Filed Pursuant to Rule 424(b)(2)
File No. 333-52984
PROSPECTUS SUPPLEMENT DATED FEBRUARY 12, 2002
(to Prospectus dated January 23, 2002)
Citibank Credit Card Issuance Trust
$1,000,000,000 Floating Rate Class 2002-A2 Notes of February 2005
(Legal Maturity Date February 2007)
Citibank (South Dakota), National Association
Citibank (Nevada), National Association
Originators of the Trust
Class 2002-A2 Notes
The issuer will issue and sell -------------------
Principal amount............... $1,000,000,000
Interest rate.................. three-month LIBOR plus 0.03% per annum
Interest payment dates......... 15th day of each February, May, August and
November, beginning May 2002
Expected principal payment date February 15, 2005
Legal maturity date............ February 15, 2007
Expected issuance date......... February 15, 2002
Price to public................ $1,000,000,000 (or 100.000%)
Underwriting discount.......... $ 1,750,000 (or 0.175%)
Proceeds to the issuer......... $ 998,250,000 (or 99.825%)
The Class 2002-A2 notes are a subclass of Class A notes of the Citiseries.
Principal payments on Class B notes of the Citiseries are subordinated to
payments on Class A notes of that series. Principal payments on Class C notes
of the Citiseries are subordinated to payments on Class A and Class B notes of
that series.
You should review and consider the discussion under "Risk Factors" beginning
on page 15 of the accompanying prospectus before you purchase any notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the notes or determined that this prospectus
supplement or the prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The notes are obligations of Citibank Credit Card Issuance Trust only and are
not obligations of any other person. Each class of notes is secured by only
some of the assets of Citibank Credit Card Issuance Trust. Noteholders will
have no recourse to any other assets of Citibank Credit Card Issuance Trust
for the payment of the notes. The notes are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency or
instrumentality.
Underwriters
Salomon Smith Barney
Lehman Brothers
Merrill Lynch & Co.
TABLE OF CONTENTS
Prospectus Supplement
Summary of Terms.................................. S-3
Underwriting...................................... S-12
Annex I: The Master Trust Receivables and Accounts I-1
The table of contents for the prospectus begins on page (i) of that
document.
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Information about these Class A notes is in two separate documents: a
prospectus and a prospectus supplement. The prospectus provides general
information about each series of notes issued by Citibank Credit Card Issuance
Trust, some of which may not apply to the Citiseries. The prospectus supplement
provides the specific terms of these Class A notes. You should carefully read
both the prospectus and the prospectus supplement before you purchase any of
these Class A notes.
This prospectus supplement may supplement disclosure in the accompanying
prospectus.
In deciding whether to purchase these Class A notes, you should rely solely
on the information in this prospectus supplement and the accompanying
prospectus. We have not authorized anyone to give you different information
about these Class A notes.
This prospectus supplement may be used to offer and sell these Class A
notes only if accompanied by the prospectus.
-----------------
These Class A notes are offered subject to receipt and acceptance by the
underwriters and to their right to reject any order in whole or in part and to
withdraw, cancel or modify the offer without notice.
S-2
SUMMARY OF TERMS
Because this is a summary, it does not contain all the information you may
need to make an informed investment decision. You should read the entire
prospectus supplement and prospectus before you purchase any of these Class A
notes.
There is a glossary beginning on page 114 of the prospectus where you will
find the definitions of some terms used in this prospectus supplement.
Securities Offered.......... $1,000,000,000 Floating Rate Class 2002-A2 notes
of February 2005 (legal maturity date February
2007).
These Class A notes are part of a multiple
issuance series of notes called the Citiseries.
The Citiseries consists of Class A notes, Class B
notes and Class C notes. These Class A notes are
a subclass of Class A notes of the Citiseries.
These Class A notes are issued by, and are
obligations of, Citibank Credit Card Issuance
Trust. The issuer has issued and expects to issue
other classes and subclasses of notes of the
Citiseries with different interest rates, payment
dates, legal maturity dates and other
characteristics. The issuer may also issue
additional Class 2002-A2 notes in the future.
Holders of these Class A notes will not receive
notice of, or have the right to consent to, any
subsequent issuance of notes, including any
issuance of additional Class 2002-A2 notes. See
"The Notes--Issuances of New Series, Classes and
Subclasses of Notes" in the prospectus.
Multiple Issuance Series.... A multiple issuance series is a series of notes
consisting of three classes: Class A, Class B and
Class C. Each class may consist of multiple
subclasses. Notes of any subclass can be issued
on any date so long as there are enough
outstanding subordinated notes to provide the
necessary subordination protection for
outstanding and newly issued senior notes. The
expected principal payment dates and legal
maturity dates of the senior and subordinated
classes of a multiple issuance series may be
different, and subordinated notes may have
expected principal payment dates and legal
maturity dates earlier than some or all senior
notes of the same series. Subordinated notes will
generally not be paid before their legal maturity
date, unless, after payment, the remaining
subordinated notes provide the required amount of
subordination protection for the senior notes of
that series.
S-3
All of the subordinated notes of a multiple
issuance series provide subordination protection
to the senior notes of the same series to the
extent of the required subordinated amount,
regardless of whether the subordinated notes are
issued before, at the same time as, or after the
senior notes of that series.
Interest.................... These Class A notes will accrue interest at a per
annum rate equal to the LIBOR rate for U.S.
dollar deposits for the applicable interest
period plus a margin of 0.03%.
Interest on these Class A notes will accrue from
February 15, 2002 and will be calculated on the
basis of the actual number of days in the year
divided by a 360-day year. The applicable
interest period for these Class A notes will
initially be three months, but if an event of
default or early redemption event occurs with
respect to these Class A notes, or if these Class
A notes are not paid in full on the expected
principal payment date, the interest period will
change to one month.
The LIBOR rate for each interest period will be
determined by the issuer two business days before
the beginning of that interest period. For
purposes of determining LIBOR, a business day is
any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank
market. The applicable LIBOR rate will be the
rate for deposits in U.S. dollars for the
applicable interest period which appears on the
Telerate Page 3750--or any other page as may
replace that page on that service for the purpose
of displaying comparable rates or prices--as of
11:00 a.m., London time, on that date.
If the LIBOR rate does not appear on Telerate
Page 3750--or any other page as may replace that
page on that service for the purpose of
displaying comparable rates or prices--the LIBOR
rate for the applicable interest period will be
determined on the basis of the rate at which
deposits in U.S. dollars are offered by four
major banks in the London interbank market,
selected by the issuer, at approximately 11:00
a.m., London time, on that day to prime banks in
the London interbank market for the applicable
interest period.
The issuer will request the principal London
office of each reference bank to provide a
quotation of its LIBOR rate
S-4
for the applicable interest period. If at least
two quotations are provided as requested, the
applicable LIBOR rate will be the arithmetic mean
of the quotations. If fewer than two quotations
are provided as requested, the applicable LIBOR
rate will be the arithmetic mean of the rates
quoted by major banks in New York City, selected
by the issuer, at approximately 11:00 a.m., New
York City time, on that day for loans in U.S.
dollars to leading European banks for the
applicable interest period.
The issuer will make interest payments on these
Class A notes on the 15th day of each February,
May, August and November, beginning May 2002. If
an event of default or early redemption event
occurs with respect to these Class A notes, or if
these Class A notes are not paid in full on the
expected principal payment date, the issuer will
begin making interest payments on the 15th day of
every month. Interest payments due on a day that
is not a business day in New York, South Dakota
and Nevada, will be made on the following
business day.
The payment of accrued interest on a class of
notes of the Citiseries is not senior to or
subordinated to payment of interest on any other
class of notes of this series.
Principal................... The issuer expects to pay the stated principal
amount of these Class A notes in one payment on
February 15, 2005, which is the expected
principal payment date, and is obligated to do so
if funds are available for that purpose. However,
if the stated principal amount of these Class A
notes is not paid in full on the expected
principal payment date, noteholders will not have
any remedies against the issuer until February
15, 2007, the legal maturity date of these Class
A notes.
If the stated principal amount of these Class A
notes is not paid in full on the expected
principal payment date, then principal and
interest payments on these Class A notes will be
made monthly until they are paid in full or the
legal maturity date occurs, whichever is earlier.
However, if the nominal liquidation amount of
these Class A notes has been reduced, the amount
of principal collections and finance charge
collections available to pay principal of and
interest
S-5
on these Class A notes will be reduced. The
nominal liquidation amount of a class of notes
corresponds to the portion of the invested amount
of the collateral certificate that is allocable
to support that class of notes.
The initial nominal liquidation amount of these
Class A notes is $1,000,000,000. If this amount
is reduced as a result of charge-offs to the
principal receivables in the master trust, and
not reimbursed as described in the prospectus,
not all of the principal of these Class A notes
will be repaid. For a more detailed discussion of
nominal liquidation amount, see "The
Notes--Stated Principal Amount, Outstanding
Dollar Principal Amount and Nominal Liquidation
Amount of Notes" in the prospectus.
Principal of these Class A notes may be paid
earlier than the expected principal payment date
if an early redemption event or an event of
default occurs with respect to these notes. See
"Covenants, Events of Default and Early
Redemption Events--Early Redemption Events" and
"--Events of Default" in the prospectus.
If principal payments on these Class A notes are
made earlier or later than the expected principal
payment date, the monthly principal date for
principal payments will be the 15th day of each
month, or if that day is not a business day, the
following business day.
Monthly Accumulation Amount. $83,333,333. This amount is one-twelfth of the
initial dollar principal amount of these Class A
notes, and is targeted to be deposited in the
principal funding subaccount for these Class A
notes each month beginning with the twelfth month
before the expected principal payment date of
these Class A notes. This amount will be
increased if the date for beginning the budgeted
deposits is postponed, as described under
"Deposit and Application of Funds--Targeted
Deposits of Principal Collections to the
Principal Funding Account--Budgeted Deposits" in
the prospectus.
Subordination; Credit
Enhancement............... No payment of principal will be made on any Class
B note of the Citiseries unless, following the
payment, the remaining available subordinated
amount of Class B notes of this series is at
least equal to the required subordinated amount
for the outstanding Class A notes of this series.
S-6
Similarly, no payment of principal will be made
on any Class C note of the Citiseries unless,
following the payment, the remaining available
subordinated amount of Class C notes of this
series is at least equal to the required
subordinated amounts for the outstanding Class A
notes and Class B notes of this series. However,
there are some exceptions to this rule. See "The
Notes--Subordination of Principal" and "Deposit
and Application of Funds--Limit on Repayments of
Subordinated Classes of Multiple Issuance Series"
in the prospectus.
The maximum amount of principal of Class B notes
of the Citiseries that may be applied to provide
subordination protection to these Class A notes
is $59,829,100. The maximum amount of principal
of Class C notes of the Citiseries that may be
applied to provide subordination protection to
these Class A notes is $79,772,100. This amount
of principal of Class C notes may also be applied
to provide subordination protection to the Class
B notes of the Citiseries.
The issuer may at any time change the amount of
subordination required or available for any class
of notes of the Citiseries, including these Class
A notes, or the method of computing the amounts
of that subordination without the consent of any
noteholders so long as the issuer has received
confirmation from the rating agencies that have
rated any outstanding notes of the Citiseries
that the change will not result in the rating
assigned to any outstanding notes of the
Citiseries to be withdrawn or reduced, and the
issuer has received the tax opinions described in
"The Notes--Required Subordinated Amount" in the
prospectus.
See "Deposit and Application of Funds" in the
prospectus for a description of the subordination
protection of these Class A notes.
Optional Redemption by the
Issuer.................... The issuer has the right, but not the obligation,
to redeem these Class A notes in whole but not in
part on any day on or after the day on which the
aggregate nominal liquidation amount of these
Class A notes is reduced to less than 5% of its
initial dollar principal amount. This repurchase
option is referred to as a clean-up call.
S-7
If the issuer elects to redeem these Class A
notes, it will notify the registered holders of
the redemption at least 30 days prior to the
redemption date. The redemption price of a note
so redeemed will equal 100% of the outstanding
dollar principal amount of that note, plus
accrued but unpaid interest on the note to but
excluding the date of redemption.
If the issuer is unable to pay the redemption
price in full on the redemption date, monthly
payments on these Class A notes will thereafter
be made until the outstanding dollar principal
amount of these Class A notes, plus all accrued
and unpaid interest, is paid in full or the legal
maturity date occurs, whichever is earlier. Any
funds in the principal funding subaccount and
interest funding subaccount for these Class A
notes will be applied to make the principal and
interest payments on these Class A notes on the
redemption date.
Security for the Notes...... These Class A notes are secured by a shared
security interest in the collateral certificate
and the collection account, but are entitled to
the benefits of only that portion of those assets
allocated to them under the indenture. These
Class A notes are also secured by a security
interest in the applicable principal funding
subaccount and the applicable interest funding
subaccount. See "Sources of Funds to Pay the
Notes--The Collateral Certificate" and "--The
Trust Accounts" in the prospectus.
Limited Recourse to the
Issuer.................... The sole source of payment for principal of or
interest on these Class A notes is provided by:
. the portion of the principal collections and
finance charge collections received by the
issuer under the collateral certificate and
available to these Class A notes after
giving effect to all allocations and
reallocations; and
. funds in the applicable trust accounts for
these Class A notes.
Class A noteholders will have no recourse to any
other assets of the issuer or any other person or
entity for the payment of principal of or
interest on these Class A notes.
Master Trust Assets and
Receivables............... The collateral certificate, which is the issuer's
primary source of funds for the payment of
principal of and
S-8
interest on these Class A notes, is an investor
certificate issued by Citibank Credit Card Master
Trust I. The collateral certificate represents an
undivided interest in the assets of the master
trust. The master trust assets include credit
card receivables from selected MasterCard and
VISA revolving credit card accounts that meet the
eligibility criteria for inclusion in the master
trust. These eligibility criteria are discussed
in the prospectus under "The Master Trust--Master
Trust Assets."
The credit card receivables in the master trust
consist of principal receivables and finance
charge receivables. Principal receivables include
amounts charged by cardholders for merchandise
and services and amounts advanced to cardholders
as cash advances. Finance charge receivables
include periodic finance charges, annual
membership fees, cash advance fees, late charges
and some other fees billed to cardholders.
The aggregate amount of credit card receivables
in the master trust as of October 7, 2001 was
$63,020,044,159, of which $62,444,992,967 were
principal receivables and $575,051,193 were
finance charge receivables. See "The Master Trust
Receivables and Accounts" in Annex I of this
prospectus supplement for more detailed financial
information on the receivables and the accounts.
The Citiseries.............. These Class A notes will be the 26th subclass of
notes issued by the issuer of the Citiseries.
As of the issuance date of these Class A notes,
the aggregate outstanding dollar principal amount
of notes of the Citiseries will be
$35,168,750,000, including these Class A notes,
consisting of:
Class A notes $31,028,750,000
Class B notes $ 1,240,000,000
Class C notes $ 2,900,000,000
As of the date of this prospectus supplement, the
weighted average interest rate payable by the
issuer in
respect of the outstanding subclasses of notes of
the Citiseries is approximately 2.44% per annum,
consisting of:
Class A notes 2.21% per annum
Class B notes 2.30% per annum
Class C notes 4.90% per annum
S-9
The weighted average interest rate calculation
takes into account:
. the actual rate of interest in effect on
floating rate notes at the time of
calculation; and
. all net payments to be made or received
under performing derivative agreements.
Participation with Other
Classes of Notes......... Each class of notes of the Citiseries will be
included in "Group 1." In addition to the
Citiseries, the issuer may issue other series of
notes that are included in Group 1. As of the
date of this prospectus supplement, the
Citiseries is the only series of notes issued by
the issuer.
Collections of finance charge receivables
allocable to each class of notes in Group 1 will
be aggregated and shared by each class of notes
in Group 1 pro rata based on the applicable
interest rate of each class. See "Deposit and
Application of Funds--Allocation to Interest
Funding Subaccounts" in the prospectus. Under
this system, classes of notes in Group 1 with
high interest rates take a larger proportion of
the collections of finance charge receivables
allocated to Group 1 than classes of notes with
low interest rates. Consequently, the issuance of
later classes of notes with high interest rates
can have the effect of reducing the finance
charge collections available to pay interest on
your notes, or available to reimburse reductions
in the nominal liquidation amount of your notes.
Stock Exchange Listing..... The issuer will apply to list these Class A notes
on the Luxembourg Stock Exchange. The issuer
cannot guarantee that the application for the
listing will be accepted. You should consult with
Dexia Banque Internationale a Luxembourg, the
Luxembourg listing agent for these Class A notes,
69, route d'Esch, L-2953 Luxembourg, phone number
(352) 4590-1, to determine whether these Class A
notes have been listed on the Luxembourg Stock
Exchange.
Ratings.................... The issuer will issue these Class A notes only if
they are rated at least "AAA" or its equivalent
by at least one nationally recognized rating
agency. See "Risk Factors--If the ratings of the
notes are lowered or withdrawn, their market
value could decrease" in the prospectus.
S-10
Change in Accounting
Standards May Necessitate
Restructuring of the
Citibank Credit Card
Securitization Program.... Citibank (South Dakota) and Citibank (Nevada)
treat the issuances of notes and related
transactions as a sale of the credit card
receivables for accounting purposes. As a result
of the adoption by the Financial Accounting
Standards Board of SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities--a replacement of
FASB Statement No. 125," the Banks may be
required to restructure their credit card
securitization program in order to continue to
receive accounting sale treatment.
As part of the restructuring, one or more
bankruptcy remote, special purpose entities may
need to be interposed between the Banks, as
sellers of the credit card receivables, and the
master trust. These special purpose entities,
which would be owned by Citibank (South Dakota)
and Citibank (Nevada), would acquire the credit
card receivables from the Banks and sell them to
the master trust. Some of the operative
documents--such as the pooling and servicing
agreement--may be amended to effectuate this
change. Holders of these Class A notes will be
deemed to consent to any such amendment. No such
amendment will be made unless the rating agencies
confirm that the amendment will not cause the
rating assigned to any outstanding notes to be
withdrawn or reduced.
S-11
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement for these
Class A notes, the issuer has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase, the
principal amount of these Class A notes set forth opposite its name:
Underwriters Principal Amount
- ------------ ----------------
Salomon Smith Barney Inc............. $ 333,334,000
Lehman Brothers Inc.................. 333,333,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............. 333,333,000
--------------
Total..................... $1,000,000,000
==============
The several underwriters have agreed, subject to the terms and conditions
of the underwriting agreement, to purchase all $1,000,000,000 aggregate
principal amount of these Class A notes if any of these Class A notes are
purchased.
The underwriters have advised the issuer that the several underwriters
propose initially to offer these Class A notes to the public at the public
offering price set forth on the cover page of this prospectus supplement, and
to certain dealers at that public offering price less a concession not in
excess of 0.125% of the principal amount of these Class A notes. The
underwriters may allow, and those dealers may reallow to other dealers, a
concession not in excess of 0.075% of the principal amount.
After the public offering, the public offering price and other selling
terms may be changed by the underwriters.
Each underwriter of these Class A notes has agreed that:
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to these Class A notes in, from or otherwise involving the
United Kingdom;
. it has only issued, distributed or passed on and will only issue,
distribute or pass on in the United Kingdom any document received by it
in connection with the issue of these Class A notes to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued, distributed or
passed on;
. if it is an authorized person under Chapter III of Part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991) to any
person in the United Kingdom the scheme described in this prospectus
supplement and the prospectus if that person is a kind described either
in Section 76(2) of the Financial Services Act 1986 or in Regulation
1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991; and
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. it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
In connection with the sale of these Class A notes, the underwriters may
engage in:
. over-allotments, in which members of the syndicate selling these Class
A notes sell more notes than the issuer actually sold to the syndicate,
creating a syndicate short position;
. stabilizing transactions, in which purchases and sales of these Class A
notes may be made by the members of the selling syndicate at prices
that do not exceed a specified maximum;
. syndicate covering transactions, in which members of the selling
syndicate purchase these Class A notes in the open market after the
distribution has been completed in order to cover syndicate short
positions; and
. penalty bids, by which underwriters reclaim a selling concession from a
syndicate member when any of these Class A notes originally sold by
that syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of these Class A notes to be higher than it would
otherwise be. These transactions, if commenced, may be discontinued at any time.
The issuer, Citibank (South Dakota) and Citibank (Nevada) will, jointly and
severally, indemnify the underwriters against certain liabilities, including
liabilities under applicable securities laws, or contribute to payments the
underwriters may be required to make in respect of those liabilities. The
issuer's obligation to indemnify the underwriters will be limited to finance
charge collections from the collateral certificate received by the issuer after
making all required payments and required deposits under the indenture.
Salomon Smith Barney Inc. is an affiliate of the issuer, Citibank (South
Dakota) and Citibank (Nevada).
This prospectus supplement and the accompanying prospectus may be used by
Salomon Smith Barney Inc. and/or other affiliates of the issuer, Citibank
(South Dakota) and Citibank (Nevada) in connection with offers and sales
related to market-making transactions in these Class A notes. These affiliates
may act as principal or agent in these market-making transactions.
Market-making sales will be made at prices related to prevailing market prices
at the time of sale.
The issuer will receive proceeds of approximately $998,250,000 from the
sale of these Class A notes. This amount represents 99.825% of the principal
amount of these Class A notes. The issuer will receive this amount net of the
underwriting discount of $1,750,000. The underwriting discount represents
0.175% of the principal amount of these Class A notes. Additional offering
expenses are estimated to be $615,000.
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ANNEX I
This annex forms an integral part of the prospectus supplement.
THE MASTER TRUST RECEIVABLES AND ACCOUNTS
The following information relates to the credit card receivables owned by
Citibank Credit Card Master Trust I and the related credit card accounts.
Loss and Delinquency Experience
The following table sets forth the loss experience for cardholder payments
on the credit card accounts for each of the periods shown. The loss experience
set forth in the following table has not been adjusted to reflect the
experience of the accounts added to the master trust in a lump addition on
October 7, 2001. The October lump addition consisted of $6,702,943,648 of
credit card receivables, including $6,667,805,559 of principal receivables and
$35,138,089 of finance charge receivables. If the October lump addition
accounts were reflected, the loss experience set forth in the table below would
not be materially different.
Losses consist of write-offs of principal receivables. These losses are
presented below on a cash basis. If accrued finance charge receivables that
have been written off were included in losses, Net Losses would be higher as an
absolute number and as a percentage of the average of principal and finance
charge receivables outstanding during the periods indicated. Average Principal
Receivables Outstanding is the average of principal receivables outstanding
during the periods indicated. The percentage reflected for the nine months
ended September 30, 2001 is an annualized number. There can be no assurance
that the loss experience for the receivables in the future will be similar to
the historical experience set forth below.
