposit
Amount for the previous transfer date.
REGULATED AMORTISATION PERIOD
A "Regulated Amortisation Period" will start on the day, if there is one, that
any of the following Series 02-1 Pay Out Events occur, each of which we refer to
as a "Regulated Amortisation Trigger Event":
o the average Portfolio Yield for any three consecutive monthly periods is
less than the average Expense Rate for those periods or, on any
determination date before the end of the third monthly period from the
closing date, the Portfolio Yield is less than average Expense Rate for
that period; or
o either:
(1) over any period of thirty consecutive days, the Transferor Interest
averaged over that period is less than the Minimum Transferor Interest
for that period and the Transferor Interest does not increase on or
before the tenth business day following that thirty day period to an
amount so that the average of the Transferor Interest as a percentage
of the Average Principal Receivables for such thirty day period,
computed by assuming that the amount of the increase of the Transferor
Interest by the last day of that ten business day period, as compared
to the Transferor Interest on the last day of the thirty day period,
would have existed in the receivables trust during each day of the
thirty day period, is at least equal to the Minimum Transferor
Interest; or
(2) on the last day of any monthly period the total balance of eligible
principal receivables is less than the Minimum Aggregate Principal
Receivables, adjusted for any series having a Companion Series as
described in the supplement for that series and the Companion Series,
and the total balance of eligible principal receivables fails to
increase to an amount equal to or greater than the Minimum Aggregate
Principal Receivables on or before the tenth business day following
that last day.
The Regulated Amortisation Period will continue until the earlier of:
o the start of the Rapid Amortisation Period; and
o the series 02-1 termination date.
During the Regulated Amortisation Period the amount of principal collections
allocated to the Investor Interest for series 02-1, up to the Controlled Deposit
Amount, will be paid each month to the MTN issuer first for the Class A Investor
Interest, second for the Class B Investor Interest and third for the Class C
Investor Interest until the series 02-1 termination date. Any principal
collections allocated to the Investor Interest for series 02-1 over the
Controlled Deposit Amount paid to the MTN issuer will be used by the receivables
trustee first as Shared Principal Collections and then to make payments to the
transferor as described above under "--Revolving Period".
RAPID AMORTISATION PERIOD
A "Rapid Amortisation Period" will start on the first day of the monthly period
next following the day on which any Pay Out Event other than a Regulated
Amortisation Trigger Event occurs.
The Rapid Amortisation Period will continue until the earlier of:
o the series 02-1 termination date; or
o the dissolution of the receivables trust following the occurrence of an
Insolvency Event; see "The Receivables Trust: Trust Pay Out Events".
During the Rapid Amortisation Period, principal collections allocable to the
Investor Interest of series 02-1 will be paid each month to the MTN issuer first
for the Class A Investor Interest, second for the Class B Investor Interest and
third for the Class C Investor Interest until the series 02-1 termination date.
The "series 02-1 termination date" is the earlier of the distribution date on
which the Investor Interest has been reduced to zero and the October 2009
distribution date.
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ALLOCATION, CALCULATION AND DISTRIBUTION OF PRINCIPAL COLLECTIONS TO THE MTN
ISSUER
During the Revolving Period, principal collections will be allocated to the
Investor Interest on the basis of the Floating Investor Percentage. During the
Controlled Accumulation Period, the Regulated Amortisation Period and the Rapid
Amortisation Period, principal collections will be allocated to the Investor
Interest on the basis of the Fixed Investor Percentage. The amount of principal
collections allocated to the Investor Interest at any time will be credited to
the Principal Collections Ledger for series 02-1. The principal collections
credited to the Principal Collections Ledger from time to time that will be
allocated to the MTN issuer will be:
o during the Revolving Period, equal to the total of the floating allocations
for each class;
o during the Controlled Accumulation Period, the Regulated Amortisation
Period and the Rapid Amortisation Period, equal to the total of the fixed
allocations for each class.
"Fixed Investor Percentage" means, for any monthly period, the following
calculation expressed as a percentage:
A
---------------------
the greater of B or C
Where:
A = the Investor Interest calculated at close of business on the last day of the
Revolving Period;
B = the total balance of eligible principal receivables in the receivables trust
plus the Unavailable Principal Collections standing to the credit of the
Principal Collections Ledger; and
C = the sum of the numerators used to calculate the fixed investor percentages
for all outstanding series.
Items B and C above will be calculated for any monthly period as of the last day
of the prior monthly period. For the first monthly period, they will be
calculated as of the closing date. The Fixed Investor Percentage will never
exceed 100 per cent.
Notwithstanding the above, for a monthly period in which an addition date
occurs, B in the fraction used to calculate the Fixed Allocation Percentage
above will be:
o for the period from the first day of the monthly period to the addition
date, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger at the close of business on
the last day of the prior monthly period; and
o for the period from the addition date to the last day of the monthly
period, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger on the addition date, taking
into account the eligible principal receivables added to the receivables
trust.
If in any monthly period the Investor Interest would be zero if the payments to
be made on the distribution date during that monthly period were made on the
last day of the prior monthly period, the Fixed Investor Percentage will be
zero.
The "Class A Fixed Allocation", the "Class B Fixed Allocation" and the "Class C
Fixed Allocation" will each be calculated the same way and will be equal to, for
each notional class and for any monthly period after the end of the Revolving
Period, the following fraction expressed as a percentage:
Investor Interest for the relevant notional class
-------------------------------------------------
Investor Interest
This percentage, never to exceed 100 per cent., will be calculated using these
amounts on the close of business on the last day of the Revolving Period.
On each business day during the Revolving Period which is not a transfer date,
the Reinvested Investor Principal Collections for that day will be distributed
in the following priority:
o the Reinvested Investor Principal Collections will be applied as Shared
Principal Collections and allocated to other outstanding series in group
one; see "--Shared Principal Collections"; and
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o the balance remaining will be applied as Investor Cash Available for
Acquisition in the manner described in "The Receivables Trust: Acquiring
Additional Entitlements to Trust Property and Payments for Receivables".
"Reinvested Investor Principal Collections" means, for any business day:
o principal collections credited to the Principal Collections Ledger
identified for series 02-1, after adjustments for Unavailable Principal
Collections during the Controlled Accumulation Period, the Regulated
Amortisation Period and the Rapid Amortisation Period -- for any day called
the "Daily Investor Principal Collections"; minus
o an amount equal to the product of the Class B Floating Allocation and the
Daily Investor Principal Collections; minus
o an amount equal to the product of the Class C Floating Allocation and the
Daily Investor Principal Collections.
"Available Investor Principal Collections" means, for any monthly period:
o the Investor Principal Collections; minus
o the Investor Cash Available for Acquisition that has been calculated as
being available to be used during that monthly period; minus
o the Reallocated Class C Principal Collections that are required to fund the
Class A Required Amount or the Class B Required Amount; minus
o the Reallocated Class B Principal Collections for that monthly period that
are required to fund the Class A Required Amount; plus
o the Shared Principal Collections from other series in group one that are
allocated to series 02-1; plus
o for a monthly period in which the Rapid Amortisation Period starts, any
previously identified Investor Cash Available for Acquisition that was not
used to acquire receivables.
"Investor Principal Collections" means, for any monthly period, the sum of:
o principal collections credited to the Principal Collections Ledger
identified for series 02-1, after adjustments for Unavailable Principal
Collections during the Controlled Accumulation Period, the Regulated
Amortisation Period and the Rapid Amortisation Period; plus
o amounts treated as Investor Principal Collections up to the Class A
Investor Default Amount and distributed out of Class A Available Funds,
Excess Spread, Reallocated Class C Principal Collections and Reallocated
Class B Principal Collections; plus
o amounts treated as Investor Principal Collections up to the Class B
Investor Default Amount and distributed out of Excess Spread and
Reallocated Class C Principal Collections; plus
o amounts treated as Investor Principal Collections up to the Class C
Investor Default Amount and distributed out of Excess Spread; plus
o Excess Spread treated as Investor Principal Collections used to reimburse
Class A Investor Charge-Offs, any reductions in the Class B Investor
Interest and any reductions in the Class C Investor Interest; plus
o Unavailable Principal Collections credited to the Principal Collections
Ledger and to be treated as Investor Principal Collections; see
"--Unavailable Principal Collections".
On each transfer date for the Controlled Accumulation Period, the Regulated
Amortisation Period or the Rapid Amortisation Period, the receivables trustee
will withdraw the Class A Monthly Principal Amount from the Principal
Collections Ledger and:
o for a transfer date for the Controlled Accumulation Period, deposit it into
the Principal Funding Account; or
o for a transfer date during the Rapid Amortisation Period or Regulated
Amortisation Period, credit it to the Class A Distribution Ledger.
The "Class A Monthly Principal Amount" is the least of:
o the Available Investor Principal Collections standing to the credit of the
Principal Collections Ledger on that transfer date;
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o for each transfer date for the Controlled Accumulation Period or the
Regulated Amortisation Period before the series 02-1 scheduled redemption
date, the Controlled Deposit Amount for that transfer date; and
o the Class A Adjusted Investor Interest -- adjusted to account for any
unreimbursed Class A Investor Charge-Offs.
The first distribution date (1) for the Controlled Accumulation Period, on which
an amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account, or (2) during the Rapid Amortisation Period or the
Regulated Amortisation Period, on which the Class A Investor Interest is paid in
full, is called the "Class B Principal Commencement Date".
Starting with the Class B Principal Commencement Date, to the extent there are
funds remaining after distributing the Class A Monthly Principal Amount, the
receivables trustee will withdraw the Class B Monthly Principal Amount from the
Principal Collections Ledger and:
o for a transfer date for the Controlled Accumulation Period, deposit it into
the Principal Funding Account; or
o for a transfer date during the Rapid Amortisation Period or the Regulated
Amortisation Period, credit it to the Class B Distribution Ledger.
The "Class B Monthly Principal Amount" is the least of:
o the Available Investor Principal Collections standing to the credit of the
Principal Collections Ledger on that transfer date minus, if applicable,
the Class A Monthly Principal Amount;
o for each transfer date for the Controlled Accumulaton Period or the
Regulated Amortisation Period before the series 02-01 scheduled redemption
date, an amount equal to the Controlled Deposit Amount minus, if
applicable, the Class A Monthly Principal Amount; and
o the Class B Adjusted Investor Interest -- adjusted to account for any
unreimbursed reductions in the Class B Investor Interest for reasons other
than principal payments.
The first distribution date (1) for the Controlled Accumulation Period, on which
an amount equal to the sum of the Class A Investor Interest and the Class B
Investor Interest has been deposited in the Principal Funding Account, or (2)
during the Rapid Amortisation Period or the Regulated Amortisation Period, on
which the Class B Investor Interest is paid in full, is called the "Class C
Principal Commencement Date".
Starting with the Class C Principal Commencement Date, to the extent there are
funds remaining after distributing the Class A Monthly Principal Amount and the
Class B Monthly Principal Amount, as applicable, the receivables trustee will
withdraw the Class C Monthly Principal Amount from the Principal Collections
Ledger and:
o for a transfer date for the Controlled Accumulation Period, deposit it into
the Principal Funding Account; or
o for a transfer date during the Rapid Amortisation Period or the Regulated
Amortisation Period, credit it to the Class C Distribution Ledger.
The "Class C Monthly Principal Amount" is the lesser of:
o the Available Investor Principal Collections standing to the credit of the
Principal Collections Ledger on that transfer date minus, if applicable,
the Class A Monthly Principal Amount and the Class B Monthly Principal
Amount; and
o the Class C Adjusted Investor Interest -- adjusted to account for any
unreimbursed reductions in the Class C Investor Interest for reasons other
than principal payments.
On the earlier of (1) the first distribution date during the Rapid Amortisation
Period or the Regulated Amortisation Period and (2) the series 02-1 scheduled
redemption date, and on each distribution date after that, the receivables
trustee will distribute the following amounts in the following priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
o the amount on deposit in the Principal Funding Account; and
o the Class A Investor Interest;
will be deposited in the Series 02-1 Distribution Account for Class A and will
be owned by the MTN issuer. The MTN issuer will use this amount to repay
principal outstanding on the series 02-1 medium term note certificate;
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(2) from the Class A Distribution Ledger an amount equal to the lesser of:
o the amount credited to the Class A Distribution Ledger; and
o the Class A Investor Interest, after taking into account the amount
described in clause (1) above;
will be deposited to the Series 02-1 Distribution Account for class A and will
be owned by the MTN issuer. The MTN issuer will use this amount to repay
principal outstanding on the series 02-1 medium term note certificate.
Starting on the earlier of (1) if the amount on deposit in the Principal Funding
Account exceeds the Class A Investor Interest, the series 02-1 scheduled
redemption date and (2) during the Rapid Amortisation Period or the Regulated
Amortisation Period, the Class B Principal Commencement Date, and on each
distribution date after that, the receivables trustee will distribute the
following amounts in the following priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
o the amount on deposit in the Principal Funding Account in excess of
the Class A Investor Interest; and
o the Class B Investor Interest;
will be deposited to the Series 02-1 Distribution Account for Class B and
will be owned by the MTN issuer. The MTN issuer will use this amount to
repay principal outstanding on the series 02-1 medium term note
certificate;
(2) from the Class B Distribution Ledger an amount equal to the lesser of:
o the amount credited to the Class B Distribution Ledger; and
o the Class B Investor Interest, after taking into account the amount
described in clause (1) above;
this amount will be deposited in the Series 02-1 Distribution Account for
Class B and will be owned by the MTN issuer. The MTN issuer will use this
amount to repay principal outstanding on the series 02-1 medium term note
certificate.
Starting on the earlier of (1) if the amount on deposit in the Principal Funding
Account exceeds the sum of the Class A Investor Interest and the Class B
Investor Interest, the series 02-1 scheduled redemption date, and (2) during the
Rapid Amortisation Period or the Regulated Amortisation Period, the Class C
Principal Commencement Date, and on each distribution date after that, the
receivables trustee will distribute the following amounts in the following
priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
o the amount on deposit in the Principal Funding Account in excess of
the sum of the Class A Investor Interest and the Class B Investor
Interest; and
o the Class C Investor Interest;
will be deposited in the Series 02-1 Distribution Account for Class C and
will be owned by the MTN issuer. The MTN issuer will use this amount to
repay principal outstanding on the series 02-1 medium term note
certificate.
(2) from the Class C Distribution Ledger, an amount equal to the lesser of;
o the amount credited to the Class C Distribution Ledger; and
o the Class C Investor Interest after taking into account the amount
described in clause (1) above;
will be deposited to the Series 02-1 Distribution Account for Class C and
will be owned by the MTN issuer. The MTN issuer will use this amount to
repay principal outstanding on the Series 02-1 medium term note
certificate.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The Controlled Accumulation Period is scheduled to begin on the close of
business on 30 September 2006. If the Controlled Accumulation Period Length,
which is explained in the next paragraph, is less than 12 months, the Revolving
Period may be extended and the start of the Controlled Accumulation Period will
be postponed. The Controlled Accumulation Period will, in any event, begin no
later than the close of business on 31 August 2007.
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On the determination date right before the distribution date in 30 September
2006, and on each determination date after that, until the Controlled
Accumulation Period begins, the servicer will determine the "Controlled
Accumulation Period Length". This is the number of months that the servicer
expects will be needed to fully fund the Principal Funding Account no later than
the series 02-1 scheduled redemption date. This calculation is based on:
o the expected monthly principal collections that the servicer calculates
will be available to the investor interests of all series other than
excluded series, assuming a principal payment rate no greater than the
lowest monthly principal payment rate on the receivables for the twelve
months before; and
o the amount of principal expected to be distributable to the investor
interests of all series in group one -- other than Companion Series -- that
are not expected to be in their revolving periods during the Controlled
Accumulation Period.
If the Controlled Accumulation Period Length is less than twelve months, the
servicer may, at its option, postpone the start of the Controlled Accumulation
Period such that the number of calendar months in the Controlled Accumulation
Period will be at least equal to the Controlled Accumulation Period Length.
The effect of this is to permit the reduction of the length of the Controlled
Accumulation Period based on the investor interest of future series that are
scheduled to be in their revolving periods during the Controlled Accumulation
Period and on increases in the principal payment rate occurring after the
closing date. The length of the Controlled Accumulation Period will not be less
than one month.
UNAVAILABLE PRINCIPAL COLLECTIONS
If:
o during the Controlled Accumulation Period or the Regulated Amortisation
Period, the amount credited to the Principal Collections Ledger identified
for series 02-1 during any monthly period minus the amount of Investor Cash
Available for Acquisition calculated for series 02-1 for that monthly
period, exceeds the sum of:
(1) the Adjusted Investor Interest as of the last day of the prior monthly
period, after taking into account any deposits to be made to the
Principal Funding Account on the transfer date for that monthly
period, any unreimbursed Investor Charge-Offs for any class and any
other adjustments to the Investor Interest for that monthly period;
and
(2) any Reallocated Class B Principal Collections or Reallocated Class C
Principal Collections on the transfer date for that monthly period; or
o during the Rapid Amortisation Period, the amount credited to the Principal
Collections Ledger identified for series 02-1 during any monthly period
exceeds the sum of:
(1) the Investor Interest as of the last day of the prior monthly period,
after taking into account any deposits to be made to the Series 02-1
Distribution Account on the transfer date for that monthly period, any
unreimbursed Investor Charge-Offs for any class and any other
adjustments to the Investor Interest for that monthly period; and
(2) any Reallocated Class B Principal Collections or Reallocated Class C
Principal Collections on the transfer date for that monthly period
the amount of any excess will be allocated and transferred to the transferor
beneficiary only to the extent that the Transferor Interest on that date is
greater than zero. If the Transferor Interest on that date is not greater than
zero, the amount will be identified as unavailable transferor principal
collections credited to the Principal Collections Ledger. This sum, together
with any unavailable investor principal collections that have been credited to
the Principal Collections Ledger, will be identified as "Unavailable Principal
Collections". Unavailable investor principal collections are principal
collections identified for the transferor beneficiary but not transferred to the
transferor beneficiary because the Transferor Interest at the relevant date is
not greater than zero.
Unavailable Principal Collections will to the extent they arise during the
Revolving Period, be allocated to the transferor beneficiary but will be
transferred to the transferor beneficiary only if and to the extent that the
Transferor Interest at that time is greater than zero. On each transfer date for
the Controlled Accumulation Period, Regulated Amortisation Period or the Rapid
Amortisation Period, any Unavailable Principal Collections which arise after the
end of the Revolving Period which are credited to the Principal Collections
Ledger will be allocated to the investor beneficiary and included as Investor
Principal Collections to be distributed as Available Investor Principal
Collections.
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SHARED PRINCIPAL COLLECTIONS
Principal collections for any monthly period allocated to the Investor Interest
of series 02-1 will first be used to cover:
o until the series 02-1 scheduled redemption date, for any monthly period
during the Controlled Accumulation Period, deposits of the Controlled
Deposit Amount to the Principal Funding Account;
o during the Regulated Amortisation Period, deposits of the Controlled
Deposit Amount to the Series 02-1 Distribution Account for series 02-1; and
o during the Controlled Accumulation Period, on the series 02-1 scheduled
redemption date and during the Rapid Amortisation Period, payments to the
MTN issuer for series 02-1.
The receivables trustee will determine the amount of principal collections for
any monthly period allocated to the Investor Interest remaining after covering
required distributions to the MTN issuer for each class of series 02-1 and any
similar amount remaining for any other outstanding series in group one. These
remaining principal collections are called "Shared Principal Collections". The
receivables trustee will allocate the Shared Principal Collections to cover any
scheduled or permitted principal distributions to beneficiaries, and deposits to
principal funding accounts, if any, for any series in group one that have not
been covered out of the principal collections allocable to that series. These
uncovered principal distributions and deposits are called "Principal
Shortfalls". Shared Principal Collections will not be used to cover investor
charge-offs for any class of any series.
If Principal Shortfalls exceed Shared Principal Collections for any monthly
period, Shared Principal Collections will be allocated in proportion among the
outstanding series in group one based on the amounts of Principal Shortfalls for
each series. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will in the normal course be paid to the transferor
beneficiary.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each transfer date, the receivables trustee will calculate the Investor
Default Amount for the previous monthly period. The "Investor Default Amount"
will be the total of, for each defaulted account, the product of the Floating
Investor Percentage and the default amount.
The "default amount" for any defaulted account will be the amount of eligible
principal receivables in the defaulted account on the day the account became a
defaulted account.
The Investor Default Amount will be calculated for each notional class of series
02-1 based on its floating allocation during the monthly period. These
allocations will be called the "Class A Investor Default Amount", the "Class B
Investor Default Amount" and the "Class C Investor Default Amount".
On each transfer date, if the Class A Investor Default Amount for the prior
monthly period exceeds the sum of:
o Class A Available Funds;
o Excess Spread;
o Reallocated Class C Principal Collections; and
o Reallocated Class B Principal Collections;
in each case, to the extent available to cover the Class A Investor Default
Amount, then the Class C Investor Interest will be reduced by the amount of the
excess, but not by more than the remaining Class A Investor Default Amount. This
reduction to the Class C Investor Interest will be made only after giving effect
to reductions to the Class C Investor Interest for any Class C Investor
Charge-Offs, any Reallocated Class B Principal Collections and Reallocated Class
C Principal Collections.
If this reduction would cause the Class C Investor Interest to be a negative
number, it will be reduced to zero. In this case, the Class B Investor Interest
will be reduced by the amount by which the Class C Investor Interest would have
been reduced below zero, but not by more than the Class A Investor Default
Amount not covered by a reduction in the Class C Investor Interest. This
reduction in the Class B Investor Interest will be made only after giving effect
to reductions for any Class B Investor Charge-Offs and Reallocated Class B
Principal Collections not covered by a reduction in the Class C Investor
Interest.
If this reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero. In this case, the
Class A Investor Interest will be reduced by the amount by which the Class B
Investor Interest would have been reduced below zero, but not by more than the
86
remaining Class A Investor Default Amount not covered by a reduction in the
Class C Investor Interest or the Class B Investor Interest. This is called a
"Class A Investor Charge-Off" and may have the effect of slowing or reducing the
return of principal to the MTN issuer calculated in respect of Class A.
If the Class A Investor Interest has been reduced by any Class A Investor
Charge-Offs, it will be reimbursed on any transfer date by the amount of Excess
Spread allocated and available for that purpose, but not by more than the total
amount by which the Class A Investor Interest has been reduced. See "--Excess
Spread".
On each transfer date, if the Class B Investor Default Amount for the prior
monthly period exceeds the sum of:
o Excess Spread; and
o Reallocated Class C Principal Collections,
in each case to the extent available to cover the Class B Investor Default
Amount, then the Class C Investor Interest will be reduced by the amount of the
excess, but not by more than the remaining Class B Investor Default Amount. This
reduction to the Class C Investor Interest will be made only after giving effect
to any reductions to the Class C Investor Interest for any Class C Investor
Charge-Offs, any Reallocated Class B Principal Collections, any Reallocated
Class C Principal Collections and any reductions in the Class C Investor
Interest to cover the Class A Investor Default Amount.
If this reduction would cause the Class C Investor Interest to be a negative
number, it will be reduced to zero. In this case, the Class B Investor Interest
will be reduced by the amount by which the Class C Investor Interest would have
been reduced below zero, but not by more than the remaining Class B Investor
Default Amount not covered by a reduction to the Class C Investor Interest. This
is called a "Class B Investor Charge-Off" and may have the effect of slowing or
reducing the return of principal to the MTN issuer calculated in respect of
Class B.
If the Class B Investor Interest has been reduced for any reasons other than the
payment of principal, it will be reimbursed on any transfer date by the amount
of Excess Spread allocated and available for that purpose, but not by more than
the total amount by which the Class B Investor Interest has been reduced. See
"--Excess Spread".
On each transfer date, if the Class C Investor Default Amount for the prior
monthly period exceeds the amount of Excess Spread available to cover the Class
C Investor Default Amount, the Class C Investor Interest will be reduced by the
amount of the excess, but not by more than the Class C Investor Default Amount.
This is called a "Class C Investor Charge-Off", which may have the effect of
slowing or reducing the return of principal to the MTN issuer calculated in
respect of Class C.
If the Class C Investor Interest has been reduced for any reasons other than the
payment of principal, it will be reimbursed on any transfer date by the amount
of Excess Spread allocated and available for that purpose, but not by more than
the total amount by which the Class C Investor Interest has been so reduced. See
"--Excess Spread".
"Reallocated Class B Principal Collections" means, for any transfer date, the
principal collections allocable to the Class B Investor Interest for the related
monthly period in an amount not to exceed the Class A Required Amount, after
applying Excess Spread and Reallocated Class C Principal Collections to cover
the Class A Required Amount. Reallocated Class B Principal Collections cannot
exceed the Class B Investor Interest after giving effect to any unreimbursed
Class B Investor Charge-Offs. Reallocated Class B Principal Collections will
reduce the Class B Investor Interest.
"Reallocated Class C Principal Collections" means, for any transfer date, the
principal collections allocable to the Class C Investor Interest for the related
monthly period in an amount not to exceed the Class A Required Amount and the
Class B Required Amount after applying Excess Spread to cover the Class A
Required Amount and the Class B Required Amount. Reallocated Class C Principal
Collections cannot exceed the Class C Investor Interest after giving effect to
any unreimbursed Class C Investor Charge-Offs. Reallocated Class C Principal
Collections will reduce the Class C Investor Interest.
The "Class A Required Amount" for any transfer date will be the amount, if any,
by which the sum of:
o the Class A Monthly Required Expense Amount;
o the total amount of the class A servicing fee and the class A cash
management fee for the prior monthly period and any due and unpaid class A
servicing fees and class A cash management fees; and
o the Class A Investor Default Amount,
87
exceeds the Class A Available Funds.
The "Class B Required Amount" for any transfer date will be the sum of (1) the
amount, if any, by which the sum of:
o the Class B Monthly Required Expense Amount; and
o the total amount of the class B servicing fee and the class B cash
management fee for the prior monthly period and any due and unpaid Class B
servicing fees or class B cash management fees,
exceeds the Class B Available Funds, and (2) the Class B Investor Default
Amount.
EXCESS SPREAD
"Excess Spread" for any transfer date will be the sum of Class A Excess Spread,
Class B Excess Spread and Class C Excess Spread.
On each transfer date, the receivables trustee will apply Excess Spread to make
the following distributions in the following priority:
(1) an amount equal to the Class A Required Amount, if any, will be used to
fund the Class A Required Amount; if the Class A Required Amount is more
than the amount of Excess Spread, Excess Spread will be applied in the
order of priority in which Class A Available Funds are to be distributed;
(2) an amount equal to the total amount of Class A Investor Charge-Offs that
have not been previously reimbursed will be used to reinstate the Class A
Investor Interest, treated as a portion of Investor Principal Collections
allocated to Class A and credited to the Principal Collections Ledger;
(3) an amount equal to the Class B Required Amount will be used to fund the
Class B Required Amount; if the Class B Required Amount is more than the
amount of Excess Spread available, Excess Spread will be applied first in
the order of priority with which Class B Available Funds are to be
distributed on any transfer date and then to fund the Class B Investor
Default Amount; any amount available to pay the Class B Investor Default
Amount will be allocated to Class B and treated as a portion of Investor
Principal Collections allocated to Class B and credited to the Principal
Collections Ledger;
(4) an amount equal to the total amount by which the Class B Investor Interest
has been reduced below the Class B Initial Investor Interest for reasons
other than the payment of principal -- but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed -- will
be used to reinstate the Class B Investor Interest, treated as a portion of
Investor Principal Collections and credited to the Principal Collections
Ledger;
(5) an amount equal to the sum of the Class C Monthly Finance Amount, the Class
C Deficiency Amount and the Class C Additional Finance Amount -- called the
"Class C Monthly Distribution Amount" -- will be credited to the Class C
Distribution Ledger;
(6) an amount equal to the Class C Investor Default Amount will be allocated to
Class C and treated as a portion of Investor Principal Collections
allocated to Class C and credited to the Principal Collections Ledger;
(7) an amount equal to the total amount by which the Class C Investor Interest
has been reduced below the Class C Investor Interest for reasons other than
the payment of principal -- but not in excess of the total amount of the
reductions that have not been previously reimbursed -- will be used to
reinstate the Class C Investor Interest, treated as a portion of Investor
Principal Collections and credited to the Principal Collections Ledger;
(8) on each transfer date from and after the Reserve Account Funding Date, but
before the date on which the Reserve Account terminates, an amount up to
the excess, if any, of the Required Reserve Account Amount over the amount
on deposit in the Reserve Account will be deposited into the Reserve
Account;
(9) on each distribution date prior to the Class C Release Date, if the
available amount on deposit in the Spread Account is less than the Required
Spread Account Amount, an amount up to any excess will be deposited into
the Spread Account;
(10) an amount equal to any Aggregate Investor Indemnity Amount for series 02-1
will be paid to the transferor and will then cease to be property of the
receivables trust;
(11) the Series 02-1 Extra Amount will be paid into the Series 02-1 Distribution
Account and will be owned by the MTN issuer;
88
(12) on the series 02-1 termination date, an amount equal to the principal
calculated as payable in accordance with the expenses loan agreement will
be paid into the Series 02-1 Distribution Account; and
(13) the balance, if any, after giving effect to the payments made under
paragraphs (1) through (12) above will be paid to the MTN issuer as
assignee of the excess interest beneficiary and will then cease to be
property of the receivables trust.
EXTRA AMOUNT
The "Series 02-1 Extra Amount" is calculated as follows:
Days in Calculation period
- -------------------------- x 0.02 per cent. x The Investor Interest
365 (366 in a leap year)
AGGREGATE INVESTOR INDEMNITY AMOUNT
By each transfer date, the receivables trustee will calculate the Aggregate
Investor Indemnity Amount for each outstanding series. The "Aggregate Investor
Indemnity Amount" is the sum of all Investor Indemnity Amounts for the related
monthly period.
An "Investor Indemnity Amount" means for any series, the amount of any
Transferor Section 75 Liability claimed from the receivables trustee by the
transferor under the trust section 75 indemnity allocated to that series,
calculated as follows:
Transferor Section 75 Liability x Floating Investor Percentage for that series
The "Transferor Section 75 Liability" is the liability that the transferor has
for any designated account because of Section 75 of the Consumer Credit Act. The
Transferor Section 75 Liability cannot exceed the original outstanding face
amount of the principal receivable relating to the transaction giving rise to
the liability. See "Risk Factors: Application of the Consumer Credit Act 1974
May Impede Collection Efforts and Could Cause Early Redemption of the Notes or a
Loss on your Notes".
Aggregate Investor Indemnity Amounts for series 02-1 will be payable only if
amounts are available from Excess Spread to pay them. See "--Excess Spread". If
Excess Spread available on any transfer date is not enough to pay the Aggregate
Investor Indemnity Amount for series 02-1 otherwise payable on that date, the
excess will be carried forward and paid on subsequent transfer dates to the
extent amounts of Excess Spread are available to pay them.
PRINCIPAL FUNDING ACCOUNT
The receivables trustee will establish and maintain the Principal Funding
Account at a Qualified Institution -- currently Barclays Bank PLC at its branch
located at 1234 Pavilion Drive Northampton NN4 7SG -- as a segregated Trust
Account held for the benefit of the MTN issuer as the investor beneficiary for
series 02-1 and the transferor beneficiary. During the Controlled Accumulation
Period, the receivables trustee will transfer the amounts described under
"--Allocation, Calculation and Distribution of Principal Collections to the MTN
Issuer" to the Principal Funding Account.
Funds on deposit in the Principal Funding Account will be invested to the
following transfer date by the receivables trustee in permitted investments.
Investment earnings, net of investment losses and expenses, on funds on deposit
in the Principal Funding Account are called "Principal Funding Investment
Proceeds".
Principal Funding Investment Proceeds will be used to pay the Class A Covered
Amount.
The "Class A Covered Amount" is calculated as follows:
Days in the Calculation Period The Class A The amounts on deposit in
- ------------------------------ x Finance Rate x the Principal Funding Account
365 (366 in a leap year)
where the amount on deposit in the Principal Funding Account is calculated as of
the last day of the monthly period before the monthly period in which the
relevant transfer date occurs.
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Principal Funding Investment Proceeds up to the Class A Covered Amount will be
transferred to the Trustee Collection Account by each transfer date and credited
to the Finance Charge Collections Ledger for application as Class A Available
Funds.
If on any transfer date during the Controlled Accumulation Period, the Principal
Funding Investment Proceeds exceed the Class A Covered Amount, that excess will
be paid to the transferor beneficiary. If the Principal Funding Investment
Proceeds are less than the Class A Covered Amount, a withdrawal will be made
from the Reserve Account -- to the extent funds are available -- and will be
deposited in the Finance Charge Collections Ledger, for application as Class A
Available Funds. The amount of this withdrawal will be reduced to the extent
Excess Spread would be available for deposit in the Reserve Account.
See"--Reserve Account" and "--Excess Spread".
RESERVE ACCOUNT
The receivables trustee will establish and maintain a reserve account at a
Qualified Institution -- currently, Barclays Bank PLC at its branch located at
54 Lombard Street, London EC3P 3AH -- as a Trust Account segregated for the
benefit of series 02-1. This account is called the "Reserve Account". The
Reserve Account will be established to assist with the payment distribution of
the Class A Monthly Finance Amount to the MTN issuer during the Controlled
Accumulation Period.
On each transfer date from and after the Reserve Account Funding Date, but
before the termination of the Reserve Account, the receivables trustee will
apply Excess Spread in the order of priority described in "--Excess Spread" to
increase the amount on deposit in the Reserve Account, up to the Required
Reserve Amount.
The "Reserve Account Funding Date" will be the transfer date that starts no
later than three months before the start of the Controlled Accumulation Period.
This date will be an earlier date if the Portfolio Yield decreases below levels
described in the Series 02-1 Supplement. In any case, this date will be no
earlier than 12 months before the start of the Controlled Accumulation Period.
The "Required Reserve Amount" for any transfer date on or after the Reserve
Account Funding Date will be:
o 0.50 per cent. of the Class A Investor Interest; or
o subject to the conditions described in the next paragraph, any other amount
designated by the transferor beneficiary;
If, on or before the Reserve Account Funding Date, the transferor beneficiary
designates a lesser amount, it must provide the servicer and the receivables
trustee with evidence that each rating agency has notified the transferor, the
servicer and the receivables trustee that that lesser amount will not result in
the rating agency reducing or withdrawing its then existing rating of any
outstanding related beneficiary debt. Also, the transferor beneficiary must
deliver to the receivables trustee an officer's certificate to the effect that,
based on the facts known to that officer at that time, in the reasonable belief
of the transferor beneficiary, the designation will not cause a Pay Out Event to
occur or an event that, after the giving of notice or the lapse of time, would
cause a Pay Out Event to occur. Further, this designation will not be effective
without the prior written agreement of all the other beneficiaries.
On each transfer date, after giving effect to any deposit to be made to, and any
withdrawal to be made from, the Reserve Account on that transfer date, the
receivables trustee will withdraw from the Reserve Account an amount equal to
the excess, if any, of the amount on deposit in the Reserve Account over the
Required Reserve Amount. The receivables trustee will distribute this amount to
the transferor beneficiary and it will cease to be the property of the
receivables trust.
All amounts on deposit in the Reserve Account on any transfer date will be
invested by the receivables trustee in permitted investments to the following
transfer date. This will be done after giving effect to any deposits to, or
withdrawals from, the Reserve Account to be made on that transfer date. The
interest and other income -- net of investment expenses and losses -- earned on
the investments will be retained in the Reserve Account if the amount on deposit
in the Reserve Account is less than the Required Reserve Amount. If the amount
on deposit is equal to or more than the Required Reserve Amount, it will be
credited to the Finance Charge Collections Ledger to be included in the Class A
Available Funds.
On each transfer date for the Controlled Accumulation Period before the series
02-1 scheduled redemption date and on the first transfer date during the
Regulated Amortisation Period or the Rapid Amortisation Period, the receivables
trustee will withdraw an amount from the Reserve Account and deposit it in the
Trustee Collection Account for credit to the Finance Charge Collections Ledger
to be included in Class A Available Funds. This amount will be equal to the
lesser of:
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o the available amount on deposit in the Reserve Account; and
o the amount, if any, by which the Class A Covered Amount is greater than the
Principal Funding Investment Proceeds.
The amount of this withdrawal will be reduced to the extent Excess Spread would
be available for deposit in the Reserve Account.
The Reserve Account will be terminated following the earliest to occur of:
o the termination of the receivables trust;
o the earlier of the first transfer date after the start of the Regulated
Amortisation Period or the Rapid Amortisation Period; and
o the series 02-1 termination date.
When the Reserve Account terminates, all amounts still on deposit in the Reserve
Account will be treated as part of the excess interest attibutable to series
02-1 and will be paid to the MTN issuer and will no longer be the property of
the receivables trust.
SPREAD ACCOUNT
The receivables trustee will establish and maintain a spread account at a
Qualified Institution -- currently Barclays Bank PLC at its branch located at
1234 Pavilion Drive, Northampton NN4 7SG -- as a segregated Trust Account held
for the benefit of the MTN issuer as the investor beneficiary and the transferor
beneficiary. This account is called the "Spread Account". The Spread Account
will be used:
o to fund shortfalls in Excess Spread available to pay the Class C Monthly
Distribution Amount;
o on the day called the "Class C Release Date", which is the earlier of:
(1) the day the Class A Investor Interest and the Class B Investor
Interest are reduced to zero, and
(2) the series 02-1 termination date,
to fund the amount, if any, by which the Class C Debt Amount is greater
than the Class C Investor Interest; and
o beginning on the Class C Release Date, to fund shortfalls in Excess Spread
available to fund the Class C Investor Default Amount.
No amounts will be deposited into the Spread Account on the closing date, but if
the amount on deposit in the Spread Account is less than the Required Spread
Account Amount, then the Spread Account will be funded by Excess Spread as
described above in item (11) under "--Excess Spread".
The "Required Spread Account Amount" will be determined monthly and will be
equal to the Spread Account Percentage times:
o during the Revolving period or the Controlled Accumulation Period, the
current Adjusted Investor Interest, or
o during the Regulated Amortisation Period or the Rapid Amortisation Period,
the Adjusted Investor Interest as of the last day of the Revolving Period
or, if the Controlled Accumulation Period has started, as of the last day
of the Controlled Accumulation Period.
The Required Spread Account Amount, however, will never exceed the Class C Debt
Amount.
The "Spread Account Percentage" will be determined each determination date by
the level of the quarterly excess spread percentage as follows:
Quarterly Excess Spread Percentage Spread Account Percentage
- ---------------------------------- -------------------------
above 4.5% ........................................... 0.0%
above 4.0% but equal to or below 4.5% ................ 1.0%
above 3.5% but equal to or below 4.0% ................ 1.5%
above 3.0% but equal to or below 3.5% ................ 2.0%
equal to or below 3.0% ............................... 2.5%
The quarterly excess spread percentage will be calculated on each determination
date and will be a percentage equal to the average of the Portfolio Yields for
the three prior months divided by the average of the Expense Rates for the same
three months.
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The quarterly excess spread percentage for the first determination date will be
calculated using the Portfolio Yield for the prior month divided by the Expense
Rate for the same month. The quarterly excess spread percentage for the second
determination date will be calculated using the average of the Portfolio Yields
for the prior two months divided by the average of the Expense Rates for the
same two months.
All amounts on deposit in the Spread Account on any transfer date will be
invested by the receivables trustee in permitted investments to the next
transfer date. For purposes of the Spread Account, permitted investments will
include investments rated A-2 by Standard & Poor's, and P-2 by Moody's. This
will be done after giving effect to any deposits to, or withdrawals from, the
Spread Account made on that transfer date. The interest and other investment
income -- net of investment expenses and losses -- earned on the investments
will be retained in the Spread Account if the amount on deposit in the Spread
Account is less than the Required Spread Account Amount. If the amount on
deposit in the Spread Account is at least equal to the Required Spread Account
Amount, then it will be paid to the transferor beneficiary.
If the Class C Monthly Distribution Amount is not fully paid from Excess Spread
on any transfer date, the receivables trustee will withdraw from available funds
on deposit in the Spread Account an amount equal to the shortfall and credit it
to the Class C Distribution Ledger.
On the Class C Release Date, the lesser of:
o the available amount on deposit in the Spread Account, and
o the amount, if any, by which the Class C Debt Amount exceeds the Class C
Investor Interest
will be withdrawn by the receivables trustee and paid to the MTN issuer as the
investor beneficiary and treated as principal paid that is referable to the
Class C Investor Interest. This withdrawal will be made only after giving effect
to any withdrawal made for the purposes described in the preceding paragraph.
Beginning on the Class C Release Date, if the Class C Investor Default Amount is
not fully funded from Excess Spread on any transfer date, the receivables
trustee will withdraw from available funds on deposit in the Spread Account an
amount equal to the shortfall and these funds will be calculated by reference to
Class C and treated as a portion of Investor Principal Collections that is
referable to the Class C Investor Interest and credited to the Principal
Collections Ledger. This withdrawal will be made only after giving effect to any
withdrawal made for the purposes described in the two preceding paragraphs.
Any amount on deposit in the Spread Account that exceeds the Required Spread
Account Amount will be withdrawn by the receivables trustee and will be paid to
the transferor beneficiary. Also, on the earlier of:
o the termination of the receivables trust; and
o the series 02-1 termination date,
any amounts still on deposit in the Spread Account, after making any deposit or
withdrawal described above, will be withdrawn by the receivables trustee and
treated as part of the excess interest attributable to series 02-1 and will be
paid to the MTN issuer.
DISTRIBUTION LEDGERS
The receivables trustee will establish distribution ledgers for each class of
series 02-1 in the Trustee Collection Account. On each transfer date it will
credit and debit amounts to these ledgers as described throughout this section
of this prospectus. All amounts credited to the Class A Distribution Ledger, the
Class B Distribution Ledger and the Class C Distribution Ledger will be regarded
as being segregated for the benefit of the MTN issuer.
TRUSTEE PAYMENT AMOUNT
The share of the Trustee Payment Amount payable on any transfer date that is
allocable to series 02-1 -- called the "Investor Trustee Payment Amount" -- will
be calculated as follows:
Investor Interest for series 02-1 Trustee
- ------------------------------------------------ x Payment Amount
Total of Investor Interests of series for which
the Trustee Payment Amount was incurred
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The share of the Investor Trustee Payment Amount allocable to the Investor
Interest for each class is equal to the product of:
o the floating allocation for the relevant class; and
o the Investor Trustee Payment.
This will be called the "Class A Trustee Payment Amount", the "Class B Trustee
Payment Amount" and the "Class C Trustee Payment Amount", respectively.
The Investor Trustee Payment Amount for any class will be payable from amounts
available for distribution for that purpose out of available funds for each
class and Excess Spread. See "--Allocation, Calculation and Distribution of
Finance Charge Collections to the MTN Issuer" and "--Excess Spread".
The portion of the Trustee Payment Amount not allocated to series 02-1 will be
paid from cashflows under the receivables trust allocated to other outstanding
series, and in no event will series 02-1 be liable for these payments.
QUALIFIED INSTITUTIONS
If the bank or banks at which any of the accounts listed below are held cease to
be a Qualified Institution, then the receivables trustee will, within 10
business days, establish a new account to replace the affected account or
accounts, and will transfer any cash and interest to that new account or
accounts. The accounts referred to above are:
o Trustee Collection Account;
o Trustee Acquisition Account;
o Reserve Account;
o Spread Account;
o Principal Funding Account; and
o Series 02-1 Distribution Account.
The receivables trustee may in its discretion elect to move any or all of these
accounts and the amounts credited to them from the Qualified Institution at
which they are kept as at the date of this document to another or other
Qualified Institutions.
"Qualified Institution" means (1) an institution which at all times has a
short-term unsecured debt rating of at least A-1+ by Standard & Poor's and P-1
by Moody's or (2) an institution acceptable to each rating agency.
SERIES 02-1 PAY OUT EVENTS
The events described below are called "Series 02-1 Pay-Out Events":
(1) failure on the part of the transferor:
o to make any payment or deposit required by the terms of the
receivables securitisation agreement within five business days after
the date that the payment or deposit is required to be made; or
o duly to observe or perform any covenants or agreements of the
transferor in the receivables securitisation agreement or the Series
02-1 Supplement that has a material adverse effect on the interests of
the MTN issuer in respect of series 02-1 and which continues
unremedied for a period of 60 days after the date on which written
notice of the failure, requiring it to be remedied, is given to the
transferor by the receivables trustee, or is given to the transferor
and the receivables trustee by the investor beneficiary for series
02-1 acting on the instructions of holders of the series 02-1 medium
term note certificate representing together 50 per cent. or more of
the total balance of the series 02-1 medium term note certificate
outstanding at that time, and which unremedied continues during that
60 day period to have a material adverse effect on the interests of
the MTN issuer in respect of series 02-1 for that period;
(2) any representation or warranty made by the transferor in the receivables
securitisation agreement or the Series 02-1 Supplement, or any information
contained in a computer file or microfiche list required to be delivered by
the transferor under the receivables securitisation agreement:
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o proves to have been incorrect in any material respect when made or
when delivered and continues to be incorrect in any material respect
for a period of 60 days after the date on which written notice of the
error, requiring it to be remedied, is given to the transferor by the
receivables trustee, or is given to the transferor and the receivables
trustee by the investor beneficiary for series 02-1 acting on the
instructions of holders of the series 02-1 medium term note
certificate representing together 50 per cent. or more of the total
balance of the series 02-1 medium term note certificate outstanding;
and
o as a result of which there is a material adverse effect on the
interests of the MTN issuer in respect of series 02-1 and which
unremedied continues during that 60 day period to have a material
adverse effect for that period;
Notwithstanding the above, no series 02-1 Pay-Out Event in relation to (2)
shall be deemed to have occurred if the transferor has complied with its
obligations for a breach of warranty as set out in the receivables
securitisation agreement.
(3) the average Portfolio Yield for any three consecutive monthly periods is
less than the average Expense Rate for those periods, or on any
determination date before the end of the third monthly period from the
closing date the Portfolio Yield is less than the average Expense Rate for
that period;
(4) either:
o over any period of thirty consecutive days, the Transferor Interest
averaged over that period is less than the Minimum Transferor Interest
for that period and the Transferor Interest does not increase on or
before the tenth business day following that thirty day period to an
amount so that the average of the Transferor Interest as a percentage
of the Average Principal Receivables for such thirty day period,
computed by assuming that the amount of the increase of the Transferor
Interest by the last day of the ten business day period, as compared
to the Transferor Interest on the last day of the thirty day period,
would have existed in the receivables trust during each day of the
thirty day period, is at least equal to the Minimum Transferor
Interest; or
o on the last day of any monthly period the total balance of eligible
receivables is less than the Minimum Aggregate Principal Receivables,
adjusted for any series having a Companion Series as described in the
supplement for that series, and the total balance of eligible
receivables fails to increase to an amount equal to or greater than
the Minimum Aggregate Principal Receivables on or before the tenth
business day following that last day;
(5) any servicer default or trust cash manager default occurs that would have a
material adverse effect on the MTN issuer in respect of series 02-1;
(6) the Investor Interest is not reduced to zero on the series 02-1 scheduled
redemption date;
(7) the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements";
(8) the MTN issuer is required to withhold or deduct any amounts for or on
account of tax on the payment of any principal or interest in respect of
the series 02-1 medium term note certificate.
If any event described in paragraphs (1), (2) or (5) occurs then, after the
applicable grace period, either (1) the receivables trustee or (2) the investor
beneficiary may declare that a Series 02-1 Pay Out Event has occurred if the
correct notice has been given. If the investor beneficiary declares that a
Series 02-1 Pay Out Event has occurred, it must have acted on the instructions
of holders of the series 02-1 medium term note certificate representing,
together, 50 per cent. or more of the series 02-1 medium term note certificate
outstanding at that time. The investor beneficiary must give a written notice to
the transferor, the servicer and the receivables trustee that a Series 02-1 Pay
Out Event has occurred. If the receivables trustee declares that a Series 02-1
Pay Out Event has occurred, it must give a written notice to this effect to the
transferor, the servicer and the trust cash manager. A Series 02-1 Pay Out Event
will be effective as of the date of the relevant notice. If any event in
paragraphs (3), (4), (6), (7) or (8) occurs, a Series 02-1 Pay Out Event will
occur without any notice or other action on the part of the receivables trustee
or the investor beneficiary.
"Portfolio Yield" means, for any monthly period:
( A + B + C + D) - E
--------------------- x 12
F
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where:
A = the finance charge collections allocable to series 02-1;
B = the Acquired Interchange allocable to series 02-1;
C = the Principal Funding Investment Proceeds up to the Class A Covered Amount;
D = the amount, if any, to be withdrawn from the Reserve Account that is
included in Class A Available Funds;
E = the Investor Default Amount; and
F = the Investor Interest.
"Expense Rate" means, for any transfer date:
A + B + C
--------- x 12
D
where:
A = the sum of the Class A Monthly Required Expense Amount, the Class B Monthly
Required Expense Amount and the Class C Monthly Required Expense Amount;
B = the investor servicing fee;
C = the investor trust cash management fee; and
D = the Investor Interest.
"Minimum Transferor Interest" means 5 per cent. of the Average Principal
Receivables. The transferor may reduce the Minimum Transferor Interest in the
following circumstances:
o upon 30 days prior notice to the receivables trustee, each rating agency
and any enhancement provider entitled to receive notice under its
supplement;
o upon written confirmation from each rating agency that the reduction will
not result in the reduction or withdrawal of the ratings of the rating
agency for any outstanding related beneficiary debt, including, for series
02-1, the notes; and
o delivery to the receivables trustee and each enhancement provider of an
officer's certificate stating that the transferor reasonably believes that
the reduction will not, based on the facts known to the officer at the time
of the certification, cause, at that time or in the future, a pay out event
to occur for any investor beneficiary.
The Minimum Transferor Interest will never be less than 2 per cent. of the
Average Principal Receivables.
"Minimum Aggregate Principal Receivables" means, an amount equal to the sum of
the numerators used in the calculation of the investor percentages for principal
collections for all outstanding series on that date. For any series in its rapid
accumulation period, as defined in its supplement, with an investor interest as
of that date of determination equal to the balance on deposit in the principal
funding account for that series, the numerator used in the calculation of the
investor percentage for principal collections for that eligible series will,
only for the purpose of the definition of Minimum Aggregate Principal
Receivables, be zero.
"Average Principal Receivables" means, for any period, an amount equal to:
o the sum of the total balance of eligible principal receivables at the end
of each day during that period divided by;
o the number of days in that period.
"Companion Series" means:
o each series that has been paired with another series so that the reduction
of the investor interest of the paired series results in the increase of
the investor interest of the other series, as described in the related
supplements; and
o the other series.
ENTITLEMENT OF MTN ISSUER TO SERIES 02-1 EXCESS INTEREST
Barclays Bank PLC will enter into an "agreement between beneficiaries" with the
MTN issuer under which Barclays Bank PLC will transfer its excess interest
entitlement attributable to series 02-1 to the
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MTN issuer. The portion of the excess interest so transferred will form part of
the Investor Interest. The MTN issuer will pay amounts of excess interest
attributable to series 02-1 which it receives pursuant to the agreement between
the beneficiaries to the issuer as "MTN additional interest payments".
In return for the transfer of the entitlement to the portion of the excess
interest relating to series 02-1 the MTN issuer will agree to pay deferred
consideration to Barclays Bank PLC. We will refer to this deferred consideration
as "excess entitlement consideration". The amount of the excess entitlement
consideration in respect of Series 02-1 will be equal to the amount of deferred
subscription price which the MTN issuer receives from the issuer in respect of
the series 02-1 medium term note certificate from time to time.
The issuer will apply any MTN additional interest payments received by it in
meeting its due and payable obligations. Any sums remaining following
satisfaction of all amounts due and payable by the issuer, which we will refer
to as "unutilised excess spread", will be paid to the MTN issuer as deferred
subscription price for the series 02-1 medium term note certificate for as long
as the series 02-1 medium term note certificate is in issue.
YOUR PAYMENT FLOWS
On each distribution date, the receivables trustee will transfer from available
funds in the Trustee Collection Account the sum of:
o the Class A Monthly Distribution Amount;
o the Class B Monthly Distribution Amount;
o the Class C Monthly Distribution Amount;
o on the series 02-1 termination date, an amount equal to the principal
calculated as payable in accordance with the expenses loan agreement; and
o the excess interest attributable to series 02-1;
and deposit that sum into the Series 02-1 Distribution Account held by the MTN
issuer.
The MTN issuer will credit the amount received in respect of the monthly
distribution amounts for each class and the portion of the excess interest
attributable to series 02-1 to the MTN coupon ledger and will record for
calculational purposes the amounts treated as referrable to each class.
The MTN issuer will then transfer from the Series 02-1 Distribution Account to
the extent there are sufficient funds on deposit:
o first, the costs and expenses of the MTN issuer for the relevant monthly
period, excluding any excess entitlement consideration owed to Barclays
Bank PLC, will be paid or reserved for within the MTN issuer to be used to
pay, or reserve for, the costs and expenses of the MTN issuer;
o second, the lesser of (1) the amounts credited to the MTN coupon ledger,
after paying or reserving for the MTN issuer's costs and expenses described
in the first bullet point above and (2) the interest due and payable on the
series 02-1 medium term note certificate, excluding the MTN additional
interest payments, will be deposited in the Series 02-1 Issuer Account;
o third, an amount equal to the Monthly Loan Expenses Amount plus, on the
series 02-1 termination date, an amount equal to the principal calculated
as payable in accordance with the expenses loan agreement will be deposited
in the Series 02-1 Issuer Account;
o fourth, an amount equal to 1/2 of the Series 02-1 Extra Amount will be paid
to the MTN issuer;
o fifth, an amount equal to 1/2 of the Series 02-1 Extra Amount will be
deposited in the Series 02-1 Issuer Account; and
o sixth, an amount equal to the MTN additional interest payments will be
deposited in the Series 02-1 Issuer Account.
The "Series 02-1 Issuer Account" is a bank account in the name of the issuer
that will be used to deposit amounts distributed to the issuer on the series
02-1 medium term note certificate from the MTN issuer.
Note coupon ledgers will be established for each class of notes in the Series
02-1 Issuer Account. On each interest payment date the issuer will credit:
o to the class A notes coupon ledger an amount equal to the lesser of (1) the
amount deposited in the Series 02-1 Issuer Account and (2) the sum of the
Class A Monthly Finance Amount, the Class A Deficiency Amount and the Class
A Additional Finance Amount;
96
o to the class B notes coupon ledger an amount equal to the lesser of (1) the
amount deposited in the Series 02-1 Issuer Account minus the amount
credited to the class A notes coupon ledger and (2) the Class B Monthly
Distribution Amount; and
o to the class C notes coupon ledger an amount equal to the lesser of (1) the
amount deposited in the Series 02-1 Issuer Account minus the sum of the
amounts credited to the class A notes coupon ledger and the class B notes
coupon ledger and the Monthly Loan Expenses Amount and (2) the Class C
Monthly Distribution Amount.
In addition, the MTN issuer will pay any amounts received from the issuer as
deferred subscription price to Barclays Bank PLC pursuant to an agreement
between beneficiaries, to the extent not required by the MTN issuer to make
other payments on that date.
Before the termination of the swap agreements, on each interest payment date,
the issuer will pay:
o first, from MTN additional interest, the costs and expenses of the issuer
for the relevant monthly period will be paid or reserved for within the
issuer;
o second, the costs and expenses of the issuer for the relevant monthly
period remaining after the first item will be paid or reserved for within
the issuer proportionately to the class A notes', the class B notes' and
the class C notes' share for such payment to be used to pay, or reserve
for, the costs and expenses of the issuer;
o third, from the class A notes coupon ledger, the lesser of (1) the amount
credited to the class A notes coupon ledger after paying or reserving for
the class A notes' proportionate share of the issuer's costs and expenses
and (2) the interest due and payable to the swap counterparty under the
class A swap agreement for the relevant Calculation Period, to the swap
counterparty;
o fourth, from the class B notes coupon ledger, the lesser of (1) the amount
credited to the class B notes coupon ledger after paying or reserving for
the class B notes' proportionate share of the issuer's costs and expenses
and (2) the interest due and payable to the swap counterparty under the
class B swap agreement for the relevant Calculation Period, to the swap
counterparty;
o fifth, the lesser of the remaining amount on deposit in the Series 02-1
Issuer Account and an amount equal to the Monthly Loan Expenses Amount will
be paid to the lender under the expenses loan agreement;
o sixth, from the class C notes coupon ledger, the lesser of (1) the amount
credited to the class C notes coupon ledger after paying or reserving for
the class C notes' proportionate share of the issuer's costs and expenses
and (2) the interest due and payable to the swap counterparty under the
class C swap agreement in respect of the relevant Calculation Period, to
the swap counterparty;
o seventh, the lesser of the remaining amount on deposit in the Series 02-1
Issuer Account and an amount equal to the principal calculated as payable
in accordance with the expenses loan agreement will be paid to the lender
under the expenses loan agreement;
o eighth, the lesser of the remaining amount on deposit in the Series 02-1
Issuer Account and an amount equal to 1 2 of the Series 02-1 Extra Amount,
will be paid to the issuer;
o ninth, any amounts due from or required to be provided for by the issuer to
meet its liabilities to any taxation authority;
o tenth, any amounts due to third parties under obligations incurred in the
course of the issuer's business;
o eleventh, an amount equal to the lesser of the amount on deposit in the
Series 02-1 Issuer Account and the amount needed to cover any shortfall
with respect to the notes caused by the imposition of withholding taxes on
payments made under the series 02-1 medium term note certificate or the
swap agreements; and
o twelfth, any amounts remaining will constitute deferred subscription price
and will be paid to the MTN issuer.
Under the terms of each swap agreement, the swap counterparty will pay to the
principal paying agent on each interest payment date an amount equal to the
interest on the applicable class of notes, converted into dollars, subject to
the deferral of interest as described in "Terms and Conditions of the Notes" and
"The Swap Agreements".
After the termination of the swap agreements, the note trustee will withdraw the
amounts on deposit in the class A notes coupon ledger, the class B notes coupon
ledger and the class C notes coupon ledger and convert those amounts into
dollars at the then prevailing spot exchange rate in London, England for
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sterling purchases of dollars and distribute these dollar amounts to the paying
agent to make payments of interest on the class A notes, the class B notes and
the class C notes, respectively.
On the earlier of (1) the series 02-1 scheduled redemption date and (2) the
first distribution date for the Regulated Amortisation Period or the Rapid
Amortisation Period, and on each distribution date after that, the receivables
trustee will transfer the following amounts and deposit them into the Series
02-1 Distribution Account:
o from the Principal Funding Account, the lesser of (1) the amount in the
Principal Funding Account on that date and (2) the Class A Investor
Interest; and
o from the Class A Distribution Ledger, the lesser of (1) during the Rapid
Amortisation Period, the amount in the Class A Distribution Ledger or,
during the Regulated Amortisation Period, the Controlled Deposit Amount,
and (2) the Class A Investor Interest -- after taking into account the
amount distributed from the Principal Funding Account as described above.
On the later to occur of the Class B Principal Commencement Date and the series
02-1 scheduled redemption date and each distribution date after, the receivables
trustee will transfer the following amounts and deposit them into the Series
02-1 Distribution Account:
o from the Principal Funding Account, the lesser of (1) the amount on deposit
in the Principal Funding Account in excess of the Class A Investor Interest
and (2) the Class B Investor Interest; and
o from the Class B Distribution Ledger, the lesser of the amount on deposit
in the Class B Distribution Ledger and the Class B Investor Interest --
after taking into account the amount distributed from the Principal Funding
Account as described above.
On the later to occur of the Class C Principal Commencement Date and the series
02-1 scheduled redemption date and each distribution date after, the receivables
trustee will transfer the following amounts and deposit them into the Series
02-1 Distribution Account:
o from the Principal Funding Account, the lesser of (1) the amount on deposit
in the Principal Funding Account in excess of the sum of the Class A
Investor Interest and the Class B Investor Interest and (2) the Class C
Investor Interest; and
o from the Class C Distribution Ledger, the lesser of the amount on deposit
in the Class C Distribution Ledger and the Class C Investor Interest --
after taking into account the amount distributed from the Principal Funding
Account as described above.
The MTN issuer will credit the amount received for each class of Investor
Interest to the MTN Principal Ledger.
On the earlier of (1) the series 02-1 scheduled redemption date and (2) the
first distribution date for the Regulated Amortisation Period or the Rapid
Amortisation Period, and each distribution date after, the MTN issuer will
transfer for same day value from the Series 02-1 Distribution Account the amount
in the MTN Principal Ledger and deposit it into the Series 02-1 Issuer Account.
The issuer will credit each amount received from the MTN Principal Ledger to the
appropriate notes principal ledger.
Before the termination of the swap agreements, on the earlier of (1) the
Series 02-1 scheduled redemption date and (2) the first interest payment
date for the Regulated Amortisation Period or the Rapid Amortisation
Period, and each interest payment date after, the issuer will pay:
o from the class A notes principal ledger, an amount equal to the lesser of
(1) the amount in the class A notes principal ledger; and (2) the sterling
equivalent of the principal due on the class A notes, to the swap
counterparty;
o from the class B notes principal ledger, an amount equal to the lesser of
(1) the amount in the class B notes principal ledger and (2) the sterling
equivalent of the principal due on the class B notes, to the swap
counterparty; and
o from the class C notes principal ledger, an amount equal to the lesser of
(1) the amount in the class C notes principal ledger and (2) the sterling
equivalent of the principal due on the class C notes, to the swap
counterparty.