Loss Experience for the Accounts
(Dollars in Thousands)
Nine Months Year Ended December 31,
Ended -------------------------------------
September 30, 2001 2000 1999 1998
------------------ ----------- ----------- -----------
Average Principal Receivables Outstanding...... $53,332,355 $48,929,967 $42,641,990 $36,082,462
Net Losses..................................... $ 1,767,683 $ 1,804,942 $ 2,009,133 $ 2,137,557
Net Losses as a Percentage of Average Principal
Receivables Outstanding...................... 4.43% 3.71% 4.71% 5.89%
Net losses as a percentage of gross charge-offs for the first nine months
of 2001 were 87.25% and for each of the years ended December 31, 2000, 1999 and
1998 were 87.65%, 89.80% and 91.56%, respectively. Gross charge-offs are
charge-offs before recoveries and do not include the amount of any reductions
in Average Principal Receivables Outstanding due to fraud, returned goods,
customer disputes or various other miscellaneous write-offs.
The following table sets forth the delinquency experience for cardholder
payments on the credit card accounts for each of the periods shown. The
delinquency experience set forth in the
I-1
following table has not been adjusted to reflect the delinquency experience of
the accounts included in the October lump addition. If the October lump
addition accounts were reflected, the delinquency experience set forth in the
table below would not be materially different.
The Delinquent Amount includes both principal receivables and finance
charge receivables. The percentages are the result of dividing the Delinquent
Amount by the average of principal and finance charge receivables outstanding
during the periods indicated. There can be no assurance that the delinquency
experience for the receivables in the future will be similar to the historical
experience set forth below.
Delinquencies as a Percentage of the Accounts
(Dollars in Thousands)
As of December 31,
As of ----------------------------------------------------------------
September 30, 2001 2000 1999 1998
-------------------- -------------------- -------------------- --------------------
Number of Days Delinquent Delinquent Delinquent Delinquent
Delinquent Amount Percentage Amount Percentage Amount Percentage Amount Percentage
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
35-64 days...... $ 783,122 1.45% $ 814,410 1.64% $ 705,753 1.63% $ 669,655 1.83%
65-94 days...... 508,952 0.94 469,595 0.95 379,166 0.88 391,200 1.07
95 days or more. 928,952 1.72 709,346 1.43 721,337 1.67 701,872 1.92
---------- ---- ---------- ---- ---------- ---- ---------- ----
Total........... $2,221,026 4.11% $1,993,351 4.02% $1,806,256 4.18% $1,762,727 4.82%
Revenue Experience
The revenues for the credit card accounts from finance charges, fees paid
by cardholders and interchange for the nine months ended September 30, 2001 and
for each year of the three-year period ended December 31, 2000 are set forth in
the following table. The following table has not been adjusted to reflect the
revenue experience of the accounts included in the October lump addition. If
the October lump addition accounts were reflected, the revenue experience set
forth in the table below would not be materially different.
The revenue experience in this table is presented on a cash basis before
deduction for charge-offs. Average Revenue Yield is the result of dividing
Finance Charges and Fees Paid by Average Principal Receivables Outstanding
during the periods indicated. The percentage for the nine months ended
September 30, 2001 is an annualized number. Revenues from finance charges, fees
and interchange will be affected by numerous factors, including the periodic
finance charge on the credit card receivables, the amount of any annual
membership fee, other fees paid by cardholders, the percentage of cardholders
who pay off their balances in full each month and do not incur periodic finance
charges on purchases, the percentage of credit card accounts bearing finance
charges at promotional rates and changes in the level of delinquencies on the
receivables.
Revenue Experience for the Accounts
(Dollars in Thousands)
Nine Months Year Ended December 31,
Ended ------------------------------------
September 30, 2001 2000 1999 1998
------------------ ---------- ----------- -----------
Finance Charges and Fees Paid $6,494,431 $8,096,143 $7,430,599 $6,768,295
Average Revenue Yield........ 16.28% 16.64% 17.43% 18.66%
I-2
The revenues from periodic finance charges and fees--other than annual
fees--depend in part upon the collective preference of cardholders to use their
credit cards as revolving debt instruments for purchases and cash advances and
to pay account balances over several months--as opposed to convenience use,
where cardholders pay off their entire balance each month, thereby avoiding
periodic finance charges on their purchases--and upon other card-related
services for which the cardholder pays a fee. Fees for these other services
will be treated for purposes of the pooling and servicing agreement as
principal receivables rather than finance charge receivables; however, the
Banks may specify that they will treat these fees as finance charge
receivables. Revenues from periodic finance charges and fees also depend on the
types of charges and fees assessed on the credit card accounts. Accordingly,
revenues will be affected by future changes in the types of charges and fees
assessed on the accounts and in the types of additional accounts added from
time to time. These revenues could be adversely affected by future changes in
fees and charges assessed on the accounts and other factors.
Cardholder Monthly Payment Rates
Monthly payment rates on the credit card receivables may vary because,
among other things, a cardholder may fail to make a required payment, may only
make the minimum required payment or may pay the entire outstanding balance.
Monthly payment rates on the receivables may also vary due to seasonal
purchasing and payment habits of cardholders. The following table sets forth
the highest and lowest cardholder monthly payment rates for the credit card
accounts during any month in the periods shown and the average of the
cardholder monthly payment rates for all months during the periods shown, in
each case calculated as a percentage of the total beginning account balances
for that month. The cardholder monthly payment rates set forth in the following
table have not been adjusted to reflect the experience of the accounts included
in the October lump addition. If the October lump addition accounts were
reflected, the cardholder monthly payment rates on the accounts would have been
approximately one percentage point (1%) lower than the percentages reported in
the table below.
Monthly payment rates include amounts that would be deemed payments of
principal receivables and finance charge receivables with respect to the
accounts. In addition, the amount of outstanding receivables and the rates of
payments, delinquencies, charge-offs and new borrowings on the accounts depend
on a variety of factors including seasonal variations, the availability of
other sources of credit, general economic conditions, tax laws, consumer
spending and borrowing patterns and the terms of the accounts, which may change.
Cardholder Monthly Payment Rates for the Accounts
Nine Months Year Ended December 31,
Ended ----------------------
September 30, 2001 2000 1999 1998
------------------ ----- ----- -----
Lowest Month....................... 17.43% 18.90% 20.66% 19.15%
Highest Month...................... 21.37% 23.03% 22.57% 22.31%
Average of the Months in the Period 20.08% 20.72% 21.54% 21.06%
I-3
Interchange
Creditors participating in the MasterCard International and VISA
associations receive interchange as partial compensation for taking credit
risk, absorbing fraud losses and funding receivables for a limited period
before initial billing. Under the MasterCard International and VISA systems, a
portion of this interchange in connection with cardholder charges for
merchandise and services is passed from banks which clear the transactions for
merchants to credit card-issuing banks. Interchange ranges from approximately
1% to 2% of the transaction amount. Citibank (South Dakota) is required to
transfer to the master trust interchange attributed to cardholder charges for
merchandise and services in the accounts. In general, interchange is allocated
to the master trust on the basis of the ratio that the amount of cardholder
charges for merchandise and services in the accounts bears to the total amount
of cardholder charges for merchandise and services in the portfolio of credit
card accounts maintained by Citibank (South Dakota). MasterCard International
and VISA may change the amount of interchange reimbursed to banks issuing their
credit cards.
The Credit Card Receivables
The receivables in the credit card accounts as of October 7, 2001 (as
adjusted by the October lump addition) included $575,051,193 of finance charge
receivables and $62,444,992,967 of principal receivables--which amounts include
overdue finance charge receivables and overdue principal receivables. As of
October 7, 2001 (as adjusted by the October lump addition), there were
46,589,559 accounts. Included within the accounts are inactive accounts that
have no balance. The accounts had an average principal receivable balance of
$1,340 and an average credit limit of $6,416. The average total receivable
balance in the accounts as a percentage of the average credit limit with
respect to the accounts was 21%. Approximately 78% of the accounts were opened
before October 1999. Of the accounts, approximately 13.49% related to
cardholders with billing addresses in California, 10.03% in New York, 6.63% in
Texas and 5.82% in Florida. Not more than 5% of the accounts related to
cardholders having billing addresses in any other single state.
The credit card accounts include receivables which, in accordance with the
servicer's normal servicing policies, were charged-off as uncollectible before
they were added to the master trust. However, for purposes of calculation of
the amount of principal receivables and finance charge receivables in the
master trust for any date, the balance of the charged-off receivables is zero
and the master trust owns only the right to receive recoveries on these
receivables.
The following tables summarize the credit card accounts by various criteria
as of October 7, 2001 (as adjusted by the October lump addition). References to
"Receivables Outstanding" in these tables include both finance charge
receivables and principal receivables. Because the composition of the accounts
will change in the future, these tables are not necessarily indicative of the
future composition of the accounts.
Credit balances presented in the following table are a result of cardholder
payments and credit adjustments applied in excess of a credit card account's
unpaid balance. Accounts
I-4
which have a credit balance are included because receivables may be generated
in these accounts in the future. Credit card accounts which have no balance are
included because receivables may be generated in these accounts in the future.
Composition of Accounts by Account Balance
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Account Balance Accounts Accounts Outstanding Outstanding
--------------- ---------- ---------- --------------- -----------
Credit Balance............... 433,080 0.93% $ (96,717,291) (0.15)%
No Balance................... 26,907,419 57.76 0 0.00
Less than or equal to $500.00 4,162,419 8.93 784,630,187 1.25
$500.01 to $1,000.00......... 2,019,339 4.33 1,499,120,094 2.38
$1,000.01 to $2,000.00....... 2,906,758 6.24 4,300,660,119 6.82
$2,000.01 to $3,000.00....... 2,205,789 4.73 5,495,934,890 8.72
$3,000.01 to $4,000.00....... 1,805,992 3.88 6,309,975,489 10.01
$4,000.01 to $5,000.00....... 1,645,342 3.53 7,423,417,173 11.78
$5,000.01 to $6,000.00....... 1,202,822 2.58 6,605,473,728 10.48
$6,000.01 to $7,000.00....... 898,071 1.93 5,823,936,125 9.24
$7,000.01 to $8,000.00....... 653,541 1.40 4,890,140,532 7.76
$8,000.01 to $9,000.00....... 464,751 1.00 3,941,030,232 6.25
$9,000.01 to $10,000.00...... 354,059 0.76 3,359,463,508 5.33
Over $10,000.00.............. 930,177 2.00 12,682,979,373 20.13
---------- ------ --------------- ------
Total..................... 46,589,559 100.00% $63,020,044,159 100.00%
Composition of Accounts by Credit Limit
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Credit Limit Accounts Accounts Outstanding Outstanding
------------ ---------- ---------- --------------- -----------
Less than or equal to $500.00 2,865,439 6.15% $ 63,597,688 0.10%
$500.01 to $1,000.00......... 2,354,750 5.05 310,787,845 0.49
$1,000.01 to $2,000.00....... 4,842,021 10.39 1,455,215,600 2.31
$2,000.01 to $3,000.00....... 4,085,153 8.77 2,204,667,151 3.50
$3,000.01 to $4,000.00....... 3,316,802 7.12 2,611,461,217 4.14
$4,000.01 to $5,000.00....... 5,283,375 11.34 5,078,196,874 8.06
Over $5,000.00............... 23,842,019 51.18 51,296,117,784 81.40
---------- ------ --------------- ------
Total..................... 46,589,559 100.00% $63,020,044,159 100.00%
Accounts presented in the table below as ''Current'' include accounts on
which the minimum payment has not been received before the next billing date
following the issuance of the related bill.
I-5
Compostion of Accounts by Payment Status
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Payment Status Accounts Accounts Outstanding Outstanding
-------------- ---------- ---------- --------------- -----------
Current................... 45,385,228 97.42% $58,310,370,186 92.52%
Up to 34 days delinquent.. 682,268 1.46 2,519,844,939 4.00
35 to 64 days delinquent.. 198,748 0.43 768,939,155 1.22
65 to 94 days delinquent.. 118,111 0.25 500,368,533 0.79
95 to 124 days delinquent. 84,096 0.18 371,132,527 0.59
125 to 154 days delinquent 67,118 0.14 300,281,502 0.48
155 to 184 days delinquent 53,990 0.12 249,107,317 0.40
---------- ------ --------------- ------
Total.................. 46,589,559 100.00% $63,020,044,159 100.00%
Composition of Accounts by Age
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Age Accounts Accounts Outstanding Outstanding
--- ---------- ---------- --------------- -----------
Less than or equal to 6 months 2,341,379 5.03% $ 6,376,287,316 10.12%
Over 6 months to 12 months.... 2,411,107 5.17 4,671,648,983 7.41
Over 12 months to 24 months... 5,645,570 12.12 9,180,502,013 14.57
Over 24 months to 36 months... 3,354,956 7.20 4,323,160,411 6.86
Over 36 months to 48 months... 2,595,354 5.57 3,483,186,112 5.53
Over 48 months................ 30,241,193 64.91 34,985,259,324 55.51
---------- ------ --------------- ------
Total...................... 46,589,559 100.00% $63,020,044,159 100.00%
Billing and Payments
The credit card accounts have different billing and payment structures,
including different periodic finance charges and fees. The following
information reflects the current billing and payment characteristics of the
accounts.
Each month, billing statements are sent to cardholders who had activity
during the immediately preceding billing period. To the extent a cardholder has
a balance due, the cardholder must make a minimum payment equal to the sum of
(1) the amount which is past due plus any amount which is in excess of
the credit limit,
(2) if the account is a combined credit card and a separate AT&T
calling card, the sum of all calling transactions posted to the
account in the current billing period, and
(3) the new balance on the billing statement if it is less than $20, or
$20, if the new balance is at least $20 and not greater than $960,
or if the new balance exceeds $960, 1/48/th of the new balance. /
The required minimum payment, however, cannot be less than the finance charges
billed.
I-6
A periodic finance charge is imposed on the credit card accounts. The
periodic finance charge imposed on balances for purchases and cash advances for
a majority of the accounts is calculated by multiplying (1) the daily balances
for each day during the billing cycle by (2) the applicable daily periodic
finance charge rate, and summing the results for each day in the billing
period. The daily balance is calculated by taking the previous day's balance,
adding any new purchases or cash advances and fees, adding the daily finance
charge on the previous day's balance, and subtracting any payments or credits.
Cash advances are included in the daily balance from the date the advances are
made. Purchases are included in the daily balance generally from the date of
purchase. Periodic finance charges are not imposed in most circumstances on
purchase amounts if all balances shown in the previous billing statement are
paid in full by the due date indicated on the statement.
No finance charge is imposed on calling card transactions in the billing
cycle in which the transactions are posted to the account. The receivables
represented by these charges are not part of the master trust's assets.
However, any charge for calling card transactions that is not paid by the
payment due date on the monthly statement in which it is billed is added to the
daily balance of purchases on the first day of the next billing cycle. These
unpaid calling card transactions, and any finance charges on these unpaid
transactions, then become receivables that are part of the master trust's
assets.
The periodic finance charge imposed on balances in most credit card
accounts for purchases is currently the Prime Rate, as published in The Wall
Street Journal, plus a percentage ranging from 5.40% to 11.99%. As of the most
recent monthly reset date, the periodic finance charge on balances in most
accounts for purchases ranged from 10.15% to 16.74%. The periodic finance
charge imposed on balances in most credit card accounts for cash advances is
currently 19.99%. If a cardholder defaults under their credit card agreement,
the periodic finance charge assessed on all balances in their account can be
increased up to 24.99%. Promotional rates of limited duration are offered from
time to time to attract new cardholders and to promote balance transfers from
other credit card issuers and the periodic finance charge on a limited number
of accounts may be greater or less than those generally assessed on the
accounts.
The periodic finance charge on accounts may be changed at any time by
providing prior written notice to cardholders. Any increase in the finance
charge will become effective upon the earlier of subsequent use of a card and
the expiration of a 25-day period from the date the change was made
effective--assuming failure on the part of the cardholder to object to the new
rate.
Most of the accounts are subject to additional fees, including:
. a late fee if the cardholder does not make the required minimum payment
by the payment date shown on the monthly billing statement, which fee
is assessed monthly until the account is less than 30 days past due.
The late fee is $15 on balances up to $100, $25 on balances of $100 up
to $1,000 and $35 on balances of $1,000 and over;
I-7
. a cash advance fee which is generally equal to 3.0% of the amount of
the cash advance, subject to a minimum fee of $5;
. a balance transfer fee of 3.0% of the amount transferred to the
account, subject to a minimum fee of $5 and a maximum fee of $50;
. a returned payment fee of $29;
. a returned check fee of $29;
. a stop payment fee of $29; and
. a fee of $29 for each billing period with respect to each account with
an outstanding balance over the credit limit established for that
account.
There can be no assurance that periodic finance charges, fees and other
charges will remain at current levels in the future. Payments by cardholders on
the accounts are processed and applied first to all minimum amounts due.
Payments in excess of the minimum amount due are applied to the following items
in the following order:
(1) balances associated with lower, promotional periodic finance
charges,
(2) balances related to purchases, and
(3) balances related to cash advances.
I-8
Prospectus
Dated January 23, 2002
Citibank Credit Card Issuance Trust
Class A Notes
Class B Notes
Class C Notes
Citibank (South Dakota), National Association
Citibank (Nevada), National Association
Originators of the Trust
We will provide the specific terms of the notes in supplements to this
prospectus. You should read this prospectus and the applicable supplement to
this prospectus carefully before you invest.
Principal payments on the Class B notes of a series are subordinated to
payments on the Class A notes of that series. Principal payments on the Class C
notes of a series are subordinated to payments on the Class A notes and Class B
notes of that series.
You should review and consider the discussion under "Risk Factors" beginning on
page 15 of this prospectus before you purchase any notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the notes or determined that this prospectus or any
applicable supplement to this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Citibank Credit Card Issuance Trust is the issuer of the notes. The notes are
obligations of Citibank Credit Card Issuance Trust only and are not obligations
of any other person. Each class of notes is secured by only some of the assets
of Citibank Credit Card Issuance Trust. Noteholders will have no recourse to
any other assets of Citibank Credit Card Issuance Trust for the payment of the
notes. The notes are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY...................... 1
RISK FACTORS............................ 15
Only some of the assets of the
issuer are available for
payments on any class of
notes.............................. 15
Cardholder payment patterns and
credit card usage may affect the
timing and amount of payments
to you............................. 15
Class A and Class B notes of a
multiple issuance series can lose
their subordination protection
under some circumstances........... 16
You may receive principal
payments earlier or later than
the expected principal payment
date............................... 17
Reductions in the nominal
liquidation amount could reduce
payment of principal to you........ 17
Allocations of charged-off
receivables in the master trust
could reduce payments to
you................................ 17
Reset of interest rate on credit
card receivables in the master
trust may reduce the amount of
finance charge collections
available for interest payments
on the notes....................... 18
Citibank (South Dakota)'s ability
to change terms of the credit
card accounts could alter
payment patterns................... 18
Addition of accounts to the master
trust may affect credit quality
and lessen the issuer's ability to
make payments to you............... 19
Page
----
Citibank (South Dakota) and
Citibank (Nevada) may not be
able to designate new accounts
to the master trust when
required by the pooling and
servicing agreement................ 19
Class B notes and Class C notes
bear losses before Class A
notes.............................. 20
Payment of Class B notes and
Class C notes may be delayed
due to the subordination
provisions......................... 20
You may not be able to reinvest
any early redemption proceeds
in a comparable security........... 21
Your ability to resell notes may be
limited............................ 22
If the ratings of the notes are
lowered or withdrawn, their
market value could decrease........ 22
Issuance of additional notes or
master trust investor certificates
may affect the timing and
amount of payments to you.......... 22
Legal aspects could affect the
timing and amount of payments
to you............................. 23
Competition in the credit card
industry could affect the timing
and amount of payments to
you................................ 26
You may have limited control of
actions under the indenture and
the pooling and servicing
agreement.......................... 27
Your remedies upon default may
be limited......................... 28
THE ISSUER.............................. 28
The Owners........................... 29
(i)
Page
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USE OF PROCEEDS........................ 29
THE NOTES.............................. 29
Interest............................ 31
Principal........................... 32
Stated Principal Amount,
Outstanding Dollar Principal
Amount and Nominal
Liquidation Amount of Notes....... 33
Subordination of Principal.......... 37
Redemption and Early
Redemption of Notes............... 39
Issuances of New Series, Classes
and Subclasses of Notes........... 39
Required Subordinated Amount........ 43
Payments on Notes; Paying
Agent............................. 45
Denominations....................... 45
Record Date......................... 46
Governing Law....................... 46
Form, Exchange, and Registration
and Transfer of Notes............. 46
Book-Entry Notes.................... 46
Replacement of Notes................ 52
Acquisition and Cancellation of
Notes by the Issuer and the
Banks............................. 52
SOURCES OF FUNDS TO PAY
THE NOTES............................ 53
The Collateral Certificate.......... 53
Derivative Agreements............... 55
The Trust Accounts.................. 56
Limited Recourse to the Issuer;
Security for the Notes............ 57
The Indenture Trustee............... 58
DEPOSIT AND APPLICATION OF
FUNDS................................ 58
Allocation of Finance Charge
Collections to Accounts........... 58
Allocation of Principal Collections
to Accounts....................... 59
Targeted Deposits of Finance
Charge Collections to the
Interest Funding Account.......... 60
Page
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Payments Received from
Derivative Counterparties for
Interest.......................... 63
Deposit of Principal Funding
Subaccount Earnings in Interest
Funding Subaccounts; Principal
Funding Subaccount Earnings
Shortfall......................... 63
Deposits of Withdrawals from the
Class C Reserve Account to the
Interest Funding Account.......... 63
Allocation to Interest Funding
Subaccounts....................... 64
Withdrawals from Interest
Funding Account................... 65
Targeted Deposits of Principal
Collections to the Principal
Funding Account................... 66
Payments Received from
Derivative Counterparties for
Principal......................... 68
Deposits of Withdrawals from the
Class C Reserve Account to the
Principal Funding Account......... 68
Deposits of Proceeds of the Sale of
Credit Card Receivables........... 68
Reallocation of Funds on Deposit
in the Principal Funding
Subaccounts....................... 69
Withdrawals from Principal
Funding Account................... 70
Limit on Reallocations of
Principal Collections from
Subordinated Classes Taken to
Benefit Senior Classes of Single
Issuance Series................... 72
Limit on Reallocations of
Principal Collections from
Subordinated Classes Taken to
Benefit Senior Classes of
Multiple Issuance Series.......... 73
Limit on Repayments of
Subordinated Classes of Single
Issuance Series................... 75
(ii)
Page
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Limit on Repayments of
Subordinated Classes of
Multiple Issuance Series........ 76
Limit on Allocations of Principal
Collections of All Classes or
Subclasses of Notes............. 78
Targeted Deposits to the Class C
Reserve Account................. 79
Withdrawals from the Class C
Reserve Account................. 79
Sale of Credit Card
Receivables..................... 80
Final Payment of the Notes........ 83
Pro Rata Payments Within a Class
or Subclass..................... 83
COVENANTS, EVENTS OF
DEFAULT AND EARLY
REDEMPTION EVENTS.................. 83
Issuer Covenants.................. 83
Events of Default................. 84
Early Redemption Events........... 86
MEETINGS, VOTING AND
AMENDMENTS......................... 88
Meetings.......................... 88
Voting............................ 88
Amendments to the Pooling and
Servicing Agreement............. 88
Amendments to the Indenture....... 89
Amendments to the Trust
Agreement....................... 91
Tax Opinions for Amendments....... 91
NOTICES AND REPORTS.................. 91
Notices........................... 91
Issuer's Annual Compliance
Statement....................... 91
Indenture Trustee's Annual
Report.......................... 91
List of Noteholders............... 92
Reports........................... 92
THE MASTER TRUST..................... 92
Master Trust Assets............... 93
The Servicer...................... 97
Page
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Master Trust Issuances; Sellers'
Interest........................ 98
Allocation of Collections, Losses
and Fees........................ 98
Early Amortization Events......... 99
Optional Termination; Final
Payment of Master Trust
Investor Certificates........... 101
TAX MATTERS.......................... 101
Tax Characterization of the
Notes........................... 102
Tax Characterization of the
Issuer.......................... 102
U.S. and Non-U.S.