The swap counterparty will pay to the principal paying agent, in dollars,
principal for distribution to the noteholders converted into dollars, at the
fixed exchange rate.
After the termination of the swap agreements, the note trustee will withdraw the
amounts on deposit in the class A notes principal ledger, the class B notes
principal ledger and the class C notes principal ledger
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and, to the extent necessary, the amounts on deposit in the Series 02-1 Issuer
Account representing MTN additional interest payments and convert those amounts
into dollars at the then prevailing spot exchange rate in London, England for
sterling purchases of dollars and distribute those dollar amounts to the paying
agent to make payments of principal first on the class A notes, then the class B
notes and finally the class C notes.
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THE TRUST DEED
The principal agreement governing the notes will be the trust deed. The trust
deed has five primary functions:
o it constitutes the notes;
o it sets out the covenants of the issuer in relation to the notes;
o it sets out the enforcement and post-enforcement procedures relating to
the notes;
o it contains provisions necessary to comply with the U.S. Trust Indenture
Act of 1939 -- which we will call the Trust Indenture Act; and
o it sets out the appointment, powers and responsibilities of the note
trustee.
Each function is summarised below.
The trust deed sets out the form of the notes. It also sets out the terms and
conditions of the notes, and the conditions for the issue of individual note
certificates and/or the cancellation of any notes. It stipulates that the paying
agents, the registrar, the transfer agents and the agent bank will be appointed.
The detailed provisions regulating these appointments are contained in the
paying agency and agent bank agreement.
The trust deed also contains covenants made by the issuer in favour of the note
trustee and the noteholders. The main covenants are that the issuer will pay
interest and repay principal on each of the notes when due. Covenants are
included to ensure that the issuer remains insolvency remote, and to give the
note trustee access to all information and reports that it may need in order to
discharge its responsibilities in relation to the noteholders. Some of the
covenants also appear in the terms and conditions of the notes, see "Terms and
Conditions of the Notes". The issuer also covenants that it will do all things
necessary to maintain the listing of the notes on the Official List of the UK
Listing Authority and admission to trading on the London Stock Exchange and to
keep in place a registrar, a transfer agent, a paying agent and an agent bank.
The trust deed sets out the general procedures by which the note trustee may
take steps to enforce the security created by the issuer in the deed of charge
so that the note trustee can protect the interests of the noteholders in
accordance with the terms and conditions. The trust deed gives the note trustee
a general discretion to enforce the security, but also provides for meetings of
the noteholders at which the noteholders can determine the action taken by the
note trustee in relation to the enforcement of the notes. The trust deed
provides that the class A noteholders' interests take precedence for so long as
the class A notes are outstanding, and after that, the interests of the class B
noteholders take precedence over the interests of class C noteholders, until no
more class B notes remain outstanding. Certain basic terms of each class of
notes may not be amended without the consent of the majority of the holders of
that class of note. This is described further in the "Terms and Conditions of
the Notes".
The trust deed also sets out the priority in which the note trustee will pay out
any monies that it receives under the notes after the security has been
enforced. This is also set out in the deed of charge and the priority of
payments is summarised in the terms and conditions of the notes.
The trust deed also sets out the terms on which the note trustee is appointed,
the indemnification of the note trustee, the payment it receives and the extent
of the note trustee's authority to act beyond its statutory powers under English
Law. The note trustee is also given the ability to appoint a delegate or agent
in the execution of any of its duties under the trust deed. The trust deed also
sets out the circumstances in which the note trustee may resign or retire.
Finally, the trust deed includes certain provisions mandated by the Trust
Indenture Act. Generally, these provisions outline the duties, rights and
responsibilities of the note trustee and the issuer and the rights of the
noteholders. Specifically these include, but are not limited to:
o the maintenance of a noteholder list by the note trustee;
o the provision of financial statements and other information by the issuer
to the note trustee;
o the duty of the note trustee to use the same degree of care in exercising
its responsibilities as would be exercised by a prudent person conducting
its own affairs;
o the duty of the note trustee to notify all noteholders of any events of
default of which it has actual knowledge; and
o the right of the note trustee to resign at any time by notifying the
issuer in writing, and the ability of the issuer to remove the note
trustee under certain circumstances.
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The trust deed contains a provision that, if any other provision of the trust
deed limits, qualifies or conflicts with another provision that is required to
be included in the trust deed by, and is not subject to contractual waiver
under, the Trust Indenture Act, the Trust Indenture Act provision will prevail.
The terms of the trust deed supercede the provisions of the Trustee Act 2000
of England and Wales.
The trust deed is governed by English Law.
THE NOTES
The issue of the notes will be authorised by a resolution of the board of
directors of the issuer passed prior to the closing date. The notes will be
constituted by a trust deed to be dated the closing date between the issuer and
the note trustee as trustee for, among others, the holders for the time being of
the notes. The trust deed includes provisions which enable it to be modified or
supplemented and any reference to the trust deed is a reference also to the
document as modified or supplemented in accordance with its terms.
The material terms of the notes are described in this prospectus. However, the
statements set out in this section with regard to the notes and the global note
certificates representing the notes are subject to the detailed provisions of
the trust deed. The trust deed will include the forms of the global note
certificates and the forms of the individual note certificates. A paying agent
and agent bank agreement between the issuer, the note trustee, The Bank of New
York in London as "principal paying agent", the other paying agents -- together
with the principal paying agent, called the "paying agents" -- the transfer
agent, the registrar and the agent bank, regulates how payments will be made on
the notes and how determinations and notifications will be made. It will be
dated as of the closing date and the parties will include, on an ongoing basis,
any successor party appointed in accordance with its terms.
Each class of notes will be represented initially by a global note certificate
in registered form. The notes will initially be offered and sold pursuant to a
registration statement, of which this prospectus forms a part, filed with the
United States Securities and Exchange Commission. The global note certificates
representing the notes offered by this prospectus -- called the "global note
certificates" -- will be deposited with The Bank of New York in New York, as the
depository for, and registered in the name of, Cede & Co. as nominee of, The
Depository Trust Company, referred to in this prospectus as, "DTC". On
confirmation from the depository that it holds the global note certificates, DTC
will record book-entry interests in the beneficial owner's account or the
participant account through which the beneficial owner holds its interests in
the notes. These book-entry interests will represent the beneficial owner's or
participant's beneficial interest in the relevant global note certificates.
The amount of notes represented by each global note certificate is evidenced by
the register maintained for that purpose by the registrar. Together, the notes
represented by the global note certificates and any outstanding individual note
certificates will equal the aggregate principal amount of the notes outstanding
at any time. However, except as described under "--Individual Note
Certificates", individual note certificates will not be issued.
Beneficial owners may hold their interests in the global note certificates only
through DTC, Clearstream, Luxembourg or Euroclear, as applicable, or indirectly
through organisations that are participants in any of those systems. Ownership
of these beneficial interests in a global note certificate will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by DTC, Clearstream, Luxembourg or Euroclear (with respect to interests of their
participants) and the records of their participants (with respect to interests
of persons other than their participants). By contrast, ownership of direct
interests in a global note certificate will be shown on, and the transfer of
that ownership will be effected through, the register maintained by the
registrar. Because of this holding structure of the notes, beneficial owners of
notes may look only to DTC, Clearstream, Luxembourg or Euroclear, as applicable,
or their respective participants for their beneficial entitlement to those
notes. The issuer expects that DTC, Clearstream, Luxembourg or Euroclear will
take any action permitted to be taken by a beneficial owner of notes only at the
direction of one or more participants to whose account the interests in a global
note certificate is credited and only in respect of that portion of the
aggregate principal amount of notes as to which that participant or those
participants has or have given that direction.
Beneficial owners will be entitled to the benefit of, will be bound by and will
be deemed to have notice of, all the provisions of the trust deed and the paying
agent and agent bank agreement. Beneficial owners can see copies of these
agreements at the principal office for the time being of the note trustee, which
is, as of the date of this document, The Bank of New York in London and at the
specified office for the time being of each of the paying agents. Pursuant to
its obligations under the Listing Rules made by the UK
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Listing Authority, the issuer will maintain a paying agent in the United Kingdom
until the date on which the notes are finally redeemed.
PAYMENT
Principal and interest payments on the notes will be made via the paying agents
to DTC or its nominee, as the registered holder of the offered global note
certificates. DTC's practice is to credit its participants' accounts on the
applicable payment date according to their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that payment date.
Payments by DTC, Clearstream, Luxembourg and Euroclear participants to the
beneficial owners of notes will be governed by standing instructions, customary
practice, and any statutory or regulatory requirements as may be in effect from
time to time, as is now the case with securities held by the accounts of
customers registered in street name. These payments will be the responsibility
of the DTC, Clearstream, Luxembourg or Euroclear participant and not of DTC,
Clearstream, Luxembourg, Euroclear, any paying agent, the note trustee or the
issuer. None of the issuer, the note trustee, any underwriter nor any paying
agent will have the responsibility or liability for any aspect of the records of
DTC, Clearstream, Luxembourg or Euroclear relating to or payments made by DTC,
Clearstream, Luxembourg or Euroclear on account of beneficial interests in the
global note certificates or for maintaining, supervising or reviewing any
records of DTC, Clearstream, Luxembourg or Euroclear relating to those
beneficial interests.
CLEARANCE AND SETTLEMENT
The Clearing Systems
DTC. DTC has advised us and the underwriters that it intends to follow the
following procedures:
DTC will act as securities depository for the global note certificates. The
notes represented by the global note certificates will be issued as securities
registered in the name of Cede & Co., DTC's nominee.
DTC has advised us that it is a:
o limited-purpose trust company organized under New York Banking Law;
o banking organisation within the meaning of New York Banking Law;
o member of the Federal Revenue System;
o clearing corporation within the meaning of the New York Uniform Commercial
Code; and
o clearing agency registered under the provisions of Section 17A of the
Exchange Act.
DTC holds securities for its participants and facilitates the clearance and
settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities certificates. DTC participants include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organisations. Indirect access to DTC system is also available to others
including securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Transfers between participants on the DTC system will occur under DTC rules.
Transfers between participants on the Clearstream, Luxembourg system and
participants in the Euroclear system will occur under their rules and operating
procedures.
Purchases of notes under the DTC system must be made by or through DTC
participants, which will receive a credit for the note on DTC's records. The
ownership interest of each actual beneficial owner is in turn to be recorded on
the DTC participants' and indirect participants' records. Beneficial owners will
not receive written confirmation from DTC of their purchase. However, beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the DTC
participant or indirect participant through which the beneficial owner entered
into the transaction. Transfer of ownership interests in the offered notes are
to be accomplished by entries made on the books of DTC participants acting on
behalf of beneficial owners. Beneficial owners will not receive certificates
representing their ownership interest in notes unless use of the book-entry
system for the notes described in this section is discontinued.
To facilitate subsequent transfers, all global note certificates deposited with
DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of these
global note certificates with DTC and their
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registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the ultimate beneficial owners of the notes. DTC's
records reflect only the identity of the DTC participants to whose accounts the
beneficial interests are credited, which may or may not be the actual beneficial
owners of the notes. The DTC participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants, by
DTC participants to indirect participants, and by DTC participants and indirect
participants to beneficial owners will be governed by arrangements among them
and by any statutory or regulatory requirements in effect from time to time.
Redemption notices for the notes represented by the global note certificates
will be sent to DTC. If less than all of those notes are being redeemed by
investors, DTC's practice is to determine by lot the amount of the interest of
each participant in those notes to be redeemed.
Neither DTC nor Cede & Co. will consent or vote on behalf of the notes. Under
its usual procedures, DTC will mail an omnibus proxy to the issuer as soon as
possible after the record date, which assigns the consenting or voting rights of
Cede & Co. to those DTC participants to whose accounts the book entry interests
are credited on the record date, identified in a list attached to the proxy.
The issuer understands that under existing industry practices, when the issuer
requests any action of noteholders or when a beneficial owner desires to give or
take any action which a noteholder is entitled to give or take under the trust
deed, DTC generally will give or take that action, or authorize the relevant
participants to give or take that action, and those participants would authorize
beneficial owners owning through those participants to give or take that action
or would otherwise act upon the instructions of beneficial owners through them.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the issuer believes to be reliable, but the
issuer takes no responsibility for the accuracy thereof.
Clearstream, Luxembourg and Euroclear. Clearstream, Luxembourg and Euroclear
each hold securities for their participating organisations and facilitate the
clearance and settlement of securities transactions between their respective
participants through electronic book-entry changes in accounts of those
participants, thereby eliminating the need for physical movement of securities.
Clearstream, Luxembourg and Euroclear provide various services including
sakekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg and
Euroclear also deal with domestic securities markets in several countries
through established depository and custodial relationships. Clearstream,
Luxembourg and Euroclear have established an electronic bridge between their two
systems across which their respective participants may settle trades with each
other. Transactions may be settled in Clearstream, Luxembourg and Euroclear in
any of numerous currencies, including United States dollars.
Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a
professional depository. Clearstream, Luxembourg participants are financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
Clearstream, Luxembourg is also available to others, including banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg participant, either directly or
indirectly.
The Euroclear system was created in 1968 to hold securities for its participants
and to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment. The Euroclear
system is operated by Euroclear Bank S.A./N.V., called the "Euroclear operator".
All operations are conducted by the Euroclear operator. All Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
operator.
Euroclear participants include banks -- including central banks -- securities
brokers and dealers and other professional financial intermediaries. Indirect
access to the Euroclear system is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear operator are
governed by the Terms and Conditions Governing use of Euroclear and the related
Operating Procedures of the Euroclear system. These terms and conditions govern
transfers of securities and cash within the Euroclear system, withdrawal of
securities and cash from the Euroclear system, and receipts of payments for
securities in the Euroclear system. All securities in the Euroclear system are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear operator acts
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under these terms and conditions only on behalf of Euroclear participants and
has no record of or relationship with persons holding through Euroclear
participants.
As the holders of book-entry interests, beneficial owners will not have the
right under the trust deed to act on solicitations by the issuer for action by
noteholders. Beneficial owners will only be able to act to the extent they
receive the appropriate proxies to do so from DTC, Clearstream, Luxembourg or
Euroclear or, if applicable, their respective participants. No assurances are
made about these procedures or their adequacy for ensuring timely exercise of
remedies under the trust deed.
No beneficial owner of an interest in a note represented by a global note
certificate will be able to transfer that interest except in accordance with
applicable procedures, in addition to those provided for under the trust deed,
of DTC, Clearstream, Luxembourg and Euroclear, as applicable. The laws of some
jurisdictions require that some purchasers of securities take physical delivery
of those securities in definitive form. These laws and limitations may impair
the ability to transfer beneficial interests in a note represented by a global
note certificate.
CLEARANCE AND SETTLEMENT
Initial Settlement
The global note certificates will be delivered on the closing date to The Bank
of New York in New York, as depository for DTC. Customary settlement procedures
will be followed for participants of each system on the closing date. Notes will
be credited to investors' securities accounts on the closing date against
payment in same-day funds.
Secondary Trading
Secondary market sales of book-entry interests in notes between DTC participants
will occur in the ordinary way in accordance with DTC rules and will be settled
using the procedures applicable to conventional United States corporate debt
obligations.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to these
procedures to facilitate transfers of interests in securities among participants
of DTC, Clearstream, Luxembourg and Euroclear, they are not obliged to perform
these procedures. Additionally, these procedures may be discontinued at any
time. None of the issuer, any agent, the underwriters or any affiliate of any of
the foregoing, or any person by whom any of the foregoing is controlled for the
purposes of the Securities Act, will have any responsibility for the performance
by DTC, Clearstream, Luxembourg, Euroclear or their respective direct or
indirect participants or accountholders of their respective obligations under
the rules and procedures governing their operations or for the sufficiency for
any purpose of the arrangements described in this prospectus.
INDIVIDUAL NOTE CERTIFICATES
Beneficial owners of notes will only be entitled to receive individual note
certificates if the notes become immediately due and repayable by reason of an
event of default or DTC notifies the issuer that it is unwilling or unable to
hold the global note certificates or is unwilling or unable to continue as, or
has ceased to be, a clearing agency registered under the Exchange Act and, in
each case, the issuer cannot appoint a successor within 90 days of such
notification.
In no event will individual note certificates in bearer form be issued. Any
individual note certificate will be issued in registered form in minimum
denominations of $1,000. Any individual note certificates will be registered in
that name or those names as the registrar shall be instructed by DTC,
Clearstream, Luxembourg and Euroclear, as applicable. It is expected that these
instructions will be based upon directions received by DTC, Clearstream,
Luxembourg and Euroclear from their participants reflecting the ownership of
book-entry interests. To the extent permitted by law, the issuer, the note
trustee and any paying agent shall be entitled to treat the person in whose
names any individual note certificate is registered as the absolute owner
thereof. The paying agent and agent bank agreement contains provisions relating
to the maintenance by a registrar of a register reflecting ownership of the
notes and other provisions customary for a registered debt security.
Any person receiving individual note certificates will not be obligated to pay
or otherwise bear the cost of any transfer tax or governmental charge or any
cost or expense relating to insurance, postage, transportation or any similar
charge in connection with the delivery of such individual note certificates,
which will be solely the responsibility of the issuer. No service charge will be
made for any registration of transfer or exchange of any individual note
certificates.
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TERMS AND CONDITIONS OF THE NOTES
The material terms of the notes are described in the body of the prospectus. The
following is a summary of the material terms and conditions of the notes, and is
numbered 1 to 16. This summary does not need to be read with the terms and
conditions of the notes in order to learn all the material terms and conditions
of the notes.
The notes are the subject of the following documents:
o a trust deed dated the closing date between the issuer and the note
trustee;
o a paying agency and agent bank agreement dated the closing date among the
issuer, the registrar, the principal paying agent and the agent bank, the
other paying agents, the transfer agent and the note trustee;
o a deed of charge dated the closing date among the lender under the
expenses loan agreement, the issuer, the swap counterparty and the note
trustee; and
o the class A swap agreement, the class B swap agreement and the class C
swap agreement, each between the issuer and the swap counterparty.
When we refer to the parties to the documents listed above, the reference
includes any successor to that party validly appointed.
Initially the parties will be as follows:
o Gracechurch Card Funding (No. 2) PLC as issuer;
o The Bank of New York as principal paying agent and agent bank, transfer
agent and note trustee; and
o Barclays Bank PLC as lender under the expenses loan agreement and swap
counterparty.
You are bound by and deemed to have notice of all of the provisions of the trust
deed, the paying agency and agent bank agreement, the deed of charge, the
expenses loan agreement and the swap agreements, which are applicable to you.
You can view drafts of those documents at the principal place of business of the
note trustee or the specified office of any of the paying agents.
1. FORM, DENOMINATION, TITLE AND TRANSFER
(1) The notes are in global registered form. Transfers and exchanges of
beneficial interests in notes represented by global note certificates are
made in accordance with the rules and procedures of DTC, Euroclear or
Clearstream, Luxembourg, as applicable. The notes are being offered in
minimum denominations of $1,000.
(2) Global note certificates will be exchanged for individual note
certificates in definitive registered form only under certain limited
circumstances. If individual note certificates are issued, they will be
serially numbered and issued in an aggregate principal amount equal to the
principal amount outstanding of the relevant global note certificates and
in registered form only.
(3) The registrar will maintain a register in respect of the notes in
accordance with the provisions of the paying agent and agent bank
agreement. References in this section to a "holder" of a note means the
person in whose name such note is for the time being registered in the
register -- or, in the case of a joint holding, the first named -- and
"noteholder" will be construed accordingly. A "note certificate" will be
issued to each noteholder for its registered holding. Each note
certificate will be numbered serially with an identifying number which
will be recorded in the register.
(4) The registered owner of each note will -- except as otherwise required by
law -- be treated as the absolute owner of such note for all purposes.
This will be true whether or not it is overdue and regardless of any
notice of ownership, trust or any other interest therein, any writing on
the note certificate -- other than the endorsed form of transfer -- or any
notice of any previous loss or theft of the note certificate -- and no
other person will be liable for so treating the registered owner.
(5) Subject to the provisions below, a note may be transferred upon surrender
of the relevant note certificate, with the endorsed form of transfer duly
completed, at the offices of the registrar or any transfer agent specified
in the paying agent and agent bank agreement, together with such evidence
as the registrar or transfer agent may reasonably require to prove the
title of the transferor and the authority of the individuals who have
executed the form of transfer. A note may not be transferred, however,
unless the principal amount of notes transferred and -- where not all of
the notes held by a holder are being transferred -- the principal amount
of the balance of notes not
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transferred are authorised holdings. "Authorised holdings" means holdings
of at least $1,000. Where not all the notes represented by the surrendered
note certificate are the subject of the transfer, a new note certificate
in respect of the balance of the notes will be issued to the transferor.
(6) Within five business days of surrender of a note certificate, the
registrar will register the transfer in question and deliver a new note
certificate of a like principal amount to the notes transferred to each
relevant holder at its office or the office of any transfer agent
specified in the paying agent and agent bank agreement or, at the request
and risk of any such relevant holder, by uninsured first class mail -- and
by airmail if the holder is overseas -- to the address specified for the
purpose by which commercial banks are open for business, including
dealings in foreign currencies, in the city where the registrar or the
relevant transfer agent has its specified office.
(7) The transfer of a note will be effected without charge by or on behalf of
the issuer, the registrar or any transfer agent but against such indemnity
as the registrar or transfer agent may require for any tax or other duty
of any nature that may be levied or imposed in connection with the
transfer.
(8) All payments on the notes are subject to any applicable fiscal or other
laws and regulations. Noteholders will not be charged commissions or
expenses on these payments.
(9) If the due date for payment of any amount on the notes is not a business
day in the place it is presented, noteholders will not be entitled to
payment of the amount due in that place until the next business day in
that place and noteholders will not be entitled to any further interest or
other payment as a result of that delay.
(10) If a noteholder holds individual note certificates, payments of principal
and interest -- except in the case of a final payment that pays off the
entire principal on the note -- will be made by U.S. dollar check and
mailed to the noteholder at the address shown in the register. In the case
of final redemption, payment will be made only when the note certificate
is surrendered. If the noteholder makes an application to the registrar,
payments can instead be made by transfer to a bank account.
(11) If payment of principal on a note is improperly withheld or refused, the
interest that continues to accrue will still be payable as usual.
(12) The issuer can, at any time, vary or terminate the appointment of any
paying agent and can appoint successor or additional paying agents,
registrars or transfer agents. If the issuer does this it must ensure that
it maintains a paying agent in London, a paying agent in New York and a
registrar. The issuer will ensure that at least 30 days' notice of any
change in the paying agents, the registrar or the transfer agent or their
specified offices is given to noteholders in accordance with condition
number 14.
(13) Subject as described earlier about the deferral of interest, if payment of
interest on a note is not paid for any other reason when due and payable,
the unpaid interest will itself bear interest at the applicable rate until
both the unpaid interest and the interest on that interest are paid.
2. STATUS
Payments on the notes will be made equally amongst all notes of the same class.
3. SECURITY AND SWAP AGREEMENT
The security for the payment of amounts due under your notes, together with the
expenses which validly arise during the transaction, is created by the deed of
charge. The security is created in favour of the note trustee who will hold it
on your behalf and on the behalf of other secured creditors of the issuer. The
security consists of the following:
(1) an assignment by way of first fixed security of the issuer's right, title
and interest in and to the series 02-1 medium term note certificate;
(2) a charge by way of first fixed sub-charge of all of the issuer's right,
title and interest in the security interest created in favour of the
security trustee in respect of the series 02-1 medium term note
certificate;
(3) an assignment by way of first fixed security of the issuer's right, title,
interest and benefit in and to the issuer related documents except the
trust deed and the deed of charge;
(4) an assignment by way of first fixed security of the issuer's right, title,
interest and benefit in and to all monies credited to the Series 02-1
Issuer Account or to any bank or other account in which the issuer may at
any time have any right, title, interest or benefit; and
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(5) a first floating charge over the issuer's business and assets not charged
under (1), (2), (3) or (4) above.
The security is described in detail in the deed of charge.
The deed of charge sets out how money is distributed between the secured parties
if the security is enforced. The order of priority it sets out is as follows:
o in no order of priority between them but in proportion to the respective
amounts due, to pay fees which are due to any receiver appointed under the
deed of charge and all amounts due for legal fees and other costs,
charges, liabilities, expenses, losses, damages, proceedings, claims and
demands which have been incurred by the note trustee under the issuer
related documents and in enforcing or perfecting title to the security
together with interest due on these amounts;
o in payment or satisfaction of all costs, charges, liabilities, expenses,
losses, damages, proceedings, claims and demands of the swap counterparty
under the swap agreements;
o in payment of all amounts due and unpaid, following the applications in
the first bullet point above, to the note trustee or anyone appointed by
them under the trust deed; and
o towards payment of amounts due and unpaid on the class A notes, to
interest then to principal after having paid any amounts due to the swap
counterparty under the terms the class A swap agreement;
o towards payment of amounts due and unpaid on the class B notes, to
interest then to principal after having paid any amounts due to the swap
counterparty under the terms of class B swap agreement;
o towards payment of amounts of interest due and unpaid under the terms of
the expenses loan agreement;
o towards payment of amounts due and unpaid on the class C notes, to
interest then to principal having paid any amounts due to the swap
counterparty under the terms of the class C swap agreement;
o after the notes have been paid in full, towards payment of amounts of
principal due and unpaid under the terms of the expenses loan agreement;
o towards payment of any sums that the issuer must pay to any tax authority;
o towards payment of any sums due to third parties under obligations
incurred in the course of the issuer's business;
o towards payment of any dividends due and unpaid to shareholders of the
issuer; and
o in payment of the balance, if any, to the liquidator of the issuer.
The security becomes enforceable when an event of default occurs. These events
are described in condition number 9 below. If an event of default occurs, the
redemption of notes will not necessarily be accelerated as described in
condition number 6 below.
The issuer will enter into three swap agreements, the material terms of which
are described under the heading "The Swap Agreements" in this prospectus.
4. NEGATIVE COVENANTS OF THE ISSUER
If any note is outstanding, the issuer will not, unless it is permitted by the
terms of the issuer related documents or by the written consent of the note
trustee:
o create or permit to subsist any mortgage, charge, pledge, lien or other
security interest, including anything which amounts to any of these things
under the laws of any jurisdiction, on the whole or any part of its
present or future business, assets or revenues, including uncalled
capital;
o carry on any business other than relating to the issue of the notes, as
described in this prospectus; in carrying on that business, the issuer
will not engage in any activity or do anything at all except:
(1) preserve, exercise or enforce any of its rights and perform and observe
its obligations under the notes, the deed of charge, the paying agency and
agent bank agreement, the trust deed, the expenses loan agreement, each
swap agreement, the series 02-1 medium term note certificate and the
related purpose trust, the corporate services agreement, the underwriting
agreement, the bank agreement and any bank mandate regarding the Series
02-1 Issuer Account -- collectively called the "issuer related documents".
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(2) use, invest or dispose of any of its property or assets in the manner
provided in or contemplated by the issuer related documents; or
(3) perform any act incidental to or necessary in connection with (1) or
(2) above.
o have any subsidiaries, subsidiary business, business of any other kind,
employees, premises or interests in bank accounts other than the Series
02-1 Issuer Account unless the account is charged to the note trustee on
acceptable terms;
o have any indebtedness, other than indebtedness permitted under the terms
of its articles of association or any of the issuer related documents;
o give any guarantee or indemnity for any obligation of any person;
o repurchase any shares of its capital stock or declare or pay any dividend
or other distributions to its shareholders;
o consolidate with or merge with or into any person or liquidate or dissolve
on a voluntary basis;
o be a member of any group of companies for the purposes of value added tax;
o waive or consent to the modification or waiver of any of the provisions of
the issuer related documents without the prior written consent of the note
trustee; or
o offer to surrender to any company any amounts which are available for
surrender by way of group relief.
5. INTEREST
Each note will bear interest on its principal amount outstanding from, and
including, the closing date. Interest on the notes is payable in arrear in U.S.
dollars on each interest payment date.
If there is a shortfall between the amounts received by the issuer from the swap
counterparty or otherwise and the amount of interest due on any class of notes
on that interest payment date, that shortfall will be borne by each note in that
class in a proportion equal to the proportion that the interest outstanding on
the relevant note bears to the total amount of interest outstanding on all the
notes of that class. This will be determined on the interest payment date on
which the shortfall arises. Payment of the shortfall will be deferred and will
be due on the next interest payment date on which funds are available to the
issuer, or, if earlier, the October 2009 interest payment date, from payments
made to it from the swap counterparty or otherwise on that interest payment
date, to make the payment. The shortfall will accrue interest at the rate
described for each class of note below plus a margin of 2.0 per cent. per annum,
and payment of that interest will also be deferred and will be due on the next
interest payment date on which funds are available to the issuer to make the
payment or, if earlier, on the October 2009 interest payment date.
Each period beginning on, and including, the closing date or any interest
payment date and ending on, but excluding, the next interest payment date is
called an interest period. The first interest payment for the notes will be made
on 15 December 2002 for the interest period from and including the closing date
to but excluding 15 December 2002.
Interest will stop accruing on any part of the principal amount outstanding of a
note from the date it is due to redeem unless payment of principal is improperly
withheld or refused. If this happens it will continue to bear interest in
accordance with this condition, both before and after any judgement is given,
until whichever is the earlier of the following:
o the day on which all sums due in respect of that note, up to that day, are
received by or on behalf of the relevant noteholder; and
o the day which is seven days after the principal paying agent or the note
trustee has notified the relevant class of noteholders, in accordance with
condition number 14, that it has received all sums due in respect of the
relevant class of notes up to that day, except to the extent that there is
any subsequent default in payment.
The rate of interest applicable to the notes for each interest period will be
determined by the agent bank on the following basis:
(1) on the quotation date for each class of note, the agent bank will
determine the offered quotation to leading banks in the London interbank
market for one-month U.S. dollar deposits or, in the case of the first
interest period, the linear interpolation of one-month and two-month
U.S. dollar deposits.
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This will be determined by reference to the British Bankers Association
LIBOR Rates display as quoted on the Moneyline Telerate Service display
page designated 3750. If the display page designated 3750 stops providing
these quotations, the replacement service for the purposes of displaying
this information will be used. If the replacement service stops displaying
the information, any page showing this information will be used. If there
is more than one service displaying the information, the one previously
approved in writing by the note trustee will be used;
In each case above, the determination will be made as at or about 11.00
a.m., London time, on that date. These are called the screen rates for the
respective classes.
A "quotation date" means the second business day before the first day of
an interest period.
(2) if, on any quotation date, the screen rate is unavailable, the agent bank
will:
o request the principal London office of each of four major banks --
called "reference banks" -- in the London interbank market selected
by the agent bank to provide the agent bank with its offered
quotation to leading banks of the equivalent of the screen rate on
that quotation date in an amount that represents a single
transaction in that market at that time; and
o calculate the arithmetic mean, rounded upwards to four decimal
places, of those quotations;
(3) if on any quotation date the screen rate is unavailable and only two or
three of the reference banks provide offered quotations, the rate of
interest for that interest period will be the arithmetic mean of the
quotations as last calculated in (2) above; and
(4) if fewer than two reference banks provide quotations, the agent bank will
determine the arithmetic mean, rounded upwards to four decimal places of
the rates quoted by major banks in London, selected by the agent bank at
approximately 11.00 a.m. London time on the relevant quotation date, to
leading banks for a period equal to the relevant interest period and in an
amount that is representative for a single transaction in that market at
that time, for loans in U.S. dollars.