Noteholders..................... 102
Tax Consequences to U.S.
Noteholders..................... 103
Tax Consequences to Non-U.S.
Noteholders..................... 106
BENEFIT PLAN INVESTORS............... 109
Prohibited Transactions........... 109
Potential Prohibited Transactions
from Investment in Notes........ 109
Investment by Benefit Plan
Investors....................... 111
Tax Consequences to Benefit
Plans........................... 111
PLAN OF DISTRIBUTION................. 111
LEGAL MATTERS........................ 112
WHERE YOU CAN FIND
ADDITIONAL
INFORMATION........................ 113
GLOSSARY OF DEFINED
TERMS.............................. 114
ANNEX I
THE CREDIT CARD BUSINESS
OF CITIBANK (SOUTH
DAKOTA)............................ A-1
General........................... A-1
Acquisition and Use of Credit
Cards........................... A-1
Collection of Delinquent
Accounts........................ A-3
(iii)
PROSPECTUS SUMMARY
This summary does not contain all the information you may need to make an
informed investment decision. You should read the entire prospectus and any
supplement to this prospectus before you purchase any notes. The accompanying
supplement to this prospectus may supplement disclosure in this prospectus.
There is a glossary beginning on page 114 where you will find the
definitions of some terms used in this prospectus.
Securities Offered.......... The issuer is offering Class A notes, Class B
notes and Class C notes. The notes will be issued
pursuant to an indenture between the issuer and
Bankers Trust Company, as trustee. References to
the "notes" in this summary and elsewhere in this
prospectus refer to the notes offered by this
prospectus, unless the context requires otherwise.
Issuer...................... Citibank Credit Card Issuance Trust, a Delaware
statutory business trust, is the issuer of the
notes. The issuer's primary asset is the
collateral certificate issued by the master
trust. The address of the issuer is Citibank
Credit Card Issuance Trust, c/o Citibank (South
Dakota), National Association, as managing
beneficiary, 701 East 60th Street, North, Mail
Code 1251, Sioux Falls, South Dakota 57117. Its
telephone number is (605) 331-1567.
Master Trust................ Citibank Credit Card Master Trust I is the issuer
of the collateral certificate, which is the
primary asset of the issuer. For a description of
the collateral certificate, see "Sources of Funds
to Pay the Notes--The Collateral Certificate."
The master trust's assets consist primarily of
credit card receivables arising in a portfolio of
revolving credit card accounts. For a description
of the master trust, see "The Master Trust."
The Banks................... Citibank (South Dakota), National Association and
Citibank (Nevada), National Association formed
the master trust and transferred credit card
receivables to the master trust. Citibank (South
Dakota) will be responsible for servicing,
managing and making collections on the credit
card receivables in the master trust.
Citibank (South Dakota) and Citibank (Nevada)
formed the issuer, and Citibank (South Dakota) is
the manager of the issuer.
1
Indenture Trustee........... Bankers Trust Company, a New York banking
corporation, is the trustee under the indenture
for the notes.
Series of Notes............. The notes will be issued in series. Each series
will be either a single issuance series or a
multiple issuance series.
Single Issuance Series. A single issuance series
is a series of notes consisting of three classes,
Class A, Class B and Class C, issued on or about
a single date. The expected principal payment
dates and legal maturity dates of the
subordinated classes of a single issuance series
will either be the same as or later than those of
the senior classes of that series. No new notes
will be issued as part of a single issuance
series after the initial issuance date.
The subordinated notes of a single issuance
series provide subordination only to the senior
notes of that series.
Multiple Issuance Series. A multiple issuance
series is a series of notes consisting of three
classes: Class A, Class B and Class C. Each class
may consist of multiple subclasses. Notes of any
subclass can be issued on any date so long as
there are enough outstanding subordinated notes
to provide the necessary subordination protection
for outstanding and newly issued senior notes.
See "The Notes--Issuances of New Series, Classes
and Subclasses of Notes." The expected principal
payment dates and legal maturity dates of the
senior and subordinated classes of a multiple
issuance series may be different, and
subordinated notes may have expected principal
payment dates and legal maturity dates earlier
than some or all senior notes of the same series.
Subordinated notes will not be paid before their
legal maturity date, unless, after payment, the
remaining subordinated notes provide the required
amount of subordination protection for the senior
notes of that series.
All of the subordinated notes of a multiple
issuance series provide subordination protection
to the senior notes of that series to the extent
of the required subordinated amount of the senior
notes of that series, regardless of whether the
subordinated notes are issued before, at the same
time as, or after the senior notes of that series.
2
Interest Payments........... Each class of notes, other than zero-coupon
discount notes, will bear interest from the date
and at the rate set forth or as determined in a
supplement to this prospectus. Interest on the
notes will be paid on the interest payment dates
specified in a supplement to this prospectus.
Expected Principal
Payment Date and Legal
Maturity Date............. The issuer expects to pay the stated principal
amount of each note in one payment on that note's
expected principal payment date. The expected
principal payment date of a note is two years
before its legal maturity date. The legal
maturity date is the date on which a note is
legally required to be fully paid. The expected
principal payment date and legal maturity date
for a note will be specified in a supplement to
this prospectus.
The issuer is obligated to pay the stated
principal amount of a note on its expected
principal payment date, or upon the occurrence of
an early redemption event or event of default
only to the extent that funds are available for
that purpose and, in the case of subordinated
notes, that payment is permitted by the
subordination provisions of the senior notes of
the same series. The remedies a noteholder may
exercise following an event of default and
acceleration or on the legal maturity date are
described in "Covenants, Events of Default and
Early Redemption Events--Events of Default" and
"Deposit and Application of Funds--Sale of Credit
Card Receivables."
Stated Principal Amount,
Outstanding Dollar
Principal Amount and
Nominal Liquidation
Amount of Notes........... Each note has a stated principal amount, an
outstanding dollar principal amount and a nominal
liquidation amount.
. Stated Principal Amount. The stated principal
amount of a note is the amount that is stated
on the face of the note to be payable to the
holder. It can be denominated in U.S. dollars
or a foreign currency.
. Outstanding Dollar Principal Amount. For U.S.
dollar notes, the outstanding dollar principal
amount
3
will be the same as the stated principal
amount, less principal payments to
noteholders. For foreign currency notes, the
outstanding dollar principal amount will be
the U.S. dollar equivalent of the stated
principal amount of the notes, less dollar
payments to derivative counterparties with
respect to principal. For discount notes, the
outstanding dollar principal amount will be an
amount stated in, or determined by a formula
described in, the applicable supplement to
this prospectus.
. Nominal Liquidation Amount. The nominal
liquidation amount of a note is a U.S. dollar
amount based on the outstanding dollar
principal amount of the note, but after
deducting
-- all reallocations of principal of that note
to pay interest on senior classes of notes
of the same series;
-- allocations of that note's proportionate
share of the charge-offs of principal
receivables in the master trust;
-- amounts on deposit in the principal funding
subaccount for that note after giving
effect to all reallocations to or from that
subaccount;
and adding back all reimbursements, from excess
finance charge collections allocated to that note,
of reallocations of principal collections to pay
interest on senior classes of notes or charge-offs
of principal receivables in the master trust.
Excess finance charge collections are the finance
charge collections that remain after the payment
of interest and other required payments under the
master trust and with respect to the notes. For
more information, see the definition of "Excess
Finance Charge Collections" in the glossary.
The nominal liquidation amount of a class of notes
corresponds to the portion of the invested amount
of the collateral certificate that is allocated to
support that class of notes.
The aggregate nominal liquidation amount of all of
the notes is equal to the invested amount of the
collateral
4
certificate. The invested amount of the collateral
certificate corresponds to the amount of principal
receivables in the master trust that is allocated
to support the collateral certificate. For a more
detailed discussion, see "Invested Amount" in the
glossary. Anything that increases or decreases the
invested amount of the collateral certificate will
also increase or decrease the aggregate nominal
liquidation amount of the notes.
Upon a sale of credit card receivables held by the
master trust directed by a class of notes
following an event of default and acceleration, or
on that class's legal maturity date, as described
in "Deposit and Application of Funds--Sale of
Credit Card Receivables," the nominal liquidation
amount of that class will be reduced to zero.
For a detailed discussion of nominal liquidation
amount, see "The Notes--Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes."
Subordination of Principal Principal payments on the Class B notes of a
series are subordinated to payments on the Class A
notes of that series. Principal payments on the
Class C notes of a series are subordinated to
payments on the Class A notes and Class B notes of
that series. See "The Notes--Subordination of
Principal" and "Deposit and Application of Funds"
for a discussion of the extent, manner and
limitations of the subordination of Class B and
Class C notes.
Sources of Funds to
Pay the Notes........... The issuer will have the following sources of
funds to pay principal and interest on the notes:
. The collateral certificate issued by Citibank
Credit Card Master Trust I. The collateral
certificate is an investor certificate issued
by the master trust to the issuer. It
represents an undivided interest in the assets
of the master trust. The master trust owns
primarily credit card receivables arising in
selected MasterCard and VISA revolving credit
card accounts. Citibank (South Dakota) and
Citibank (Nevada) have
transferred the credit card receivables to the
master
5
trust in accordance with the terms of a
pooling and servicing agreement among Citibank
(South Dakota), Citibank (Nevada) and Bankers
Trust Company, as trustee. Both principal
collections and finance charge collections on
the receivables will, in general, be allocated
pro rata among holders of interests in the
master trust--including the collateral
certificate--based on the investment in credit
card receivables of each interest in the
master trust. If collections of receivables
allocable to the collateral certificate are
less than expected, payments of principal of
and interest on the notes could be delayed or
remain unpaid.
The collateral certificate has an investment
grade rating from at least one nationally
recognized rating agency.
. Derivative Agreements. Some classes of notes
may have the benefit of one or more derivative
agreements, including interest rate or
currency swaps, caps, collars, guaranteed
investment contracts or other similar
agreements with various counterparties.
Citibank (South Dakota), Citibank (Nevada) or
any of their affiliates may be counterparties
to a derivative agreement. A description of
the specific terms of each derivative
agreement and each derivative counterparty
will be included in the applicable supplement
to this prospectus.
. The Trust Accounts. The issuer has
established a collection account for the
purpose of receiving payments of finance
charge collections and principal collections
from the master trust payable under the
collateral certificate.
The issuer has also established a principal
funding account, an interest funding account
and a Class C reserve account. Each one of
those accounts will have subaccounts for a
class or subclass of notes of a series. Also,
if specified in a supplement to this
prospectus, the issuer may establish
supplemental accounts for any series, class or
subclass of notes.
6
Each month, distributions on the collateral
certificate will be deposited into the
collection account. Those deposits will then
be reallocated to
-- the principal funding account;
-- the interest funding account;
-- the Class C reserve account;
-- any supplemental account;
-- payments under any applicable derivative
agreements; and
-- the other purposes as specified in "Deposit
and Application of Funds" or in a
supplement to this prospectus.
Funds on deposit in the principal funding account
and the interest funding account will be used to
make payments of principal of and interest on the
notes.
The Class C reserve account will initially not be
funded. If the finance charge collections
generated by the master trust fall below a level
specified in the applicable supplement to this
prospectus, the Class C reserve account will be
funded as described under "Deposit and Application
of Funds--Targeted Deposits to the Class C Reserve
Account."
Funds on deposit in the Class C reserve account
will be available to holders of Class C notes to
cover shortfalls of interest payable on interest
payment dates. Funds on deposit in the Class C
reserve account will also be available to holders
of Class C notes on any day when principal is
payable, but only to the extent that the nominal
liquidation amount of the Class C notes plus funds
on deposit in the Class C principal funding
account is less than the outstanding dollar
principal amount of the Class C notes.
Only the holders of Class C notes will have the
benefit of the Class C reserve account. See
"Deposit and Application of Funds--Withdrawals
from the Class C Reserve Account."
7
Limited Recourse to
the Issuer.............. The sole source of payment for principal of or
interest on a class of notes is provided by:
. the portion of the principal collections and
finance charge collections received by the
issuer under the collateral certificate and
available to that class of notes after giving
effect to all allocations and reallocations;
. funds in the applicable trust accounts for
that class of notes; and
. payments received under any applicable
derivative agreement for that class of notes.
Noteholders will have no recourse to any other
assets of the issuer or any other person or entity
for the payment of principal of or interest on the
notes.
A further restriction applies if a class of notes
directs the master trust to sell credit card
receivables following an event of default and
acceleration, or on the applicable legal maturity
date, as described in "Deposit and Application of
Funds--Sale of Credit Card Receivables." In that
case, that class of notes has recourse only to the
proceeds of that sale and investment earnings on
those proceeds.
Security for the Notes.... The notes of all series are secured by a shared
security interest in the collateral certificate
and the collection account, but each class of
notes is entitled to the benefits of only that
portion of those assets allocated to it under the
indenture.
Each class of notes is also secured by
. a security interest in the applicable
principal funding subaccount;
. the applicable interest funding subaccount;
. in the case of a class of Class C notes, the
applicable Class C reserve subaccount;
. any applicable supplemental account; and
. by a security interest in any derivative
agreement for that class.
8
Redemption and Early
Redemption of Notes..... If we specify in a supplement to this prospectus,
the issuer or a noteholder may, at its option,
redeem the notes of any series or class before its
expected principal payment date. The supplement
will indicate who will have that right of
redemption as well as the terms of that redemption.
In addition, the issuer is required to redeem any
note upon the occurrence of an early redemption
event with respect to that note, but only to the
extent of available funds. Available funds are
funds that are available to that note after giving
effect to all allocations and reallocations.
In addition, payment of subordinated notes that
provide subordination protection to senior notes
is limited as described under "Limit on Repayment
of all Notes" in this summary. It is not an event
of default if the issuer fails to redeem a note
because it does not have sufficient funds
available or because payment of the note is
delayed to provide required subordination
protection to a senior class of notes.
Early redemption events include the following:
. for any note, the occurrence of the expected
principal payment date of that note;
. each of the early amortization events
applicable to the collateral certificate, as
described under "The Master Trust--Early
Amortization Events";
. mandatory prepayment of the entire collateral
certificate resulting from a breach of a
representation or warranty by Citibank (South
Dakota) or Citibank (Nevada) under the pooling
and servicing agreement;
. some events relating to the performance of the
credit card receivables owned by the master
trust as described under "Covenants, Events of
Default and Early Redemption Events--Early
Redemption Events"; and
. any additional early redemption events
specified in a supplement to this prospectus.
9
This list summarizes only some of the early
redemption events. See "Covenants, Events of
Default and Early Redemption Events--Early
Redemption Events" for a description of the early
redemption events and their consequences to
holders of notes.
Events of Default......... The documents that govern the terms and conditions
of the notes include a list of adverse events
known as "events of default." Some events of
default result in an automatic acceleration of
those notes, and others result in the right of the
holders of the affected class of notes to demand
acceleration after an affirmative vote by holders
of more than 50% of the affected class of notes.
Events of default for any class of notes include
the following:
. the issuer fails to pay interest on any note
of that class within five business days of its
due date;
. the issuer fails to pay in full principal of
any note of that class on its legal maturity
date;
. the issuer defaults on any covenant or
breaches any agreement under the indenture
after applicable notice and cure periods, and
the default or breach is materially adverse to
noteholders;
. the occurrence of some events of bankruptcy,
insolvency or reorganization of the issuer; or
. any additional events of default specified in
a supplement to this prospectus.
This list summarizes only some of the events of
default. See "Covenants, Events of Default and
Early Redemption Events--Events of Default" for a
description of the events of default and their
consequences to holders of notes.
It is not an event of default if the stated
principal amount of a note is not paid on its
expected principal payment date.
10
Event of Default Remedies. After an event of default and acceleration of a
class of notes, funds on deposit in the principal
funding subaccount and the interest funding
subaccount for that class of notes will be applied
to pay principal of and interest on those notes.
Then, in each following month, principal
collections and finance charge collections
allocated to those notes will be applied to make
monthly principal and interest payments on those
notes until the earlier of the date those notes
are paid in full or the legal maturity date of
those notes. However, if your notes are
subordinated notes, you will receive full payment
of principal of those notes only if and to the
extent that, after giving effect to that payment,
the required subordinated amount will be
maintained for senior notes in that series. See
"Deposit and Application of Funds--Limit on
Repayments of Subordinated Classes of Single
Issuance Series" and "--Limit on Repayments of
Subordinated Classes of Multiple Issuance Series."
If an event of default of a class of notes occurs
and that class is accelerated, the indenture
trustee may, and at the direction of the majority
of the noteholders of that class will, direct the
master trust to sell credit card receivables.
However, this sale of receivables may occur only
if the conditions specified in "Covenants, Events
of Default and Early Redemption Events--Events of
Default" are satisfied or on the legal maturity
date of that class of notes. The proceeds of a
sale of credit card receivables will be deposited
directly to the principal funding subaccount for
the accelerated notes. Upon the sale of the
receivables of the accelerated notes, the nominal
liquidation amount of those notes will be reduced
to zero. See "Deposit and Application of
Funds--Sale of Credit Card Receivables."
Limit on Repayment of All
Notes................... You may not receive full repayment of your notes if
. the nominal liquidation amount of your notes
has been reduced by charge-offs of principal
receivables in the master trust or as the
result of reallocations of principal
collections to pay interest on senior classes
of notes, and those amounts have not been
reimbursed from excess finance charge
collections; or
11
. receivables are sold after an event of default
and acceleration or on the legal maturity date
and the proceeds from the sale of receivables
are insufficient.
Subordinated notes that reach their expected
principal payment date, or that have an early
redemption event, event of default or other
optional or mandatory redemption, will not be paid
to the extent that those notes are necessary to
provide the required subordinated amount to senior
classes of notes of the same series. If a class of
subordinated notes cannot be paid because of the
subordination provisions of the indenture,
prefunding of the principal funding subaccounts
for the senior notes of the same series will
begin, as described in "Deposit and Application of
Funds--Targeted Deposits of Principal Collections
to the Principal Funding Account." After that
time, the remaining amount of those subordinated
notes will be paid only to the extent that:
. enough notes of senior classes of that series
are repaid so that the subordinated notes that
are paid are no longer necessary to provide
the required subordinated amount; or
. in the case of multiple issuance series, new
classes of subordinated notes of that series
are issued so that the subordinated notes that
are paid are no longer necessary to provide
the required subordinated amount; or
. the principal funding subaccounts for the
senior classes of notes of that series are
fully prefunded so that none of the
subordinated notes that are paid are necessary
to provide the required subordinated amount; or
. the subordinated notes reach their legal
maturity date.
On the legal maturity date of a class of notes,
all amounts on deposit in the principal funding
subaccount for that class, after giving effect to
all allocations, reallocations and sales of
receivables, will be paid to the noteholders of
that class, even if payment would reduce the
amount of subordination protection below the
required subordinated amount of the senior classes
of that series.
12
See "Deposit and Application of Funds--Targeted
Deposits of Principal Collections to the Principal
Funding Account--Prefunding of the Principal
Funding Account for Senior Classes," and "--Sale
of Credit Card Receivables."
Registration, Clearance
and Settlement.......... The notes will be registered in the name of The
Depository Trust Company or its nominee, and
purchasers of notes will not be entitled to
receive a definitive certificate except under
limited circumstances. Owners of notes may elect
to hold their notes through The Depository Trust
Company in the United States or through
Clearstream Banking, societe anonyme or the
Euroclear System in Europe. Transfers will be made
in accordance with the rules and operating
procedures of those clearing systems. See "The
Notes--Book-Entry Notes."
ERISA Eligibility......... The indenture permits benefit plans to purchase
notes of every class. A fiduciary of a benefit
plan should consult its counsel as to whether a
purchase of notes by the plan is permitted by
ERISA and the Internal Revenue Code.
Tax Status................ In the opinion of Cravath, Swaine & Moore, special
tax counsel to the issuer, for United States
federal income tax purposes (1) the notes will be
treated as indebtedness and (2) the issuer will
not be an association or a publicly traded
partnership taxable as a corporation. In addition,
noteholders will agree, by acquiring notes, to
treat the notes as debt of Citibank (South Dakota)
and Citibank (Nevada) for federal, state and local
income and franchise tax purposes.
Denominations............. The notes will be issued in denominations of
$1,000 and multiples of $1,000 in excess of that
amount.
Record Date............... The record date for payment of the notes will be
the last day of the month before the related
payment date.
13
Ratings................... It is a condition to the issuance of the notes
that they are rated no lower than the following
rating categories by at least one nationally
recognized rating agency:
Note Rating
---- ------
Class A................. AAA or its equivalent
Class B................. A or its equivalent
Class C................. BBB or its equivalent
If a class of notes has subclasses, each subclass
offered by this prospectus will have the same
rating requirement as the class of notes of which
it is a part.
The issuer may also issue notes not offered by
this prospectus that do not meet these rating
requirements so long as the issuer obtains (i)
confirmation from each rating agency that has
rated any outstanding notes that the new series,
class or subclass of notes to be issued will not
cause a reduction or withdrawal of the ratings of
any outstanding notes rated by that rating agency
and (ii) appropriate tax opinions.
See "Risk Factors--If the ratings of the notes are
lowered or withdrawn, their market value could
decrease."
14
RISK FACTORS
The following is a summary of the material risks that apply to an
investment in the notes. The remainder of this prospectus and the attached
supplement provide much more detailed information about these risks. You should
consider the following risk factors in deciding whether to purchase the notes.
There is a glossary beginning on page 114 where you will find the
definitions of some terms used in this prospectus.