The rate of interest for each interest period for the class A notes will be the
sum of:
o 0.12 per cent. per annum; and
o the screen rate or the arithmetic mean calculated to replace the screen
rate.
The rate of interest for each interest period for the class B notes will be the
sum of:
o 0.45 per cent. per annum; and
o the screen rate or the arithmetic mean calculated to replace the screen
rate.
The rate of interest for each interest period for the class C notes will be the
sum of:
o 1.15 per cent. per annum; and
o the screen rate or the arithmetic mean calculated to replace the screen
rate.
If the agent bank is unable to determine the screen rate or an arithmetic mean
to replace it, as described in (2), (3) and (4) the rates of interest for any
interest period will be as follows:
o for the class A notes the rate will be the sum of 0.12 per cent. per annum
and the screen rate or arithmetic mean last determined for the class A
notes;
o for the class B notes the rate will be the sum of 0.45 per cent. per annum
and the screen rate or arithmetic mean last determined for the class B
notes; and
o for the class C notes the rate will be the sum of 1.15 per cent. per annum
and the screen rate or arithmetic mean last determined for the class C
notes.
The agent bank will, as soon as it can after the quotation date for each
interest period, calculate the amount of interest payable on each note for that
interest period. The amount of interest will be calculated by applying the rate
of interest for that interest period to the principal amount outstanding of that
note during that interest period, multiplying the product by the actual number
of days in that interest period divided by 360 and rounding to the nearest U.S.
dollars 0.01, half a cent being rounded upwards:
On each interest payment date, the agent bank will determine the actual amount
of interest which will be paid on the notes on that interest payment date and
the amount of any shortfall on the notes for that interest period and the amount
of interest on any shortfall which will be paid on that interest payment date.
The amount of any interest on the shortfall will be calculated by applying the
relevant rate of interest for those notes plus a margin of 2 per cent. per
annum, to the sum of the shortfall and accrued interest on shortfall from prior
interest periods which remains unpaid, multiplying by the actual number
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of days in the relevant interest period and dividing by 360 and rounding the
nearest U.S. dollars 0.01, half a cent being rounded upwards.
If, on any interest payment date, the amount available to the issuer, from the
swap counterparty or otherwise is insufficient to pay in full the amount of
interest due on a class of notes, any outstanding shortfall and accrued interest
on shortfall, due on that interest payment date, that amount will be applied
first to the payment of the interest due on that class of notes, secondly to the
payment of any outstanding shortfall and thereafter to the payment of any
accrued interest on shortfall for that class of notes.
The rates and amounts determined by the agent bank will be notified to the
issuer, trustee and paying agent and published in accordance with condition
number 14 as soon as possible after these parties have been notified.
The issuer, the paying agents, the note trustee, the reference banks, the agent
bank and the noteholders will be bound by the determinations properly made as
described above and none of the reference banks, the agent bank or the note
trustee will be liable in connection with the exercise or non-exercise by them
of their powers, duties and discretions for those purposes.
If the agent bank fails to make a determination or calculation required as
described above, the note trustee, or its appointed agent, without accepting any
liability for it, will make the determination or calculation as described above.
If this happens, the determination or calculation will be deemed to have been
made by the agent bank.
The issuer will ensure that there will be four reference banks while there are
notes outstanding.
6. REDEMPTION AND PURCHASE
The issuer is only entitled to redeem the notes as provided in paragraphs (1),
(2) and (3) below.
(1) Scheduled Redemption
Class A Notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or Rapid Amortisation Period has already started, all class A notes will
be redeemed on the series 02-1 scheduled redemption date, unless there is a
shortfall between the amount in the Series 02-1 Issuer Account and the total
amount payable to the swap counterparty under the class A swap agreement. If
there is such a shortfall, the class A notes will be redeemed proportionately
with the amount in the Series 02-1 Issuer Account after being exchanged under
the terms of the class A swap agreement. The Rapid Amortisation Period will then
begin. The payments will be made in no order of preference and proportionately
between all class A notes.
Class B Notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or the Rapid Amortisation Period has already started, the class B notes
will be redeemed on the series 02-1 scheduled redemption date unless there is a
shortfall between the amount in the Series 02-1 Issuer Account, after payment of
all interest and principal due and payable on the class A notes, and the amount
due and payable to the swap counterparty under the class B swap agreement. If
there is such a shortfall, the class B notes will be redeemed proportionately
with the amount in the Series 02-1 Issuer Account after being exchanged under
the terms of the class B swap agreement. The Rapid Amortisation Period will then
begin. The payments will be made, in no order of preference and proportionately
between all class B notes.
Class C Notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or the Rapid Amortisation Period has already started, the class C notes
will be redeemed on the series 02-1 scheduled redemption date unless there is a
shortfall between the amount in the Series 02-1 Issuer Account, after payment of
all interest and principal due and payable on the class A notes and the class B
notes, and the amount due and payable to the swap counterparty under the class C
swap agreement. If there is such a shortfall, the class C notes will be redeemed
proportionately with the amount in the Series 02-1 Issuer Account after being
exchanged under the terms of the class C swap agreement. The Rapid Amortisation
Period will then begin. The payments will be made, in no order of preference and
proportionately between all class C notes.
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If the Rapid Amortisation Period begins as a result of there being insufficient
funds to repay principal and pay interest on the class A notes, the class B
notes or the class C notes, as described above, then on each interest payment
date after that, first the class A notes, second the class B notes and third the
class C notes, will be redeemed, to the extent of amounts available to the
issuer, after being exchanged under the swap agreements, for each note of a
class in the proportion that the principal amount outstanding of that note bears
to the total principal amount outstanding of the notes that class. This will
happen until the earlier of the time when each class of notes has been paid in
full and the October 2009 interest payment date.
On each interest payment date, the agent bank will determine for each class of
notes the following:
o the amount of principal repayable on each note of that class; and
o the principal amount outstanding of each note of that class on the first
day of the next interest period, after deducting any principal payment due
to be made on each note of that class on that interest payment date.
The amounts and dates determined by the agent bank will be notified to the
issuer, the paying agents and the note trustee and published in accordance with
condition number 14 as soon as possible after these parties have been notified.
The issuer, the paying agents, the note trustee and the noteholders will be
bound by the determinations properly made as described above and neither the
agent bank nor the note trustee will be liable for the exercise or non-exercise
by it of its powers, duties and discretions for those purposes.
If the agent bank fails to make a determination as described above, the note
trustee will calculate the principal payment or principal amount outstanding as
described above, and each of these determinations or calculations will be deemed
to have been made by the agent bank. If this happens, the determination will be
deemed to have been made by the agent bank.
(2) Mandatory Early Redemption
If the Regulated Amortisation Period or the Rapid Amortisation Period begins
before the series 02-1 scheduled redemption date, then on each interest payment
date after that each note of first class A, second class B, and third class C
will be redeemed, in the proportion that its principal amount outstanding bears
to the total principal amount outstanding of the notes of that class, to the
extent of the amount which is deposited into the Series 02-1 Issuer Account
towards redemption of the series 02-1 medium term note certificate -- after the
amount has been exchanged for dollars under the relevant swap agreement or by
the note trustee in the spot exchange market if the relevant swap agreement has
been terminated. This will happen until the earliest of:
o the date on which the relevant class of notes has been redeemed in full;
or
o the October 2009 interest payment date.
(3) Optional Redemption
The issuer may by not less than thirty and not more than sixty days prior notice
to the trustee and without the need to obtain the prior consent of the note
trustee or the noteholders redeem all of the remaining notes on the next
following interest payment date together with all accrued interest, deferred
interest and additional interest if any if the principal balance of the
remaining notes is less than 10 per cent. of their original principal balance
and the note trustee is satisfied that the issuer will have funds available to
it to make the required payment on that interest payment date.
(4) Final Redemption
If the notes have not previously been purchased and cancelled or redeemed in
full as described in condition number 6, the notes will be finally redeemed at
their then principal amount outstanding on the October 2009 interest payment
date, together with, in each case, all accrued and unpaid interest, shortfall
and interest on shortfall, if any.
The issuer or its parent may buy notes at any price. Any notes that are redeemed
or purchased pursuant to these provisions will be cancelled at that time and may
not be reissued or resold.
You are required, at its request, to sell all of your notes to Gracechurch Card
(Holdings) Limited, pursuant to the option granted to it by the note trustee, on
your behalf. The option is granted to acquire all, but not some only, of the
notes, plus accrued interest on them, for one penny per note, on the date upon
which the note trustee gives written notice to Gracechurch Card (Holdings)
Limited that it has determined, in its sole opinion, that all amounts
outstanding under the notes have become due and
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payable and there is no reasonable likelihood of there being any further
realisations, whether arising from an enforcement of the note trustee's security
or otherwise, which would be available to pay all such amounts outsanding under
the notes.
This is called the "post maturity call option".
You acknowledge that the note trustee has the authority and the power to bind
you in accordance with the terms and conditions set out in the post maturity
call option and, by subscribing or acquiring, as the case may be, for your
note(s), you agree to be bound in this way.
7. PAYMENTS
Payments of principal and interest in respect of the notes will be made to the
persons in whose names the global note certificates are registered on the
register at the opening of business in the place of the registrar's specified
office on the fifteenth day before the due date for such payment. Such date is
called the "record date". Payments will be made by wire transfer of immediately
available funds, if the registered holder has provided wiring instructions no
less than five business days prior to the record date, or otherwise by check
mailed to the address of the registered holder as it appears in the register at
the opening of business on the record date. In the case of the final redemption,
and provided that payment is made in full, payment will only be made against
surrender of those global note certificates to the registrar.
The note trustee will not be responsible for any deficiency which may arise
because it is liable to tax in respect of the proceeds of any security.
Similar provisions in respect of the indemnification of the security trustee are
set out in the transaction documents.
8. TAXATION
Payments of interest and principal will be made without making any deductions
for any tax imposed by any jurisdiction having power to tax unless a deduction
is required by the law of the relevant jurisdiction which has power to tax. If a
deduction for tax is made, the paying agent will account to the relevant
authority for the amount deducted. Neither the issuer nor any paying agent is
required to make any additional payments to noteholders for any deductions made
for tax.
9. EVENTS OF DEFAULT
If any of the following events occurs and is continuing it is called an "event
of default":
o the issuer fails to pay any amount of principal on the notes within 7 days
of the date payment is due or fails to pay any amount of interest on the
notes within 15 days of the date payment is due; or
o the issuer fails to perform or observe any of its other obligations under
the notes, the trust deed, the deed of charge or the paying agency and
agent bank agreement other than any obligation to pay any principal or
interest on the notes, and, except where that failure is incapable of
remedy, it remains unremedied for 30 days after the note trustee has given
written notice of it to the issuer, certifying that the default is, in its
opinion, materially prejudicial to the interests of the noteholders; or
o the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements"; or
o a judgement or order for the payment of any amount is given against the
issuer and continues unsatisfied and unstayed for a period of 30 days
after it is given or, if a later date is specified for payment, from that
date; or
o a secured party or encumbrancer takes possession or a receiver,
administrative receiver, administrator, examiner, manager or other similar
officer is appointed, of the whole or any part of the business, assets and
revenues of the issuer or an enforcement action is begun for unpaid rent
or execution is levied against any of the assets of the issuer; or
o the issuer becomes insolvent or is unable to pay its debts as they fall
due; or
o an administrator or liquidator of the issuer or the whole or any part of
the business, assets and revenues of the issuer is appointed, or an
application for an appointment is made; or
o the issuer takes any action for a readjustment or deferment of any of its
obligations or makes a general assignment or an arrangement or composition
with or for the benefit of its creditors or
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declares a moratorium in respect of any of its indebtedness or any
guarantee of indebtedness given by it; or
o the issuer stops or threatens to stop carrying on all or any substantial
part of its business; or
o an order is made or an effective resolution is passed for the winding up,
liquidation or dissolution of the issuer; or
o any action, condition or thing at any time required to be taken, fulfilled
or done in order :
(1) to enable the issuer lawfully to enter into, exercise its rights and
perform and comply with its obligations under and in respect of the
notes and the issuer related documents; or
(2) to ensure that those obligations are legal, valid, binding and
enforceable, except as that enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganisation or
other similar laws affecting the enforcement of the rights of
creditors generally and that that enforceability may be limited by
the effect of general principles of equity,
is not taken, fulfilled or done; or
o it is or will become unlawful for the issuer to perform or comply with any
of its obligations under or in respect of the notes or the related
documents; or
o all or any substantial part of the business, assets and revenues of the
issuer is condemned, seized or otherwise appropriated by any person acting
under the authority of any national, regional or local government; or
o the issuer is prevented by any person acting under the authority of any
national, regional or local government from exercising normal control over
all or any substantial part of its business, assets and revenues.
If an event of default occurs then the note trustee may give an enforcement
notice or appoint a receiver if it chooses and if it is indemnified to its
satisfaction.
If an event of default occurs then the note trustee shall be bound to give an
enforcement notice if it is indemnified to its satisfaction and it is:
o required to by the swap counterparty;
o required to by holders of at least one-quarter of the aggregate principal
amount outstanding of the class A notes, if any remain outstanding, and if
none remain outstanding, the class B notes, and if none of these remain
outstanding, the class C notes; or
o directed by an extraordinary resolution, as defined in the trust deed, of
holders of outstanding class A notes, and if there are none, of holders of
outstanding class B notes, and if there are none, of holders of
outstanding class C notes.
An "enforcement notice" is a written notice to the issuer declaring the notes to
be immediately due and payable. When it is given, the notes will become
immediately due and payable at their principal amount outstanding together with
accrued interest without further action or formality. Notice of the receipt of
an enforcement notice shall be given to the noteholders as soon as possible. A
declaration that the notes have become immediately due and payable will not, of
itself, accelerate the timing or amount of redemption of the notes as described
in condition number 6.
10. PRESCRIPTION
Your notes will become void if they are not presented within the time limit for
payment. That time limit is ten years from their due date. If there is a delay
in the principal paying agent receiving the funds, the due date, for the
purposes of this time limit, is the date on which it notifies you, in accordance
with condition number 14, that it has received the relevant payment.
11. REPLACEMENT OF NOTE CERTIFICATES
If any note certificates are lost, stolen, mutilated, defaced or destroyed, you
can replace them at the specified office of the registrar. You will be required
to both pay the expenses of producing a replacement and comply with the issuer's
reasonable requests for evidence, security and indemnity. You must surrender any
defaced or mutilated note certificates before replacements will be issued.
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12. NOTE TRUSTEE AND AGENTS
The note trustee is entitled to be indemnified and relieved from responsibility
in certain circumstances and to be paid its costs and expenses in priority to
your claims.
In the exercise of its powers and discretions under the conditions and the trust
deed, the note trustee will consider the interests of the noteholders as a class
and will not be responsible for any consequence to you individually as a result
of you being connected in any way with a particular territory or taxing
jurisdiction.
In acting under the paying agency and agent bank agreement, and in connection
with your notes, the paying agents and the agent bank act only as agents of the
issuer and the note trustee and do not assume any obligations towards or
relationship of agency or trust for or with you.
The note trustee and its related companies are entitled to enter into business
transactions with the issuer, Barclays Bank PLC or related companies of either
of them without accounting for any profit resulting from those transactions.
The issuer can, at any time, vary or terminate the appointment of any paying
agent or the agent bank and can appoint successor or additional paying agents or
a successor agent bank. If the issuer does this it must ensure that it maintains
the following:
o a principal paying agent;
o a paying agent in New York and, if and for so long as any of the notes are
listed on the Official List of the UK Listing Authority and admitted to
trading on the London Stock Exchange, in London;
o an agent bank; and
o a registrar.
Notice of any change in the paying agents, agent bank, registrar or their
specified offices shall be promptly given to you in accordance with condition
number 14.
13. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER, SUBSTITUTION AND
ADDITION
Meetings of Noteholders
The trust deed contains provisions for convening single and separate meetings of
each class of noteholders to consider matters relating to the notes, including
the modification of any provision of the conditions or the trust deed. Any
modification may be made if sanctioned by an extraordinary resolution.
The quorum for any meeting convened to consider an extraordinary resolution will
be two or more persons holding or representing a clear majority of the aggregate
principal amount outstanding of the relevant class of notes -- and in the case
of a separate meeting, the class A notes, the class B notes or the class C
notes, as the case may be -- for the time being outstanding.
Certain terms including the date of maturity of the notes, any day for payment
of interest on the notes, reducing or cancelling the amount of principal or the
rate of interest payable in respect of the notes or altering the currency of
payment of the notes, require a quorum for passing an extraordinary resolution
of two or more persons holding or representing in total not less than 75 per
cent. of the total principal amount outstanding of the relevant class of notes.
These modifications are called "Basic Terms Modifications".
Except where the extraordinary resolution effects a Basic Terms Modification,
the interests of the most senior class of notes outstanding at the time take
precedence over the interests of the subordinated classes. The note trustee may
only give effect to an extraordinary resolution passed by the class C
noteholders if it considers that the interests of the class A noteholders or the
class B noteholders will not be materially prejudiced. An extraordinary
resolution of the class B noteholders will only be effective if the note trustee
considers that it will not be materially prejudicial to the class A noteholders.
Subject to the foregoing, any extraordinary resolution duly passed shall be
binding on all noteholders, whether or not they are present at the meeting at
which such resolution was passed. The majority required for an extraordinary
resolution shall be 75 per cent. of the votes cast on that extraordinary
resolution.
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Modification and Waiver
The note trustee may agree, without the consent of the noteholders, (1) to any
modification -- except a Basic Terms Modification -- of, or to the waiver or
authorisation of any breach or proposed breach of, the notes or any other
related agreement, which is not, in the opinion of the note trustee, materially
prejudicial to the interests of the noteholders or (2) to any modification of
any of the provisions of the terms and conditions or any of the related
agreements which, in the opinion of the note trustee, is of a formal, minor or
technical nature or is to correct a manifest error. Any of those modifications,
authorisations or waivers will be binding on the noteholders and, unless the
note trustee agrees otherwise, shall be promptly notified by the issuer to the
noteholders in accordance with condition number 14.
Substitution and Addition
The note trustee may also agree to the substitution of any other body corporate
in place of the issuer as principal debtor under the trust deed and the notes
and in the case of such a substitution or addition the note trustee may agree,
without the consent of the noteholders, to a change of the law governing the
notes and/or the trust deed provided that such change would not in the opinion
of the trustee be materially prejudicial to the interests of the noteholders.
Any such substitution or addition will be promptly notified to the noteholders
in accordance with condition number 14.
Enforcement
At any time after the notes become due and repayable and without prejudice to
its rights of enforcement in relation to the security, the note trustee may, at
its discretion and without notice, institute such proceedings as it thinks fit
to enforce payment of the notes, including the right to repayment of the notes
together with accrued interest thereon, and shall be bound to do so only if it
has been so directed by an extraordinary resolution of the noteholders of the
relevant class. No extraordinary resolution of the class B noteholders or class
C noteholders or any request of the class B noteholders or class C noteholders
will be effective unless there is an extraordinary resolution of the class A
noteholders or a direction of the class A noteholders to the same effect or none
of the class A notes remain outstanding.
No extraordinary resolution of the class C noteholders or any request of the
class C noteholders will be effective unless there is an extraordinary
resolution of the class B noteholders or a direction of the class B noteholders
to the same effect or none of the class B notes remain outstanding.
No noteholder may institute any proceedings against the issuer to enforce its
rights under or in respect of the notes or the trust deed unless (1) the note
trustee has become bound to institute proceedings and has failed to do so within
a reasonable time and (2) the failure is continuing. Notwithstanding the
previous sentence and notwithstanding any other provision of the trust deed, the
right of any noteholder to receive payment of principal of and interest on its
notes on or after the due date for the principal or interest, or to institute
suit for the enforcement of payment of that interest or principal, may not be
impaired or affected without the consent of that noteholder.
14. NOTICES
Any notice to you will be deemed to have been validly given if published in a
leading English language daily newspaper in London -- which is expected to be
the Financial Times -- and will be deemed to have been given on the day it is
first published.
Any notice specifying a rate of interest, an interest amount, an amount of
shortfall or interest on it, principal payment or a principal amount outstanding
will be treated as having been duly given if the information contained in that
notice appears on the relevant page of the Reuters Screen or other similar
service approved by the note trustee and notified to you. The notice will be
deemed given when it first appears on the screen. If it cannot be displayed in
this way, it will be published as described in the previous paragraph.
Copies of all notices given in accordance with these provisions will be sent to
the London Stock Exchange Company Announcements Office, Clearstream, Luxembourg,
Euroclear and DTC.
15. CURRENCY INDEMNITY
You can be indemnified against losses you suffer from the use of an exchange
rate to convert sums recovered by you in litigation against the issuer, which is
different to the rate you ordinarily use. You must request this indemnity in
writing from the issuer.
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This indemnity constitutes a separate and independent obligation of the issuer
and shall give rise to a separate and independent cause of action.
16. GOVERNING LAW AND JURISDICTION
The notes, swap agreements and trust deed are governed by English Law and the
English courts have non-exclusive jurisdiction in connection with the notes.
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THE SWAP AGREEMENTS
GENERAL
The issuer will enter into the class A swap agreement, the class B swap
agreement and the class C swap agreement -- called collectively the "swap
agreements". There is no separate interest rate cap agreement for any of the
notes.
Under the class A swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
o an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class A notes; and
o on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN issuer on the series 02-1 medium term note
certificate, including any MTN additional interest payments and after
deducting the costs and expenses of the issuer, and (2) the amounts due
and payable to the swap counterparty under the class A swap agreement.
The swap counterparty will pay to the issuer:
o an initial payment in sterling, on the closing date, in an amount equal to
the dollar amount of the initial balance of the class A notes converted
into sterling at the fixed exchange rate; and
o on each interest payment date after the closing date, sums in dollars
equal to the interest payable and, if any, principal repayable to holders
of the class A notes on that interest payment date, as set out in the
terms and conditions of the class A notes.
Under the class B swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
o an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class B notes; and
o on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN issuer on the series 02-1 medium term note
certificate, including any MTN additional interest payments and after
deducting the costs and expenses of the issuer, remaining after giving
effect to the payment made under the class A swap agreement described
above, and (2) the amounts due and payable to the swap counterparty under
the class B swap agreement.
The swap counterparty will pay to the issuer:
o an initial payment in sterling, on the closing date, in an amount equal to
the dollar amount of the initial balance of the class B notes converted
into sterling at the fixed exchange rate; and
o on each interest payment date after the closing date, sums in dollars
equal to the interest payable and principal repayable, if any, to holders
of the class B notes on that interest payment date, as set out in the
terms and conditions of the class B notes.
Under the class C swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
o an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class C notes; and
o on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN issuer on the series 02-1 medium term note
certificate, including any MTN additional interest payments and after
deducting the costs and expenses of the issuer, remaining after giving
effect to the payments made under the class A swap agreement and the class
B swap agreement, and (2) the amounts due and payable to the swap
counterparty under the class C swap agreement.
The swap counterparty will pay to the issuer:
o an initial payment in sterling, on the closing date, in an amount equal to
the dollar amount of the initial balance of the class C notes converted
into sterling at the fixed exchange rate; and
o on each interest payment date after the closing date, sums in dollars
equal to the interest payable and principal repayable, if any, to holders
of the class C notes on that interest payment date, as set out in the
terms and conditions of the class C notes.
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Each swap agreement provides that payments made under it is to be reduced in the
event that any amounts due and payable to the issuer under the series 02-1
medium term note certificate is deferred by the MTN issuer under the terms of
the series 02-1 medium term note certificate such that the issuer does not have
sufficient funds to make the scheduled payments under the swap agreement. This
is to prevent that amount in dollars being payable by the swap counterparty
before it receives the corresponding sterling amount from the issuer under the
relevant swap agreement. There will be a corresponding increase in the amounts
payable under the relevant swap agreement to make up this shortfall if the
deferred amount is subsequently received by the issuer. The MTN issuer will be
liable to pay deferred interest on any such deferred amount, and the issuer will
be liable to pay that deferred interest on to the noteholders in the order of
priorities set out in the terms and conditions of the notes, after converting it
into U.S. dollars under the relevant swap agreement. You should be aware that if
withholding tax is levied on the series 02-1 medium term note certificate,
payments to the issuer will be reduced accordingly. Such reduced payments would
not be treated as deferred amounts -- and, accordingly, would not bear deferred
interest -- and neither the issuer nor the swap counterparty is obliged to make
up the shortfall.
The fixed sterling to dollar exchange rate, which we refer to as the "fixed
exchange rate", in the swap agreements will be approximately (pound)0.6436 per
one dollar.
COMMON PROVISIONS OF THE SWAP AGREEMENTS
The swap agreements provide that if the short-term unsecured debt rating of the
swap counterparty is withdrawn or reduced below "A-1+" by Standard & Poor's or
if the long-term unsecured debt rating of the swap counterparty is withdrawn or
reduced below "Aa3" by Moody's, then within 30 days following that event, the
swap counterparty will be required to take one of the following steps:
o post collateral equal to the amount necessary to defease the obligations
of the swap counterparty under the swap agreement, as confirmed in writing
by Standard & Poor's or Moody's and, if the posting of collateral is
confirmed in writing by Standard & Poor's, it must be done in accordance
with the Standard & Poor's interest rate and currency swap criteria dated
January 1999 for calculating swap collateral (including all mark-to-market
and volatility buffer calculations which are set out in the swap
criteria);
o assign its obligations under the swap agreement to a substitute swap
counterparty having long-term unsecured debt ratings of "AAA" by Standard
& Poor's and "Aaa" by Moody's or, with the prior written confirmation of
the rating agencies that such action will not result in a reduction or
withdrawal of the rating of the applicable class of notes, a substitute
swap counterparty that has a lesser rating; or
o arrange for the appointment of a joint and several swap counterparty with
a long-term unsecured debt rating that, when combined with the long-term
unsecured debt ratings of the swap counterparty, are assessed as
sufficient to maintain the then-current ratings of the applicable class of
notes.
Termination of the Swap Agreements
The swap agreements will, or may, in the case of the third bullet point below,
terminate on the earliest of:
o the distribution date on which there is no further obligation to make a
payment under the series 02-1 medium term note certificate;
o the October 2009 interest payment date; and
o the occurrence of an early swap termination event as described below.
The swap agreements may be terminated early in the following circumstances --
each called an "early swap termination event":
o at the option of one party, if there is a failure by the other party to
pay any amounts due under the swap agreement;
o if an event of default under the notes occurs or if there is no further
obligation to make a payment under the series 02-1 medium term note
certificate before the series 02-1 scheduled redemption date;
o upon the occurrence of an insolvency of either party, merger without an
assumption of the obligations under the swap agreements, or changes in law
resulting in illegality;
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o if as a result of a change in applicable law, withholding taxes would be
imposed by any jurisdiction on payments to the issuer under the series
02-1 medium note certificate on any payments made or required to be made
by the swap counterparty to the issuer or by the
issuer to the swap counterparty under the swap agreement and there are no
reasonable measures that the swap counterparty or the issuer can take to
avoid their imposition; and
o the issuer determines that it or the paying agent has or will become
obligated to deduct or withhold amounts from payments on the related class
of notes to be made to any of the related noteholders on the next interest
payment date, for any political subdivision or taxing authority of the
United Kingdom on the payments as a result of any change in its laws or
regulations or rulings, or any change in official position regarding the
application or interpretation of its laws, regulations or rulings, which
change or amendment becomes effective on or after the date the notes are
issued, and there are no reasonable measures the issuer can take to avoid
the tax or assessment.
The swap agreements may be terminated following the events described in either
of the last two bullet points above only if the issuer is directed to terminate
the swap agreements by a vote of the holders of the class A notes representing
66-2/3 per cent. of the outstanding principal balances of the class A notes or,
if there are no class A notes outstanding, a vote of the holders of the class B
notes representing 66-2/3 per cent. of the outstanding principal balance of the
class B notes or, if there are no class B notes outstanding, a vote of the
holders of the class C notes representing 66-2/3 per cent. of the outstanding
principal balance of the class C notes.
If notice is given to terminate, following the occurrence of any of the events
referred to in the last two bullet points above, the issuer or the swap
counterparty may be liable to make a termination payment to the other. This
termination payment will be calculated and made in sterling. The amount of any
termination payment will be based on the market value of the terminated swap
agreement based on market quotations of the cost of entering into a swap
transaction with the same terms and conditions that would have the effect of
preserving the respective full payment obligations of the parties. Any such
termination payment could, if the sterling/dollar exchange rates have changed
significantly, be substantial.
If an early swap termination event occurs, on each interest payment date
thereafter, payments of interest and principal payable on the series 02-1 medium
term note certificate, including MTN additional interest, available to make
payments on the notes will be converted into dollars by the note trustee at the
then-prevailing spot exchange rate in the City of London for sterling purchases
of dollars. The issuer will apply the U.S. dollar proceeds of that exchange to
pay principal and interest on the notes in the order of priority described under
"Terms and Conditions of the Notes". Any dollar amounts so distributed may not
be equal to the dollar amounts then due and owing on the notes. Any dollar
amounts so converted in excess of principal and interest due and payable on that
class of notes will be held in the series 02-1 Issuer Account to be applied, if
needed to cover any future shortfall in sterling amounts needed for such
conversion.
TAXATION
Neither the issuer nor the swap counterparty is obliged under the swap
agreements to gross up if withholding taxes are imposed on payments made under
the swap agreements.
If any withholding tax is imposed on payments due from the issuer under the swap
agreements, the swap counterparty will be entitled to deduct amounts in the same
proportion from subsequent payments due from it. If that happens MTN additional
interest payments, to the extent available, will be used to cover the shortfall
in the payments due from the swap counterparty. If MTN additional interest
payments are not sufficient to cover the shortfall, amounts available to the
issuer to make payments on the notes will be reduced by the amount so deducted
that is not covered by MTN additional interest payments. Any reduction will be
applied first to the class C notes, second to the class B notes and third to the
class A notes.
If any withholding tax is imposed on payments due from the swap counterparty
under the swap agreements, the issuer will not be entitled to deduct amounts
from subsequent payments due from it and amounts available to the issuer to make
payments on the notes will be reduced by the amount so withheld by the swap
counterparty. To the extent any such withholding exceeds available MTN
additional interest payments, any reduction will be applied first to the class C
notes, second to the class B notes and third to the class A notes.