Only some of the assets of the issuer are available for payments on any class
of notes
The sole source of payment of principal of or interest on a class of notes
is provided by:
. the portion of the principal collections and finance charge collections
received by the issuer under the collateral certificate and available
to that class of notes after giving effect to all allocations and
reallocations;
. the applicable trust accounts for that class of notes; and
. payments received under any applicable derivative agreement for that
class of notes.
As a result, you must rely only on the particular allocated assets as security
for your class of notes for repayment of the principal of and interest on your
notes. You will not have recourse to any other assets of the issuer or any
other person for payment of your notes. See "Sources of Funds to Pay the Notes."
A further restriction applies if a class of notes directs the master trust
to sell credit card receivables following an event of default and acceleration,
or on the applicable legal maturity date, as described in "Deposit and
Application of Funds--Sale of Credit Card Receivables." In that case, that
class of notes has recourse only to the proceeds of that sale and investment
earnings on those proceeds.
Cardholder payment patterns and credit card usage may affect the timing and
amount of payments to you
The amount of principal collections available to pay your notes on any
principal payment date or to make deposits into the principal funding account
will depend on many factors, including:
. the rate of repayment of credit card balances by cardholders, which may
be earlier or later than expected;
. the extent of credit card usage by cardholders, and the creation of
additional receivables in the accounts designated to the master trust;
and
. the rate of default by cardholders, which means that receivables may
not be paid at all.
15
Changes in payment patterns and credit card usage result from a variety of
economic, social and legal factors. Economic factors include the rate of
inflation, unemployment levels and relative interest rates. Social factors
include consumer confidence levels and the public's attitude about incurring
debt and the stigma of personal bankruptcy. For some of the legal factors, see
"--Legal aspects could affect the timing and amount of payments to you" below.
The availability of incentive or other award programs may also affect
cardholders' actions. We cannot predict how these or other factors will affect
repayment patterns or card use and, consequently, the timing and amount of
payments on your notes.
Class A and Class B notes of a multiple issuance series can lose their
subordination protection under some circumstances
Class B notes and Class C notes of a multiple issuance series may have
expected principal payment dates and legal maturity dates earlier than some or
all of the notes of the senior classes of that series.
If notes of a subordinated class reach their expected principal payment
date at a time when they are needed to provide subordination protection to the
senior classes of the same series, and the issuer is unable to issue additional
notes of that subordinated class, prefunding of the senior classes of that
series will begin. The principal funding subaccounts for the senior classes
will be prefunded with monthly collections of principal receivables in the
master trust allocable to that series in an amount necessary to maintain the
required subordination protection for the senior classes, if available. See
"Deposit and Application of Funds--Targeted Deposits of Principal Collections
to the Principal Funding Account."
There will be a two-year period between the expected principal payment date
and the legal maturity date of the subordinated notes to prefund the principal
funding subaccounts for the senior classes of that series. The subordinated
notes will be paid on their legal maturity date, to the extent that funds are
available from the applicable Class C reserve subaccount or from proceeds of
the sale of receivables or otherwise, whether or not the senior classes of
notes of that series have been fully prefunded.
If the rate of repayment of principal receivables in the master trust were
to decline to less than an average of 4 1/2% per month during this two-year
prefunding period, then the principal funding subaccounts for the senior
classes of notes may not be fully prefunded before the legal maturity date of
the subordinated notes. In that event and only to the extent not fully
prefunded, the senior classes of that series would lose their subordination
protection on the legal maturity date of those subordinated notes, unless
additional subordinated notes of that class were issued or a sufficient amount
of senior notes of that series have matured so that the remaining outstanding
subordinated notes provide the necessary subordination protection.
Since January 1995 the monthly rate of repayment of principal receivables
in the master trust has ranged from a low of 16.59% to a high of more than 22%.
Principal payment rates may change due to a variety of factors including
economic, social and legal factors, changes in the terms of credit card
accounts designated to the master trust or the addition of credit card
16
accounts with different characteristics to the master trust. There can be no
assurance that the rate of principal repayment will remain in this range in the
future.
Monthly reports concerning the performance of the credit card receivables
in the master trust will be filed with the SEC on Form 8-K. The monthly rate of
repayment of principal receivables will be included in these publicly available
reports.
You may receive principal payments earlier or later than the expected principal
payment date
There is no assurance that the stated principal amount of your notes will
be paid on its expected principal payment date.
The effective yield on the credit card receivables owned by the master
trust could decrease due to, among other things, a change in periodic finance
charges on the accounts, an increase in the level of delinquencies or increased
convenience use of the card whereby cardholders pay their credit card balance
in full each month and incur no finance charges. A significant decrease in the
amount of credit card receivables in the master trust for any reason could
result in an early redemption event and in early payment of your notes, as well
as decreased protection to you against defaults on the accounts. If surplus
finance charge collections calculated using a three-month moving average
decreases below the required surplus finance charge amount, an early redemption
event will occur and could result in an early payment of your notes. See
"Covenants, Events of Default and Early Redemption Events--Early Redemption
Events." For a discussion of surplus finance charge collections and required
surplus finance charge amount, see "Surplus Finance Charge Collections" and
"Required Surplus Finance Charge Amount" in the glossary.
If, for any reason, cardholders make payments on their credit card accounts
later than expected or default on the payments on their credit card accounts
the allocations of principal collections to the collateral certificate and to
the notes may be reduced, and the principal of the notes may be paid later than
expected or not paid at all.
Reductions in the nominal liquidation amount could reduce payment of principal
to you
You may not receive full repayment of your notes if the nominal liquidation
amount of your notes has been reduced by charge-offs of principal receivables
in the master trust or as the result of reallocations of principal collections
to pay interest on senior classes of notes, and those amounts have not been
reimbursed from excess finance charge collections. See "Deposit and Application
of Funds--Final Payment of the Notes." For a discussion of nominal liquidation
amount, see "The Notes--Stated Principal Amount, Outstanding Dollar Principal
Amount and Nominal Liquidation Amount of Notes."
Allocations of charged-off receivables in the master trust could reduce
payments to you
Citibank (South Dakota), as servicer of the master trust, will charge off
the receivables arising in the accounts in the master trust portfolio if the
receivables become uncollectible or
17
are otherwise more than 184 days delinquent. The collateral certificate will be
allocated a portion of these charged-off receivables. If the amount of
charged-off receivables allocated to the collateral certificate exceeds the
amount of funds available for reimbursement of those charge-offs, the issuer,
as the holder of the collateral certificate, may not receive a sufficient
amount under the collateral certificate to pay the full stated principal amount
of your notes. See "The Master Trust Receivables and Accounts--Loss and
Delinquency Experience" in Annex I to the supplement to this prospectus,
"Sources of Funds to Pay the Notes--The Collateral Certificate," "Deposit and
Application of Funds--Allocation of Principal Collections to Accounts,"
"--Targeted Deposits of Principal Collections to the Principal Funding
Account," "--Reallocation of Funds on Deposit in the Principal Funding
Subaccounts" and "--Final Payment of the Notes."
Reset of interest rate on credit card receivables in the master trust may
reduce the amount of finance charge collections available for interest payments
on the notes
A majority of the credit card receivables in the master trust bear interest
at the prime rate plus a margin. The notes generally bear interest at a fixed
or floating rate. If the prime rate declines, the amount of collections of
finance charge receivables on the accounts in the master trust may be reduced
while the interest payments on fixed rate notes required to be funded out of
those collections will remain constant.
Changes in the interest rate indices applicable to floating rate notes
might not be reflected in the prime rate, resulting in an increase or decrease
in the difference between the amount of collections of finance charge
receivables on the accounts in the master trust and the amount of interest
payable on the floating rate notes.
In addition, a decrease in the difference between collections of finance
charge receivables and those collections allocated to make interest payments on
the notes could cause an early redemption event which could result in early
payment of your notes. See "Covenants, Events of Default and Early Redemption
Events--Early Redemption Events."
Citibank (South Dakota)'s ability to change terms of the credit card accounts
could alter payment patterns
The master trust owns the credit card receivables generated in designated
credit card accounts, but Citibank (South Dakota) or one of its affiliates will
continue to own the accounts themselves. Citibank (South Dakota) or its
affiliate thus will have the right to determine the fees, periodic finance
charges including the interest rate index used to compute periodic finance
charges, and other charges that will apply to the credit card accounts. They
may also change the minimum monthly payment or other terms of the accounts. A
decrease in the effective yield on the credit card receivables could cause an
early redemption event, resulting in an early payment of the notes. See
"Covenants, Events of Default and Early Redemption Events--Early Redemption
Events." Also, changes in account terms could affect payment patterns on the
credit card receivables, which could cause principal of the notes to be paid
earlier or later than anticipated.
18
Citibank (South Dakota) has agreed--and each affiliate that owns accounts
designated to the master trust will agree--generally to avoid taking actions
that would
. reduce the portfolio yield of the receivables in the master trust below
specified levels;
. change the terms of the credit card accounts designated to the master
trust, unless it is changing the terms of all similar accounts in its
portfolio; or
. decrease the finance charges on the credit card accounts designated to
the master trust below a specified level after the occurrence of an
early redemption event resulting from surplus finance charge
collections being less than the required surplus finance charge amount.
For a discussion of portfolio yield, surplus finance charge collections and
required surplus finance charge amount, see "Portfolio Yield," "Surplus Finance
Charge Collections" and "Required Surplus Finance Charge Amount" in the
glossary.
There are no other restrictions on Citibank (South Dakota)'s or its
affiliates' ability to change the terms of the credit card accounts designated
to the master trust, and we can provide no assurance that finance charges or
other fees will not be reduced.
Addition of accounts to the master trust may affect credit quality and lessen
the issuer's ability to make payments to you
The assets of the master trust, and therefore the assets allocable to the
collateral certificate held by the issuer, change every day. Citibank (South
Dakota) and Citibank (Nevada) may choose, or may be required, to add credit
card receivables to the master trust. The credit card accounts from which these
receivables arise may have different terms and conditions from the credit card
accounts already designated for the master trust. For example, the new credit
card accounts may have higher or lower fees or interest rates, or different
payment terms. We cannot guarantee that new credit card accounts will have the
same credit quality as the credit card accounts currently designated for the
master trust. If the credit quality of the assets in the master trust were to
deteriorate, the issuer's ability to make payments on the notes could be
adversely affected. See "The Master Trust--Master Trust Assets."
The issuer's ability to make payments on the notes will be impaired if
sufficient new credit card receivables are not generated by Citibank (South
Dakota) and Citibank (Nevada). We do not guarantee that new credit card
receivables will be created, that any credit card receivables will be added to
the master trust or that credit card receivables will be repaid at a particular
time or with a particular pattern.
Citibank (South Dakota) and Citibank (Nevada) may not be able to designate new
accounts to the master trust when required by the pooling and servicing
agreement
The pooling and servicing agreement provides that Citibank (South Dakota)
and Citibank (Nevada) must add additional credit card receivables to the master
trust if the total amount of principal receivables in the master trust falls
below specified percentages of the
19
total invested amounts of investor certificates in the master trust. There is
no guarantee that Citibank (South Dakota) and Citibank (Nevada) will have
enough receivables to add to the master trust. If Citibank (South Dakota) and
Citibank (Nevada) do not make an addition of receivables within five business
days after the date they are required to do so, an early amortization event
will occur with respect to the collateral certificate. This would constitute an
early redemption event and could result in an early payment of your notes. See
"The Master Trust--Master Trust Assets" and "--Early Amortization Events" and
"Covenants, Events of Default and Early Redemption Events--Early Redemption
Events."
Class B notes and Class C notes bear losses before Class A notes
Class B notes of a series are subordinated in right of payment of principal
to Class A notes of that series, and Class C notes of a series are subordinated
in right of payment of principal to Class A notes and Class B notes of that
series. In general, interest payments on a class of notes are not subordinated
in right of payment to interest payments on any other class of notes.
In all series, principal collections that are allocable to subordinated
classes of notes may be reallocated to pay interest on senior classes of notes
of that series. In addition, losses on charged-off receivables in the master
trust are allocated first to the subordinated classes of a series. See "The
Notes--Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes--Nominal Liquidation Amount" and "Deposit and
Application of Funds--Allocation of Principal Collections to Accounts." If
these reallocations and losses are not reimbursed from excess finance charge
collections, the full stated principal amount of the subordinated classes of
notes may not be repaid.
If there is a sale of the credit card receivables owned by the master trust
due to a sale or repurchase of the interest represented by the collateral
certificate after a default by the servicer of the master trust, the net
proceeds of the sale allocable to principal payments with respect to the
collateral certificate will generally be used first to pay amounts due to Class
A noteholders, next to pay amounts due to Class B noteholders of that series,
and lastly, for amounts due to Class C noteholders. This could cause a loss to
Class C noteholders, if the amount available to them plus the amount, if any,
available under their credit enhancement--the applicable Class C reserve
account--is not enough to pay the Class C notes in full. It could also cause a
loss to Class B noteholders if the amount available to them plus the amount, if
any, available under their credit enhancement--the applicable Class C notes--is
not enough to pay the Class B notes in full.
Payment of Class B notes and Class C notes may be delayed due to the
subordination provisions
For a single issuance series, in general no payment of principal of Class B
notes of that series will be made until all principal of Class A notes of that
series has been paid in full, and no payment of principal of Class C notes of
that series will be made until all principal of Class A notes and Class B notes
of that series has been paid in full, even if the subordinated notes have
reached their expected principal payment date, or have had an early redemption
20
event, event of default or other optional or mandatory redemption. See "The
Notes--Subordination of Principal" and "Deposit and Application of Funds--Limit
on Repayments of Subordinated Classes of Single Issuance Series."
For a multiple issuance series, subordinated notes generally, except as
noted in the following paragraph, will be paid only to the extent that they are
not necessary to provide the required subordinated amount to senior classes of
notes of the same series. In addition, if a senior class of notes has reached
its expected principal payment date, or has had an early redemption event,
event of default or other optional or mandatory redemption, any principal
collections allocable to a subordinated class of notes or funds on deposit in
the principal funding account for a subordinated class of notes of the same
series--other than proceeds of sales of credit card receivables or funds from
the Class C reserve account--will be reallocated to the senior class.
If you have subordinated notes of a single issuance series or multiple
issuance series that reach their expected principal payment date, or that have
an early redemption event, event of default or other optional or mandatory
redemption, and your notes cannot be paid because of the subordination
provisions of the indenture, prefunding of the principal funding subaccounts
for the senior notes of your series will begin, as described in "Deposit and
Application of Funds--Targeted Deposits of Principal Collections to the
Principal Funding Account." After that time, your notes will be paid only if,
and to the extent that:
. enough notes of senior classes of that series are repaid so that your
notes are no longer necessary to provide the required subordinated
amount, or
. in the case of multiple issuance series, new classes of subordinated
notes of the same series are issued so that your notes are no longer
necessary to provide the required subordinated amount, or
. the principal funding subaccounts for the senior classes of notes of
that series are fully prefunded so that your notes are no longer
necessary to provide the required subordinated amount; or
. your notes reach their legal maturity date.
This may result in a delay or loss of principal payments to holders of
subordinated notes. See "Deposit and Application of Funds--Limit on Repayment
of Subordinated Classes of Single Issuance Series," "--Limit on Repayment of
Subordinated Classes of Multiple Issuance Series" and "--Targeted Deposits of
Principal Collections to the Principal Funding Account--Prefunding of the
Principal Funding Account for Senior Classes."
You may not be able to reinvest any early redemption proceeds in a comparable
security
If your notes are redeemed at a time when prevailing interest rates are
relatively low, you may not be able to reinvest the redemption proceeds in a
comparable security with an effective interest rate as high as that of your
notes.
21
Your ability to resell notes may be limited
It may be difficult for you to resell your notes at the time and at the
price you desire. We expect that the underwriters of and agents for the notes
will make a market in the notes, but no underwriter or agent will be required
to do so. Even if a secondary market does develop, it may not provide you with
liquidity for the notes, and it may not continue until the maturity of the
notes.
In addition, some notes have a more limited trading market and experience
more price volatility because they were designed for specific investment
objectives or strategies. There may be a limited number of buyers when you
decide to sell those notes. This may affect the price you receive for the notes
or your ability to sell the notes at all. You should not purchase notes unless
you understand and know you can bear the investment risks.
If the ratings of the notes are lowered or withdrawn, their market value could
decrease
The initial rating of a note addresses the likelihood of the payment of
interest on that note when due and the ultimate payment of principal of that
note by its legal maturity date. The ratings do not address the possibility of
an early payment or acceleration of a note, which could be caused by an early
redemption event or an event of default. See "Covenants, Events of Default and
Early Redemption Events--Early Redemption Events" and "--Events of Default."
The ratings of the notes are not a recommendation to buy, hold or sell the
notes. The ratings of the notes may be lowered or withdrawn entirely at any
time by the applicable rating agency. The market value of the notes could
decrease if the ratings are lowered or withdrawn. See "Prospectus
Summary--Ratings."
Issuance of additional notes or master trust investor certificates may affect
the timing and amount of payments to you
The issuer expects to issue notes from time to time, and the master trust
may issue new investor certificates from time to time. New notes and master
trust investor certificates may be issued without notice to existing
noteholders, and without their consent, and may have different terms from
outstanding notes and investor certificates. For a description of the
conditions that must be met before the master trust can issue new investor
certificates or the issuer can issue new notes, see "The Master Trust--Master
Trust Issuances; Sellers' Interest" and "The Notes--Issuances of New Series,
Classes and Subclasses of Notes."
The issuance of new notes or master trust investor certificates could
adversely affect the timing and amount of payments on outstanding notes. For
example, if notes issued after your notes have a higher interest rate than your
notes, the result could be that there is a smaller amount of finance charge
collections available to pay interest on your notes. Also, when new notes or
investor certificates are issued, the voting rights of your notes may be
diluted. See "Risk Factors--You may have limited control of actions under the
indenture and the pooling and servicing agreement."
22
Legal aspects could affect the timing and amount of payments to you
Transfer of credit card receivables could be a security interest
Although Citibank (South Dakota) and Citibank (Nevada) sell credit card
receivables to the master trust, it is possible that a court could treat those
sales as an assignment of collateral for the benefit of the holders of the
master trust investor certificates in the master trust, including the
collateral certificate, instead of as a sale. If the transfer of credit card
receivables to the master trust were deemed to create a security interest under
the South Dakota or Nevada Uniform Commercial Code:
. A tax or government lien on property of Citibank (South Dakota) or
Citibank (Nevada) arising before the credit card receivables came into
existence may have priority over the master trust's interest, and
therefore over the issuer's interest, in the receivables.
. If the FDIC were appointed receiver of Citibank (South Dakota) or
Citibank (Nevada), its administrative expenses may also have priority
over the master trust's interest, and therefore the issuer's interest,
in the receivables.
Insolvency or bankruptcy of Citibank (South Dakota) or Citibank (Nevada)
could adversely affect you
If the FDIC were appointed a conservator or receiver for either Citibank
(South Dakota) or Citibank (Nevada), then an early amortization event would
occur under the pooling and servicing agreement, thus causing an early
redemption event for the notes. Under the terms of the pooling and servicing
agreement, no new principal receivables would be transferred to the master
trust and the master trust trustee would sell the credit card receivables
unless holders of more than 50% of the unpaid principal amount of master trust
investor certificates of each class of each series, including the collateral
certificate, Citibank (South Dakota), unless it is insolvent, Citibank
(Nevada), unless it is insolvent, and each other holder, if any, of an interest
in the master trust, give the master trust trustee other instructions. In that
event
. the master trust would terminate;
. an early amortization event would occur with respect to the collateral
certificate, thus causing an early payment of the notes; and
. you would have a loss if proceeds from the sale of the credit card
receivables allocable to the collateral certificate were insufficient
to pay your notes in full.
However, the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, gives the FDIC
powers when it is acting as receiver or conservator for a bank, including the
power:
. to prevent the start of an early amortization period under the pooling
and servicing agreement, thereby preventing the termination of the
master trust and a possible early payment of the notes;
. to continue to require Citibank (South Dakota) and Citibank (Nevada) to
transfer new principal receivables to the master trust; and
23
. to prevent the early sale, liquidation or disposition of the credit
card receivables in the master trust.
In addition, if Citibank (South Dakota) defaults on its obligations as servicer
under the pooling and servicing agreement solely because a conservator or
receiver is appointed for it, the conservator or receiver might have the power
to prevent either the master trust trustee or the master trust
certificateholders from appointing a new servicer under the pooling and
servicing agreement.
We believe that the FDIC, acting as a receiver or conservator of Citibank
(South Dakota) or Citibank (Nevada), would not interfere with the continued
transfer and liquidation of credit card receivables between that bank and the
master trust. The transfer of the receivables by the banks to the master trust
has been documented as a sale. If the transfer constitutes a sale under general
applicable law, and if no fraud or other misconduct has occurred and the
pooling and servicing agreement satisfies the regulatory requirements of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, the FDIC as conservator or receiver for
one of the banks could not reclaim the receivables or limit that bank's
subsequent transfer or exercise of rights with respect to the receivables.
However, the transfer of the receivables by Citibank (South Dakota) or
Citibank (Nevada) to the master trust constitutes, under general applicable
law, the grant of a security interest rather than a sale. Nevertheless, the
FDIC has announced, through the promulgation of a regulation, that it will
refrain from exercising its authority under the FDIA to reclaim, recover or
recharacterize a transfer by a bank of financial assets such as the receivables
if:
. the transfer involved a securitization of the financial assets and met
all the conditions for treatment as a sale under relevant accounting
principles, other than the condition that, as a result of the transfer,
the financial assets are placed beyond the control of the bank or are
"legally isolated" from the bank;
. the bank received adequate consideration for the transfer at the time
of the transfer;
. the parties to the transfer intended that the transfer constitute a
sale for accounting purposes; and
. the financial assets were not transferred by the bank fraudulently, in
contemplation of the bank's insolvency, or with the intent to hinder,
delay, or defraud the bank or its creditors.
The pooling and servicing agreement and the transfer of the receivables by the
banks to the master trust have been structured to satisfy all of these
conditions.
If a condition required under the FDIC's regulations were found not to have
been met, however, the FDIC could seek to recover or reclaim the receivables.
We believe the FDIC would not seek to do so, so long as:
. the banks' transfer of the receivables to the master trust is the grant
of a valid security interest in the receivables to the master trust;
24
. the security interest is validly perfected before the insolvency of the
bank and was neither taken in contemplation of its insolvency nor with
the intent to hinder, delay or defraud the bank or its creditors; and
. the pooling and servicing agreement is continuously an official record
of the bank and represents a bona fide and arm's length transaction
undertaken for adequate consideration in the ordinary course of
business.
The FDIC could, however, assert a contrary position, and seek to:
. avoid the master trust's security interest in the credit card
receivables;
. require the master trust trustee to go through an administrative claims
procedure to establish its right to payments collected on the credit
card receivables in the master trust;
. request a stay of proceedings with respect to Citibank (South Dakota)
or Citibank (Nevada), as the case may be; or
. repudiate the pooling and servicing agreement and limit the master
trust's resulting claim to "actual direct compensatory damages"
measured as of the date of receivership.
If the FDIC were to take any of those actions, payments of outstanding
principal and interest on the notes could be delayed and possibly reduced.
Changes in consumer protection laws may impede Citibank (South Dakota)'s
collection efforts
The credit card industry is extensively regulated by federal, state and
local consumer protection laws. The most significant federal laws are
. the Federal Truth-in-Lending Act;
. the Equal Credit Opportunity Act;
. the Fair Credit Reporting Act; and
. the Fair Debt Collection Practices Act.
These laws affect how loans are made, enforced and collected. The United States
Congress and the states may pass new laws, or may amend existing laws, to
regulate further the credit card industry or to reduce finance charges or other
fees applicable to credit card accounts. This could make collection of credit
card receivables more difficult for Citibank (South Dakota), as servicer, and
could decrease the amount of finance charge receivables received by the master
trust and thus available for interest payments on the notes.
In recent years, interest rates charged by credit card issuers have come
under increased scrutiny by consumer groups and lawmakers. Changes in
applicable laws could add limitations on the finance charges and other fees
related to the credit card accounts. For example, if an interest rate cap were
imposed by law at a level substantially lower than the
25
annual percentage rates currently charged on the credit card accounts, the
decrease in finance charge collections could result in an early redemption
event and a possible early payment of the notes.
Citibank (South Dakota) and Citibank (Nevada) make representations and
warranties about their compliance with applicable laws and regulations, and
about the validity and enforceability of the credit card receivables and the
accounts. These representations and warranties are made for the benefit of the
holders of investor certificates under the master trust, and are not made for
your benefit. If the credit card receivables do not comply with applicable law
in all material respects, the issuer's interest in the receivables will be
reassigned to Citibank (South Dakota) or Citibank (Nevada), and you will have
no other remedy.
A breach of the representations and warranties by Citibank (South Dakota)
or Citibank (Nevada) relating to the credit card receivables and accounts
generally results in the sellers' interest being reduced by the amount of the
reassigned receivables. However, a breach of some representations and
warranties results in Citibank (South Dakota) and Citibank (Nevada) paying a
reassignment price for the receivables generally equal to the aggregate
invested amount of all series of investor certificates, including the
collateral certificate, issued by the master trust, plus accrued and unpaid
interest on those certificates. See "The Master Trust--Master Trust Assets." A
breach of these representations and warranties could result in a possible early
payment of the notes.
Competition in the credit card industry could affect the timing and amount of
payments to you
The credit card industry is very competitive and operates in a legal and
regulatory environment increasingly focused on the cost of services charged to
consumers for credit cards. Through advertising, target marketing, pricing
competition and incentive programs, credit card issuers compete to attract and
retain customers. Citibank (South Dakota), Citibank (Nevada) and other credit
card issuers may offer cards with lower fees and/or finance charges than the
credit card accounts that have been designated as part of the master trust.
Also, Citibank (South Dakota), Citibank (Nevada) or any of their affiliates
that own accounts designated to the master trust may solicit existing
cardholders to open other accounts with benefits not available under the
designated accounts. If cardholders choose to use competing sources of credit,
the rate at which new credit card receivables are generated may be reduced and
the pattern of payments may be affected. If the credit card receivables decline
significantly, Citibank (South Dakota) and Citibank (Nevada) may be required to
designate additional accounts to the master trust, or an early amortization
event with respect to the collateral certificate could occur and the notes
could be paid early.
In 1998, the U.S. Justice Department sued MasterCard International
Incorporated, VISA U.S.A., Inc. and VISA International, Inc. in the U.S.
District Court for the Southern District of New York. The suit asserted that
joint control of both the MasterCard and VISA associations by the same group of
banks--with such joint control referred to as "duality"--
26
lessens competition and therefore violates the antitrust laws. The government
contended that banks should not be permitted to participate in the governance
of both associations. The government also challenged the rules of the
associations that restrict banks from issuing American Express or Discover
cards. In October 2001 the District Court issued a decision which found no
violation by the MasterCard and Visa associations on the duality issue but held
that the exclusionary rule had substantial adverse impact on competition and
could not be enforced by the associations. It appears the associations will
appeal the District Court's decision and ask for an injunction to stay the
ruling pending the appeal.
In 1996, Wal-Mart Stores, Inc. and several other retailers sued MasterCard
International Incorporated, VISA U.S.A. Inc., and Visa International in the
U.S. District Court for the Eastern District of New York. The suit asserts that
the rules of both associations regarding the uniform acceptance of all Visa and
MasterCard cards, including debit Visa and MasterCard cards, constitute an
illegal tying arrangement. Both MasterCard and VISA have stated that they
believe the suit to be without merit, and have denied the allegations.
We cannot predict the final outcome of the litigations described above or
their effect on the competitive environment in the credit card industry.
You may have limited control of actions under the indenture and the pooling and
servicing agreement
Under the indenture, some actions require the vote of noteholders holding a
specified percentage of the aggregate outstanding dollar principal amount of
notes of a series, class or subclass or all the notes. These actions include
accelerating the payment of principal of the notes or consenting to amendments
relating to the collateral certificate. In the case of votes by series or votes
by holders of all of the notes, the Class A outstanding dollar principal amount
will generally be substantially greater than the Class B or Class C outstanding
dollar principal amounts. Consequently, the Class A noteholders will generally
have the ability to determine whether and what actions should be taken. The
Class B and Class C noteholders will generally need the concurrence of the
Class A noteholders to cause actions to be taken.
The collateral certificate is an investor certificate under the pooling and
servicing agreement, and noteholders have indirect voting rights under the
pooling and servicing agreement. See "Meetings, Voting and Amendments." Under
the pooling and servicing agreement, some actions require the vote of a
specified percentage of the aggregate principal amount of all of the investor
certificates. These actions include causing the early amortization of the
investor certificates or consenting to amendments to the pooling and servicing
agreement. In the case of votes by holders of all of the investor certificates,
the outstanding principal amount of the collateral certificate is and may
continue to be substantially smaller than the outstanding principal amount of
the other series of investor certificates. Consequently, the holders of
investor certificates--other than the collateral certificate--will generally
have the ability to determine whether and what actions should be taken. The
noteholders, in exercising their voting powers under the collateral
certificate, will generally
27
need the concurrence of the holders of the other investor certificates to cause
actions to be taken.
Your remedies upon default may be limited
Your remedies may be limited if an event of default under your class of
notes occurs. After an event of default affecting your class of notes, any
funds in the principal funding subaccount and the interest funding subaccount
with respect to that class of notes will be applied to pay principal of and
interest on those notes or reallocated or retained for the benefit of senior
classes of notes. Then, in each following month, principal collections and
finance charge collections allocated to those notes will either be deposited
into the applicable principal funding subaccount or interest funding
subaccount, and applied to make monthly principal and interest payments on
those notes or reallocated or retained for the benefit of senior classes of
notes until the earlier of the date those notes are no longer necessary to
provide subordination protection for senior classes of notes or until the legal
maturity date of those notes.
Any funds in the applicable principal funding subaccount that are not
reallocated to other classes of that series, any funds in the applicable
interest funding subaccount, and in the case of Class C notes, any funds in the
applicable Class C reserve account, will be available to pay principal of and
interest on that class of notes. However, if your notes are Class B notes or
Class C notes, you generally will receive full payment of principal of those
notes only if and to the extent that, after giving effect to that payment, the
required subordinated amount will be maintained for the senior classes of notes
in that series. See "Risk Factors--Payment of Class B notes and Class C notes
may be delayed due to the subordination provisions."
Following an event of default and acceleration, and on the applicable legal
maturity date, holders of notes will have the ability to direct a sale of
credit card receivables--or a sale of interests in credit card
receivables--held by the master trust only under the limited circumstances as
described in "Covenants, Events of Default and Early Redemption Events--Events
of Default" and "Deposit and Application of Funds--Sale of Credit Card
Receivables." Even if a sale of receivables is permitted, we can give no
assurance that the proceeds of the sale will be enough to pay unpaid principal
of and interest on the accelerated notes.
THE ISSUER
Citibank Credit Card Issuance Trust is the issuer of the notes. It is a
Delaware statutory business trust formed by Citibank (South Dakota) and
Citibank (Nevada) on September 12, 2000.
The issuer exists for the exclusive purposes of:
. acquiring and holding the collateral certificate and other trust
assets, including the proceeds of these assets;
. issuing series of notes;
. making payments on the notes; and
. engaging in other activities that are necessary or incidental to
accomplish these limited purposes.
The issuer is operated pursuant to a trust agreement among Citibank (South
Dakota), Citibank (Nevada) and The Bank of New York (Delaware), as trustee. The
issuer does not
28
have any officers or directors. Its manager is Citibank (South Dakota). As
manager of the issuer, Citibank (South Dakota) will generally direct the
actions to be taken by the issuer.
The assets of the issuer consist primarily of:
. the collateral certificate;
. derivative agreements that the issuer enters into from time to time to
manage interest rate or currency risk relating to some classes of
notes; and
. the trust accounts.
The issuer does not expect to have any other significant assets.
The Owners
Citibank (South Dakota), National Association and Citibank (Nevada),
National Association are the sole owners of the beneficial interests in the
issuer. Citibank (South Dakota) and Citibank (Nevada) are sometimes referred to
as the "Banks" in this prospectus and the supplements to this prospectus. Other
affiliates of the Banks may in the future become owners of beneficial interests
in the issuer.
Citibank (South Dakota) is a national banking association and an indirect
wholly owned subsidiary of Citigroup Inc. It was formed in 1981 and conducts
credit card-related activities. Citibank (South Dakota) is the nation's largest
bank credit card issuer. The principal executive office of Citibank (South
Dakota) is located at 701 East 60th Street, North, Sioux Falls, South Dakota
57117. Its telephone number is (605) 331-2626.
Citibank (Nevada) is a national banking association and an indirect wholly
owned subsidiary of Citigroup Inc. It was formed in 1985 and conducts a retail
banking business in the Las Vegas, Nevada area and services credit card
accounts for some of its affiliates. The principal executive office of Citibank
(Nevada) is located at 8725 West Sahara Avenue, Las Vegas, Nevada 89163. Its
telephone number is (702) 797-4444.
USE OF PROCEEDS
The issuer will pay the net proceeds from the sale of a class of notes to
Citibank (South Dakota) and Citibank (Nevada).
THE NOTES
The notes will be issued pursuant to the indenture. The indenture does not
limit the aggregate stated principal amount of notes that may be issued.
The notes will be issued in series. Each series of notes is expected to
consist of Class A notes, Class B notes and Class C notes. Each class of notes
may have subclasses, if we so specify in a supplement to this prospectus, and
may be issued on different days. Whenever a
29
"class" of notes is referred to in this prospectus or any supplement to this
prospectus, it also includes all subclasses of that note, unless the context
requires otherwise. References to the "notes" in this prospectus refer to the
notes offered by this prospectus, unless the context requires otherwise.
The issuer may issue Class A notes, Class B notes and Class C notes of a
series at the same time or at different times, but no Class A notes or Class B
notes of a series may be issued unless a sufficient amount of subordinated
Class B notes and/or Class C notes of that series have previously been issued
and are outstanding. See "--Required Subordinated Amount." If and to the extent
specified in a supplement to this prospectus, the notes of a series may be
included in a group of series for purposes of sharing of principal collections
and/or finance charge collections.
The issuer may offer notes denominated in any foreign currency. We will
describe the specific terms of any note denominated in a foreign currency in
the applicable supplement to this prospectus.
If we specify in a supplement to this prospectus, the noteholders of a
particular class will have the benefit of a derivative agreement, including an
interest rate or currency swap, cap, collar, guaranteed investment contract or
other similar agreement for the exclusive benefit of that class. We will
describe any derivative agreement for the benefit of a class and the financial
institution that provides it in the applicable supplement to this prospectus.
Citibank (South Dakota), Citibank (Nevada) or any of their affiliates may be
counterparties to a derivative agreement.
The issuer will pay principal of and interest on a class of notes solely
from the portion of finance charge collections and principal collections under
the collateral certificate which are available to that class of notes after
giving effect to all allocations and reallocations, amounts in any trust
account relating to that class of notes, and amounts received under any
derivative agreement relating to that class of notes. If those sources are not
sufficient to pay the notes of that class, those noteholders will have no
recourse to any other assets of the issuer or any other person or entity for
the payment of principal of or interest on those notes.
We will include the following terms of the notes in a supplement to this
prospectus:
. the series designation;
. whether the series is a single issuance series or a multiple issuance
series;
. if the series will be part of a group of series for purposes of
allocations and reallocations of principal collections and/or finance
charge collections, the manner and extent to which each series in the
group will participate in those allocations and reallocations;
. the stated principal amount of the notes and whether they are Class A
notes, Class B notes or Class C notes or a subclass of any of those
classes;
. the required subordinated amount, if any, for that class of notes;
. the currency of payment of principal of and interest on the notes, if
other than U.S. dollars;
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. the price or prices at which the notes will be issued;
. the expected principal payment date of the notes, which will be at
least two years before the termination date of the collateral
certificate;
. the legal maturity date of the notes, which will be no later than the
termination date of the collateral certificate;
. the times at which the notes may, pursuant to any optional or mandatory
redemption provisions, be redeemed, and the other terms and provisions
of those redemption provisions;
. the rate per annum at which the notes will bear interest, if any, or
the formula or index on which that rate will be determined, including
the relevant definitions, and the date from which interest will accrue;
. the interest payment dates, if any, for the notes;
. if the notes are discount notes or foreign currency notes, the initial
outstanding dollar principal amount of those notes, and the means for
calculating the outstanding dollar principal amount of those notes;
. whether or not application will be made to list the notes on any stock
exchange;
. any additional events of default or early redemption events for the
notes;
. if the notes have the benefit of a derivative agreement, the terms of
that agreement and a description of the counterparty to that agreement;
and
. any other terms of the notes consistent with the provisions of the
indenture.
Holders of notes of any outstanding series, class or subclass will not have
the right to prior review of, or consent to, any subsequent issuance of notes,
including any issuance from time to time of additional notes of the same
series, class or subclass.
Interest
Each note, except zero-coupon discount notes, will bear interest at either
a fixed rate or a floating rate on its outstanding principal amount until final
payment of that note as described under "Deposit and Application of
Funds--Final Payment of the Notes." For each issuance of fixed rate notes, we
will designate in a supplement to this prospectus the fixed rate of interest at
which interest will accrue on that note. For each issuance of floating rate
notes, we will designate in a supplement to this prospectus the interest rate
index or other formula on which the interest is based. A discount note will be
issued at a price significantly lower than the stated principal amount payable
on that note's expected principal payment date. Until the expected principal
payment date for a discount note, accreted principal will be capitalized as
part of the principal of the note and reinvested in the collateral certificate.
The applicable supplement to this prospectus will specify the interest rate to
be borne by a discount note after an event of default or after its expected
principal payment date.
Each payment of interest on a note will include all interest accrued from
the preceding interest payment date--or, for the first interest period, from
the issuance date--through the
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day preceding the current interest payment date, or any other period as may be
specified in a supplement to this prospectus. We refer to each period during
which interest accrues as an "interest period." Interest on a note will be due
and payable on each interest payment date.
If finance charge collections allocable to the collateral certificate are
less than expected, principal collections allocable to the subordinated classes
of notes under the collateral certificate may be used to pay interest on the
senior classes of notes of the same series. However, this reallocation of
principal would reduce the Invested Amount of the collateral certificate, as
well as the nominal liquidation amount of the subordinated classes of notes of
that series, and thus reduce later principal collections and finance charge
collections allocable to the collateral certificate, unless the principal
reduction is reimbursed from excess finance charge collections. See "Deposit
and Application of Funds--Allocation of Principal Collections to Accounts."
If interest on a note is not paid within five business days after it is due
an event of default will occur with respect to that note. See "Covenants,
Events of Default and Early Redemption Events--Events of Default."
Principal
The timing of payment of principal of a note will be specified in a
supplement to this prospectus.
The issuer expects to pay the stated principal amount of each note in one
payment on that note's expected principal payment date, and the issuer is
obligated to do so if funds are available for that purpose. It is not an event
of default if the principal of a note is not paid on its expected principal
payment date because no funds are available for that purpose or because the
notes are required to provide subordination protection to a senior class of
notes of the same series.
Principal of a note may be paid earlier than its expected principal payment
date if an early redemption event or an event of default occurs. See
"Covenants, Events of Default and Early Redemption Events--Early Redemption
Events" and "--Events of Default."
Principal of a note may be paid later than its expected principal payment
date if sufficient funds are not allocable from the master trust to the
collateral certificate, or are not allocable under the collateral certificate
to the series and class of the note to be paid. Each note will have a legal
maturity date two years after its expected principal payment date. If the
stated principal amount of a note is not paid in full on its legal maturity
date, an event of default will occur with respect to that note. See "Covenants,
Events of Default and Early Redemption Events--Events of Default."
See "Risk Factors--You may receive principal payments earlier or later than
the expected principal payment date" for a discussion of factors that may
affect the timing of principal payments on the notes.
32
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes
In order to understand the subordination of the different classes of notes
and the allocations of funds to different classes of notes, an investor needs
to understand three concepts:
. the stated principal amount of the notes;
. the outstanding dollar principal amount of the notes; and
. the nominal liquidation amount of the notes.
Each class of notes has a stated principal amount, an outstanding dollar
principal amount and a nominal liquidation amount.
Stated Principal Amount
The stated principal amount of a class of notes is the amount that is
stated on the face of the notes to be payable to the holder. It can be
denominated in U.S. dollars or in a foreign currency.
Outstanding Dollar Principal Amount
For U.S. dollar notes, the outstanding dollar principal amount will be the
same as the stated principal amount, less principal payments to the
noteholders. For foreign currency notes, the outstanding dollar principal
amount will be the U.S. dollar equivalent of the stated principal amount of the
notes, less dollar payments to derivative counterparties with respect to
principal. For discount notes, the outstanding dollar principal amount will be
an amount stated in, or determined by a formula described in, the applicable
supplement to this prospectus. The outstanding dollar principal amount of a
discount note will increase over time as principal accretes, and the
outstanding dollar principal amount of any note will decrease as a result of
each payment of principal of the note. The outstanding dollar principal amount
of a class of notes will also be reduced by the dollar principal amount of any
note that is held by the Banks, the issuer or any of their affiliates and
canceled.
Nominal Liquidation Amount
The nominal liquidation amount of a class of notes is a U.S. dollar amount
based on the outstanding dollar principal amount of that class of notes, but
with some reductions--including reductions from reallocations of principal
collections and allocations of charge-offs of credit card receivables in the
master trust--and increases described under this heading. The aggregate nominal
liquidation amount of all of the notes will always be equal to the Invested
Amount of the collateral certificate, and the nominal liquidation amount of a
class of notes corresponds to the portion of the Invested Amount of the
collateral certificate that would be allocated to that class of notes if the
master trust were liquidated.
In most circumstances, the nominal liquidation amount of a class of notes,
together with any funds on deposit in the applicable principal funding
subaccount, will be equal to the outstanding dollar principal amount of that
class. However, if there are reductions in the nominal liquidation amount of a
class of notes as a result of reallocations of principal
33
collections from that class to pay interest on senior classes, or as a result
of charge-offs of principal receivables in the master trust, there will be a
deficit in the nominal liquidation amount of that class. Unless that deficiency
is reimbursed through the reinvestment of Excess Finance Charge Collections in
the collateral certificate, the stated principal amount of some notes will not
be paid in full.
The nominal liquidation amount is used to calculate the maximum amount of
funds that may be reallocated from a subordinated class of notes to pay
interest on a senior class of notes of the same series. The nominal liquidation
amount is also used to calculate the amount of principal collections that can
be allocated for payment to a class of notes, or paid to the counterparty to a
derivative agreement, if applicable. This means that if the nominal liquidation
amount of a class of notes has been reduced by charge-offs of principal
receivables in the master trust or by reallocations of principal collections to
pay interest on senior classes of notes, the holders of notes with the reduced
nominal liquidation amount may receive less than the full stated principal
amount of their notes, either because the amount of U.S. dollars allocated to
pay them is less than the outstanding dollar principal amount of the notes, or
because the amount of U.S. dollars allocated to pay the counterparty to a
derivative agreement is less than the amount necessary to obtain enough of the
applicable foreign currency for payment of their notes in full.
The nominal liquidation amount of a class of notes may be reduced as
follows:
. If there are charge-offs of principal receivables in the master trust,
the portion of charge-offs allocated to the collateral certificate will
reduce the Invested Amount of the collateral certificate. The reduction
allocated to the collateral certificate will then be reallocated among
the series of notes pro rata based on the nominal liquidation amount of
all notes in the series. Within each series, the reductions will
initially be allocated pro rata to each class of notes based on the
nominal liquidation amount of that class. Then, the reductions
initially allocated to the Class A notes of that series will be
reallocated, first, to the Class C notes of that series, and second, to
the Class B notes of that series, in each case to the extent of the
required subordinated amount of the Class A notes. The reductions
initially allocated to the Class B notes of that series will be
reallocated to the Class C notes of that series to the extent of the
required subordinated amount of the Class B notes.
These reallocations will be made from a senior class to a subordinated
class only to the extent that the senior class has not used all of its
required subordinated amount. For a single issuance series, the
subordination usage limit is the same as the limit described in
"Deposit and Application of Funds--Limit on Reallocations of Principal
Collections from Subordinated Classes Taken to Benefit Senior Classes
of Single Issuance Series." For multiple issuance series, the
subordination usage limit is the same as the limit described in
"Deposit and Application of Funds--Limit on Reallocations of Principal
Collections from Subordinated Classes Taken to Benefit Senior Classes
of Multiple Issuance Series." Reductions that cannot be reallocated to
a subordinated class will reduce the nominal liquidation amount of the
class to which the reductions were initially allocated.
34
. If principal collections are allocated from a subordinated class of
notes of a series to pay interest on the senior classes of notes of
that series, the nominal liquidation amount of that subordinated class
will be reduced by the amount of the reallocations. The amount of the
reallocation of principal collections to pay interest on Class A notes
will be applied first, to reduce the nominal liquidation amount of
Class C notes of the same series to the extent of the required
subordinated amount of Class C notes for that class of Class A notes,
and second, to reduce the nominal liquidation amount of Class B notes
of the same series to the extent of the required subordinated amount of
Class B notes for that class of Class A notes. The amount of the
reallocation of principal collections to pay interest on Class B notes
will be applied to reduce the nominal liquidation amount of Class C
notes of the same series to the extent of the required subordination
amount of Class C notes for that class of Class B notes. No principal
of Class A notes may be reallocated to pay interest on any class of
notes. In a multiple issuance series, these reductions will be
allocated to each outstanding subclass of the series, based on the
nominal liquidation amount of each subclass.