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THE MEDIUM TERM NOTE CERTIFICATE
On the closing date the MTN issuer will issue one interest bearing medium term
note certificate to the issuer -- which we call the "series 02-1 medium term
note certificate". The series 02-1 medium term note certificate will mature for
redemption on the series 02-1 scheduled redemption date. The Bank of New York in
London will act as trustee, depositary, issue agent and principal paying agent
in relation to the series 02-1 medium term note certificate.
The series 02-1 medium term note certificate is a series of medium term note
certificates issued under a security trust deed and MTN cash management
agreement. Under the terms of the security trust deed and MTN cash management
agreement, Barclays, acting through its corporate lending division at 54 Lombard
Street, London, EC3P 3AH, was appointed as cash manager for the medium term
notes and certificates -- called the "MTN cash manager".
The medium term notes or certificates will be issued on a non-syndicated
continuous basis in series. Previously the MTN issuer issued the series 99-1
medium term notes. Medium term notes or certificates issued in respect of any
series may differ as to principal, interest and recourse to security. Each
series must be constituted by a supplemental deed to the security trust deed and
MTN cash management agreement.
Each new series may differ from any other series in its principal terms and the
manner, timing and amounts of distributions made to the holders of that series
of medium term notes or certificates. The MTN issuer will not issue any further
medium term notes or certificates in respect of an existing series without the
prior consent of the holders of the existing medium term notes in that series,
unless the further medium term notes or certificates are fungible with the
existing ones.
The series 02-1 medium term note certificate will be issued at par with a right
of the MTN issuer to receive further payments of subscription price as deferred
consideration, which we call "deferred subscription price". The MTN issuer will
pay the initial consideration received for the series 02-1 medium term note
certificate to the receivables trustee for the purpose of the receivables trust
which will permit the MTN issuer to acquire an undivided beneficial interest in
the receivables trust. See "The Receivables Trust" and "Use of Proceeds". The
initial principal amount of each undivided beneficial interest acquired is the
initial Investor Interest for each class of investor certificates. These will be
issued to the MTN issuer by the receivables trustee. See "Series 02-1: General".
The ability of the MTN issuer to meet its obligations to pay principal of and
interest on the series 02-1 medium term note certificate will be entirely
dependent on the receipt by it of funds from the series 02-1 investor
certificates and excess interest attributable to series 02-1.
The MTN issuer and the security trustee will have no recourse to Barclays other
than:
o against Barclaycard as transferor under the receivables securitisation
agreement for any breach of representations and obligations in respect of
the receivables; and
o against Barclaycard as MTN cash manager under the security trust deed and
MTN cash management agreement for any breach of obligations of the MTN cash
manager.
On the closing date, the MTN issuer will declare an English law express purpose
trust in respect of any funds received by it from the investor certificate and
excess interest attributable to series 02-1. This trust will create a right in
equity in favour of the holder of the series 02-1 medium term note certificate
to require these funds to be applied in making payments on the series 02-1
medium term note certificate.
The obligations of the MTN issuer and certain other rights of the MTN issuer
under each series of medium term notes or certificates and under the documents
relating to them, will be secured under the security trust deed and MTN cash
management agreement, by security interests over the investor certificates. The
security for each series will be granted by the MTN issuer in favour of the
security trustee. If the net proceeds of the enforcement of security for a
series following a mandatory redemption -- after meeting the expenses of the
trustee, the paying agents, the depository and any receiver -- are insufficient
to make all payments due on the medium term notes or certificates of that
series, the assets of the MTN issuer securing other series of medium term notes
or certificates will not be available for payment of that shortfall.
If the security trust deed and MTN cash management agreement is enforced, the
monies paid to the MTN issuer by the receivables trustee on each transfer date
will be applied:
o first to meet payments due to any receiver appointed under it or to the
security trustee and all amounts due for legal fees and other costs,
charges, liabilities, expenses, losses, damages,
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proceedings, claims and demands which have been incurred under the relevant
documents and in enforcing the security, together with interest due on
these amounts; then
o to the extent not met above, to meet the costs, charges, liabilities,
expenses, losses, damages, proceedings, claims and demands of the security
trustee; then
o to meet payments of premium (if any), interest and principal on the
relevant series of medium term notes or certificates; then
o to meet payments due by the MTN issuer to any taxation authority; then
o to meet payment of sums due to third parties under obligations incurred in
the course of the MTN issuer's business; then
o to meet payment of any dividends due and unpaid to shareholders of the MTN
issuer; then
o to pay all amounts of excess entitlement consideration; then
o to pay any balance to the liquidator of the MTN issuer.
The interest rate on the series 02-1 medium term note certificate will be
determined by the agent bank in accordance with the series 02-1 medium term note
certificate conditions. This is done by reference to the screen rate or other
rate set by the agent bank (a) for the first interest period, the linear
interpolation of one-month and two-month deposits, (b) for the second interest
period and any interest period commencing during the Regulated Amortisation
Period, the Rapid Amortisation Period or on the series 02-1 scheduled redemption
date, for one-month deposits, or (c) for any other interest period, for
three-month deposits, in each case for pounds sterling in the London interbank
market plus a margin. The margin will be 0.19345 per cent. per annum for the
series 02-1 medium term note certificate. The interest rate for the first
interest period will be determined on the closing date. Interest in respect of
the series 02-1 medium term note certificate will be payable in arrear in
sterling on each interest payment date. Interest on the series 02-1 medium term
note certificate will be paid monthly on each distribution date falling during
or upon the expiry of each quarterly interest period.
Excess interest received by the MTN issuer under the agreement between
beneficiaries will be paid as MTN additional interest payments on the series
02-1 medium term note certificate concurrently with the interest payments on the
series 02-1 medium term note certificate.
If any withholding or deduction for any taxes, duties, assessments or government
charges is imposed, levied, collected, withheld or assessed on payments of
principal or interest, including MTN additional interest, on the series 02-1
medium term note certificate by any jurisdiction or any political subdivision or
authority in or of any jurisdiction having power to tax, neither the MTN issuer
nor the principal paying agent will be required to make any additional payments
to holders of the series 02-1 medium term note certificate for that withholding
or deduction.
The occurrence and continuation of the following events is called an MTN event
of default:
o the MTN issuer fails to pay any amount of principal of the series 02-1
medium term note certificate within 7 days of the due date for its payment
or fails to pay any amount of interest on the series 02-1 medium term note
certificate within 15 days of its due date; or
o the MTN issuer fails to perform or observe any of its other obligations
under the series 02-1 medium term note certificate, the series 02-1 MTN
supplement, or the security trust deed and MTN cash management agreement
and, except where the failure is incapable of remedy, it remains
unremedied for 30 days, in either case, after the security trustee has
given written notice to the MTN issuer, certifying that the failure is, in
the opinion of the security trustee, materially prejudicial to the
interests of the series 02-1 medium term note certificate holders; or
o the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements"; or
o a judgment or order for the payment of any amount is given against the MTN
issuer and continues unsatisfied and unstayed for a period of 30 days after
the date it is given or the date specified for payment, if later; or
o a secured party takes possession or a receiver, administrative receiver,
administrator, examiner, manager or other similar officer is appointed, of
the whole or any part of the undertaking, assets and revenues of the MTN
issuer or an enforcement action is begun for unpaid rent or executions
levied against any of the assets of the MTN issuer; or
o the MTN issuer becomes insolvent or is unable to pay its debts as they fall
due or an administrator or liquidator of the MTN issuer or the whole or any
part of its business, assets and revenues is
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appointed, or application for any appointment is made, or the MTN issuer
takes any action for a readjustment or deferment of any of its obligations
or makes a general assignment or an arrangement or composition with or for
the benefit of its creditors or declares a moratorium in respect of any of
its indebtedness or any guarantee of indebtedness given by it or ceases or
threatens to cease to carry on all or any substantial part of its business;
or
o an order is made or an effective resolution is passed for the winding up,
liquidation or dissolution of the MTN issuer; or
o any action, condition or thing at any time required to be taken, fulfilled
or carried out in order to (i) enable the MTN issuer lawfully to enter
into, exercise its rights and perform and comply with its obligations under
and in respect of the medium term notes or certificates and the documents
relating to them or (ii) to ensure that those obligations are legal, valid,
binding and enforceable, except as the enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganisation or other
similar laws affecting the enforcement of the rights of creditors generally
and as that enforceability may be limited by the effect of general
principles of equity, is not taken. fulfilled or, as the case may be,
carried out; or
o it is or will become unlawful for the MTN issuer to perform or comply with
any of its obligations under or in respect of the medium term notes or
certificates or the documents relating to them; or
o all or any substantial part of the business, assets and revenues of the MTN
issuer is condemned, seized or otherwise appropriated by any person acting
under the authority of any national, regional or local government or the
MTN issuer is prevented by any of these people from exercising normal
control over all or any substantial part of its business assets and
revenues,
If an MTN event of default occurs then the security trustee will be bound to
give an enforcement notice if it is indemnified to its satisfaction and it is:
o required to by holders of at least one-quarter of the aggregate principal
amount outstanding of the series 02-1 medium term note certificate; or
o directed by an extraordinary resolution, as defined in the security trust
deed and MTN cash management agreement, of holders of the series 02-1
medium term note certificate.
An MTN enforcement notice is a written notice to the MTN issuer declaring the
series 02-1 medium term note certificate to be immediately due and payable. When
it is given, the series 02-1 medium term note certificate will become
immediately due and payable at its principal amount outstanding together with
accrued interest without further action or formality. Notice of the receipt of
an MTN enforcement notice shall be given to the holders of the series 02-1
medium term note certificate as soon as possible. A declaration that the series
02-1 medium term note certificate has become immediately due and payable will
not, of itself, accelerate the timing or amount of redemption of the series 02-1
medium term note certificate.
When reference is made to the MTN cash manager it includes any successor to
Barclays as MTN cash manager. The security trust deed and MTN cash management
agreement provides that, as MTN cash manager, Barclays will service and
administer the Series 02-1 Distribution Account.
Barclays, and any successor MTN cash manager to the MTN issuer, will be entitled
to receive the fee inclusive of VAT, if any, for acting as MTN cash manager,
payable by the MTN issuer from amounts received as MTN Issuer Costs Amounts from
the Series 02-1 Distribution Account.
The MTN cash manager may not resign, apart from in certain circumstances. The
resignation of the MTN cash manager shall only become effective once a
replacement has assumed all of the responsibilities of the MTN cash manager set
out in the security trust deed and MTN cash management agreement.
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
CONSUMER CREDIT ACT 1974
A significant number of the credit transactions that occur on a designated
account will be for items of credit extended to a cardholder for an amount up to
(pound)25,000. The Consumer Credit Act applies to these transactions and, in
whole or in part, the credit or charge card agreement establishing each
designated account. This has certain consequences for the designated accounts,
including the following:
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Enforcement of improperly executed or modified card agreements
If a credit or charge card agreement has not been executed or modified in
accordance with the Consumer Credit Act, it may be unenforceable against a
cardholder without a court order -- and in some instances may be completely
unenforceable. As is common with many other UK credit and charge card issuers,
some of Barclaycard's credit and charge card agreements do not comply in all
respects with the
Consumer Credit Act or other related legislation. As a result, these agreements
may be unenforceable by Barclaycard against the cardholders without a court
order. The transferor gives no guarantee that a court order could be obtained if
required. With respect to those credit or charge card agreements which may not
be compliant, such that a court order could not be obtained, Barclaycard
estimates that this would apply to less than 1 per cent. of the aggregate
principal receivables in the designated accounts on 30 June 2002. Barclaycard
does not anticipate any material increase in this percentage of receivables in
the securitised portfolio. The accounts that do not comply with the Consumer
Credit Act are still legal, valid and binding obligations of the relevant
cardholder and it will still be possible to collect payments and demand arrears
from cardholders willing to pay their debt and demand arrears from cardholders
who are falling behind with their payments. The transferor will have no
obligation to repay or account to a cardholder for any payments received by a
cardholder because of this non-compliance with the Consumer Credit Act. However,
if losses arise on these accounts, they will be written off and borne by the
investor beneficiary and transferor beneficiary based on their respective
interests in the receivables trust.
Liability for supplier's misrepresentation or breach of contract
Transactions involving the use of a credit or charge card in the United Kingdom
may constitute transactions under debtor-creditor-supplier agreements. A
debtor-creditor-supplier agreement includes an agreement where the creditor,
with knowledge of its purpose, advances funds to finance a purchase by the
debtor of goods or services from a supplier.
Section 75 of the Consumer Credit Act provides that, if the supplier is in
breach of the contract -- whether such contract is express or implied by law --
between the supplier and a cardholder in a debtor-creditor-supplier agreement or
if the supplier has made a misrepresentation about that contract, the creditor
may also be liable to the cardholder for the breach or misrepresentation. The
liability of the transferor for a designated account is called a "Transferor
Section 75 Liability". In these circumstances, the cardholder may have the right
to reduce the amount owed to the transferor under his or her credit or charge
card account. This right would survive the sale of the receivables to the
receivables trustee. As a result, the receivables trustee may not receive
payments from cardholders that it might otherwise expect to receive. As a
result, the receivables trustee may not receive the full amount otherwise owed
by a cardholder. However, the creditor will not be liable where the cash price
of the item or service supplied concerning the claim is less than (pound)100 or
greater than (pound)30,000.
The receivables trustee has agreed to indemnify the transferor for any loss
suffered by the transferor arising from any claim under section 75 of the
Consumer Credit Act. This indemnity cannot exceed the original outstanding
principal balance of the affected charges on the designated account.
The receivables trustee's indemnity will be payable from excess spread on the
receivables. Any amounts that Barclaycard recovers from the supplier will reduce
Barclaycard's loss for purposes of the receivables trustee's indemnity.
Barclaycard will have rights of indemnity against suppliers under section 75 of
the Consumer Credit Act. Barclaycard may also be able to charge-back the
transaction in dispute to the supplier under the operating regulations of VISA
or Mastercard.
If Barclaycard's loss for purposes of the receivables trustee's indemnity
exceeds the excess spread available to satisfy the loss, the amount of the
excess will reduce the Transferor Interest accordingly.
TRANSFER OF BENEFIT OF RECEIVABLES
The transfer by the transferor to the receivables trustee of the benefit of the
receivables is governed by English law and takes effect in equity only.
Notice to the cardholders of the assignment to the receivables trustee would
perfect the legal title of the receivables trustee to the receivables. The
receivables trustee has agreed that notice will not be given to cardholders,
unless the transferor's long-term senior unsecured indebtedness as rated by
Moody's, Standard & Poor's or Fitch Ratings Limited were to fall below Baa2, BBB
or BBB respectively. The lack of notice has several legal consequences.
Until notice is given to the cardholders, each cardholder will discharge his or
her obligations under the designated account by making payment to the
transferor. Notice to cardholders would mean that cardholders should no longer
make payment to the transferor as creditor under the card agreement but
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should instead make payment to the receivables trustee as assignee of the
receivables. If notice is given, and a cardholder ignores it and makes payment
to the transferor for its own account, that cardholder would nevertheless still
be bound to make payment to the receivables trustee. The transferor, having
transferred the benefit of the receivables to the receivables trustee, is the
bare trustee of the receivables trustee for the purposes of the collection of
the receivables that are the property of the receivables trust and is
accountable to the receivables trustee accordingly.
Before the insolvency of the transferor, until notice is given to a cardholder
who is a depositor or other creditor of the transferor, equitable set-offs may
accrue in favour of that cardholder against his or her obligation to make
payments under the card agreement to the transferor. These rights of set-off may
result in the receivables trustee receiving less monies than anticipated from
the receivables.
The transfer of the benefit of receivables to the receivables trustee has been
and will continue to be subject both to any prior equities that have arisen in
favour of the cardholder and to any equities that may arise in the cardholder's
favour after the assignment. Where notice of the assignment is given to a
cardholder, certain rights of set-off may not arise after the date of the
notice.
Under the terms of the receivables securitisation agreement, the transferor
represents that each receivable assigned to the receivables trust is an eligible
receivable -- unless the receivable is specified as being an ineligible
receivable. The eligibility criteria include that each receivable constitutes
the legal, valid and binding obligations of the cardholder enforceable -- unless
they are not in compliance with the Consumer Credit Act in which case they may
only be enforceable with a court order and, in a small number of cases, may be
unenforceable -- against the cardholder in accordance with its terms. They also
include that each receivable is not, save as specifically contemplated by any
rule of English law, currently subject to any defence, dispute, set-off or
counterclaim or enforcement orders apart from in the limited cases described in
the previous sentence.
Notice to the cardholder would perfect the transfer so that the receivables
trustee would take priority over any interest of a later encumbrancer or
transferee of the transferor's rights who has no notice of the transfer to the
receivables trustee.
Notice to the cardholder would prevent the card agreement from being amended by
the transferor or the cardholder without the consent of the receivables trustee.
Lack of notice to the cardholder means that, for procedural purposes, the
receivables trustee will have to join the transferor as a party to any legal
action that the receivables trustee may want to take against any cardholder.
UNITED KINGDOM TAXATION TREATMENT OF THE NOTES
OVERVIEW
United Kingdom legal advisers, Clifford Chance LLP, have filed an opinion that,
subject to finalisation of documents including those which are exhibits to the
registration statement of which this prospectus forms a part in a form which is
satisfactory to them and not inconsistent with the descriptions in the body of
this prospectus and based on certain assumptions which cannot be verified before
closing, the following summary is true in all material respects in relation to
the matters expressly addressed. The summary set out below describes the
material United Kingdom withholding tax, income tax, corporation tax,
inheritance tax, capital gains tax, stamp duty and stamp duty reserve tax
consequences of acquiring, holding and disposing of the notes.
The comments below are, based on United Kingdom law and practice at the date of
this prospectus. They relate only to the position of persons who are the
absolute beneficial owners of their notes and may not apply to certain classes
of persons, including dealers and persons who own the notes as trustee, nominee
or otherwise on behalf of another person, but otherwise will, subject to the
following paragraph, apply to United States holders who beneficially own the
notes.
The comments below do not necessarily apply where the interest or any other
income on the notes is deemed for United Kingdom tax purposes to be the income
of a person other than the absolute beneficial owner of the notes in question,
for example where a person ordinarily resident in the United Kingdom transfers
assets to a non-resident company for the purpose of avoiding United Kingdom tax.
It is suggested that any noteholders who are in doubt as to their position
consult their professional advisers.
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TAXATION OF U.S. RESIDENTS
As discussed in more detail below, a United States holder who is not resident in
the United Kingdom for United Kingdom tax purposes may obtain payment of
interest on their notes without deduction or withholding for or on account of
United Kingdom income tax if and for so long as the notes are "quoted
Eurobonds". Notes issued by the issuer which carry a right to interest will
constitute "quoted Eurobonds" provided they are and continue to be listed on a
recognised stock exchange.
Under the terms of the Convention of 31 December 1975 between the United Kingdom
and the United States of America, called the "Convention", a person who is a
U.S. resident for the purposes of the Convention, called a "U.S. noteholder",
will not be subject to United Kingdom tax on any coupon beneficially owned by
him, unless he carries on business in the United Kingdom through a permanent
establishment situated in the United Kingdom, or performs in the United Kingdom
independent personal services from a fixed base situated therein, and the notes
are effectively connected with such permanent establishment or fixed base, or in
certain other circumstances specified in the Convention where relief is not
available.
A U.S. noteholder who is an individual will not be subject to United Kingdom tax
on any gain on any disposal of the notes unless they are held by or for a trade,
profession or vocation carried on by him through a branch or agency in the
United Kingdom -- subject to any relief which may be available under the
Convention or which may be available under United Kingdom law.
TAXATION OF INTEREST PAID
The notes will constitute "quoted Eurobonds" provided that they are and continue
to be listed on a recognised stock exchange. On the basis of the United Kingdom
Inland Revenue's published interpretation of the relevant legislation,
securities which are to be listed on a stock exchange in a country which is a
member state of the European Union or which is part of the European Economic
Area will satisfy this requirement if they are listed by a competent authority
in that country and are admitted to trading on a recognised stock exchange in
that country; securities which are to be listed on a stock exchange in any other
country will satisfy this requirement if they are admitted to trading on a
recognised stock exchange in that country. The London Stock Exchange is a
recognised stock exchange for these purposes. Whilst the notes are and continue
to be quoted Eurobonds, payments of interest on the notes may be made without
deduction or withholding for or on account of United Kingdom income tax
irrespective of whether the notes are in global or definitive form.
In all cases falling outside the exemption described above, interest on the
notes may fall to be paid under deduction of United Kingdom income tax at the
lower rate, currently 20 per cent, subject to such relief as may be available
under the provisions of any applicable double taxation treaty.
PROVISION OF INFORMATION
Holders should note that where any interest on notes is paid to them, or to any
person acting on their behalf, by the issuer or any person in the United Kingdom
acting on behalf of the issuer, called a "paying agent", or is received by any
person in the United Kingdom acting on behalf of the relevant holder, other than
solely by clearing or arranging the clearing of a cheque, called a "collecting
agent", then the issuer, the paying agent or the collecting agent as the case
may be, may in certain circumstances be required to supply to the United Kingdom
Inland Revenue details of the payment and certain details relating to the
holder, including the holder's name and address. These provisions will apply
whether or not the interest has been paid subject to withholding or deduction
for or on account of United Kingdom income tax and whether or not the holder is
resident in the United Kingdom for United Kingdom taxation purposes. Where the
holder is not so resident, the details provided to the United Kingdom Inland
Revenue, in certain cases, may be passed by United Kingdom Inland Revenue to the
tax authorities of the jurisdiction in which the holder is resident for taxation
purposes.
PROPOSED EUROPEAN UNION SAVINGS DIRECTIVE
On 13 December 2001 the European Union Council of Economic and Finance Ministers
approved the text of a proposed new directive regarding the taxation of savings
income. Subject to a number of important conditions being met, it is proposed
that member states of the European Union will be required to provide to the tax
authorities of another member state details of payments of interest or other
similar income paid by a person within its jurisdiction to an individual
resident in that other member state
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subject to the right of Belgium, Luxembourg and Austria to opt instead for a
withholding system for a transitional period in relation to such payments.
The proposed directive is not yet final, and may be subject to further amendment
and/or clarification. Consequently, it is not possible to predict what effect,
if any, the adoption of the directive would have on the notes or on payment of
principal or interest on the notes.
OTHER RULES RELATING TO UNITED KINGDOM WITHHOLDING TAX
1. Where interest has been paid under deduction of United Kingdom income tax,
holders who are not resident in the United Kingdom may be able to recover
all or part of the tax deducted if there is an appropriate provision in any
applicable double taxation treaty.
2. The references to "interest" above mean "interest" as understood in United
Kingdom tax law. The statements above do not take any account of any
different definitions of "interest" or "principal" which may prevail under
any other law or which may be created by the terms and conditions of the
notes or any related documentation.
3. The above description of the United Kingdom withholding tax position
assumes that there will be no substitution of issuer and does not consider
the tax consequences of any such substitution.
4. The notes may be issued at an issue price of less than 100 per cent. of
their principal amount. Any discount element on any of these notes will not
be subject to any United Kingdom withholding tax pursuant to the provisions
mentioned above, but may be subject to reporting requirements as outlined
above.
OWNERSHIP AND DISPOSAL, INCLUDING REDEMPTION, OF THE NOTES BY UNITED KINGDOM TAX
PAYERS
1. CORPORATE NOTEHOLDERS
Noteholders which are companies within the charge to United Kingdom corporation
tax -- other than authorised unit trusts and open ended investment companies,
subject to recent changes discussed below -- will normally be taxed on their
returns from the notes, including interest and returns attributable to movements
in value, whether income or capital in nature, as income, which is calculated in
accordance with an authorised accruals or mark-to-market basis of accounting.
Relief may be available for related expenses on a similar basis.
Such noteholders may also be subject to taxation with respect to foreign
exchange gains and losses on their notes, with all such gains and losses being
computed by translating the relevant amounts into sterling at year-ends and
other "translation times".
With effect from the beginning of their first accounting period commencing on or
after 1 October 2002, noteholders that are authorised unit trusts or open ended
investment companies will be subject to the same taxation treatment in respect
of the notes as other noteholders that are within the charge to United Kingdom
corporation tax, other than, in each case, with respect to profits and losses of
a capital nature in respect of these notes.
2. OTHER NOTEHOLDERS
The notes may be treated by the United Kingdom Inland Revenue as "qualifying
corporate bonds" within the meaning of Section 117 of the Taxation of Chargeable
Gains Act 1992.
If the notes are qualifying corporate bonds, any capital gain, or loss, arising
on a disposal -- including redemption -- will be exempt from United Kingdom
taxation of capital gains. However, any profit arising on transfer or redemption
of the notes will be chargeable to income tax.
If the notes are not qualifying corporate bonds, a noteholder who is not within
the charge to United Kingdom corporation tax but who is resident or ordinarily
resident in the United Kingdom or who carries on a trade in the United Kingdom
through a branch or agency to which the notes are attributable may be treated as
realising a chargeable gain or an allowable loss for capital gains tax purposes
on a disposal -- including redemption -- of the notes. In calculating any gain
or loss on disposal of a note, sterling values are compared at acquisition and
transfer. Accordingly, a taxable profit can arise even where the foreign
currency amount received on a disposal is less than or the same as the amount
paid from the note. In addition, on disposal, including redemption, of the notes
by a noteholder, an amount which is treated as re-ecting interest which has
accrued since the last interest payment date may be chargeable to tax as income
under the rules known as the Accrued Income Scheme contained in Chapter II of
Part XVII of the Income and Corporation Taxes Act 1988, if that noteholder is
not a dealer in securities and is not within
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the charge to United Kingdom corporation tax but is resident or ordinarily
resident in the United Kingdom or carries on a trade in the United Kingdom
through a branch or agency to which the notes are attributable. There are
provisions to prevent any particular gain or loss from being charged or relieved
at the same time under the provisions of the Taxation of Chargeable Gains Act
1992 and also under the provisions of the "accrued income scheme" described in
this paragraph. For further information in this regard, noteholders should seek
their own professional advice.
UNITED KINGDOM INHERITANCE TAX
Where a note is held by an individual there may be a charge to United Kingdom
inheritance tax on the individual's death or on certain transfers of the note,
including gifts to some settlements and gifts made within seven years of the
death of the individual.
These provisions are subject to any relief provided by any applicable double tax
convention relating to estate and gift taxes.
STAMP DUTY AND STAMP DUTY RESERVE TAX
No United Kingdom stamp duty or stamp duty reserve tax is payable on the issue
or transfer of a note provided that the note does not at any time carry (1) a
right to interest, the amount of which exceeds a reasonable commercial return on
the nominal amount of the capital of the note or (2) a right on repayment to an
amount which exceeds the nominal amount of the capital of the note and is not
reasonably comparable with what is generally repayable, in respect of a similar
nominal amount of capital, under the terms of issue of loan capital listed on
the Official List of the UK Listing Authority and admitted to trading on the
London Stock Exchange.
TAXATION OF THE MTN ISSUER AND THE ISSUER
The MTN issuer and the issuer will be subject to UK corporation tax, at a
maximum rate currently of 30 per cent., on the profit re-ected in their
respective profit and loss accounts as increased by the amounts of any
non-deductible expenses or losses. The profit in the profit and loss account
should not exceed 1 basis point of the principal amount outstanding on the
medium term notes or certificates in the case of the MTN issuer, or on the notes
in the case of the issuer. Examples of non-deductible expenses and losses may
include, for the MTN issuer:
o amounts paid by the MTN issuer to the receivables trustee to cover the
receivables trustee's fee and expenses; and
o any losses of principal which cannot be met out of excess spread; and
for the issuer, certain expenses relating to cash management.
TAXATION OF RECEIVABLES TRUSTEE
The receivables trustee will have no United Kingdom tax liabilities, and
accordingly, the receivables trustee will have no liability to United Kingdom
tax in relation to amounts which it receives on behalf of the MTN issuer or
amounts which it is obliged to pay the MTN issuer.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OVERVIEW
The following summary describes the material US federal income tax consequences
of acquiring, holding and disposing of the notes. This summary has been prepared
and reviewed by Orrick, Herrington & Sutcliffe LLP, special U.S. federal income
tax counsel to the issuer -- called "special U.S. tax counsel".
This summary does not discuss all aspects of U.S. federal tax law. In
particular, except as specifically indicated in this summary, it addresses only
purchasers in the original offering who hold notes as "capital assets" within
the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, called
the "Code". It does not address special U.S. federal income tax considerations
that may be important to particular investors in light of their individual
investment circumstances or to certain types of investors subject to special tax
rules -- e.g. financial institutions, insurance companies, tax-exempt
institutions, dealers in securities or currencies or investors holding the notes
as part of a conversion transaction, as part of a hedge or integrated
transaction, a constructive sale transaction, or as a position in a straddle for
tax purposes, or persons whose functional currency, as defined in Code Section
985, is not the U.S. dollar.
Further, this discussion does not address alternative minimum tax consequences
or any tax consequences to holders of interests in a noteholder. In addition,
this summary does not discuss any foreign, state, local or other tax
considerations. This summary is based on the Code, and administrative and
judicial authorities, all as in effect on the date of this prospectus and all of
which are subject to change, possibly on a retroactive basis.
Special U.S. tax counsel has prepared and reviewed this summary of material U.S.
federal income tax consequences, and is of the opinion that it is correct in all
material respects. Special U.S. tax counsel also opines that, as described
below, each of the receivables trust, the MTN issuer and the issuer will not be
treated as engaged in a trade or business within the United States for U.S.
federal income tax purposes and will not be subject to U.S. federal income tax.
Special U.S. tax counsel further opines that, as described below, although there
is no directly governing authority addressing the classification of securities
similar to the notes, under current law, the notes will be treated as debt for
U.S. federal income tax purposes. Except as set forth in the preceding
sentences, special U.S. tax counsel will render no other opinions about the
acquisition, holding and disposition of the notes. Further, an opinion of
special U.S. tax counsel is not binding on the IRS or the courts, and no ruling
on any of the consequences or issues discussed below will be sought from the
IRS. Moreover, there are no authorities on similar transactions involving
securities issued by an entity with terms similar to those of the notes.
Accordingly, the issuer suggests that persons considering the purchase of notes
consult their own tax advisors about the U.S. federal income tax consequences of
an investment in the notes and the application of United States federal tax
laws, as well as the laws of any state, local or foreign taxing jurisdictions,
to their particular situations.
For the purposes of this summary, a "United States holder" means a beneficial
owner of notes who is a "United States person" as described in Section
7701(a)(30) of the Code, generally including;
o an individual who is a citizen or resident of the United States;
o a corporation or partnership created in or under the laws of the United
States, any state or any political subdivision of any state -- including
the District of Columbia; and
o an estate or trust whose income is includible in gross income for US
federal income tax purposes without regard to source.
A "non-United States holder" means a beneficial owner of notes that is not a
United States holder.