. The nominal liquidation amount of a class of notes will be reduced by
the amount on deposit in its principal funding subaccount after giving
effect to all allocations, reallocations and payments. This includes
principal collections that are deposited directly into that class's
principal funding subaccount, or reallocated from the principal funding
subaccount for a subordinated class.
. The nominal liquidation amount of a class of notes will be reduced by
the amount of all payments of principal of that class.
. If a class of notes directs a sale of credit card receivables after an
event of default and acceleration or on its legal maturity date, its
nominal liquidation amount is reduced to zero. See "Deposit and
Application of Funds--Sale of Credit Card Receivables."
There are three ways in which the nominal liquidation amount of a note can
be increased.
. For a class of discount notes, the nominal liquidation amount of that
class will increase over time as principal accretes, to the extent that
finance charge collections are allocated to that class for that purpose.
. If Excess Finance Charge Collections are available, they will be
applied to reimburse earlier reductions in nominal liquidation amount
from charge-offs of principal receivables in the master trust, or from
reallocations of principal collections from subordinated classes to pay
interest on senior classes. These reimbursements will be allocated to
each series pro rata based on the sum of all unreimbursed reductions of
each class in that series. Within each series, the increases will be
allocated first, to any Class A notes with a deficiency in their
nominal liquidation amount, second, to any Class B notes with a
deficiency in their nominal liquidation amount, and third, to any Class
C notes with a deficiency in their nominal liquidation amounts. In
multiple issuance series, the increases will be
35
allocated to each subclass of a class pro rata based on the deficiency
in the nominal liquidation amount in each subclass.
. If principal collections have been reallocated from the principal
funding subaccount for a subordinated class to the principal funding
subaccount for a senior class of notes of the same series, the nominal
liquidation amount of the subordinated class will be increased by the
amount of the reallocation, and the nominal liquidation amount of the
senior class will be reduced by the same amount.
If the nominal liquidation amount of your notes has been reduced by
charge-offs of principal receivables in the master trust and reallocations of
principal collections to pay interest on senior classes of notes, and the
reduction has not been reimbursed from Excess Finance Charge Collections, you
will likely not receive repayment of all of your principal. See "Deposit and
Application of Funds--Final Payment of the Notes."
The nominal liquidation amount of a class of notes may not be reduced below
zero, and may not be increased above the outstanding dollar principal amount of
that class of notes, less any amounts on deposit in the applicable principal
funding subaccount.
If a note held by the Banks, the issuer or any of their affiliates is
canceled, the nominal liquidation amount of that note is reduced to zero, with
a corresponding reduction in the Invested Amount of the collateral certificate.
For a single issuance series, the cumulative amount of reductions of the
nominal liquidation amount of any class of notes due to reallocation of
principal collections to pay interest on senior classes of notes and
charge-offs of principal receivables in the master trust cannot exceed the
outstanding dollar principal amount of that class. See "Deposit and Application
of Funds--Limit on Reallocations of Principal Collections from Subordinated
Classes Taken to Benefit Senior Classes of Single Issuance Series."
For Class B notes and Class C notes of a multiple issuance series, the
reductions in the nominal liquidation amount due to reallocation of principal
collections to pay interest on senior classes of notes and charge-offs of
principal receivables in the master trust may be allocated to a subclass of
Class C notes and Class B notes only to the extent that subordination of that
series is available. Subordination is limited so that no senior class of notes
can utilize more than its required subordinated amount of subordinated classes
of notes of the same series as described in "Deposit and Application of
Funds--Limit on Reallocations of Principal Collections from Subordinated
Classes Taken to Benefit Senior Classes of Multiple Issuance Series."
Because reductions to the nominal liquidation amount are limited as
described in the prior two paragraphs, it is possible that the nominal
liquidation amount of a subordinated class will be greater than zero, but no
further reductions will be allocated to that class, and any further reductions
will be allocated to the next senior class in that series. This can occur, for
example, when the nominal liquidation amount of a class of Class C notes of a
series has been reduced to zero as a result of the allocation of charge-offs of
principal receivables in
36
the master trust to that class and the reallocation of principal collections
from that class to pay interest on senior classes of notes, but the reduction
in the Class C nominal liquidation amount is later reimbursed from Excess
Finance Charge Collections. Because the nominal liquidation amount of those
Class C notes has been reduced to zero, the Class A notes and Class B notes of
that series have received the full benefit of the subordination of those Class
C notes, and no further reductions will be allocated to those Class C notes,
even if those Class C notes later have a positive nominal liquidation amount
from reimbursements. However, in the case of multiple issuance series,
reimbursements of reductions in the nominal liquidation amount of subordinated
classes of notes may be counted toward the required subordinated amount of
senior classes of that series, but only for subclasses that are issued after
the date of that reimbursement. See "--Subordination of Principal."
Allocations of charge-offs of principal receivables in the master trust and
reallocations of principal collections to senior classes of notes reduce the
nominal liquidation amount of outstanding notes only, and do not affect notes
that are issued after that time.
Subordination of Principal
Principal payments on Class B notes and Class C notes of a series are
subordinated to payments on Class A notes of that series. Subordination of
Class B notes and Class C notes of a series provides credit enhancement for
Class A notes of that series.
Principal payments on Class C notes of a series are subordinated to
payments on Class A notes and Class B notes of that series. Subordination of
Class C notes of a series provides credit enhancement for the Class A notes and
Class B notes of that series.
In all series, principal collections that are allocable to subordinated
classes of notes may be reallocated to pay interest on senior classes of notes
of that series. In addition, losses of charged-off receivables in the master
trust are allocated first to the subordinated classes of a series. See "The
Notes--Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes--Nominal Liquidation Amount" and "Deposit and
Application of Funds--Allocation of Principal Collections to Accounts."
In a single issuance series, no principal payments will be made on a
subordinated class of notes of that series until all principal of the senior
classes of notes of that series has been paid in full. However, there are
several exceptions to this rule. Principal may be paid to the holders of
subordinated classes while notes of senior classes of that series are still
outstanding under the following circumstances:
. If the nominal liquidation amount of a subordinated class has been
reduced as a result of an allocation of charge-offs of principal
receivables to that class or reallocation of principal collections from
that class to pay interest on a senior class, and that reduction is
later reimbursed from Excess Finance Charge Collections, the amount of
that reimbursement is no longer subordinated to the senior classes of
that series and may be paid to the holders of the subordinated class
while those notes of senior classes are still outstanding.
37
. If the principal funding subaccounts for the senior classes of notes of
a series have been prefunded as described in "Deposit and Application
of Funds--Targeted Deposits of Principal Collections to the Principal
Funding Account--Prefunding of the Principal Funding Account for Senior
Classes," the subordinated classes of notes of that series may be paid.
. Class C notes may be paid with funds available from the applicable
Class C reserve subaccount. See "Deposit and Application of
Funds--Withdrawals from the Class C Reserve Account."
In a multiple issuance series, payment of principal may be made on a
subordinated class of notes of that series before payment in full of each
senior class of notes of that series but only under the following circumstances:
. If after giving effect to the proposed principal payment there is still
a sufficient principal amount of subordinated notes to support the
outstanding senior notes of that series. See "Deposit and Application
of Funds--Limit on Repayments of Subordinated Classes of Multiple
Issuance Series." For example, if a subclass of Class A notes has
matured and been repaid, this generally means that at least some Class
B notes and Class C notes may be repaid, even if other subclasses of
Class A notes are outstanding and require reallocation of principal
collections from subordinated classes.
. If the nominal liquidation amount of a subordinated class has been
reduced as a result of allocation of charge-offs of principal
receivables in the master trust to that class or reallocation of
principal collections from that class to pay interest on a senior
class, and that reduction is later reimbursed from Excess Finance
Charge Collections, then the amount of that reimbursement is no longer
subordinated to the senior classes of notes of that series that were
outstanding before the date of reimbursement and may be paid to the
holders of the subordinated class while those notes of senior classes
are still outstanding. However, that reimbursed amount of a
subordinated class of notes is subordinated to the senior classes of
notes that are issued on or after the date of the reimbursement.
. Subordinated classes of notes of a multiple issuance series may be paid
before senior classes of notes of that series if the principal funding
subaccounts for the senior classes of notes have been prefunded as
described in "Deposit and Application of Funds--Targeted Deposits of
Principal Collections to the Principal Funding Account--Prefunding of
the Principal Funding Account for Senior Classes," and Class C notes
may be paid with funds available from the applicable Class C reserve
subaccount. See "Deposit and Application of Funds--Withdrawals from the
Class C Reserve Account."
. On the legal maturity date of a subordinated class of notes, funds on
deposit in that class's principal funding subaccount will be paid to
the subordinated noteholders. As a result, there could be senior
classes of that series that remain outstanding without the required
subordination protection.
38
The payment of accrued interest on a class of notes of a series from
finance charge collections is not senior to or subordinated to payment of
interest on any other class of notes of that series. However, in the case of a
discount note, the accreted principal of that note corresponding to capitalized
interest will be senior or subordinated to the same extent that principal is
senior or subordinated.
Redemption and Early Redemption of Notes
Each class of notes will be subject to mandatory redemption on its expected
principal payment date, which will be two years before its legal maturity date.
If we so specify in a supplement to this prospectus the issuer may, at its
option, redeem the notes of any class before its expected principal payment
date. The supplement will indicate at what times the issuer may exercise that
right of redemption and if the redemption may be made in whole or in part as
well as any other terms of the redemption. The issuer will give notice to
holders of the affected notes before any optional redemption date.
If we so specify in a supplement to this prospectus a noteholder may, at
its option, require the issuer to redeem notes before the expected principal
payment date. The supplement will indicate at what times a noteholder may
exercise that right of redemption and if the redemption may be made in whole or
in part as well as any other terms of the redemption.
In addition, if an early redemption event occurs, the issuer will be
required to redeem each class of affected notes before the note's expected
principal payment date to the extent funds are available for that purpose. The
issuer will give notice to holders of the affected notes before an early
redemption date. See "Covenants, Events of Default and Early Redemption
Events--Early Redemption Events" for a description of the early redemption
events and their consequences to holders of notes.
Whenever the issuer is required to redeem a class of notes before its legal
maturity date, it will do so only if funds are allocated to the collateral
certificate and to that class of notes, and only to the extent that the class
of notes to be redeemed is not required to provide required subordinated amount
to a senior class of notes. A noteholder will have no claim against the issuer
if the issuer fails to make a required redemption of notes because no funds are
available for that purpose or because the notes to be redeemed are required to
provide subordination protection to a senior class of notes. The failure to
redeem before the legal maturity date under these circumstances will not be an
event of default.
Issuances of New Series, Classes and Subclasses of Notes
Conditions to Issuance
The issuer may issue new notes of a series, class or subclass, so long as
the conditions of issuance are met. These conditions include:
. on or before the fourth business day before a new issuance of notes,
the issuer gives the indenture trustee and the rating agencies notice
of the issuance;
39
. the issuer delivers to the indenture trustee a certificate stating that
-- the issuer reasonably believes that the new issuance will not at
the time of its occurrence or at a future date (1) cause an early
redemption event or event of default, (2) adversely affect the
amount or timing of payments to holders of notes of any series or
(3) adversely affect the security interest of the indenture
trustee in the collateral securing the outstanding notes;
-- all instruments furnished to the indenture trustee conform to the
requirements of the indenture and constitute sufficient authority
under the indenture for the indenture trustee to authenticate and
deliver the notes;
-- the form and terms of the notes have been established in
conformity with the provisions of the indenture;
-- all laws and requirements with respect to the execution and
delivery by the issuer of the notes have been complied with;
-- the issuer has the power and authority to issue the notes;
-- the notes have been duly authorized, are binding obligations of
the issuer, and are entitled to the benefits of the indenture; and
-- any other matters as the indenture trustee may reasonably request;
. the issuer delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal and South Dakota income and
franchise tax purposes (1) the new issuance will not adversely affect
the characterization as debt of any outstanding series or class of
master trust investor certificates issued by the master trust, other
than the collateral certificate, (2) the new issuance will not cause a
taxable event to holders of master trust investor certificates, and (3)
following the new issuance, the master trust will not be an
association, or publicly traded partnership, taxable as a corporation,
except, if the Threshold Conditions are satisfied, the issuer at its
option will not be required to deliver the foregoing opinions;
. the issuer delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal and Delaware income and franchise
tax purposes (1) the new issuance will not adversely affect the
characterization of the notes of any outstanding series, class or
subclass as debt, (2) the new issuance will not cause a taxable event
to holders of any outstanding notes, (3) following the new issuance,
the issuer will not be an association, or publicly traded partnership,
taxable as a corporation, and (4) following the new issuance, the newly
issued notes will be properly characterized as debt, except, if the
Threshold Conditions are satisfied, the issuer at its option will not
be required to deliver the foregoing opinions;
. either all of the following conditions are satisfied:
-- the notes of the new issuance are denominated in U.S. dollars;
-- the interest rate applicable to notes of the new issuance is
either a fixed rate of interest, or a floating rate of interest
based on LIBOR, the prime rate or
40
base rate of a Bank or another major bank, the federal funds rate
or the Treasury bill rate, or another interest rate index that has
been approved in advance by the rating agencies;
-- if the new issuance has the benefit of a derivative agreement, the
form of the derivative agreement and the identity of the
derivative counterparty have been approved in advance by the
rating agencies;
-- the legal maturity date of the new issuance is no more than
fourteen years after the date of issuance; and
-- any other conditions specified by a rating agency to the issuer in
writing,
or the issuer obtains confirmation from the rating agencies that the
new issuance of notes will not cause a reduction or withdrawal of the
rating of any outstanding notes rated by that rating agency;
. at the time of the new issuance, either the ratings condition described
in "Prospectus Summary--Ratings" is satisfied or the issuer obtains
confirmation from the rating agencies that the new issuance of notes
will not cause a reduction or withdrawal of the rating of any
outstanding notes rated by that rating agency;
. no early amortization event with respect to the collateral certificate
has occurred and is continuing as of the date of the new issuance;
. if the new issuance is a subclass of Class A notes or Class B notes of
a multiple issuance series, the new issuance will have the required
subordination protection described under "--Required Subordination
Protection in Multiple Issuance Series" and "--Required Subordinated
Amount";
. if the new issuance results in an increase in the funding deficit of
the Class C reserve account for any subclass of Class C notes of a
multiple issuance series, the issuer makes a cash deposit to that Class
C reserve account in the amount of that increase; and
. any other conditions specified in any supplement to this prospectus are
satisfied.
The issuer may from time to time issue additional notes of an outstanding
subclass of a multiple issuance series, so long as the conditions of issuance
are met. These conditions include the conditions described in the prior
paragraph as well as the following conditions:
. the issuer obtains confirmation from the rating agencies that the
issuance of additional notes will not cause a reduction or withdrawal
of the rating of any outstanding notes of that subclass rated by that
rating agency;
. as of the date of issuance of the additional notes, all amounts due and
owing to the holders of outstanding notes of that subclass have been
paid, and there are no unreimbursed reductions in the nominal
liquidation amount of that subclass due to a reallocation of principal
collections to pay interest on senior classes of notes of that series
or charge-offs of principal receivables in the master trust; and
41
. the additional notes of that subclass will be fungible with the
original notes of that subclass for federal income tax purposes--this
means that an investor buying notes at any particular time and for any
particular price will have exactly the same federal income tax
consequences regardless of whether it buys original notes or additional
notes.
There are no restrictions on the timing or amount of any additional
issuance of notes of a subclass of a multiple issuance series, so long as the
conditions described above are met. As of the date of any additional issuance
of notes, the stated principal amount, outstanding dollar principal amount and
nominal liquidation amount of that subclass will be increased to reflect the
principal amount of the additional notes. If the additional notes are a
subclass of notes that has the benefit of a derivative agreement, the issuer
will enter into another derivative agreement for the benefit of the additional
notes. If the additional notes are a subclass of Class A notes, the monthly
accumulation amount for targeted deposits to the principal funding subaccount
will be increased proportionately to reflect the principal amount of the
additional notes.
When issued, the additional notes of a subclass will be identical in all
respects to the other outstanding notes of that subclass and will be equally
and ratably entitled to the benefits of the indenture as the other outstanding
notes of that subclass without preference, priority or distinction.
Notes other than the notes offered by this prospectus may have different
conditions to issuance, to the extent acceptable to the rating agencies.
Required Subordination Protection in Multiple Issuance Series
No Class A notes or Class B notes of a multiple issuance series may be
issued unless the required subordinated amount of subordinated classes for that
class of notes is available at the time of its issuance, as described in the
following paragraphs.
In order to issue Class A notes of a multiple issuance series, the issuer
must calculate the available amount of Class B notes and Class C notes of that
series. The issuer will first calculate the subordinated amount of Class B
notes required for Class A notes. This is done by computing the following:
. the aggregate nominal liquidation amount of all outstanding Class B
notes of that series on that date, plus all funds on deposit in the
principal funding subaccounts for Class B notes of that series--other
than receivables sales proceeds in those subaccounts--on that date,
after giving effect to issuances, deposits, allocations or payments
with respect to Class B notes to be made on that date;
. minus, the aggregate amount of the Class A required subordinated amount
of Class B notes for all other Class A notes of that series which are
outstanding on that date after giving effect to any issuances or
repayments in full of any Class A notes to be made on that date; and
42
. plus, the amount of usage by outstanding Class A notes of Class B
required subordinated amount, as described in "Deposit and Application
of Funds--Limit on Reallocations of Principal Collections from
Subordinated Classes Taken to Benefit Senior Classes of Multiple
Issuance Series."
The calculation in the prior paragraph will be made in the same manner for
calculating the subordinated amount of Class C notes required for Class A
notes. The calculation in the prior paragraph will also be made in the same
manner for determining the subordinated amount of Class C notes required for
Class B notes, except that the amount of usage by outstanding Class B notes of
Class C required subordinated amount that is added back to the available amount
of Class C notes will be limited to usage of Class C notes that directly
benefits Class B notes of the same series.
Required Subordinated Amount
The required subordinated amount of a senior class of notes of a multiple
issuance series is the amount of a subordinated class that is required to be
outstanding and available on the date when the senior class of notes is issued
to provide subordination protection for that senior class. It is also used to
determine whether a subordinated class of a multiple issuance series of notes
may be repaid before the legal maturity date while senior classes of notes of
that series are outstanding.
In general, the subordinated notes of a multiple issuance series serve as
credit enhancement for the senior notes of that series, regardless of whether
the subordinated notes are issued before, at the same time as, or after the
senior notes of that series. However, some subclasses of senior notes of a
multiple issuance series may not require subordination from each class of notes
subordinated to it. For example, if a subclass of Class A notes of a multiple
issuance series requires credit enhancement solely from Class C notes, the
Class B notes of that series will not, in that case, provide credit enhancement
for that subclass of Class A notes. In addition, notes of different subclasses
within a single class of a multiple issuance series may have different required
subordinated amounts.
Unless otherwise specified in the applicable supplement to this prospectus:
. On the date of issuance of Class A notes of a multiple issuance series
offered by this prospectus, the required subordinated amount for Class
B notes will be 5.98291% and for Class C notes 7.97721%, in each case
expressed as a percentage of the initial outstanding dollar principal
amount of those Class A notes. These required subordinated amounts will
be available to provide credit enhancement to the Class A notes, and
the required subordinated amount of Class C notes of that series will
be shared with the Class B notes of that series.
. On the date of issuance of Class B notes of a multiple issuance series
offered by this prospectus, the required subordinated amount for Class
C notes will be 7.52688%, expressed as a percentage of the initial
outstanding dollar principal amount of those Class B notes. However,
Class B notes share the credit enhancement provided by Class C notes of
the same series with Class A notes of that series. Except for purposes
of determining whether Class B notes of a multiple issuance series may
be issued or Class C notes may be repaid, the required subordinated
amount for Class C
43
notes will be 133.33333%, expressed as a percentage of the initial
outstanding dollar principal amount of that subclass of Class B notes.
This larger percentage determines how much Class C credit enhancement
may be applied to Class B notes of the same series, up to the amount of
Class C notes outstanding.
. For discount notes of a senior class, the method of calculating the
required subordinated amount will be set forth in the applicable
supplement to this prospectus.
For example, in order to issue $1,000,000 of Class A notes of a multiple
issuance series, at least $59,829 ($1,000,000 x 5.98291%) of Class B notes and
$79,772 ($1,000,000 x 7.97721%) of Class C notes must be outstanding and
available in that series. In order to issue $59,829 of Class B notes, at least
$4,503 of Class C notes ($59,829 x 7.52688%) must be outstanding and available,
but the Class B notes are entitled to share up to $79,772 ($59,829 x
133.33333%) of Class C credit enhancement with the Class A notes. In this
example, if no Class A notes are outstanding, only $4,503 of Class C notes must
be outstanding and available in order for the Class B notes to be issued. If
Class A notes are issued, additional Class C notes must be issued to provide
credit enhancement to the Class A notes, and the Class B notes will share the
credit enhancement provided by the additional Class C notes up to the amount of
$79,772. The smaller amount of Class C credit enhancement required for the
issuance of Class B notes is also used in determining whether Class C notes may
be repaid or canceled as described under "Deposit and Application of
Funds--Limit on Repayments of Subordinated Classes of Multiple Issuance Series."
In addition, on the issuance date of any Class A notes or Class B notes of
a multiple issuance series, immediately after giving effect to that issuance,
the aggregate nominal liquidation amount of all outstanding Class C notes of
that series, plus all funds on deposit in the principal funding subaccounts for
Class C notes of that series, must equal at least 7.52688% of the outstanding
dollar principal amount of the Class A notes and Class B notes of that series.
Currently, one subclass of the issuer's notes, the issuer's Class 2001-A3
notes of the multiple issuance series called the "Citiseries," has a required
subordinated amount of Class B notes of 0%, and a required subordinated amount
of Class C notes of 6.95187%. The Class 2001-A3 notes are not offered by this
prospectus. The Class 2001-A3 notes are not counted for determining the amount
of Class B notes or Class C notes required to provide subordination protection
to Class A notes offered by this prospectus. The amount of Class C notes that
provides subordination protection to the Class 2001-A3 notes is not counted in
determining the amount of subordination protection available to Class A notes
or Class B notes offered by this prospectus.
The issuer may change the amount of subordination required or available for
any class of notes of a multiple issuance series, or the method of computing
the amount of that subordination, at any time without the consent of any
noteholders so long as the issuer has received:
. confirmation from the rating agencies that have rated any outstanding
notes of that series that the change will not result in the rating
assigned to any outstanding notes in that series to be withdrawn or
reduced;
44
. an opinion of counsel that for federal and South Dakota income and
franchise tax purposes (1) the change will not adversely affect the
characterization as debt of any outstanding series or class of investor
certificates issued by the master trust, other than the collateral
certificate, (2) the change will not cause a taxable event to holders
of master trust investor certificates, and (3) following the change,
the master trust will not be an association, or publicly traded
partnership, taxable as a corporation; and
. an opinion of counsel that for federal and Delaware income and
franchise tax purposes (1) the change will not adversely affect the
characterization of the notes of any outstanding series or class as
debt, (2) the change will not cause a taxable event to holders of any
outstanding notes, and (3) following the change, the issuer will not be
an association, or publicly traded partnership, taxable as a
corporation.
Payments on Notes; Paying Agent
The notes will be issued in book-entry form and payments of principal of
and interest on the notes will be made in U.S. dollars as described under
"--Book-Entry Notes" unless the stated principal amount of the notes is
denominated in a foreign currency.
The issuer and the indenture trustee, and any agent of the issuer or the
indenture trustee, will treat the registered holder of any note as the absolute
owner of that note, whether or not the note is overdue and notwithstanding any
notice to the contrary, for the purpose of making payment and for all other
purposes.
The issuer will make payments on a note to the registered holder of the
note at the close of business on the record date established for the related
payment date.
The issuer has designated the corporate trust office of Citibank, N.A., in
New York City, as its paying agent for the notes of each series. The issuer
will identify any other entities appointed to serve as paying agents on notes
of a series or class in a supplement to this prospectus. The issuer may at any
time designate additional paying agents or rescind the designation of any
paying agent or approve a change in the office through which any paying agent
acts. However, the issuer will be required to maintain a paying agent in each
place of payment for a series or class of notes.
After notice by publication, all funds paid to a paying agent for the
payment of the principal of or interest on any note of any series which remains
unclaimed at the end of two years after the principal or interest becomes due
and payable will be repaid to the issuer. After funds are repaid to the issuer,
the holder of that note may look only to the issuer for payment of that
principal or interest.
Denominations
The notes will be issued in denominations of $1,000 and multiples of $1,000
in excess of that amount.
45
Record Date
The record date for payment of the notes will be the last day of the month
before the related payment date.
Governing Law
The laws of the State of New York will govern the notes and the indenture.
Form, Exchange, and Registration and Transfer of Notes
The notes will be issued in registered form. The notes will be represented
by one or more global notes registered in the name of The Depository Trust
Company, as depository, or its nominee. We refer to each beneficial interest in
a global note as a "book-entry note." For a description of the special
provisions that apply to book-entry notes, see "--Book-Entry Notes."
A holder of notes may exchange those notes for other notes of the same
class of any authorized denominations and of the same aggregate stated
principal amount and tenor.
Any holder of a note may present that note for registration of transfer,
with the form of transfer properly executed, at the office of the note
registrar or at the office of any transfer agent that the issuer designates.
Holders of notes will not be charged any service charge for the exchange or
transfer of their notes. Holders of notes that are to be transferred or
exchanged will be liable for the payment of any taxes and other governmental
charges described in the indenture before the transfer or exchange will be
completed. The note registrar or transfer agent, as the case may be, will
effect a transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.
The issuer has appointed Citibank, N.A. as the note registrar for the
notes. The issuer also may at any time designate additional transfer agents for
any series or class of notes. The issuer may at any time rescind the
designation of any transfer agent or approve a change in the location through
which any transfer agent acts. However, the issuer will be required to maintain
a transfer agent in each place of payment for a series or class of notes.
Book-Entry Notes
The notes will be in book-entry form. This means that, except under the
limited circumstances described in this subheading under "Definitive Notes,"
purchasers of notes will not be entitled to have the notes registered in their
names and will not be entitled to receive physical delivery of the notes in
definitive paper form. Instead, upon issuance, all the notes of a class will be
represented by one or more fully registered permanent global notes, without
interest coupons.
Each global note will be deposited with a securities depository named The
Depository Trust Company and will be registered in the name of its nominee,
Cede & Co. No global note representing book-entry notes may be transferred
except as a whole by DTC to a nominee of
46
DTC, or by a nominee of DTC to another nominee of DTC. Thus, DTC or its nominee
will be the only registered holder of the notes and will be considered the sole
representative of the beneficial owners of notes for purposes of the indenture.
The registration of the global notes in the name of Cede & Co. will not
affect beneficial ownership and is performed merely to facilitate subsequent
transfers. The book-entry system, which is also the system through which most
publicly traded common stock is held, is used because it eliminates the need
for physical movement of securities. The laws of some jurisdictions, however,
may require some purchasers to take physical delivery of their notes in
definitive form. These laws may impair the ability to transfer book-entry notes.
Purchasers of notes in the United States can hold interests in the global
notes only through DTC, either directly, if they are participants in that
system--such as a bank, brokerage house or other institution that maintains
securities accounts for customers with DTC or its nominee--or otherwise
indirectly through a participant in DTC. Purchasers of notes in Europe can hold
interests in the global notes only through Clearstream or through Euroclear
Bank S.A./N.V., as operator of the Euroclear system.
Because DTC will be the only registered owner of the global notes,
Clearstream and Euroclear will hold positions through their respective U.S.
depositories, which in turn will hold positions on the books of DTC. Citibank,
N.A. will act as U.S. depository for Clearstream and The Chase Manhattan Bank
will act as U.S. depository for Euroclear.
As long as the notes are in book-entry form, they will be evidenced solely
by entries on the books of DTC, its participants and any indirect participants.
DTC will maintain records showing
. the ownership interests of its participants, including the U.S.
depositories; and
. all transfers of ownership interests between its participants.
The participants and indirect participants, in turn, will maintain records
showing
. the ownership interests of their customers, including indirect
participants, that hold the notes through those participants; and
. all transfers between these persons.
Thus, each beneficial owner of a book-entry note will hold its note indirectly
through a hierarchy of intermediaries, with DTC at the "top" and the beneficial
owner's own securities intermediary at the "bottom."
The issuer, the indenture trustee and their agents will not be liable for
the accuracy of, and are not responsible for maintaining, supervising or
reviewing DTC's records or any participant's records relating to book-entry
notes. The issuer, the indenture trustee and their agents also will not be
responsible or liable for payments made on account of the book-entry notes.
47
Until definitive notes are issued to the beneficial owners as described in
this subheading under "Definitive Notes," all references to "holders" of notes
means DTC. The issuer, the indenture trustee and any paying agent, transfer
agent or securities registrar may treat DTC as the absolute owner of the notes
for all purposes.
Beneficial owners of book-entry notes should realize that the issuer will
make all distributions of principal and interest on their notes to DTC and will
send all required reports and notices solely to DTC as long as DTC is the
registered holder of the notes. DTC and the participants are generally required
by law to receive and transmit all distributions, notices and directions from
the indenture trustee to the beneficial owners through the chain of
intermediaries.
Similarly, the indenture trustee will accept notices and directions solely
from DTC. Therefore, in order to exercise any rights of a holder of notes under
the indenture, each person owning a beneficial interest in the notes must rely
on the procedures of DTC and, in some cases, Clearstream or Euroclear. If the
beneficial owner is not a participant in that system, then it must rely on the
procedures of the participant through which that person owns its interest. DTC
has advised the issuer that it will take actions under the indenture only at
the direction of its participants, which in turn will act only at the direction
of the beneficial owners. Some of these actions, however, may conflict with
actions it takes at the direction of other participants and beneficial owners.
Notices and other communications by DTC to participants, by participants to
indirect participants, and by participants and indirect participants to
beneficial owners will be governed by arrangements among them.
Beneficial owners of book-entry notes should also realize that book-entry
notes may be more difficult to pledge because of the lack of a physical note.
Beneficial owners may also experience delays in receiving distributions on
their notes since distributions will initially be made to DTC and must be
transferred through the chain of intermediaries to the beneficial owner's
account.
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York Banking
Law and is a "banking institution" within the meaning of the New York Banking
Law. DTC is also a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under Section 17A of the Securities Exchange Act
of 1934. DTC was created to hold securities deposited by its participants and
to facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thus eliminating the need for physical movement of securities.
DTC is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. The rules applicable to DTC and its participants
are on file with the Securities and Exchange Commission.
48
Clearstream
Clearstream Banking, societe anonyme is registered as a bank in Luxembourg
and is subject to regulation by the Luxembourg Commission for the Supervision
of the Financial Sector, which supervises Luxembourg banks. Clearstream holds
securities for its customers and facilitates the clearance and settlement of
securities transactions by electronic book-entry transfers between their
accounts. Clearstream provides various services, including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream has established an electronic bridge with
Euroclear in Brussels to facilitate settlement of trades between Clearstream
and Euroclear. Clearstream currently accepts over 110,000 securities issues on
its books.
Clearstream's customers are worldwide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations. Clearstream's U.S. customers are limited to securities
brokers and dealers, and banks. Currently, Clearstream has approximately 2,000
customers located in over 80 countries, including all major European countries,
Canada, and the United States. Indirect access to Clearstream is available to
other institutions that clear through or maintain a custodial relationship with
an account holder of Clearstream.
Euroclear System
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This
system eliminates the need for physical movement of securities and any risk
from lack of simultaneous transfers of securities and cash. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. The Euroclear Operator
is Euroclear Bank S.A./N.V., under contract with Euro-clear Clearance Systems
S.C., a Belgian cooperative corporation, known as the "Cooperative." The
Euroclear Operator conducts all operations. All Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks, including
central banks, securities brokers and dealers and other professional financial
intermediaries and may include the underwriters. Indirect access to Euroclear
is also available to other firms that clear through or 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, and applicable Belgian
law. These Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific
49
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear participants, and has no record of or
relationship with persons holding through Euroclear participants.
This information about DTC, Clearstream and Euroclear has been provided by
each of them for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Distributions on Book-Entry Notes
The issuer will make distributions of principal of and interest on
book-entry notes to DTC. These payments will be made in immediately available
funds by the issuer's paying agent, Citibank, N.A., at the office of the paying
agent in New York City that the issuer designates for that purpose.
In the case of principal payments, the global notes must be presented to
the paying agent in time for the paying agent to make those payments in
immediately available funds in accordance with its normal payment procedures.
Upon receipt of any payment of principal of or interest on a global note,
DTC will immediately credit the accounts of its participants on its book-entry
registration and transfer system. DTC will credit those accounts with payments
in amounts proportionate to the participants' respective beneficial interests
in the stated principal amount of the global note as shown on the records of
DTC. Payments by participants to beneficial owners of book-entry notes will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of those participants.
Distributions on book-entry notes held beneficially through Clearstream
will be credited to cash accounts of Clearstream participants in accordance
with its rules and procedures, to the extent received by its U.S. depository.
Distributions on book-entry notes held beneficially through Euroclear will
be credited to the cash accounts of Euroclear participants in accordance with
the Terms and Conditions, to the extent received by its U.S. depository.
In the event definitive notes are issued, distributions of principal and
interest on definitive notes will be made directly to the holders of the
definitive notes in whose names the definitive notes were registered at the
close of business on the related record date.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using DTC's Same-Day Funds Settlement System. Secondary market
trading between Clearstream participants and/or
50
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream and Euroclear and will
be settled using the procedures applicable to conventional eurobonds in
immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream or
Euroclear participants, on the other, will be effected in DTC in accordance
with DTC's rules on behalf of the relevant European international clearing
system by the U.S. depositories. However, cross-market transactions of this
type will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S.
depository to take action to effect final settlement on its behalf by
delivering or receiving notes in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to DTC.
Because of time-zone differences, credits to notes received in Clearstream
or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and will be credited the
business day following a DTC settlement date. The credits to or any
transactions in the notes settled during processing will be reported to the
relevant Euroclear or Clearstream participants on that business day. Cash
received in Clearstream or Euroclear as a result of sales of notes by or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date, but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to these procedures in
order to facilitate transfers of notes among participants of DTC, Clearstream
and Euroclear, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
Definitive Notes
Beneficial owners of book-entry notes may exchange those notes for
definitive notes registered in their name only if:
. DTC is unwilling or unable to continue as depository for the global
notes or ceases to be a registered "clearing agency" and the issuer is
unable to find a qualified replacement for DTC;
. the issuer, in its sole discretion, elects to terminate the book-entry
system through DTC; or
. any event of default has occurred with respect to those book-entry
notes, and beneficial owners evidencing not less than 50% of the unpaid
outstanding dollar principal amount of the notes of that class advise
the indenture trustee and DTC that the continuation of a book entry
system is no longer in the best interests of those beneficial owners.
51
If any of these three events occurs, DTC is required to notify the
beneficial owners through the chain of intermediaries that the definitive notes
are available. The appropriate global note will then be exchangeable in whole
for definitive notes in registered form of like tenor and of an equal aggregate
stated principal amount, in specified denominations. Definitive notes will be
registered in the name or names of the person or persons specified by DTC in a
written instruction to the registrar of the notes. DTC may base its written
instruction upon directions it receives from its participants. Thereafter, the
holders of the definitive notes will be recognized as the "holders" of the
notes under the indenture.
Replacement of Notes
The issuer will replace at the expense of the holder any mutilated note,
upon surrender of that note to the indenture trustee. The issuer will replace
at the expense of the holder any notes that are destroyed, lost or stolen upon
delivery to the indenture trustee of evidence of the destruction, loss or theft
of those notes satisfactory to the issuer and the indenture trustee. In the
case of a destroyed, lost or stolen note, the issuer and the indenture trustee
may require the holder of the note to provide an indemnity satisfactory to the
indenture trustee and the issuer before a replacement note will be issued.
Acquisition and Cancellation of Notes by the Issuer and the Banks
The issuer, the Banks and their affiliates may acquire notes in the open
market or otherwise. The issuer, the Banks and their affiliates may cause the
notes acquired by them to be canceled and notes so canceled will no longer be
outstanding. The nominal liquidation amount and outstanding dollar principal
amount of a class of notes will be reduced by the nominal liquidation amount
and outstanding dollar principal amount, respectively, of any notes of that
class that are canceled in this manner. Any cancellation of notes will observe
the same limitations for payments of subordinated classes as described in
"Deposit and Application of Funds--Limit on Repayments of Subordinated Classes
of Single Issuance Series" and "--Limit on Repayments of Subordinated Classes
of Multiple Issuance Series."
52
SOURCES OF FUNDS TO PAY THE NOTES
The Collateral Certificate
The primary source of funds for the payment of principal of and interest on
the notes is the collateral certificate issued by the master trust to the
issuer. For a description of the master trust and its assets, see "The Master
Trust." The collateral certificate is the only master trust investor
certificate issued pursuant to Series 2000 of the master trust certificates.
Finance charge collections allocated to the collateral certificate will be
deposited every month by the master trust into the issuer's collection account.
Finance charge collections allocated to the collateral certificate are not
shared with or reallocated to any other series of investor certificates issued
by the master trust.
Each month, the issuer will request the master trust to deposit into the
collection account the amount of principal collections the issuer needs to
reallocate to the interest funding account and for deposits into the principal
funding account. To the extent principal collections are allocable to the
collateral certificate, the master trust will deposit the requested amount of
principal collections into the collection account.
The collateral certificate represents an undivided interest in the assets
of the master trust. The assets of the master trust consist primarily of credit
card receivables arising in selected MasterCard and VISA* revolving credit card
accounts that have been transferred by the Banks. The amount of credit card
receivables in the master trust will fluctuate from day to day as new
receivables are generated or added to or removed from the master trust and as
other receivables are collected, charged off as uncollectible, or otherwise
adjusted.
The collateral certificate has a fluctuating Invested Amount, representing
the investment of that certificate in credit card receivables. The Invested
Amount of the collateral certificate will be the same as the total nominal
liquidation amount of the outstanding notes. For a discussion of Invested
Amount, see "Invested Amount" in the glossary.
The collateral certificate has no specified interest rate. The issuer, as
holder of the collateral certificate, is entitled to receive its allocable
share of cash collections from two kinds of credit card receivables payable to
the master trust: finance charge receivables and principal receivables.
Finance charge receivables are all periodic finance charges, annual
membership fees, cash advance fees and late charges on amounts charged for
merchandise and services, interchange, which is described below in this
paragraph, and some other fees designated by the Banks. Principal receivables
are all amounts charged by cardholders for merchandise and services, amounts
advanced to cardholders as cash advances and all other fees billed to
cardholders on the credit card accounts. Recoveries of charged-off receivables
are credited to the category from which they were charged off. "Interchange"
consists of fees received by Citibank (South Dakota), as a credit card-issuing
bank, from MasterCard International and VISA as partial compensation for taking
credit risk, absorbing fraud losses and funding
- --------
* VISA(R) and MasterCard(R) are registered trademarks of VISA U.S.A. Inc. and
MasterCard International Incorporated, respectively.
53
receivables for a limited period before initial billing. Interchange varies
from approximately 1% to 2% of the transaction amount, but these amounts may be
changed by MasterCard International or VISA.
In general, the allocable share of monthly collections of finance charge
receivables and principal receivables available to the collateral certificate,
to other series of investor certificates issued by the master trust and to the
sellers' interest is determined as follows:
. first, collections of finance charge receivables and collections of
principal receivables are allocated among the different series of
certificates issued by the master trust, including the series to which
the collateral certificate belongs, pro rata based on the Invested
Amount of each series; and
. second, following the allocation to each series, collections of finance
charge receivables and principal receivables are further allocated
between the holders of each series of investor certificates under the
master trust and the Banks pro rata based on the aggregate Invested
Amount of the master trust investor certificates and the principal
receivables allocable to the sellers' interest.
In general, the Invested Amount of each other series of certificates issued
by the master trust will equal the stated dollar amount of participation
certificates issued to investors in that series less unreimbursed charge-offs
of principal receivables in the master trust allocated to those investors,
principal payments made to those investors and deposits made to any principal
funding account for the series. The sellers' interest, which is owned by
Citibank (South Dakota) and Citibank (Nevada), represents the interest in the
principal receivables in the master trust at the end of the relevant month not
represented by any series of investor certificates.
Servicing fees and losses on principal receivables in the master trust
arising from failure of cardholders to pay, charge-offs or otherwise are
allocated among series and between investors in each series and the sellers'
interest generally in the same manner as finance charge collections.
Each month, the master trust will allocate collections of finance charge
receivables and principal receivables as well as the servicing fee and losses
to the investor certificates outstanding under the master trust, including the
collateral certificate. The master trust deducts the collateral certificate's
share of the servicing fee from its share of the collections of finance charge
receivables, and deducts the collateral certificate's share of losses from its
share of collections of finance charge receivables and/or principal
receivables. The servicing fee is described under "The Master Trust--The
Servicer."
Allocations of losses, servicing fees and collections of finance charge
receivables and principal receivables are made pro rata for each month based on
the invested amount of each investor certificate under the master trust,
including the collateral certificate, and the principal receivables allocable
to the sellers' interest. For example, if the total principal receivables in
the master trust at the end of the month is 500, the invested amount of the
collateral certificate is 100, the invested amounts of the other investor
certificates are 200 and the sellers' interest is 200, the collateral
certificate is entitled, in general, to 1/5--or 100/500--of the cash received
each month.
54
There is an exception to the pro rata allocations described in the
preceding paragraph. In the master trust, when the principal amount of an
master trust investor certificate other than the collateral certificate begins
to amortize, a special allocation procedure is followed. In this case,
collections of principal receivables continue to be allocated between investors
in the series and the sellers' interest as if the invested amount of the series
had not been reduced by principal collections deposited to a principal funding
account or paid to investors. Allocations of principal collections between the
investors in a series and the sellers' interest is based on the invested amount
of the series "fixed" at the time immediately before the first deposit of
principal collections into a principal funding subaccount or the time
immediately before the first payment of principal collections to investors.
Distributions of ongoing collections of finance charge receivables, as well as
losses and expenses, however, are not allocated on this type of a fixed basis.
In the case of the collateral certificate, each class of notes is treated as a
separate series of investor certificates that becomes "fixed" immediately
before the issuer begins to allocate principal collections to the principal
funding subaccount for that class, whether for budgeted deposits or prefunding,
or upon the occurrence of the expected principal payment date, an early
redemption event, event of default or other optional or mandatory redemption.
If principal collections allocated to the collateral certificate are needed
to pay the notes or to make a deposit into the trust accounts within a month,
they will be deposited into the issuer's collection account. Otherwise,
collections of principal receivables allocated to the collateral certificate
will be reallocated to other series of master trust investor certificates which
have principal collection shortfalls--which does not reduce the Invested Amount
of the collateral certificate--or reinvested in the master trust to maintain
the Invested Amount of the collateral certificate. If the collateral
certificate has a principal collection shortfall, but other series of investor
certificates have excess principal collections, a portion of the other excess
principal collections allocated to other series of investor certificates will
be reallocated to the collateral certificate and deposited into the issuer's
collection account--which reduces the Invested Amount of the collateral
certificate.
If a class of notes has directed the master trust to sell credit card
receivables following an event of default and acceleration, or on the
applicable legal maturity date, as described in "Deposit and Application of
Funds--Sale of Credit Card Receivables," the only source of funds to pay
principal of and interest on that class will be the proceeds of that sale and
investment earnings on the applicable principal funding subaccount.
Derivative Agreements
Some notes may have the benefit of one or more derivative agreements,
including interest rate or currency swaps, caps, collars, guaranteed investment
contracts or other similar agreements with various counterparties. Citibank
(South Dakota), Citibank (Nevada) or any of their affiliates may be
counterparties to a derivative agreement. In general, the issuer will receive
payments from counterparties to the derivative agreements in exchange for the
issuer's payments to them, to the extent required under the derivative
agreements. The specific terms of each derivative agreement and a description
of each counterparty will be included in the applicable supplement to this
prospectus for those notes. We refer to the agreements described in this
paragraph as "derivative agreements."
55
The Trust Accounts
The issuer has established a collection account for the purpose of
receiving payments of finance charge collections and principal collections from
the master trust payable under the collateral certificate.
The issuer has also established a principal funding account and interest
funding account, which will have subaccounts for each class and subclass of
notes of a series, and a Class C reserve account, which will have subaccounts
for each class and subclass of Class C notes of a series. If specified in a
supplement to this prospectus, the issuer may establish supplemental accounts
for any series, class or subclass of notes.
Each month, distributions on the collateral certificate will be deposited
into the collection account, and then reallocated to the principal funding
account, the interest funding account, the Class C reserve account, any
supplemental account, to payments under any applicable derivative agreements,
and to the other purposes as specified in "Deposit and Application of Funds" or
in a supplement to this prospectus. However, for so long as Citibank (South
Dakota) is the servicer of the master trust and manager of the issuer and
Citibank (South Dakota) maintains a certificate of deposit rating of at least
A-1 and P-1, or their equivalent, by the rating agencies, Citibank (South
Dakota) may commingle funds received from the collateral certificate until the
business day before the payment date of a class of notes, instead of
immediately depositing those funds into the trust accounts.