TAX STATUS OF THE RECEIVABLES TRUST, THE MTN ISSUER AND THE ISSUER
It is presently contemplated that each of the receivables trust, the MTN issuer
and the issuer will conduct their respective activities, including activities
undertaken on their behalf, such as servicing activities entirely outside of the
United States. In that regard, assuming that the activities of each of the
receivables trust, the MTN issuer and the issuer are, as contemplated, conducted
entirely outside of the United States, and assuming each of these entities makes
no investments that are subject to withholding of U.S. federal income tax,
special U.S. tax counsel is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of a Treasury
regulation, revenue ruling or judicial decision and hence the matter cannot be
free from doubt, each of the receivables trust, the MTN issuer and the issuer
will not be treated as engaged in a trade or business within the United States
for
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U.S. federal income tax purposes and that each of these entities will not be
subject to U.S. federal income tax.
Prospective investors should understand that such determination of whether a
person is engaged in a U.S. trade or business is based on a highly factual
analysis, there is no direct guidance as to which activities constitute being
engaged in a trade or business within the United States, and it is unclear how a
court would construe the existing indirect authorities. A foreign corporation
deemed to be so engaged would be subject to U.S. federal income tax, as well as
the branch profits tax, on its income which is treated as effectively connected
with the conduct of that trade or business. Such income tax, if imposed, would
be based on effectively connected income computed in a manner generally
analogous to that applied to the income of a domestic corporation, except that a
foreign corporation would be entitled to deductions and credits for a taxable
year only if it files, on a timely basis, an income tax return for that year
which none of the receivables trust, MTN issuer and issuer intend to do, even as
a protective measure. The maximum U.S. federal income tax rates are currently 35
per cent. for a corporation's effectively connected income and 30 per cent. for
the branch profits tax, resulting in an effective maximum U.S. federal income
tax rate of 54.5 per cent. The branch profits tax is imposed each year on a
corporation's effectively connected earnings and profits, with certain
adjustments, deemed repatriated out of the United States.
UNITED STATES HOLDERS
TAX TREATMENT OF THE NOTES AS INDEBTEDNESS. The issuer will treat the notes as
debt for U.S. federal income tax purposes. Each holder of notes, by acceptance
of such notes, will also agree to treat the notes as indebtedness for U.S.
federal income tax purposes. Special U.S. tax counsel has advised that in its
opinion, although there is no directly governing authority addressing the
classification of securities similar to the notes, under current law, the notes
will be treated as indebtedness for U.S. federal income tax purposes. Such
agreement and opinion are not binding on the IRS and, as stated above, no
assurance can be given that the characterisation of the notes as indebtedness
would prevail if the issue were challenged by the IRS. The IRS might attempt to
treat the notes for U.S. federal income tax purposes as equity interests in a
corporation. As discussed below, treatment of the notes as equity interests
could have adverse tax consequences for United States holders.
Except as indicated, the discussion below assumes the notes are treated as
indebtedness for U.S. federal income tax purposes.
INTEREST PAYMENTS AND DISTRIBUTIONS. The notes may be treated as having been
issued with original issue discount -- "OID" -- for U.S. federal income tax
purposes, in which case the OID will be taxed as described below. However, in
the absence of any OID on the notes, interest on the notes will be taxable to a
United States holder as ordinary income at the time it is received or accrued,
in accordance with the holder's regular method of accounting for U.S. federal
income tax purposes.
The total amount of OID on a note is the excess of its stated redemption price
at maturity over its issue price. The issue price for the notes is the price --
including any accrued interest -- at which a substantial portion of the relevant
notes are first sold to the public. In general, the stated redemption price at
maturity of a note is the sum of all payments made on the note other than
payments of interest that (1) are payable at least annually over the entire life
of the note and (2) are based on a single fixed rate or variable rate -- or
certain combinations of fixed and variable rates.
If any of the notes are issued at a discount of an amount equal to or greater
than 0.25 per cent of that note's stated redemption price at maturity multiplied
by the note's weighted average maturity, called its "WAM", then that note will
be deemed to bear OID. The WAM of a note is computed based on the number of full
years each distribution of principal -- or other amount included in the stated
redemption price at maturity -- is scheduled to be outstanding. Further, the IRS
could take the position based on U.S. Treasury regulations that none of the
interest payable on a note is unconditionally payable and so that all of that
interest should be included in the note's stated redemption price at maturity.
In addition, if on the closing date there is a differential of more than 25
basis points between the initial fixed interest rate and the current value of
the variable interest rate that follows, the IRS may take the position that the
note bears OID and the holder of the note would be required to accrue OID into
income as described below.
A United States holder -- including a cash basis holder -- of a note deemed to
bear OID generally would be required to accrue OID on the relevant note for U.S.
federal income tax purposes on a constant yield basis. This would require the
inclusion of OID in income in advance of the receipt of cash attributable to
that income. Under Section 1272(a)(6) of the Code, special provisions apply to
debt instruments on
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which payments may be accelerated due to prepayments of other obligations
securing those debt instruments. However, no regulations have been issued
interpreting those provisions, and the manner in which those provisions would
apply to the notes is unclear.
Sourcing: Interest payments or distributions on a note generally will constitute
foreign source income for U.S. federal income tax purposes. Subject to certain
limitations, UK withholding tax, if any, imposed on these payments will
generally be treated as foreign tax eligible for credit against a United States
holder's U.S. federal income tax. For foreign tax credit purposes, it is
expected that interest will generally be treated as passive income or, in the
case of some United States holders, financial services income.
DISPOSITION OR RETIREMENT OF INVESTMENT. Subject to the discussion of the PFIC
rules below, upon the sale, exchange or retirement of a note -- including
pursuant to a redemption by the issuer prior to its maturity date -- a United
States holder will recognise gain or loss equal to the difference between the
amount realised and the United States holder's "adjusted tax basis" in the
relevant note. In general, a United States holder's adjusted tax basis in an OID
debt instrument is equal to the United States holder's cost for such debt
instrument, plus any OID accrued and less the amount of any payments received by
the holder that are not "qualified stated interest" payments under applicable
U.S. Treasury regulations.
A United States holder's adjusted tax basis in a debt instrument with no OID is
generally equal to the holder's cost less the amount of any principal payments
made before the date of disposition. A United States holder's adjusted tax basis
in stock is generally equal to the United States holder's cost for the stock. In
general, any gain or loss realised by the holder will be capital gain or loss.
Under certain circumstances, capital gains derived by individuals are taxed at
preferential rates. The deductibility of capital losses is subject to
limitations.
Sourcing: Gain realised by a United States holder on the sale, exchange or
retirement of a note generally will be treated as a United States source gain.
Under recently issued U.S. Treasury regulations governing losses recognised on
the sale of personal property, loss from the sale, exchange or retirement of a
note generally will also be treated as a United States source loss. Exceptions
to the application of these regulations' sourcing provisions include exceptions
for certain losses attributable to foreign exchange -uctuations, accrued but
unpaid interest, and foreign offices of U.S. residents, among others. Some other
exceptions to the regulations' general rule apply to notes treated as equity in
the issuer. The issuer suggests that United States holders consult their own tax
advisors about the proper treatment of losses for foreign tax credit purposes.
ALTERNATIVE TAX TREATMENT OF NOTES AS EQUITY. Special U.S. tax counsel opines,
and the issuer intends to take the position, that the notes are debt for U.S.
federal income tax purposes. Consequently, the U.S. federal income tax
consequences of purchasing, owing and disposing of the notes should be as set
forth above. However, if the notes were not to be treated as debt, they would
likely be treated as equity interests in the issuer.
INVESTMENT IN A PASSIVE FOREIGN INVESTMENT COMPANY. Because of the nature of the
income of the issuer, the issuer could constitute a passive foreign investment
company -- or "PFIC". Accordingly, United States holders of any class of notes
treated as equity -- in particular, the class C notes -- might be shareholders
in a PFIC.
In general, United States holders treated as shareholders of a PFIC constituted
by the issuer would be subject to special tax rules on excess distributions made
to them by the issuer, including a rateable inclusion of "excess distributions"
in the United States holder's gross income as ordinary income and requirement
for the payment of an interest charge on tax that is deemed to have been
deferred on these excess distributions. Excess distributions would generally
include (1) some distributions on a United States shareholder's equity interest
in the issuer for a taxable year, if the total of those amounts exceeds 125 per
cent. of the average amount of distributions from the issuer made during a
specified base period, and (2) gain from the disposition, or deemed disposition,
of the equity interest in the issuer. United States holders generally might
avoid these unfavourable consequences if they made either of two specific
elections available under the Code with respect to shares in a PFIC, but it is
not clear either election would be available for the notes.
The first such mitigating election is a "qualified electing fund", or "QEF",
election pursuant to Code Section 1295. If a United States holder made a QEF
election with respect to a note treated as equity, that United States holder
generally would be required to include its pro rata share of the issuer's
ordinary income and net capital gains in income for each taxable year and pay
tax on it, even if such income and gain were not distributed to the United
States holder. Further, any losses of the issuer would not be deductible by the
United States holder. If the issuer later distributed the income or gain on
which a United States holder had already paid tax, amounts so distributed will
not be further taxable to the
130
United States holder. A United States holder's tax basis in such a note would be
increased by the amount so included and decreased by the amount of nontaxable
distributions thereon. In general, a United States holder making a QEF election
would recognize, on a disposition of its notes, capital gain or loss equal to
the difference, if any, between the amount realized upon such disposition and
the tax basis in such notes. In general, a QEF election would be required to be
made on or before the due date for filing a United States holders' federal
income tax return for the first taxable year for which it holds a note. The QEF
election would be effective only if certain required information were made
available by the issuer to an investor. The issuer, however, does not intend to
provide holders with this information and, accordingly, no assurance can be
given to investors that any QEF election made with respect to notes would be
effective.
A United States holder that held marketable stock in a PFIC might, in lieu of
making a QEF election, also avoid certain unfavourable consequences of the PFIC
rules by electing to mark the PFIC stock to market as of the close of each
taxable year. A United States holder that made the mark-to-market election would
be required to include in income each year as ordinary income an amount equal to
the excess, if any, of the fair market value of the stock at the close of the
year over the United States holder's adjusted tax basis in the stock. For this
purpose, a United States holder's adjusted basis would generally be the holder's
cost for the stock, increased by the amount previously included in the holder's
income pursuant to this mark-to market election and decreased by any amount
previously allowed to the United States holder as a deduction pursuant to this
election. If, at the close of the year, the United States holder's adjusted tax
basis exceeded the fair market value of the stock, then the United States holder
could deduct any of this excess ordinary income, but only to the extent of net
mark-to market gains previously included in income. Any gain from the actual
sale of the PFIC stock would be treated as ordinary income, and any loss would
be treated as ordinary loss to the extent of net mark-to market gains previously
included in income. Stock would be considered marketable if it were regularly
traded on an exchange that the IRS determined to be qualified for these
purposes. Although the issuer believes that each class of notes will be listed
on a qualified exchange, pursuant to U.S. Treasury regulations, a class of stock
is regularly traded for any calendar year during which it is traded, other than
in de minimis quantities, on at least 15 days during each calendar quarter.
Accordingly, because there is uncertainty as to whether any class of notes will
be regularly traded and hence, there can be no assurance -- and no
representation is made -- that the notes would be eligible for mark-to-market
election.
Because the issuer does not expect the QEF election to be available to an
investor to mitigate the effect of the PFIC provisions, United States holders
should be aware of the potentially adverse tax consequences arising under the
PFIC provisions discussed above should any notes be treated as equity. First,
all or a portion of both distributions and gains on notes generally would be
taxable to holders as ordinary income, and would be taxable at the highest
marginal rates applicable to current and prior years during the holding period.
Further, all or a portion of the distributions and gains could be subject to the
additional "interest charge" tax. Such interest charge tax -- computed in the
manner described above on "excess distributions" and gains -- generally is
intended to eliminate the value of any tax deferral arising from an investment
in notes. Although the issuer does not expect there would be any significant
deferral of tax arising from an investment in notes treated as equity and
consequently does not expect that the interest charge tax computation should
produce a substantial additional tax liability, in some circumstances, it could
do so. For example, the interest charge computation could produce an interest
charge tax with respect to a -oating rate note if the -oating rate on the note
increased substantially over an investor's holding period. Alternatively, the
computation could produce such a tax with respect to a fixed rate note if that
note was sold by a United States holder at a substantial gain due to -uctuations
in the general level of interest rates. No assurance is possible that such
circumstances, or others, will not occur.
Certain additional adverse consequences could -ow to indirect investors in a
PFIC. More specifically, the ownership of the notes by a non-United States
holder might be attributed to a United States holder notwithstanding that such
United States holder held no note and received no cash in respect of a note.
Code Section 1298(a) generally treats notes held directly or indirectly by a
foreign partnership, corporation, trust or estate as owned by such entity's
partners, shareholders or beneficiaries, as applicable; it also may treat any of
various option arrangements as conferring ownership of notes on United States
holders. Hence, a United States holder treated as owning notes held by a
non-United States holder generally would be subject to tax on indirect gains and
distributions attributable to the notes in the manner described above.
131
Finally, an investor who pledged shares in a PFIC as security for a loan should
be aware that such a pledge would be treated as a disposition of the related
shares, and any gain would be subject to the rules applicable to distributions
and gains with respect to shares in a PFIC described above.
Sourcing: For sourcing of payments for a note treated as stock in the issuer and
gain or loss on sale of an interest in this stock, see "-- Interest Payments
and Distributions -- Sourcing" and "-- Disposition or Retirement of Investment
- -- Sourcing" above.
CONTROLLED FOREIGN CORPORATION STATUS. Should the notes, and particularly the
class C notes, be treated as equity, it is possible that the issuer might be
treated as a controlled foreign corporation for U.S. federal income tax
purposes. In this event, United States holders of equity interests that were
treated as owning 10 per cent. or more of the combined voting power of the
issuer would be required to include in income their pro rata share of the
earnings and profits of the issuer, and generally would not be subject to the
rules described above about PFICs. Additionaly, an IRS Form 5471 may be required
to be filed.
REPORTING REQUIREMENTS. If any United States holder were treated as owning an
equity interest in the issuer for U.S. federal income tax purposes, it would be
required file IRS Form 8621 for each tax year in which it held such an interest.
In addition, if a United States holder were treated as owning 5 per cent. or
more of an equity interest of the issuer, certain additional reporting
requirements would be required to be satisfied.
Under Section 6038B if the Code -- relating to reporting requirements incident
to the transfer of property, including cash, to a foreign corporation by U.S.
persons or entities -- in general, a United States holder, including a
tax-exempt entity, that purchased any notes treated as equity for U.S. federal
income tax purposes would be required to file an IRS Form 926 or similar form
with the IRS if such United States holder were treated as owning, directly or by
attribution, immediately after the transfer at least 10 per cent. by vote or
value of the issuer, or the purchase, when aggregated with all purchases made by
such United States holder -- or any related person thereto -- within the
preceding 12 month period, exceeded $100,000. If a United States holder fails to
file any such required form, the United States holder could be required to pay a
penalty equal to 10 per cent. of the gross amount paid for the notes, subject to
a maximum penalty of $100,000, except in cases involving intentional disregard.
NON-UNITED STATES HOLDERS
Subject to the discussion of backup withholding below, an investment in the
notes by non-United States holders generally will not give rise to any U.S.
federal income tax to these holders, unless the income received on, or any gain
recognised on the sale or other disposition of their notes is:
o treated as effectively connected with the conduct of a trade or business in
the United States; or
o in the case of gain recognised by an individual, the individual is present
in the United States for 183 days or more and has a tax home -- as defined
in the Code -- in the United States during the taxable year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of principal and interest, as well as payments of proceeds from the
sale, retirement or disposition of a note, may be subject to "backup
withholding" tax under Section 3406 of the Code if a recipient of such payments
fails to furnish to the payor certain identifying information. Any amounts
deducted and withheld would be allowed as a credit against such recipient's U.S.
federal income tax, provided appropriate proof is provided under rules
established by the IRS. Furthermore, certain penalties may be imposed by the IRS
on a recipient of payments that is required to supply information but that does
not do so in the proper manner. Backup withholding will not apply with respect
to payments made to certain exempt recipients, such as corporations and
financial institutions. Information may also be required to be provided to the
IRS concerning payments, unless an exemption applies. Holders of the notes
should consult their tax advisors regarding their qualification for exemption
from backup withholding and information reporting and the procedure for
obtaining such an exemption.
ERISA CONSIDERATIONS
The U.S. Employee Retirement Income Security Act of 1974, as amended -- called
"ERISA"- and Section 4975 of the Code impose requirements on employee benefit
plans and some other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective
132
investment funds, insurance company general or separate accounts or other
entities in which these plans, accounts or arrangements are invested, that are
subject to the fiduciary responsibility provisions of ERISA or Section 4975 of
the Code. We call these entities "Plans." ERISA also imposes requirements on
persons who are fiduciaries of Plans for the investment of "plan assets" of any
Plan -- called "Plan Assets". ERISA generally imposes on Plan fiduciaries
certain general fiduciary requirements, including those of investment prudence
and diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons -- called "Parties in Interest" -- who have
specified relationships to a Plan or its Plan Assets, unless an exemption is
available. Parties in Interest that participate in a prohibited transaction may
be subject to a penalty imposed under ERISA or an excise tax imposed under
Section 4975 of the Code, unless an exemption is available. The details of these
prohibited transaction rules are contained in Section 406 of ERISA and Section
4975 of the Code.
Subject to the considerations described below, you may purchase the notes with
Plan Assets of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the notes
with Plan Assets of any Plan should determine whether that purchase is
consistent with its fiduciary duties and whether that purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code because any of Barclays Bank PLC, the issuer, the receivables
trustee, the MTN issuer, the servicer, the note trustee, the security trustee or
any other party may be Parties in Interest with respect to the investing Plan
and may be deemed to be benefiting from the issuance of the notes. If Barclays
Bank PLC, the issuer, the receivables trustee, the MTN issuer, the servicer, the
note trustee or the security trustee is a Party in Interest with respect to the
prospective Plan investor, the issuer suggests that any fiduciary or other Plan
investor considering whether to purchase or hold the notes consult with its
counsel regarding the availability of exemptive relief under U.S. Department of
Labor -- "DOL" -- Prohibited Transaction Class Exemption -- "PTCE" -- 96-23,
relating to transactions determined by "in-house asset managers", 95-60,
relating to transactions involving insurance company general accounts, 91-38,
relating to transactions involving bank collective investment funds, 90-1,
relating to transactions involving insurance company pooled separate accounts or
84-14, relating to transactions determined by independent "qualified
professional asset managers", or any other prohibited transactions exemption
issued by the DOL. A purchaser of the notes should be aware, however, that even
if the conditions specified in one or more of the above-referenced exemptions
are met, the scope of the exemptive relief provided by the exemption might not
cover all acts that might be construed as prohibited transactions.
You will be deemed to have represented and agreed by your purchase and holding
of the notes that (1) no part of the funds being used to pay the purchase price
for those notes constitutes Plan Assets of any Plan or will constitute Plan
Assets while you hold those notes, and that you are not, and for so long as you
hold the notes will not be, a Plan, or (2) the purchase and holding of those
notes do not and will not constitute, result in or otherwise involve a
non-exempt prohibited transaction under ERISA or Section 4975 of the Code.
In addition, under DOL Regulation Section 2510.3-101 -- called the "Plan Asset
Regulation" -- the purchase with Plan Assets of equity interests in the issuer
could, in certain circumstances, cause the series 02-1 medium term note
certificate and other assets of the issuer to be deemed Plan Assets of the
investing Plan which, in turn, would subject the issuer and its assets to the
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code. Nevertheless, consistent with
the expectation indicated above that the issuer expects that the notes will be
treated as indebtedness for U.S. federal income tax purposes, and the opinion of
special U.S. tax counsel to that effect -- see "Material United States Federal
Income Tax Consequences -- United States Holders -- Tax Treatment of the Notes
as Indebtedness", the issuer will proceed based on the position that the notes
should not be treated as equity investments for purposes of the Plan Asset
Regulation and, therefore, the notes may be purchased by Plans. The issuer's
position is also based, in part, upon the traditional debt features of the
notes, including the reasonable expectation of purchasers of the notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features.
The notes may not be purchased or held by any Plan, or any person investing Plan
Assets of any Plan, if any of Barclays Bank PLC, the issuer, the receivables
trustee, the MTN issuer, the servicer, the note trustee, security trustee or any
of their respective affiliates (a) has investment or administrative discretion
with respect to the Plan Assets used to effect the purchase; (b) has authority
or responsibility to give, or regularly gives, investment advice with respect to
the Plan Assets, for a fee and pursuant to an
133
agreement or understanding that the advice (1) will serve as a primary basis for
investment decisions for the Plan Assets and (2) will be based on the particular
investment needs of that Plan; or (c) unless PTCE 95-60, 91-38 or 90-1 is
applicable, is an employer maintaining or contributing to that Plan. Each
purchaser or holder of the notes or any interest in the notes will be deemed to
have represented by its purchase and holding of them that it is not subject to
the foregoing limitation.
ACCORDINGLY, THE ISSUER SUGGESTS THAT PROSPECTIVE EMPLOYEE BENEFIT PLAN
INVESTORS, WHETHER OR NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE, CONSULT
WITH THEIR OWN LEGAL AND OTHER ADVISORS CONCERNING THE IMPACT OF ERISA AND THE
CODE AND, PARTICULARLY IN THE CASE OF EMPLOYEE BENEFIT PLANS NOT SUBJECT TO
ERISA, ANY ADDITIONAL U.S. STATE AND LOCAL LAW OR NON-U.S. LAW CONSIDERATIONS,
AS APPLICABLE.
134
ENFORCEMENT OF FOREIGN JUDGEMENTS IN ENGLAND AND WALES
The issuer is incorporated with limited liability in England and Wales under the
Companies Act 1985. Any final and conclusive judgement of either a New York
state or United States Federal court that has jurisdiction recognised by England
and Wales regarding obligations of the issuer for the notes, which is for a debt
or a fixed sum of money and which has not been stayed or fully satisfied, can be
enforced by action against the issuer in the courts of England and Wales without
re-examining the merits of the issues determined by the proceedings unless:
o the proceedings in New York state or the United States Federal court
involved a denial of the principles of natural justice;
o the judgement goes against the public policy of England and Wales;
o the judgement was obtained by fraud, duress or was based on a clear mistake
of fact;
o the judgement is a penal or revenue judgement; or
o there has been an earlier judgment in another court between the same
parties on the same issues as are dealt within the judgement to be
enforced.
A judgement by a court may be sometimes given in pounds sterling. The issuer
expressly submits to the jurisdiction of New York state and the United States
Federal courts sitting in the Borough of Manhattan in the City of New York for
the purpose of any suit, action or proceedings arising out of this offering. The
following parties have been appointed to receive legal documents for the issuer
and the transferor, servicer and trust cash manager.
o for the issuer:
CT Corporation Systems
111 Eighth Avenue
New York, NY 10011
+1 212 590 9009
o for the transferor, servicer and trust cash manager:
Cheryl Grassman
Barclays Capital Inc.
200 Park Avenue
New York, New York 10166
+1 212 412 1392
Most of the directors and executive officers of the issuer and some of the
experts named in this document live outside the United States. Most of their
assets are located outside the United States. Because of this, the holders of
the notes may not be able to serve notice of legal action on them or to enforce
judgements against them. The issuer has been advised by its English counsel,
Clifford Chance LLP, that because of this, they may not be able to enforce in
England and Wales, in original actions or in actions for enforcement of
judgements of United States courts, civil liabilities based on the Federal
securities laws of the United States.
135
UNDERWRITING
The issuer has agreed to sell and the underwriters for the notes listed below
have agreed to purchase the principal amount of the notes listed in the table
below. The terms of these purchases are governed by an underwriting agreement
between the issuer and Barclays Capital Inc. for itself and as representative
for all of the underwriters. Underwriters of the Class A Notes
Principal
Amount of
the Class A
Notes
-----------
Underwriter of the Class A Notes
Barclays Capital Inc. .......................................... $750,000,000
JP Morgan Securities Inc. ...................................... $ 50,000,000
Lehman Brothers Inc. ........................................... $ 50,000,000
Salomon Smith Barney Inc. ...................................... $ 50,000,000
------------
Total ...................................................... $900,000,000
============
Principal
Amount of
the Class B
Notes
-----------
Underwriter of the Class B Notes
Barclays Capital Inc. .......................................... $ 50,000,000
Principal
Amount of
the Class C
Notes
-----------
Underwriter of the Class C Notes
Barclays Capital Inc. .......................................... $ 50,000,000
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class A notes will be 100.00 per
cent. and 0.225 per cent, respectively.
Barclays Capital Inc., as representative of the underwriters of the class A
notes, has advised the issuer that the underwriters propose initially to offer
the class A notes to the public at the public offering price stated on the cover
page of this prospectus, and to some dealers at that price, less a concession up
to 0.135 per cent. for each class A note. The underwriters may allow, and those
dealers may reallow, concessions up to 0.0675 per cent. of the principal balance
of the class A notes to some brokers and dealers.
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class B notes will be 100.00 per
cent. and 0.25 per cent., respectively.
Barclays Capital Inc. has advised the issuer that it proposes initially to offer
the class B notes to the public at the public offering price stated on the cover
page of this prospectus, and to some dealers at that price, less a concession up
to 0.15 per cent. for each class B note. Barclays Capital Inc. may allow, and
those dealers may reallow, concessions up to 0.075 per cent. of the principal
balance of the class B notes to some brokers and dealers.
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class C notes will be 100.00 per
cent. and 0.35 per cent., respectively.
Barclays Capital Inc. has advised the issuer that it proposes initially to offer
the class C notes to the public at the public offering price stated on the cover
page of this prospectus, and to some dealers at that price, less a concession up
to 0.21 per cent. for each class C note. Barclays Capital Inc. may allow, and
those dealers may reallow, concessions up to 0.105 per cent. of the class C
notes to some brokers and dealers.
Additional offering expenses are estimated to be $2,295,902.
The underwriters have agreed to purchase all of the notes if any of them are
purchased.
The issuer and Barclays Bank PLC will indemnify the underwriters against
liabilities -- including liabilities under the Securities Act -- caused by (1)
any untrue statement or alleged untrue statement of a material fact contained in
this prospectus or the related registration statement or (2) any omission or
alleged omission to state a material fact required to be stated in this
prospectus or the related registration statement or necessary to make the
statements in this prospectus or the related registration statement not
misleading. The issuer and Barclays Bank PLC will not, however, indemnify the
underwriters against liabilities caused by any untrue statement or omission,
real or alleged, made in reliance upon and in
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conformity with information relating to and provided by any underwriter for use
in this prospectus and the related registration statement.
The underwriters may engage in over-allotment transactions, stabilising
transactions, syndicate covering transactions and penalty bids for the notes
under Regulation M under the Securities and Exchange Act of 1934.
o Over-allotment transactions involve syndicate sales in excess of the
offering size, which creates a syndicate short position.
o Stabilising transactions permit bids to purchase the notes so long as the
stabilising bids do not exceed a specified maximum.
o Syndicate covering transactions involve purchases of the notes in the open
market after the distribution has been completed in order to cover
syndicate short positions.
o Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by that syndicate member
are purchased in a syndicate covering transaction.
These transactions may cause the prices of the notes to be higher than they
would otherwise be in the absence of those transactions. Neither the issuer nor
any of the underwriters represent that the underwriters will engage in any of
those transactions or that those transactions, once begun, will not be
discontinued without notice at any time.
The underwriters are entitled to terminate the underwriting agreements in
certain limited circumstances prior to the issue of the notes.
The notes will be registered under the Securities Act.
UNITED KINGDOM
Each underwriter has represented and agreed with the issuer that:
(i) it has not offered or sold and will not offer or sell any notes to any
person in the United Kingdom prior to the admission of the notes to
listing on the Official List in accordance with Part VI of the Financial
Services and Markets Act 2000, called the "FSMA", and admission of the
notes to trading on the London Stock Exchange except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments, as principal or agent, for the purpose of their
business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or the FSMA;
(ii) it has complied and will comply with all applicable provisions of the FSMA
with respect to anything done by it in relation to the notes in, from or
otherwise involving the United Kingdom; and
(iii) it has only communicated or caused to be communicated, and will only
communicate or cause to be communicated, any invitation or inducement to
engage in investment activity -- within the meaning of Section 21 of the
FSMA -- received by it in connection with the issue or sale of the notes,
in circumstances in which Section 21(1) of the FSMA does not apply to the
issuer.
GENERAL
The underwriters have represented and agreed that they have complied and will
comply with all applicable laws and regulations in force in any jurisdiction in
which they purchase, offer, sell or deliver notes or possess them or distribute
the prospectus and will obtain any consent, approval or permission required by
them for the purchase, offer, sale or delivery by them of notes under the laws
and regulations in force in any jurisdiction to which they are subject or in
which they make such purchases, offers, sales or deliveries and the issuer shall
have no responsibility for them. Furthermore, they will not directly or
indirectly offer, sell or deliver any notes or distribute or publish any
prospectus, form of application, offering circular, advertisement or other
offering material except under circumstances that will, to the best of its
knowledge and belief, result in compliance with any applicable laws and
regulations, and all offers, sales and deliveries of notes by it will be made on
the same terms.
The underwriters have agreed that no invitation may be made to the public in
Jersey to subscribe for the notes.
137
Neither the issuer nor the underwriters represent that notes may at any time
lawfully be sold in compliance with any application registration or other
requirements in any jurisdiction, or pursuant to any exemption available
thereunder, or assume any responsibility for facilitating such sale.
With regard to each issue of notes, the underwriters will be required to comply
with such other additional or modified restrictions, if any, as the issuer and
the underwriters shall agree.
The underwriters will, unless prohibited by applicable law, furnish to each
person to whom they offer or sell notes a copy of the prospectus as then amended
or supplemented or, unless delivery of the prospectus is required by applicable
law, inform each such person that a copy will be made available upon request.
The underwriters are not authorised to give any information or to make any
representation not contained in the prospectus in connection with the offer and
sale of notes to which the prospectus relates.
This prospectus may be used by Barclays Bank PLC -- the transferor, servicer and
trust cash manager -- for offers and sales related to market-making transactions
in the notes. Barclays Bank PLC may act as principal or agent in these
transactions. These sales will be made at prices relating to prevailing market
prices at the time of sale. Barclays Bank PLC has no obligation to make a market
in the notes, and any market-making may be discontinued at any time without
notice.
Barclays Bank PLC will be the initial transferor, the servicer, the cash manager
for the receivables trust and the series 02-1 medium term note certificate, the
transferor beneficiary and excess interest beneficiary, the swap counterparty
and the lender under the expenses loan agreement.
RATINGS OF THE NOTES
It is a condition to issuing the class A notes that they be rated in the highest
rating category by two internationally recognised rating agencies.
It is a condition to issuing the class B notes that they be rated at least "A"
or its equivalent by two internationally recognised rating agencies.
It is a condition to issuing the class C notes that they be rated at least "BBB"
or its equivalent by two internationally recognised rating agencies.
Any rating of your notes by a rating agency will indicate:
o its view on the likelihood that you will receive timely interest payments
and principal payments by the series 02-1 termination date; and
o its evaluation of the receivables and the availability of the credit
enhancement for your notes.
What a rating will not indicate is:
o the likelihood that principal payments will be paid on a scheduled
redemption date before the series 02-1 termination date;
o the likelihood that a Pay Out Event will occur;
o the likelihood that a withholding tax will be imposed on noteholders;
o the marketability of your notes;
o the market price of your notes; or
o whether your notes are an appropriate investment for you.
A rating will not be a recommendation to buy, sell or hold the notes. A rating
may be lowered or withdrawn at any time.
The issuer will request a rating of the notes from two nationally recognized
rating agencies. Rating agencies other than those requested could assign a
rating to the notes, and its rating could be lower than any rating assigned by a
rating agency chosen by the issuer.
EXPERTS
The balance sheet of the issuer and the MTN issuer as of 2 October 2002,
included in this prospectus, have been so included in reliance on the reports of
PricewaterhouseCoopers, independent public
138
accountants, given on the authority of the said firm as experts in auditing and
accounting. PricewaterhouseCoopers is a member of the Institute of Chartered
Accountants in England and Wales.
PricewaterhouseCoopers have given, and not withdrawn, their consent to the
inclusion in this document of their reports on the issuer and the MTN issuer in
the form and context in which they are included and have authorised the contents
of the reports for the purposes of Regulation 6(1)(e) of the United Kingdom
Financial Services and Markets Act 2000 (Official Listing of Securities)
Regulations 2001.
Orrick, Herrington & Sutcliffe and Clifford Chance LLP have given and not
withdrawn their written consent to, and have authorised, for the purposes of
Regulation 6(1)(e) of the Financial Services and Markets Act 2000 (Official
Listing of Securities) Regulations 2001, the issue of this document with
reference to their respective names and the contents of their respective
opinions filed with the SEC.
LEGAL MATTERS
Matters of English law relating to the validity of the issuance of the notes and
matters of U.S. tax law will be passed upon for the issuer by Clifford Chance
LLP, London, England. Matters of US law will be passed upon for the underwriters
by Orrick, Herrington & Sutcliffe, London, England who will also act as special
counsel to the issuer as to U.S. tax matters. Matters of English law will be
passed upon for the underwriters by Weil, Gotshal & Manges, London, England.
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the notes. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until individual note certificates are issued, the
reports will be sent to the depository as holder of the notes. No reports will
be sent to you.
WHERE YOU CAN FIND MORE INFORMATION
Any reference in this document to listing particulars means this document
excluding all information incorporated by reference. We have confirmed that any
information incorporated by reference, including any such information to which
readers of this document are expressly referred, has not been and does not need
to be included in the listing particulars to satisfy the requirements of the
FSMA under part VI of the FSMA or the listing rules. We believe that none of the
information incorporated therein by reference conflicts in any material respect
with the information included in the listing particulars.
We filed a registration statement for the notes with the SEC. This prospectus is
part of the registration statement, but the registration statement includes
additional information.
The servicer will file with the SEC all required annual, monthly and special SEC
reports and other information about the notes.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at +1 (800) SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings also are available to
the public on the SEC internet site (http://www.sec.gov).
LISTING AND GENERAL INFORMATION
Listing particulars with regards to the issuer and the notes in accordance with
the listing rules made under Part VI of the FSMA, have been delivered to the
Registrar of Companies in England and Wales for registration in accordance with
Section 83 of the FSMA.
The listing of the notes on the Official List of the UK Listing Authority and
admission to trading of the notes on the London Stock Exchange is expected to be
granted before the closing date subject only to the issue of the notes. The
listing of the notes will not become effective if any of the notes are not
issued.
139
Before official listing, however, dealings in the notes will be permitted by the
UK Listing Authority in accordance with its rules.
The auditors of the issuer and the MTN issuer are PricewaterhouseCoopers,
chartered accountants, who have audited the issuer's and the MTN issuer's
accounts, without qualification, in accordance with generally accepted auditing
standards in the United States, in the case of the MTN issuer, for each of the
three financial years ended on 14 December 2001.
LITIGATION AND CHANGE IN CIRCUMSTANCES
Other than as described in the section "The Issuer" there have been no material
adverse changes in the financial position of the issuer nor has the issuer been
involved in, or expects, any litigation which has had or may have a significant
effect on its financial position, for the twelve months preceding the date of
this prospectus.
Other than as described in the section "The MTN Issuer" there have been no
material adverse changes in the financial position of the MTN issuer nor has the
MTN issuer been involved in, or expects, any litigation which has had or may
have a significant effect on its financial position, for the twelve months
preceding the date of this prospectus.
DOCUMENTS AVAILABLE FOR INSPECTION
You may inspect drafts of the following documents at the offices of Clifford
Chance LLP, 200 Aldersgate Street, London EC1A 4JJ, England during usual
business hours on any weekday, apart from Saturdays, Sundays and public
holidays, during the period of 21 days from the date of this prospectus:
o master definitions schedule;
o receivables securitisation agreement;
o declaration of trust and trust cash management agreement;
o series 02-1 supplement to declaration of trust and trust cash management
agreement;
o beneficiaries servicing agreement;
o agreement between beneficiaries
o trust section 75 indemnity;
o security trust deed and MTN cash management agreement;
o series 02-1 MTN supplement to security trust deed and MTN cash management
agreement;
o MTN paying agency and agent bank agreement;
o expenses loan agreement;
o class A swap agreement;
o class B swap agreement;
o class C swap agreement;
o corporate officers agreement;
o underwriting agreement;
o MTN dealership agreement;
o paying agency and agent bank agreement;
o trust deed;
o deed of charge;
o post maturity call option;
o form of class A global note certificate;
o form of class B global note certificate;
o form of class C global note certificate
o form of class A individual note certificate;
o form of class B individual note certificate;
o form of class C individual note certificate;
140
o memorandum and articles of association of the issuer;
o accountant's report on the issuer;
o memorandum and articles of association of the MTN issuer;
o accountant's report on the MTN issuer;
o memorandum and articles of association of the receivables trustee;
o accountant's report on the receivables trustee;
o consolidated audited accounts of the MTN issuer for each of the three
years preceding the publication of this prospectus; and
o US tax opinion of Orrick, Herrington & Sutcliffe LLP.
141
ISSUER
Gracechurch Card Funding (No. 2) PLC
54 Lombard Street
London EC3P 3AH
INTITIAL TRANSFEROR AND TRUST
CASH MANAGER RECEIVABLES TRUSTEE
Barclays Bank PLC Gracechurch Receivables Trustee Ltd
1234 Pavillion Drive 26 New Street
Northhampton NN4 7SG St. Helier, Jersey JE2 3RA
NOTE TRUSTEE AND SECURITY TRUSTEE
THE BANK OF NEW YORK, LONDON BRANCH
One Canada Square
London E14 5AL
PRINCIPAL PAYING AGENT OTHER PAYING AGENTS
The Bank of New York, London Branch The Bank of New York
One Canada Square One Wall Street
London E14 5AL New York, New York 10286
REGISTRAR
The Bank of New York, London Branch
One Canada Square
London E14 5AL
LEGAL ADVISERS
To the Issuer, the MTN Issuer, To the Lead Manager
the Receivables Trustee and Barclays as to United States law
as to English law and United States law Orrick, Herrington & Sutcliffe
Clifford Chance LLP 1st Floor, 4 Broadgate
200 Aldersgate Street London EC2M 2DA
London EC1A 4JJ
To the Lead Manager as to English Law
To the Receivables Trustee as to and to the Note Trustee and the Security
Jersey law Trustee as to English and United States law
Bedell Cristin Weil, Gotshal & Manges
26 New Street One South Place
St. Helier, Jersey JE4 3RA London EC2M 2WG
AUDITORS
To the Issuer and the MTN Issuer To the Receivables Trustee
PricewaterhouseCoopers PricewaterhouseCoopers
Southwark Towers Twenty Two Colomberie
32 London Bridge Street St Helier,
London SE1 9SY Jersey JE1 4XA
AUTHORISED ADVISOR
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
142
INDEX OF TERMS FOR PROSPECTUS
Acquired Interchange ..................................................... 49
addition date ............................................................ 45
additional accounts ...................................................... 45
Adjusted Investor Interest ............................................... 73
adjusted tax basis ....................................................... 130
Aggregate Investor Indemnity Amount ...................................... 89
aggregate interest ....................................................... 59
agreement between beneficiaries .......................................... 95
Available Investor Principal Collections ................................. 82
Average Principal Receivables ............................................ 95
Barclaycard Operating Account ............................................ 60
Barclaycard Proceeds Account ............................................. 61
Basic Terms Modifications ................................................ 114
business day ............................................................. 47
Calculation Period ....................................................... 76
cancelled account ........................................................ 47
Class A .................................................................. 72
Class A Additional Finance Amount ........................................ 76
Class A Adjusted Investor Interest ....................................... 73
Class A Available Funds .................................................. 76
Class A Covered Amount ................................................... 89
Class A Debt Amount ...................................................... 76
Class A Deficiency Amount ................................................ 75
Class A Distribution Ledger .............................................. 77
Class A Excess Spread .................................................... 76
Class A Finance Rate ..................................................... 75
Class A Fixed Allocation ................................................. 81
Class A Floating Allocation .............................................. 72
Class A Initial Investor Interest ........................................ 72
Class A Investor Charge-Off .............................................. 73
Class A Investor Default Amount .......................................... 86
Class A Investor Interest ................................................ 72
Class A Monthly Distribution Amount ...................................... 77
Class A Monthly Finance Amount ........................................... 75
Class A Monthly Principal Amount ......................................... 82
Class A Monthly Required Expense Amount .................................. 75
Class A Required Amount .................................................. 87
Class A Trustee Payment Amount ........................................... 93
Class B .................................................................. 72
Class B Additional Finance Amount ........................................ 77
Class B Adjusted Investor Interest ....................................... 73
Class B Available Funds .................................................. 77
Class B Debt Amount ...................................................... 77
Class B Deficiency Amount ................................................ 77
Class B Distribution Ledger .............................................. 78
Class B Excess Spread .................................................... 78
Class B Fixed Allocation ................................................. 81
Class B Floating Allocation .............................................. 72
Class B Initial Investor Interest ........................................ 73
Class B Investor Charge-Off .............................................. 87
Class B Investor Default Amount .......................................... 86
Class B Investor Interest ................................................ 73
Class B Monthly Distribution Amount ...................................... 78
Class B Monthly Finance Amount ........................................... 77
Class B Monthly Principal Amount ......................................... 83
Class B Monthly Required Expense Amount .................................. 77
Class B Principal Commencement Date ...................................... 83
Class B Required Amount .................................................. 88
143
Class B Trustee Payment Amount ........................................... 93
Class C .................................................................. 72
Class C Additional Finance Amount ........................................ 78
Class C Adjusted Investor Interest ....................................... 74
Class C Available Funds .................................................. 78
Class C Debt Amount ...................................................... 78
Class C Deficiency Amount ................................................ 78
Class C Distribution Ledger .............................................. 79
Class C Excess Spread .................................................... 79
Class C Fixed Allocation ................................................. 81
Class C Floating Allocation .............................................. 72
Class C Initial Investor Interest ........................................ 73
Class C Investor Charge-Off .............................................. 74
Class C Investor Default Amount .......................................... 86
Class C Investor Interest ................................................ 73
Class C Monthly Distribution Amount ...................................... 88
Class C Monthly Finance Amount ........................................... 78
Class C Monthly Principal Amount ......................................... 83
Class C Monthly Required Expense Amount .................................. 78
Class C Principal Commencement Date ...................................... 83
Class C Release Date ..................................................... 91
Class C Trustee Payment Amount ........................................... 93
closing date ............................................................. 33
Code ..................................................................... 128
Companion Series ......................................................... 95
Controlled Accumulation Period ........................................... 79
Controlled Accumulation Period Length .................................... 85
Controlled Deposit Amount ................................................ 79
Daily Investor Principal Collections ..................................... 82
default amount ........................................................... 86
defaulted account ........................................................ 47
defaulted receivable ..................................................... 50
deferred subscription price .............................................. 120
designated account ....................................................... 45
Discount Option Receivables .............................................. 48
Discount Percentage ...................................................... 48
distribution date ........................................................ 76
early swap termination event ............................................. 118
eligible account ......................................................... 50
eligible receivable ...................................................... 51
Eligible Receivables Pool ................................................ 59
eligible servicer ........................................................ 69
eligible trust cash manager .............................................. 71
enforcement notice ....................................................... 113
ERISA .................................................................... 132
event of default ......................................................... 112
excess distributions ..................................................... 130
excess entitlement consideration ......................................... 96
Excess Interest .......................................................... 59
Excess Spread ............................................................ 88
Expense Rate ............................................................. 95
expenses loan agreement .................................................. 33
Finance Charge Collections Ledger ........................................ 62
finance charge receivables ............................................... 47
fixed exchange rate ...................................................... 118
Fixed Investor Percentage ................................................ 81
Floating Investor Percentage ............................................. 74
Future Receivables Transfer .............................................. 45
ineligible receivables ................................................... 51
144
initial closing date ..................................................... 45
Initial Investor Interest ................................................ 72
Insolvency Events ........................................................ 63
interchange .............................................................. 48
interest charge .......................................................... 131
interest payment date .................................................... 76
Investor Cash Available for Acquisition .................................. 62
investor certificate ..................................................... 35
Investor Default Amount .................................................. 86
Investor Indemnity Amount ................................................ 89
Investor interest ........................................................ 73
Investor Percentage ...................................................... 61
Investor Principal Collections ........................................... 82
investor servicing fee ................................................... 68
investor trust cash management fee ....................................... 68
Investor Trustee Payment Amount .......................................... 92
issuer related documents ................................................. 108
Maximum Addition Amount .................................................. 46
Minimum Aggregate Principal Receivables .................................. 95
Minimum Transferor Interest .............................................. 95
Monthly Loan Expense Amount .............................................. 76
MTN additional interest payments ......................................... 96
MTN cash manager ......................................................... 120
MTN Issuer Costs Amount .................................................. 76
notice of assignment ..................................................... 50
OID ...................................................................... 129
Parties in Interest ...................................................... 133
Pay Out Event ............................................................ 64
permitted additional jurisdiction ........................................ 50
permitted investments .................................................... 60
PFIC ..................................................................... 130
Plan Assets .............................................................. 133
Plans .................................................................... 133
pool selection date ...................................................... 45
Portfolio Yield .......................................................... 94
post maturity call option ................................................ 112
pounds ................................................................... 31
pounds sterling .......................................................... 31
Principal Collections Ledger ............................................. 61
Principal Funding Account ................................................ 79
Principal Funding Investment Proceeds .................................... 89
principal receivables .................................................... 46
Principal Shortfalls ..................................................... 86
QEF ...................................................................... 130
quotation date ........................................................... 109
quoted Eurobonds ......................................................... 124
Rapid Amortisation Period ................................................ 80
Reallocated Class B Principal Collections ................................ 87
Reallocated Class C Principal Collections ................................ 87
receivables securitisation agreement ..................................... 45
redesignated account ..................................................... 47
reference banks .......................................................... 109
Regulated Amortisation Period ............................................ 80
Regulated Amortisation Trigger Event ..................................... 80
Reinvested Investor Principal Collections ................................ 82
related beneficiary debt ................................................. 58
relevant documents ....................................................... 37
Required Reserve Amount .................................................. 90
Required Spread Account Amount ........................................... 91
145
Reserve Account .......................................................... 90
Reserve Account Funding Date ............................................. 90
restricted additional jurisdiction ....................................... 50
restricted eligible receivable ........................................... 50
Revolving Period ......................................................... 79
Series 02-1 Distribution Account ......................................... 77
Series 02-1 Extra Amount ................................................. 89
Series 02-1 Issuer Account ............................................... 96
Series 02-1 Pay-Out Events ............................................... 93
series 02-1 scheduled redemption date .................................... 79
Series 02-1 Supplement ................................................... 72
series 02-1 termination date ............................................. 80
Servicer default ......................................................... 68
servicing fee ............................................................ 67
Shared Principal Collections ............................................. 86
special U.S. tax counsel ................................................. 128
Spread Account ........................................................... 91
Spread Account Percentage ................................................ 91
successor trust cash manager ............................................. 70
successor servicer ....................................................... 68
swap agreements .......................................................... 117
transferor acquisition ................................................... 57
Transferor Cash Available for Acquisition ................................ 62
transfer certificate ..................................................... 57
Transfer Ineligible Interest ............................................. 61
Transferor Interest ...................................................... 59
Transferor Percentage .................................................... 59
Transferor Section 75 Liability .......................................... 123
transferor servicing fee ................................................. 68
transferor trust cash management fee ..................................... 68
Trust Accounts ........................................................... 60
trust cash management fee ................................................ 68
Trust cash manager default ............................................... 70
Trust Pay Out Events ..................................................... 63
Trustee Acquisition Account .............................................. 60
Trustee Collection Account ............................................... 60
Trustee Payment Amount ................................................... 65
Unavailable Principal Collections ........................................ 85
United States holder ..................................................... 128
United States person ..................................................... 128
unutilised excess spread ................................................. 96
WAM ...................................................................... 129
zero balance account ..................................................... 47
146
INDEX OF APPENDICES
The appendixes are an integral part of this prospectus.
Page
----
A Report of Independent Accounts for Gracechurch Card Funding (No. 2) PLC ................. A-1
B Balance Sheet for Gracechurch Card Funding (No. 2) PLC .................................. B-1
C Notes to Financial Statement ............................................................ C-1
D Report of Independent Accountants for Barclaycard Funding PLC and subsidiary ............ D-1
E Unaudited Financial Statements of Barclaycard Funding PLC and subsidiary
for the six months ended June 14, 2002.................................................. E-1
F Notes to Financial Statements ........................................................... F-1
G Report of Independent Accountants for Barclaycard Funding PLC and subsidiary ............ G-1
H Financial Statements of Barclaycard Funding PLC and subsidiary for the year ended
December 14, 2001....................................................................... H-1
I Notes to Financial Statements............................................................ I-1
J Other Series Issued and Outstanding ..................................................... J-1
147
GRACECHURCH CARD FUNDING (NO. 2) PLC
BALANCE SHEET
AS AT OCTOBER 2, 2002
TOGETHER WITH AUDITORS' REPORT
APPENDIX A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Gracechurch Card Funding (No. 2) PLC
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Gracechurch Card Funding (No. 2) PLC
("Company") at October 2, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
PricewaterhouseCoopers
London, England
October 3, 2002
A-1
APPENDIX B
GRACECHURCH CARD FUNDING (NO. 2) PLC
FINANCIAL INFORMATION
BALANCE SHEET AS OF OCTOBER 2, 2002:
ASSETS
NOTES US($)
----- -----
CURRENT ASSETS
Balance with Barclays Bank PLC............................................................... 19,565
----- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Common Stock ................................................................................. (3) 78,260
Less Receivable from Shareholders ............................................................ (58,695)
Total Liabilities and Shareholder's Equity.................. ................................. (3) 19,565
The notes on the following page form an integral part
of this financial statement.
B-1
APPENDIX C
GRACECHURCH CARD FUNDING (NO. 2) PLC
NOTES TO FINANCIAL STATEMENT
OCTOBER 2, 2002
1. ACCOUNTING POLICIES
The financial information of Gracechurch Card Funding (No. 2) PLC (The
"Company") has been prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP") and in US Dollars which is
the Group's operating currency. The financial statements are reported in
accordance with US GAAP due to the Group's reporting requirements under the
United States Securities Exchange Act of 1933. These are not the Company's
statutory accounts for the period to October 2, 2002. The statutory accounts and
an unqualified statement under s235 of the United Kingdom's Companies Act for
the period to and as at October 2, 2002 have not been delivered to the registrar
of companies.
2. TRADING ACTIVITY
The Company did not trade during the period from incorporation on July 29, 2002
to October 2, 2002 nor did it receive any income nor did it incur any expenses
or pay any dividends. Consequently, no profit and loss account has been
prepared. The Company's business is the issuing of the notes and transactions
incidental thereto.
3. SHARE CAPITAL
The Company was incorporated on July 29, 2002 with an authorised share capital
of (pound)50,000, comprising 50,000 ordinary shares of (pound)1 each. 2 ordinary
shares were allotted for cash, and fully paid, on incorporation. The name of the
Company was changed from Sunnytrail PLC to Gracechurch Card Funding (No. 2) PLC
on September 19, 2002. On October 2, 2002, 49,998 ordinary shares were allotted
quarter paid. 49,999 shares are held by Gracechurch Card (Holdings) Limited and
one share is held by a share trustee under the terms of a share declaration of
trust. The shares in Gracechurch Card (Holdings) Limited are in turn held by
Royal Exchange Trust Company Limited. For the purposes of this balance sheet
Sterling amounts have been converted into US dollars at a $:(pound) rate of
1:0.6389.
C-1
BARCLAYCARD FUNDING PLC
AND
SUBSIDIARY
UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 14, 2002
AND
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 14, 2001
APPENDIX D
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of:
Barclaycard Funding PLC and Subsidiary
We have reviewed the accompanying balance sheet and the related statement of
income, statement of changes in shareholders' equity and statement of cash flows
of Barclaycard Funding PLC and consolidated Subsidiary as of June 14, 2002, and
for the six month period then ended. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles in the United States of America.
PricewaterhouseCoopers
London, England
3 October 2002
D-1
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AT JUNE 14, 2002 AND DECEMBER 14, 2001
UNAUDITED AUDITED
NOTES 06/30/2002 12/14/2001
-------- ---------- -----------
ASSETS (pound) (pound)
Cash .................................................................. 3,754,004 3,353,064
Intercompany notes .................................................... 3 607,050,000 607,050,000
Derivatives ........................................................... 9,10,11 44,610,918 80,444,623
Other assets .......................................................... 5 172,850 396,535
----------- -----------
TOTAL ASSETS .......................................................... 655,587,772 691,244,222
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Asset backed notes .................................................... 4,10,11 652,100,000 687,500,000
Accrued interest payable .............................................. 10 2,417,568 2,231,913
Other liabilities ..................................................... 5 1,444,769 1,467,570
----------- -----------
TOTAL LIABILITIES ..................................................... 655,962,337 691,199,483
MINORITY INTEREST ..................................................... (404,060) 14,828
SHAREHOLDERS' EQUITY
Common stock, (pound)1 par value; 50,000 shares authorized,
issued and outstanding ................................................ 6 50,000 50,000
Less: Receivable from shareholders .................................... (37,500) (37,500)
Retained earnings ..................................................... 16,995 17,411
----------- -----------
TOTAL SHAREHOLDERS' EQUITY ............................................ 29,495 29,911
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ 655,587,772 691,244,222
=========== ===========
The accompanying notes are an integral
part of these consolidated financial statements.
E-1
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 14, 2002 AND 2001
UNAUDITED UNAUDITED
NOTES 2002 2001
----------- ---------- ----------
REVENUES (pound) (pound)
Interest income .................................................. 7 13,148,272 18,646,072
Foreign currency translation gain ................................ 35,400,000 --
Unrealized gain on derivatives ................................... 7 -- 36,433,712
Servicing fees ................................................... 7 1,615,477 2,484,499
Other Income ..................................................... 5,485 6,002
---------- ----------
TOTAL REVENUE .................................................... 50,169,234 57,570,285
---------- ----------
EXPENSES
Interest expense ................................................. 7 12,835,699 18,343,641
Unrealized loss on derivatives ................................... 35,833,705 --
Foreign currency translation loss ................................ -- 36,100,000
Servicing fees ................................................... 7 1,615,477 2,484,499
Administration expenses .......................................... 299,213 322,746
---------- ----------
TOTAL EXPENSES ................................................... 50,584,094 57,250,886
---------- ----------
(LOSS)/INCOME BEFORE PROVISION FOR INCOME TAXES .................. (414,860) 319,399
Less: Provision for income taxes ................................. 1 4,406 423
NET LOSS)/INCOME BEFORE MINORITY INTEREST ........................ (419,266) 318,976
Minority interest, net of income taxes ........................... 418,850 (317,988)
---------- ----------
NET (LOSS)/INCOME ................................................ (416) 988
========== ==========
The accompanying notes are an integral
part of these consolidated financial statements.
E-2
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 14, 2002 AND 2001
UNAUDITED UNAUDITED
NOTES 2002 2001
------- --------- ---------
(pound) (pound)
Net (loss)/income for the period ................... (416) 988
Retained earnings brought forward .................. 17,411 9,698
------ ------
Retained earnings carried forward .................. 16,995 10,686
Common stock brought forward ....................... 6 12,500 12,500
Shares issued in the period ........................ -- --
------ ------
Common stock carried forward ....................... 12,500 12,500
------ ------
TOTAL SHAREHOLDERS' EQUITY ......................... 29,495 23,186
====== ======
The accompanying notes are an integral
part of these consolidated financial statements.
E-3
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 14, 2002 AND 2001
UNAUDITED UNAUDITED
2002 2001
----------- ----------
(pound) (pound)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income ....................................................... (416) 988
Adjustments to reconcile net income
to net cash provided by (used in) operating activities
Unrealized loss/(gain) on derivatives .............................. 35,833,705 (36,433,433)
Foreign currency translation (gain)/loss ........................... (35,400,000) 36,100,000
Minority interest .................................................. (418,888) 321,353
Decrease/(Increase) in accrued interest receivable ................. (1,424,667)
Decrease/(Increase) in other assets ................................ 223,685 227,365
Increase/(Decrease) in accrued interest payable .................... 185,655 (1,753,255)
(Decrease)/Increase in other liabilities ........................... (22,801) 30,071
----------- ----------
TOTAL ADJUSTMENTS ............................................... 401,356 (2,932,566)
----------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ............. 400,940 (2,931,578)
----------- ----------
NET INCREASE/(DECREASE) IN CASH ................................. 400,940 (2,931,578)
Cash at beginning of year ............................................... 3,353,064 3,754,586
----------- ----------
Cash at end of period ................................................... 3,754,004 823,008
=========== ==========
Cash paid for:
Interest .............................................................. 12,834,453 18,155,097
Taxes ................................................................. -- --
=========== ==========
The accompanying notes are an integral
part of these consolidated financial statements.
E-4
APPENDIX F
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Barclaycard Funding PLC (the "Company") was incorporated on August 13, 1990. The
Company commenced business on November 22, 1999. Barclaycard Funding PLC and its
subsidiary, Gracechurch Card Funding (No 1) PLC ("Subsidiary"), collectively
comprise the "Group".
The principal purpose of the Group is to raise financing via the issuance of
asset backed debt instruments in order invest the proceeds in the purchase of a
beneficial interest in a pool of credit card receivables.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
(a) Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP") and in Pounds Sterling ("(pound)"), the currency of the United Kingdom,
which is the Group's operating currency. The financial statements are reported
in accordance with US GAAP due to the Group's reporting requirements under the
United States Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"). These financial statements are not statutory financial
statements and a statement in accordance with section 235 of the United
Kingdom's Companies Act ("UKCA") for the consolidated group is not given.
The individual UK statutory financial statements for Barclaycard Funding PLC and
Gracechurch Card Funding (No 1) PLC for each of the years in the three year
period ended December 14, 2001 and December 31, 2001 respectively, have been
filed with the registrar of companies in the United Kingdom.
(b) Consolidation
The consolidated financial statements include the accounts of Barclaycard
Funding PLC and, Gracechurch Card Funding (No 1) PLC. Gracechurch Card Funding
(No 1) PLC is a special-purpose vehicle established by Barclays Bank PLC solely
to issue asset backed notes denominated in United States Dollars (see footnote
4), the proceeds of which were remitted to Barclaycard Funding PLC in exchange
for a corresponding medium term note. Because the only purpose of Gracechurch
Card Funding (No 1) PLC is to raise financing for the Group, its accounts are
consolidated with those of Barclaycard Funding PLC. The total share capital
issued by Gracechurch Card Funding (No 1) PLC is owned by Gracechurch Card
(Holdings) Limited, and its earnings and losses allocable thereto are reported
as minority interest in the accompanying consolidated balance sheet.
Any distributable profits which Gracechurch Card Funding (No 1) PLC generates is
payable to Gracechurch Card (Holdings) Limited, a wholly owned subsidiary of
Royal Exchange Trust, (the "Trust"). Losses which Gracechurch Card Funding
(No 1) PLC incurs are allocated firstly to the Trust's equity at risk, which is
comprised of the Trust's initial capital investment (via Gracechurch Card
(Holdings) Limited) plus any distributable profits receivable, reflected as
minority interest. Losses in excess of the Trust's equity at risk are allocated
to the note holders.
Intercompany transactions and balances have been eliminated on consolidation.
There was a difference of 16 days between the fiscal year end of the Company and
Subsidiary. Eliminations were performed at the Company's fiscal year end and
aside from the differences in the unrealized gains on derivatives and effects of
currency fluctuations on the asset backed notes as noted in Footnote 11, the
non-coterminous year-end did not have a significant effect on the financial
statements.
(c) Foreign Currency Translation
All foreign currency assets and liabilities are translated into Pounds Sterling
at the exchange rates prevailing at the end of the period. Interest income and
expense denominated in foreign currencies are translated into Pounds Sterling at
the exchange rates in force when the transaction occurred. Foreign currency
translation effects are reflected on the face of the income statement. Foreign
currency transactions are economically hedged into Pounds Sterling to offset
exposure to fluctuating currency exchange rates. Although these instruments
offset exposures they do not qualify for hedge accounting
F-1
under Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133").
(d) Derivatives
The derivative instrument is a cross currency swap, and is used by the Group to
minimize currency risk associated with its financing activities denominated in
United States Dollars (USD). Although this instrument is a hedge from an
economic perspective, it does not qualify for hedge accounting under SFAS No.
133 as its documentation does not meet the requirements of the standard. The
derivative is recorded on the balance sheet at fair value with changes reflected
in the income statement. The derivative is transacted simultaneously with the
purchase or issuance of the underlying funding instrument. The swap is not held
for trading purposes.
(e) Interest Income and Expense
Interest income and expense are recognized in the consolidated financial
statements on an accrual basis. Interest income and interest expense are
primarily related to intercompany notes and asset backed notes, respectively.
(f) Servicing Fee Income/Expense
The Company earns fee income from the servicing of the credit card receivables
and at the same time remits those monies earned to Barclays Bank PLC for the
same amount which is included as expenses in the Consolidated Income Statement.
Fees are recorded when earned, net of associated expenses.
(g) Income Taxes
Income taxes for the Group are paid to the tax authorities in the United
Kingdom. There are no deferred tax assets or liabilities for the periods
presented in the financial statements. The tax charge is based on an effective
UK corporation tax rate of 30%.
(h) Distribution Policy
Distributions to shareholders are accounted for when approved by the Board of
Directors.
(i) Issue Costs
The portion of the direct costs associated with the issue of the notes by the
Subsidiary that are attributable to the Group are capitalized and are amortized
over the expected life of the notes.
(j) Funding Instruments
Asset backed notes are stated at amortized cost restated at the exchange rate
prevailing at the balance sheet date.
(k) Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the balance sheet date and the reported amount of
revenues and expenses in the reporting period. Actual results may differ from
the estimates used in the financial statements.
3. INTERCOMPANY NOTES
On November 23, 1999, the Company paid (pound)607,050,000 to the Receivables
Trustee, an offshore trustee, in order to fund the purchase of credit card
receivables (the "Receivables") by the Trustee from Barclaycard, a division of
Barclays Bank PLC. This payment to the Trustee secured a fractional beneficial
interest in the assets of the Receivables Trustee (the "Trust"). The assets of
the Trust comprise the Receivables acquired from Barclaycard. This amount will
be repaid by the Receivables Trustee in 2002.
The receivables continue to be accounted for as an asset on Barclays Bank PLC's
balance sheet and therefore in substance the Company has recorded its payment to
the Trustee as intercompany notes.
F-2
The notes are repayable on November 15, 2002.
The notes bear interest as:
546,345,000 - 3 month LIBOR plus 0.2375%
30,352,500 - 3 month LIBOR plus 0.53%
30,352,500 - 3 month LIBOR plus 1.00%
------------
607,050,000
============
The intercompany notes are secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the Trust.
The Trust uses a portion of the interest and principal payments that it receives
on the credit card receivables held by it in trust to repay principal and
interest amounts on the loan from the Group.
The payment of interest and repayment of the principal on the advance to the
Trust is dependent upon payment of interest and repayment of the principal due
under the credit card receivables held by the Trust, and is therefore subject to
the risk of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays Bank
PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread within the UK inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety of
social, legal, political and economic factors in the United Kingdom. There can
be no assurance that changes in social, legal, political and economic factors
will not have a material effect on the Group's future performance.
4. ASSET BACKED NOTES
A summary of asset backed notes at June 14, 2002 and December 14, 2001 are as
follows:
Unaudited Unaudited Audited Audited
2002 2002 2001 2001
(pound) $ (pound) $
----------- ------------- ----------- -------------
Class A ............ 586,890,000 900,000,000 618,750,000 900,000,000
Class B ............ 32,605,000 50,000,000 34,375,000 50,000,000
Class C ............ 32,605,000 50,000,000 34,375,000 50,000,000
----------- ------------- ----------- -------------
652,100,000 1,000,000,000 687,500,000 1,000,000,000
=========== ============= =========== =============
The floating rate notes were issued on November 23, 1999. The floating rate
notes represent asset-backed debt obligations and have a nominal value of
(pound)607,050,000. Interest is payable on the floating rate notes as follows:
Class A Notes -- 3 month LIBOR plus 0.18%
Class B Notes -- 3 month LIBOR plus 0.43%
Class C Notes -- 3 month LIBOR plus 0.90%
These notes are repayable on November 15, 2002.
F-3
5. OTHER ASSETS/OTHER LIABILITIES
The other assets and other liabilities balances at June 14, 2002 and December
14, 2001 includes the following:
Unaudited Audited
2002 2001
--------- ---------
(pound) (pound)
OTHER ASSETS
- ------------
Prepayments administrative expenses ............ 6,595 13,424
Prepayments underwriting fee ................... 166,255 383,111
Tax debtor ..................................... -- --
--------- ---------
172,850 396,535
--------- ---------
OTHER LIABILITIES
- -----------------
Bank loans interest bearing .................... 1,310,769 1,310,769
Bank loans interest free ....................... 16,920 16,920
Other accruals ................................. 117,080 139,881
--------- ---------
1,444,769 1,467,570
========= =========
6. COMMON STOCK
Unaudited Audited
June 14, December 14,
2002 2001
---------- ------------
(pound) (pound)
BARCLAYCARD FUNDING PLC
Authorised:
Ordinary shares of (pound)1 each ................. 50,000 50,000
------ ------
Ordinary A allotted and nil paid ................. 37,500 37,500
Ordinary B allotted and fully paid ............... 12,500 12,500
------ ------
Ordinary shares of(pound)1 each .................. 50,000 50,000
====== ======
Barclays Bank PLC holds 75% of the issued share capital of Barclaycard Funding
PLC representing 51% issued voting share capital and 49% entitlement to
distributable profits.
Royal Exchange Trust Company owns 49% of the issued voting share capital and are
entitled to 51% of the distributable profits.
7. RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial or operational decisions.
Barcosec Limited and Barometers Limited are Barclays Bank PLC group companies
whose business is the provision of corporate directorship services for Barclays
Bank subsidiaries.
F-4
The Company enters into various transactions with affiliates. At June 14, 2002
and December 14, 2001, in addition to the intercompany notes disclosed in
footnote 3, the following are the balances related to transactions with
affiliates:
Unaudited Audited
2002 2001
---------- ----------
(pound) (pound)
ASSETS
Cash - (Barclays Bank PLC) .......................... 3,754,004 3,353,064
Other assets - (Barclays Bank PLC) .................. 37,500 37,500
Derivatives - (Barclays Bank PLC) ................... 44,610,918 80,444,623
LIABILITIES
Other liabilities - (Barclays Bank PLC) ............. 1,327,689 1,327,689
For the six months ended June 14, 2002 and 2001, the following are the balances
related to transactions with affiliates:
Unaudited Audited
2002 2001
--------- ----------
(pound) (pound)
INCOME/EXPENSE
----------------
Interest income - (Barclays Bank PLC) ............................ 13,148,272 18,646,072
Interest expense - (Barclays Bank PLC) ........................... 57,321 509,614
Servicing income - (Barclays Bank PLC) ........................... 1,615,477 2,484,499
Servicing expense - (Barclays Bank PLC) .......................... 1,615,477 2,484,499
Unrealized gain/(loss) on derivatives - (Barclays Bank PLC) ...... (35,833,705) 36,433,712
8. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There were no outstanding capital commitments, guarantees or contingent
liabilities at June 14, 2002 and December 14, 2001.
9. DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group enters into cross currency swaps. The purpose of these transactions is
to manage the currency risk arising from the Group's operations and its sources
of finance.
The net loss/gain reflected is attributable to the recognition of gains/losses
on derivatives entered into for hedging purposes. Because the hedge
documentation requirements under Statement of Financial Accounting Standards No.
133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133") were not met, the Group is required to record the changes in the fair
value of the derivatives in the income statement.
Currency risk - all of the Group's assets and associated income are denominated
in Pounds Sterling, although some of the asset backed notes issued by the
Subsidiary and associated interest expense are denominated in USD. The Group's
policy is to match this currency income and expense by the use of cross currency
swaps.
The existing cross currency swaps entered into by the Subsidiary are all
expected to mature within one year or less.
DEBT MATURITY ANALYSIS
2002 2001
----------- -----------
(pound) (pound)
Less than one year ........... 653,427,689 --
Between one and two years .... -- 688,827,689
F-5
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
Disclosures in the table below are in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of
Financial Instruments".
Fair values have been estimated using quoted marked prices where available.
Where no ready markets exist and hence quoted market prices are not available,
appropriate techniques are used to estimate fair values which take account of
the characteristics of the instruments, including the expected future cash
flows, market interest rates and prices available for similar instruments. There
were no financial instruments listed below for which quoted market prices were
not used to estimate fair value.
The estimated fair value and recorded carrying values of the financial
instruments as of June 14, 2002 and December 14, 2001 are as follows:
Unaudited Unaudited Audited Audited
2002 2002 2001 2001
Carrying Fair Carrying Fair
amount value amount Value
----------- ----------- ----------- -----------
(pound) (pound) (pound) (pound)
NON-TRADING ASSETS
Cash ............................... 3,754,004 3,754,004 3,353,064 3,353,064
Intercompany notes ................. 607,050,000 607,050,000 607,050,000 607,050,000
Derivatives ........................ 44,610,918 44,610,918 80,444,623 80,444,623
Other assets ....................... 172,850 172,850 396,535 396,535
NON-TRADING LIABILITIES
Asset backed notes ................. 652,100,000 652,100,000 687,500,000 687,500,000
Accrued interest payable ........... 2,417,568 2,417,568 2,231,913 2,231,913
Other liabilities .................. 1,444,769 1,444,769 1,467,570 1,467,570
The Group had no trading assets or liabilities at June 14, 2002 and December 14,
2001.
11. NON-COTERMINOUS YEAR ENDS
Eliminations between the Company and the Subsidiary were performed at the fiscal
year end and aside from the differences in the unrealized gain on derivatives
and effects of currency fluctuations noted below there were no significant
effects.
BALANCE SHEET 06/30/2002 06/14/2002 12/31/2001 12/14/2001
----------- ----------- ----------- -----------
(pound) (pound) (pound) (pound)
Unrealized gain on
derivatives ................ 44,610,918 70,204,382 80,444,623 80,295,914
Asset backed notes ......... 652,100,000 677,000,000 687,500,000 687,600,000
PROFIT & LOSS 06/30/2002 06/14/2002 06/30/2001 06/14/2001
----------- ----------- ----------- -----------
(pound) (pound) (pound) (pound)
Unrealized
(loss)/gain on
derivatives ................ (35,833,705) (10,091,531) 36,423,712 34,578,000
Foreign Currency
translation gain/(loss) .... 35,400,000 10,500,000 (36,110,000) (17,800,000)
12. SUBSEQUENT EVENTS
Subsequent to June 14, 2002 Gracechurch Card Funding (No 1) PLC paid a dividend
of (pound)12,500 to Gracechurch Card (Holdings) Limited.
F-6
APPENDIX G
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of:
Barclaycard Funding PLC and Subsidiary
In our opinion, the accompanying balance sheet and the related statement of
income, statement of changes in shareholders' equity and statement of cash flows
present fairly, in all material respects, the financial position of Barclaycard
Funding PLC and Subsidiary (the "Group") at December 14, 2001 and December 14,
2000 and the results of its operations and its cash flows for each of the years
in three-year period ended December 14, 2001, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Group's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
PricewaterhouseCoopers
London, England
October 3, 2002
G-1
APPENDIX H
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AT DECEMBER 14, 2001 AND 2000
2001 2000
ASSETS NOTE (pound) (pound)
- ------ ---- ----------- -----------
Cash ........................................... 3,353,064 3,754,586
Intercompany notes ............................. 3 607,050,000 607,050,000
Derivatives .................................... 9,10,11 80,444,623 63,008,173
Other assets ................................... 5 396,535 841,514
----------- -----------
Total assets ................................... 691,244,222 674,654,273
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Asset backed notes ............................. 4,10,11 687,500,000 669,800,000
Accrued interest payable ....................... 10 2,231,913 3,153,342
Other liabilities .............................. 5 1,467,570 1,398,869
----------- -----------
TOTAL LIABILITIES .............................. 691,199,483 674,352,211
MINORITY INTEREST .............................. 14,828 279,864
SHAREHOLDERS' EQUITY
Common stock, (pound)1 par value; 50,000 shares
authorized, issued and outstanding ............ 6 50,000 50,000
Less: Receivable from shareholders ............. (37,500) (37,500)
Retained earnings 17,411 9,698
----------- -----------
TOTAL SHAREHOLDERS' EQUITY ..................... 29,911 22,198
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..... 691,244,222 674,654,273
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
H-1
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED
DECEMBER 14, 2001, 2000 AND 1999
2001 2000 1999
NOTE (pound) (pound) (pound)
REVENUES ---- ---------- ---------- ----------
Interest income .................................. 7 34,396,764 39,439,510 3,974,744
Servicing fees ................................... 7 4,552,875 4,465,117 188,800
Unrealized gain on derivatives ................... 7 17,436,450 51,695,832 11,312,341
Other Income ..................................... 11,000 10,447 676
---------- ---------- ----------
TOTAL REVENUE .................................... 56,397,089 95,610,906 15,476,561
---------- ---------- ----------
EXPENSES
Interest expense ................................. 7 33,783,357 38,838,159 3,916,123
Foreign currency translation loss ................ 17,700,000 51,800,000 10,950,000
Servicing fees ................................... 7 4,552,875 4,465,117 188,800
Administration expenses .......................... 614,858 579,035 54,094
---------- ---------- ----------
TOTAL EXPENSES ................................... 56,651,090 95,682,311 15,109,017
---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES .. (254,001) (71,405) 367,544
Less: Provision for income taxes ................. 1 3,322 4,971 1,606
---------- ---------- ----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST ....... (257,323) (76,376) 365,938
Minority interest, net of income taxes ........... 265,036 83,088 (362,952)
---------- ---------- ----------
NET INCOME ....................................... 7,713 6,712 2,986
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
H-2
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 14, 2001, 2000 AND 1999
2001 2000 1999
NOTES (pound) (pound) (pound)
----- ------- ------- -------
Net income for the period ........... 7,713 6,712 2,986
Retained earnings brought forward ... 9,698 2,986 --
------ ------ --------
Retained earnings carried forward ... 17,411 9,698 2,986
------ ------ --------
Common stock brought forward ........ 6 12,500 12,500 0
Shares issued in the period ......... -- -- 50,000
Less: Receivable from shareholders .. 6 -- -- (37,500)
------ ------ --------
Common stock carried forward ........ 12,500 12,500 12,500
------ ------ --------
TOTAL SHAREHOLDERS' EQUITY .......... 29,911 22,198 15,486
====== ====== ========
The accompanying notes are an integral part of these
consolidated financial statements.
H-3
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR YEARS ENDED
DECEMBER 14, 2001, 2000 AND 1999
2001 2000 1999
NOTES (pound) (pound) (pound)
----- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................... 7,713 6,712 2,986
Adjustments to reconcile net income
To net cash (used in) provided by operating
activities
Unrealized gain on derivatives ......................... 7 (17,436,450) (51,695,832) (11,312,341)
Unrealized Foreign currency translation loss ........... 7 17,700,000 51,800,000 10,950,000
Minority interest ...................................... (265,036) (133,092) 412,956
Decrease/(Increase) in accrued interest receivable ..... -- 3,972,250 (3,972,250)
Decrease/(Increase) in other assets .................... 5 444,979 470,345 (1,311,859)
(Decrease)/Increase in accrued interest payable ........ 5 (921,429) (752,733) 3,906,075
(Decrease)/Increase in other liabilities ............... 5 68,701 45,018 26,162
----------- ----------- -----------
TOTAL ADJUSTMENTS .................................. (409,235) 3,705,956 (1,301,257)
----------- ----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING ........... (401,522) 3,712,668 (1,298,271)
ACTIVITIES
Cash flows from investing activities
Deposit with Barclays Bank PLC ......................... 3,10 -- -- (607,050,000)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES .............. -- -- (607,050,000)
Cash flows from financing activities
Issue of asset backed notes ............................ 4,10,11 -- -- 607,050,000
Loan from Barclays Bank PLC ............................ 5,7 -- -- 1,327,689
Issue of ordinary shares ............................... -- -- 12,500
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......... -- -- 608,390,189
----------- ----------- -----------
NET (DECREASE)/INCREASE IN CASH .................... (401,522) 3,712,668 41,918
Cash at beginning of year ................................ 3,754,586 41,918 --
----------- ----------- -----------
Cash at end of year ...................................... 3,353,064 3,754,586 41,918
=========== =========== ===========
Cash paid for:
Interest ................................................ 33,690,979 40,975,759 --
Taxes ................................................... 1,562 5,070 --
The accompanying notes are an integral part of these
consolidated financial statements.
H-4
APPENDIX I
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Barclaycard Funding PLC (the "Company") was incorporated on August 13, 1990. The
Company commenced business on November 22, 1999. Barclaycard Funding PLC and its
subsidiary, Gracechurch Card Funding (No1) PLC ("Subsidiary"), collectively
comprise the "Group".
The principal purpose of the Group is to raise financing via the issuance of
asset backed debt instruments in order to invest the proceeds in the purchase of
a beneficial interest in a pool of credit card receivables.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
(a) Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP") and in Pounds Sterling ("(pound)"), the currency of the United Kingdom,
which is the Group's operating currency. The financial statements are reported
in accordance with US GAAP due to the Group's reporting requirements under the
United States Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"). These financial statements are not statutory financial
statements and a statement in accordance with section 235 of the United
Kingdom's Companies Act ("UKCA") for the consolidated group is not given.
The individual UK statutory financial statements for Barclaycard Funding PLC and
Gracechurch Card Funding (No 1) PLC for each of the years in the three year
period ended December 14, 2001 and December 31, 2001 respectively, have been
filed with the registrar of companies in the United Kingdom.
(b) Consolidation
The consolidated financial statements include the accounts of Barclaycard
Funding PLC and, Gracechurch Card Funding (No 1) PLC. Gracechurch Card Funding
(No 1) PLC is a special-purpose vehicle established by Barclays Bank PLC solely
to issue asset backed notes denominated in United States Dollars (see footnote
4), the proceeds of which were remitted to Barclaycard Funding PLC in exchange
for a corresponding medium term note. Because the only purpose of Gracechurch
Card Funding (No 1) PLC is to raise financing for the Group, its accounts are
consolidated with those of Barclaycard Funding PLC. The total share capital
issued by Gracechurch Card Funding (No 1) PLC is owned by Gracechurch Card
(Holdings) Limited, and its earnings and losses allocable thereto are reported
as minority interest in the accompanying consolidated balance sheet.
Any distributable profits which Gracechurch Card Funding (No 1) PLC generates is
payable to Gracechurch Card (Holdings) Limited, a wholly owned subsidiary of
Royal Exchange Trust, (the "Trust"). Losses which Gracechurch Card Funding
(No 1) PLC incurs are allocated firstly to the Trust's equity at risk, which is
comprised of the Trust's initial capital investment (via Gracechurch Card
(Holdings) Limited) plus any distributable profits receivable, reflected as
minority interest. Losses in excess of the Trust's equity at risk are allocated
to the note holders.
Intercompany transactions and balances have been eliminated on consolidation.
There was a 16 day difference between the fiscal year end of the Company and
Subsidiary. Eliminations were performed at the Company's fiscal year end and
aside from the differences in the unrealized gains on derivatives and effects of
currency fluctuations on the asset backed notes as noted in Footnote 11, the
non-coterminous year-end did not have a significant effect on the financial
statements.
(c) Foreign Currency Translation
All foreign currency assets and liabilities are translated into Pounds Sterling
at the exchange rates prevailing at the end of the period. Interest income and
expense denominated in foreign currencies are translated into Pounds Sterling at
the exchange rates in force when the transaction occurred. Foreign currency
translation effects are reflected on the face of the income statement. Foreign
currency transactions are economically hedged into Pounds Sterling to offset
exposure to fluctuating currency
I-1
exchange rates. Although these instruments offset exposures they do not qualify
for hedge accounting under Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
(d) Derivatives
The derivative instrument is a cross currency swap, and is used by the Group to
minimize currency risk associated with its financing activities denominated in
United States Dollars (USD). Although this instrument is a hedge from an
economic perspective, it does not qualify for hedge accounting under SFAS No.
133 as its documentation does not meet the requirements of the standard. The
derivative is recorded on the balance sheet at fair value with changes reflected
in the income statement. The derivative is transacted simultaneously with the
purchase or issuance of the underlying funding instrument. The swap is not held
for trading purposes.
(e) Interest Income and Expense
Interest income and expense are recognized in the consolidated financial
statements on an accrual basis. Interest income and interest expense are
primarily related to intercompany notes and asset backed notes respectively.
(f) Servicing Fee Income/Expense
The Company earns fee income from the servicing of the credit card receivables
and at the same time remits those monies earned to Barclays Bank PLC for the
same amount which is included as expenses in the Consolidated Income Statement.
Fees are recorded when earned, net of associated expenses.
(g) Income Taxes
Income taxes for the Group are paid to the tax authorities in the United
Kingdom. There are no deferred tax assets or liabilities for the periods
presented in the financial statements. The tax charge is based on an effective
UK corporation tax rate of 30%.
(h) Distribution Policy
Distributions to shareholders are accounted for when approved by the Board of
Directors.
(i) Issue Costs
The portion of the direct costs associated with the issue of the notes by the
Subsidiary that are attributable to the Group are capitalized and are amortized
over the expected life of the notes.
(j) Funding Instruments
Asset backed notes are stated at amortised cost restated at the exchange rate
prevailing at the balance sheet date.
(k) Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the balance sheet date and the reported amount of
revenues and expenses in the reporting period. Actual results may differ from
the estimates used in the financial statements.
3. INTERCOMPANY NOTES
On November 23, 1999, the Company paid (pound)607,050,000 to the Receivables
Trustee, an offshore trustee, in order to fund the purchase of credit card
receivables (the "Receivables") by the Trustee from Barclaycard, a division of
Barclays Bank PLC. This payment to the Trustee secured a fractional beneficial
interest in the assets of the Receivables Trustee (the "Trust"). The assets of
the Trust comprise the Receivables acquired from Barclaycard. This amount will
be repaid by the Receivables Trustee in 2002.
The Receivables continue to be accounted for as an asset on Barclays Bank PLC's
balance sheet and therefore in substance the Company has recorded its payment to
the Trustee as intercompany notes.
The notes are repayable on November 15, 2002.
I-2
The notes bear interest as:
546,345,000 - 3 month LIBOR plus 0.2375%
30,352,500 - 3 month LIBOR plus 0.53%
30,352,500 - 3 month LIBOR plus 1.00%
-----------
607,050,000
===========
The Inter company Notes are secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the Trust.
The Trust uses a portion of the interest and principal payments that it receives
on the credit card receivables held by it in trust to repay principal and
interest amounts on the loan from the Group.
The payment of interest and repayment of the principal on the advance to the
Trust is dependent upon payment of interest and repayment of the principal due
under the credit card receivables held by the Trust, and is therefore subject to
the risk of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays Bank
PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread within the UK inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety of
social, legal, political and economic factors in the United Kingdom. There can
be no assurance that changes in social, legal, political and economic factors
will not have a material effect on the Group's future performance.
4. ASSET BACKED NOTES
A summary of asset backed notes at December 14, 2001 and 2000 are as follows:
2001 2001 2000 2000
(pound) $ (pound) $
----------- ------------- ----------- -------------
Class A ..... 618,750,000 900,000,000 602,820,000 900,000,000
Class B ..... 34,375,000 50,000,000 33,490,000 50,000,000
Class C ..... 34,375,000 50,000,000 33,490,000 50,000,000
----------- ------------- ----------- -------------
687,500,000 1,000,000,000 669,800,000 1,000,000,000
=========== ============= =========== =============
The floating rate notes were issued on November 23, 1999. The floating rate
notes represent asset backed debt obligations and have a nominal value of
(pound)607,050,000. Interest is payable on the floating rate notes as follows:
Class A Notes - 3 month LIBOR plus 0.18%
Class B Notes - 3 month LIBOR plus 0.43%
Class C Notes - 3 month LIBOR plus 0.90%
These notes are repayable on November 15, 2002.
I-3
5. OTHER ASSETS / OTHER LIABILITIES
The other assets and other liabilities balances at December 14, 2001 and 2000
includes the following:
2001 2000
(pound) (pound)
--------- ---------
OTHER ASSETS
------------
Prepayments administrative expenses 13,424 3,989
Prepayments underwriting fee ...... 383,111 837,436
Tax debtor ........................ -- 89
--------- ---------
396,535 841,514
--------- ---------
OTHER LIABILITIES
-----------------
Bank loans interest bearing ....... 1,310,769 1,310,769
Bank loans interest free .......... 16,920 16,920
Other accruals .................... 139,881 71,180
--------- ---------
1,467,570 1,398,869
========= =========
6. COMMON STOCK
2001 2000
(pound) (pound)
------ ------
BARCLAYCARD FUNDING PLC
Authorised:
Ordinary shares of (pound)1 each ...... 50,000 50,000
Ordinary A allotted and nil paid ...... 37,500 37,500
Ordinary B allotted and fully paid .... 12,500 12,500
------ ------
Ordinary shares of (pound)1 each ...... 50,000 50,000
====== ======
Barclays Bank PLC holds 75% of the issued share capital of Barclaycard Funding
PLC representing 51% issued voting share capital and 49% entitlement to
distributable profits.
Royal Exchange Trust Company owns 49% of the issued voting share capital and are
entitled to 51% of the distributable profits
7. RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with an enterprise.
Barcosec Limited and Barometers Limited are Barclays Bank PLC group companies
whose business is the provision of corporate directorship services for Barclays
Bank subsidiaries.
The Company enters into various transactions with affiliates. At December 14,
2001 and 2000, in addition to the intercompany notes disclosed in footnote 3,
the following are the balances related to transactions with affiliates:
2001 2000
(pound) (pound)
---------- ----------
ASSETS
- ------
Cash - (Barclays Bank PLC) ................ 3,353,064 3,754,586
Derivatives - (Barclays Bank PLC) ......... 80,444,623 63,008,173
---------- ----------
LIABILITIES
- -----------
Other liabilities - (Barclays Bank PLC).... 1,327,689 1,327,689
I-4
For the six months ended June 14, 2002 and 2001, the following are the balances
related to transactions with affiliates:
2001 2000 1999
(pound) (pound) (pound)
---------- ---------- ----------
INCOME / EXPENSE
- ----------------
Interest income - (Barclays Bank PLC) .............. 34,396,764 39,439,510 3,974,744
Interest expense - (Barclays Bank PLC) ............. 87,110 99,703 10,048
Servicing income - (Barclays Bank PLC) ............. 4,552,875 4,465,117 188,800
Servicing expense - (Barclays Bank PLC) ............ 4,552,875 4,465,117 188,800
Unrealized gain on derivatives - (Barclays
Bank PLC) ........................................ 17,436,450 51,695,832 11,312,341
8. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There were no outstanding capital commitments, guarantees or contingent
liabilities at December 14, 2001 and 2000.
9. DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group enters into cross currency swaps. The purpose of these transactions is
to manage the currency risk arising from the Group's operations and its sources
of finance.
The net loss/gain reflected is attributable to the recognition of gains/losses
on derivatives entered into for hedging purposes. Because the hedge
documentation requirements under Statement of Financial Accounting Standards No.
133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133") were not met, the Group is required to record the changes in the fair
value of the derivatives in the income statement.
Currency risk - all of the Group's assets and associated income are denominated
in Pounds Sterling, although some of the asset backed notes issued by the
Subsidiary and associated interest expense are denominated in US dollars. The
Group's policy is to match this currency income and expense by the use of cross
currency swaps.
DEBT MATURITY ANALYSIS
2001 2000
(pound) (pound)
----------- -----------
Less than one year .......... 688,827,689 --
Between one and two years ... -- 671,127,689
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
Disclosures in the table below are in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of
Financial Instruments".
Fair values have been estimated using quoted marked prices where available.
Where no ready markets exist and hence quoted market prices are not available,
appropriate techniques are used to estimate fair values which take account of
the characteristics of the instruments, including the expected future cash
flows, market interest rates and prices available for similar instruments. There
were no financial instruments listed below for which quoted market prices were
not used to estimate fair value.
I-5
The estimated fair value and recorded carrying values of the financial
instruments as of December 14, 2001 and 2000 are as follows:
2001 2001 2000 2000
Carrying Fair Carrying Fair
amount value amount value
(pound) (pound) (pound) (pound)
----------- ----------- ----------- -----------
NON-TRADING ASSETS
- ------------------
Cash ................... 3,353,064 3,353,064 3,754,586 3,754,586
Intercompany notes ..... 607,050,000 607,050,000 607,050,000 607,050,000
Derivatives ............ 80,444,623 80,444,623 63,008,173 63,008,173
Other assets ........... 396,535 396,535 841,514 841,514
NON-TRADING LIABILITIES
- -----------------------
Asset backed notes ..... 687,500,000 687,500,000 669,800,000 669,800,000
Accrued interest payable 2,231,913 2,231,913 3,153,342 3,153,342
Other liabilities ...... 1,467,570 1,467,570 1,398,869 1,398,869
The Group had no trading assets or liabilities at December 14, 2001 and 2000.
11. NON-COTERMINOUS YEAR ENDS
Eliminations between the Company and the Subsidiary were performed at the fiscal
year end and aside from the differences in the unrealized gain on derivatives
and effects of currency fluctuations noted below there were no significant
effects.
12/31/2001 12/14/2001 12/31/2000 12/14/2000
(pound) (pound) (pound) (pound)
----------- ----------- ----------- -----------
BALANCE SHEET
Unrealized gain on
derivatives ........... 80,444,623 80,295,914 63,008,173 72,689,767
Asset backed notes ...... 687,500,000 687,600,000 669,800,000 678,800,000
12/31/2001 12/14/2001 12/31/2000 12/14/2000 12/31/1999 12/14/1999
(pound) (pound) (pound) (pound) (pound) (pound)
---------- --------- ---------- ---------- ---------- ----------
PROFIT & LOSS
Unrealised gain on
derivatives ........... 17,436,450 7,606,147 51,695,832 59,075,069 11,312,341 13,614,698
Foreign Currency
translation
(loss)/gain ........... (17,700,000) (8,800,000) (51,800,000) (58,200,000) 10,950,000 13,550,000
I-6
APPENDIX J
OTHER SERIES ISSUED AND OUTSTANDING
The table below sets forth the principal characteristics of the other series
previously issued by other issuers, in connection with the receivables trust and
the receivables assigned by the transferor. For more information with respect to
any series, any prospective investor should contact Barclaycard, 1234 Pavilion
Drive, Northhampton NN4 7SG, United Kingdom, Attention [___]. Barclaycard will
provide, without charge, to any prospective purchaser of the notes, a copy of
the disclosure document for any such other publicly-issued series.
SERIES 99-1
Principal Sterling
Class Balance Equivalent* Interest Rate
- ------- ------------ ------------------ -------------------------
Class A $ 900,000,000 (pound)546,345,000 One month USD LIBOR + 0.18%
Class B $ 50,000,000 (pound) 30,352,500 One month USD LIBOR + 0.43%
Class C $ 50,000,000 (pound) 30,352,500 One month USD LIBOR + 0.90%
-------------- -----------------
$1,000,000,000 (pound)607,050,000
-============= ==================
Closing Date: 23 November, 1999
Scheduled Redemption Date: 15 November, 2002
Legal Final Redemption Date: 15 November, 2004
* sterling equivalent obtained by converting dollars to sterling at the
exchange rate of (euro)0.60705 to $1.
J-1
GRACECHURCH CARD FUNDING (NO. 2) PLC
Issuer
BARCLAYS BANK PLC
Transferor, Servicer and Trust Cash Manager
$900,000,000 Class A Floating Rate Asset-Backed Notes
$50,000,000 Class B Floating Rate Asset-Backed Notes
$50,000,000 Class C Floating Rate Asset-Backed Notes
-------------------------
PROSPECTUS
-------------------------
Underwriters of the Class A Notes
BARCLAYS CAPITAL
JP MORGAN LEHMAN BROTHERS SALOMON SMITH BARNEY
Underwriter of the Class B and Class C Notes
BARCLAYS CAPITAL
You should reply only in the information contained in this prospectus. We have
not authorised anyone to provide you with different information.
We are not offering the notes where the offer is not permitted.
Dealers will deliver a prospectus when acting as underwriters of the notes and
with respect to their unsold allotments or subscriptions. In addition, all
dealers selling the notes may be required to deliver a prospectus until 16
January 2003.