Funds on deposit in the principal funding account and the interest funding
account will be used to make payments of principal of and interest on the
notes. Payments of principal of and interest on the notes will be made from
funds on deposit in the accounts when the payments are due, either in the month
when the funds are deposited into the accounts, or in later months--for
example, if principal must be accumulated for payment at a later date, or if
interest is payable quarterly, semiannually or at another interval less
frequently than monthly.
If the issuer anticipates that the amount of principal collections that
will be deposited into the collection account in a particular month will not be
enough to pay all of the stated principal amount of a note that has an expected
principal payment date in that month, the issuer may begin to withdraw funds
from the collection account in months before the expected principal payment
date and deposit those funds into the principal funding subaccount established
for that class to be held until the expected principal payment date of that
note. If the earnings on funds in the principal funding subaccount are less
than the yield payable on the applicable class of notes--after giving effect to
net payments and receipts under any derivative agreements--additional funds
will be deposited in the interest funding subaccount as described under
"Deposit and Application of Funds--Deposit of Principal Funding Subaccount
Earnings in Interest Funding Subaccounts; Principal Funding Subaccount Earnings
Shortfall."
If interest on a note is not scheduled to be paid every month--for example,
if interest on that note is payable quarterly, semiannually or at another
interval less frequently than monthly--the issuer will withdraw a portion of
funds from the collection account in months
56
in which no interest payment is due and deposit those funds into the interest
funding subaccount for that note to be held until the interest is due. See
"Deposit and Application of Funds--Targeted Deposits of Finance Charge
Collections to the Interest Funding Account."
The Class C reserve account will initially not be funded. If the finance
charge collections generated by the master trust fall below a level specified
in the applicable supplement to this prospectus, the Class C reserve account
will be funded as described under "Deposit and Application of Funds--Targeted
Deposits to the Class C Reserve Account."
Funds on deposit in the Class C reserve account will be available to
holders of Class C notes to cover shortfalls of interest payable on interest
payment dates. Funds on deposit in the Class C reserve account will also be
available to holders of Class C notes on any day when principal is payable, but
only to the extent that the nominal liquidation amount of the Class C notes
plus funds on deposit in the applicable Class C principal funding subaccount is
less than the outstanding dollar principal amount of the Class C notes.
Only the holders of Class C notes will have the benefit of the Class C
reserve account. See "Deposit and Application of Funds--Withdrawals from the
Class C Reserve Account."
The accounts described in this section are referred to as "trust accounts."
Trust accounts may be maintained only in:
. a segregated trust account with the corporate trust department of a
United States bank or a domestic branch of a foreign bank; or
. a segregated account at a United States bank or a domestic branch of a
foreign bank that is rated in the highest long term or short term
rating category by the rating agencies that rate the issuer's notes.
Funds maintained in the trust accounts will be invested in investments the
obligor on which has a rating in the highest rating category by the rating
agencies that rate the notes. Investment earnings on funds in the principal
funding subaccount for a class of notes will be applied to make interest
payments on that class of notes. Investment earnings on funds in the other
trust accounts will be allocated as described under "Deposit and Application of
Funds--Allocation of Finance Charge Collections to Accounts." Any loss
resulting from the investment of funds in the trust accounts will be charged to
the trust subaccount incurring the loss.
Limited Recourse to the Issuer; Security for the Notes
Only the portion of finance charge collections and principal collections
under the collateral certificate available to a class of notes after giving
effect to all allocations and reallocations, the applicable trust accounts, any
applicable derivative agreement and proceeds of sales of credit card
receivables held by the master trust provide the source of payment for
principal of or interest on any class of notes. Noteholders will have no
recourse to any other assets of the issuer or any other person or entity for
the payment of principal of or interest on the notes.
57
The notes of all series are secured by a shared security interest in the
collateral certificate and the collection account, but each class of notes is
entitled to the benefits of only that portion of those assets allocated to it
under the indenture. Each class of notes is also secured by a security interest
in the applicable principal funding subaccount, the applicable interest funding
subaccount, in the case of classes of Class C notes, the applicable Class C
reserve subaccount, any applicable supplemental account, and by a security
interest in any applicable derivative agreement.
The Indenture Trustee
Bankers Trust Company is the trustee under the indenture for the notes. Its
principal corporate trust office is located at Four Albany Street, 10th Floor,
New York, New York 10006.
The indenture trustee may resign at any time. The issuer may also remove
the indenture trustee if the indenture trustee is no longer eligible to act as
trustee under the indenture or if the indenture trustee becomes insolvent. In
all circumstances, the issuer must appoint a successor trustee for the notes.
Any resignation or removal of the indenture trustee and appointment of a
successor trustee will not become effective until the successor trustee accepts
the appointment.
The issuer or its affiliates may maintain accounts and other banking or
trustee relationships with the indenture trustee and its affiliates.
DEPOSIT AND APPLICATION OF FUNDS
The indenture specifies how finance charge collections and principal
collections allocated to the collateral certificate and payments received from
counterparties under derivative agreements will be deposited into the trust
accounts established for each class or subclass of notes to provide for the
payment of principal and interest on those notes as the payments become due.
Following are summaries of those provisions.
Allocation of Finance Charge Collections to Accounts
Each month, the indenture trustee will allocate, or cause to be allocated,
finance charge collections--together with any other funds to be treated as
finance charge collections--received that month from the collateral certificate
and investment earnings on funds in the trust accounts other than the principal
funding account as follows:
. first, to pay the fees and expenses of the indenture trustee;
. second, to make the targeted deposit to the interest funding account to
fund the payment of interest on the notes, other than any class of
notes that has directed the master trust to sell credit card
receivables as described in "--Sale of Credit Card Receivables";
58
. third, to make a reinvestment in the collateral certificate if the
nominal liquidation amount of any class of notes, plus any amounts on
deposit in that class's principal funding subaccount, is less than the
outstanding dollar principal amount of that class, or to reimburse
reallocations from the principal funding subaccount of any class of
notes that has directed a sale of receivables;
. fourth, to make the targeted deposit to the Class C reserve account, if
any;
. fifth, to make any other payment or deposit required by any series,
class or subclass of notes; and
. sixth, to the issuer.
Other funds to be treated as finance charge collections include income and
other gain on the trust accounts--other than the principal funding account--and
amounts remaining on deposit in the trust subaccounts after payment in full of
the applicable subclass of notes.
Allocation of Principal Collections to Accounts
Each month, the indenture trustee will allocate, or cause to be allocated,
principal collections received that month from the collateral
certificate--together with other funds that are to be treated as principal
collections--as follows:
. first, if the amount available under item second under "--Allocation of
Finance Charge Collections to Accounts" is not enough to make the full
targeted deposit into the interest funding subaccount for any class of
notes, principal collections allocable to the subordinated classes of
notes of that series--together with proceeds of sales of principal
receivables described under "--Sale of Credit Card Receivables" in the
principal funding subaccounts of the subordinated classes of notes of
that series--will be reallocated to the senior classes of notes of that
series to the extent of the required subordinated amount of the senior
classes of notes of that series. Those reallocations will be made in
the following order:
-- (1), from Class C notes of that series to Class A notes of that
series;
-- (2), from Class C notes of that series to Class B notes of that
series; and
-- (3), from Class B notes of that series to Class A notes of that
series;
. second, to make the targeted deposits to the principal funding account;
and
. third, to the master trust, to be reinvested in the collateral
certificate.
Other funds that are to be treated as principal collections include funds
released from principal funding subaccounts when prefunding is no longer
necessary, as described in "--Withdrawals from Principal Funding Account." If a
class of notes directs the master trust to sell credit card receivables as
described in "--Sale of Credit Card Receivables," the proceeds of that sale
will be treated as principal collections for item first, but not for item
second or third.
59
The amount of principal collections that may be allocated to pay interest
is limited as described under "--Limit on Reallocations of Principal
Collections from Subordinated Classes Taken to Benefit Senior Classes of Single
Issuance Series" and "--Limit on Reallocations of Principal Collections from
Subordinated Classes Taken to Benefit Senior Classes of Multiple Issuance
Series."
The Invested Amount of the collateral certificate will be reduced by the
amount of principal collections used to make deposits into the interest funding
account and deposits into the principal funding account. If the Invested Amount
of the collateral certificate is reduced because principal collections have
been used to make deposits into the interest funding account, the amount of
finance charge collections and principal collections allocated to the
collateral certificate will be reduced in later months unless the reduction in
the Invested Amount is reimbursed from Excess Finance Charge Collections.
Targeted Deposits of Finance Charge Collections to the Interest Funding Account
The aggregate deposit targeted to be made each month to the interest
funding account with finance charge collections and other amounts that are to
be treated as finance charge collections will be equal to the sum of the
interest funding account deposits targeted to be made for each class or
subclass of notes. These requirements are set forth below. The deposit targeted
for any month will also include any shortfall in the targeted deposit from any
prior month. A supplement to this prospectus for a class or subclass of notes
may specify additional or different monthly deposits. Notes other than the
notes offered by this prospectus may have different targeted deposits.
. Interest Payments not Covered by a Derivative Agreement. If a class or
subclass of notes provides for interest payments that are not covered
by a derivative agreement, the deposit targeted for that class or
subclass of notes for any month will be equal to the amount of interest
accrued on the outstanding dollar principal amount of that class or
subclass, during the period from the prior Monthly Interest Date--or
the date of issuance of that class or subclass for the determination
for the first Monthly Interest Date--to the first Monthly Interest Date
after the end of the month. If a class or subclass of notes provides
for interest payments that are partially covered by a derivative
agreement--for example, an interest rate cap--the deposit targeted for
that class or subclass for any month will be computed in the same
manner, but will be reduced by the amount of the payment for interest
received from the derivative counterparty.
. Notes with Performing Derivative Agreements. If a class or subclass of
U.S. dollar notes or foreign currency notes has a Performing derivative
agreement for interest that provides for monthly payments to the
applicable derivative counterparty, the deposit targeted for that class
or subclass of notes is equal to the amount required to be paid to the
applicable derivative counterparty on the payment date following the
end of that month.
60
If a class or subclass of U.S. dollar notes or foreign currency notes
has a Performing derivative agreement for interest that provides for
payments less frequently than monthly to the applicable derivative
counterparty, the deposit targeted for that class or subclass of notes
for each month is equal to the amount required to be paid to the
applicable derivative counterparty on the next payment date following
the end of that month taking into account the applicable interest rate
and day count convention, but allocated pro rata to that month as
provided in the derivative agreement, or as otherwise provided in the
applicable derivative agreement.
. U.S. Dollar Notes with Non-Performing Derivative Agreements. If a
class or subclass of U.S. dollar notes has a non-Performing derivative
agreement for interest, the deposit targeted for that class or subclass
for each month unless otherwise provided in the applicable derivative
agreement will be equal to the amount of interest accrued on the
outstanding dollar principal amount of those notes, after deducting any
amounts on deposit in the applicable principal funding subaccount,
during the period from the prior Monthly Interest Date to the first
Monthly Interest Date after the end of that month to the extent which
that interest would have been covered by the non-Performing derivative
agreement.
. Foreign Currency Notes with Non-Performing Derivative Agreements. If a
class or subclass of foreign currency notes has a non-Performing
derivative agreement for interest that provides for monthly payments to
the applicable derivative counterparty, then the calculation of the
targeted deposit is made with reference to the amount of U.S. dollars
that would have been payable to the applicable derivative counterparty
on the payment date following the applicable month if the derivative
agreement were Performing, or as otherwise provided in the applicable
derivative agreement.
If a class or subclass of foreign currency notes has a non-Performing
derivative agreement for interest that provides for payments less
frequently than monthly to the applicable derivative counterparty, the
deposit targeted for that class or subclass of notes for each month is
equal to the amount that would have been required to be paid to the
applicable derivative counterparty on the next payment date following
the end of that month taking into account the applicable interest rate
and day count convention, but allocated pro rata to that month as
provided in the derivative agreement, or as otherwise provided in the
applicable derivative agreement.
. Discount Notes. In the case of a class or subclass of discount notes,
the deposit targeted for that class or subclass of notes for any month,
in addition to any applicable stated interest as determined under the
four items above, is the amount of accretion of principal of that class
or subclass of notes from the prior Monthly Principal Date--or in the
case of the first Monthly Principal Date, from the date of issuance of
that class or subclass--to the first Monthly Principal Date after the
end of the month.
61
Each of the deposits described above will be reduced proportionately for any
funds on deposit in the principal funding subaccount for the applicable class
or subclass of notes, for which the applicable deposit will be made to the
interest funding account as described under "Deposits of Principal Funding
Subaccount Earnings in Interest Funding Subaccount; Principal Funding
Subaccount Earnings Shortfall."
In addition, for each month each of the following deposits will be targeted
to be made to the interest funding account with finance charge collections and
other amounts to be treated as finance charge collections, pro rata with the
deposits described above.
. Specified Deposits. If the applicable supplement to this prospectus
for any class or subclass of notes specifies deposits in addition to or
different from the deposits described above to be made to the interest
funding subaccount for that class or subclass, the deposits targeted
for that class or subclass each month are the specified amounts.
. Interest on Overdue Interest. Unless otherwise specified in a
supplement to this prospectus, the deposit targeted for any class or
subclass of notes that has accrued and overdue interest for any month
will be the interest accrued on that overdue interest. Interest on
overdue interest will be computed from and including the interest
payment date in that month to but excluding the interest payment date
next following that month, at the rate of interest applicable to
principal of that class or subclass.
If the amount of finance charge collections is not enough to make all of
the deposits described above for any class of notes, then principal collections
allocable to subordinated classes of notes and receivables sales proceeds
received by subordinated classes of notes as described under "--Sale of Credit
Card Receivables" will be reallocated first, from the Class C notes of that
series to the Class A notes of that series, second, from the Class C notes of
that series to the Class B notes of that series, and third, from the Class B
notes of that series to the Class A notes of that series, in each case, to the
extent of the required subordinated amount of the senior class of notes.
Each deposit to the interest funding account will be made on the applicable
Monthly Interest Date, or as much earlier as necessary to make timely deposit
or payment to the applicable interest funding subaccount or derivative
counterparty.
A single class or subclass of notes may be entitled to more than one of the
preceding deposits, plus deposits from other sources, described under
"--Deposit of Principal Funding Subaccount Earnings in Interest Funding
Subaccounts; Principal Funding Subaccount Earnings Shortfall."
A class of notes that has directed the master trust to sell credit card
receivables as described in "--Sale of Credit Card Receivables," will not be
entitled to receive any of the preceding deposits to be made to its interest
funding subaccount from finance charge collections, other amounts to be treated
as finance charge collections or reallocated principal collections.
62
Payments Received from Derivative Counterparties for Interest
Payments received under derivative agreements for interest on notes payable
in U.S. dollars will be deposited into the applicable interest funding
subaccount. Payments received under derivative agreements for interest on
foreign currency notes will be made directly to the applicable paying agent for
payment to the holders of those notes, or as otherwise specified in the
applicable supplement to this prospectus.
Deposit of Principal Funding Subaccount Earnings in Interest Funding
Subaccounts; Principal Funding Subaccount Earnings Shortfall
Investment earnings on amounts on deposit in the principal funding
subaccount for a class of notes will be deposited monthly into that class's
interest funding subaccount.
The issuer will notify the master trust from time to time of the aggregate
amount on deposit in the principal funding account, other than with respect to
classes that have directed the master trust to sell credit card receivables as
described in "--Sale of Credit Card Receivables." Whenever there is any amount
on deposit in any principal funding subaccount, other than with respect to
classes that have directed the master trust to sell receivables, the master
trust will designate an equal amount of the sellers' interest, and the finance
charge collections allocable to the designated portion of the sellers' interest
will be applied as follows: Each month the issuer will calculate the targeted
amount of principal funding subaccount earnings for each class or subclass of
notes, which will be equal to the amount that the funds on deposit in each
principal funding subaccount would earn at the interest rate payable by the
issuer--taking into account payments and receipts under applicable derivative
agreements--on the related class or subclass of notes. As a general rule, if
the amount actually earned on the funds on deposit is less than the targeted
amount of earnings, then the shortfall will be made up from the finance charge
collections allocated to the corresponding designated portion of the sellers'
interest. A class of notes that has directed the master trust to sell credit
card receivables as described in "--Sale of Credit Card Receivables," will not
be entitled to any finance charge collections from the designated portion of
the sellers' interest if there is an earnings shortfall in its principal
funding subaccount.
If the amount of principal funding subaccount earnings for any class or
subclass of notes for any month is greater than the targeted principal funding
subaccount earnings for that month, the amount of the excess will be treated as
finance charge collections.
Deposits of Withdrawals from the Class C Reserve Account to the Interest
Funding Account
Withdrawals made from any Class C reserve subaccount will be deposited into
the applicable interest funding subaccount to the extent described under
"--Withdrawals from the Class C Reserve Account."
63
Allocation to Interest Funding Subaccounts
The aggregate deposit of finance charge collections and reallocated
principal collections made each month to the interest funding account will be
allocated, and a portion deposited in the interest funding subaccount
established for each class or subclass of notes, based on the following rules:
(1) Available Amounts Are Equal to Targeted Amounts. If the aggregate
amount of finance charge collections available for deposit to the
interest funding account is equal to the sum of the deposits of finance
charge collections targeted by each class or subclass of notes, then
that targeted amount is deposited in the interest funding subaccount
established for each class or subclass.
(2) Available Amounts Are Less Than Targeted Amounts. If the aggregate
amount of finance charge collections available for deposit to the
interest funding account is less than the sum of the deposits of
finance charge collections targeted by each class or subclass of notes,
then the amount available to be deposited into the interest funding
account will be allocated to each series of notes pro rata based on the
aggregate nominal liquidation amount of notes in that series.
. For all series of notes identified as "Group 1" series, the
allocation of finance charge collections is reaggregated into a
single pool, and reallocated to each series, class or subclass of
notes in Group 1 pro rata based on the amount of the deposit
targeted by that series, class or subclass and not based on the
nominal liquidation amount of notes in that series, class or
subclass.
. For all series of notes identified as in another group, the
allocation of finance charge collections will be based on a rule
for that group set forth in a supplement to this prospectus.
(3) Other Funds not Reallocated. Funds on deposit in an interest funding
subaccount from earlier months, funds representing interest on amounts
in deposit in the related principal funding subaccount, and payments
received from derivative counterparties in the current month will not
be reallocated to other interest funding subaccounts. These funds
remain in the interest funding subaccount into which they were
deposited until they are withdrawn to be paid to the applicable
noteholder or derivative counterparty.
The principal collections deposited into the interest funding account will
be allocated to each class or subclass of Class A notes and Class B notes based
on the amount of the deposit targeted by that class or subclass. However, these
deposits are limited to the extent described under "--Limit on Reallocations of
Principal Collections from Subordinated Classes Taken to Benefit Senior Classes
of Single Issuance Series" and "--Limit on Reallocations of Principal
Collections from Subordinated Classes Taken to Benefit Senior Classes of
Multiple Issuance Series."
64
Withdrawals from Interest Funding Account
After giving effect to all deposits and reallocations of funds in the
interest funding account in a month, the following withdrawals from the
applicable interest funding subaccount will be made, but in no event more than
the amount on deposit in the applicable interest funding subaccount. A class or
subclass of notes may be entitled to more than one of the following withdrawals
in a particular month. Notes other than the notes offered by this prospectus
may be entitled to different withdrawals.
(1) Withdrawals for U.S. Dollar Notes with no Derivative Agreement for
Interest. On each applicable interest payment date for each class or
subclass of U.S. dollar notes, an amount equal to interest due on the
applicable class or subclass of notes on the applicable interest
payment date will be withdrawn from that interest funding subaccount
and paid to the applicable paying agent, or as otherwise provided in
the applicable supplement to this prospectus.
(2) Withdrawals for Discount Notes. On each applicable Monthly Principal
Date, with respect to each class or subclass of discount notes, an
amount equal to the amount of the accretion of principal of that class
or subclass of notes from the prior Monthly Principal Date, or in the
case of the first Monthly Principal Date, the date of issuance of that
class or subclass, to the applicable Monthly Principal Date will be
withdrawn from that interest funding subaccount and invested in the
collateral certificate, or as otherwise provided in the applicable
supplement to this prospectus.
(3) Withdrawals for Notes with Performing Derivative Agreements for
Interest. On each date on which a payment is required under the
applicable derivative agreement, or a date specified in the applicable
supplement to this prospectus, with respect to any class or subclass of
notes that has a Performing derivative agreement for interest, an
amount equal to the amount of the payment to be made under the
applicable derivative agreement will be withdrawn from that interest
funding subaccount and paid to the applicable derivative counterparty,
or as otherwise provided in the applicable supplement to this
prospectus.
(4) Withdrawals for Notes with Non-Performing Derivative Agreements for
Interest in U.S. Dollars. On each interest payment date, or a date
specified in the applicable supplement to this prospectus, for a class
or subclass of U.S. dollar notes that has a non-Performing derivative
agreement for interest, an amount equal to the amount of interest
payable on that interest payment date will be withdrawn from that
interest funding subaccount and paid to the applicable paying agent, or
as otherwise provided in the applicable supplement to this prospectus.
(5) Withdrawals for Notes with Non-Performing Derivative Agreements for
Foreign Currency Interest. On each interest payment date with respect
to a class or subclass of foreign currency notes that has a
non-Performing derivative agreement for interest, or a date specified
in the applicable supplement to this prospectus, an amount equal to the
amount of U.S. dollars necessary to be converted at the applicable
exchange rate to pay the foreign currency interest due on that class or
65
subclass of notes on the interest payment date will be withdrawn from
that interest funding subaccount and converted to the applicable
foreign currency at the applicable exchange rate and paid to the
applicable paying agent. Any excess U.S. dollar amount will be retained
on deposit in the applicable interest funding subaccount to be applied
to make interest payments on later interest payment dates, or as
otherwise provided in the applicable supplement to this prospectus.
If the aggregate amount available for withdrawal from an interest funding
subaccount is less than all withdrawals required to be made from that
subaccount in a month after giving effect to all deposits and reallocations,
then the amounts on deposit in the interest funding account will be withdrawn
and, if payable to more than one person, applied pro rata based on the amounts
of the withdrawals required to be made.
After payment in full of any class or subclass of notes, any amount
remaining on deposit in the applicable interest funding subaccount will be
treated as finance charge collections.
Targeted Deposits of Principal Collections to the Principal Funding Account
The aggregate amount targeted to be deposited into the principal funding
account in any month will be the sum of the following amounts. If a single
class or subclass of notes is entitled to more than one of the following
deposits in any month, the deposit targeted for that month will be the highest
of the targeted amounts for that month, plus any shortfall in the targeted
deposit from any prior month, but not more than the nominal liquidation amount
of that class of notes. These requirements are set forth below. A supplement to
this prospectus for a class or subclass of notes may specify additional or
different monthly deposits. Notes other than the notes offered by this
prospectus may have different targeted deposits.
(1) Expected Principal Payment Date. With respect to the last month before
the expected principal payment date of a class or subclass of notes,
and each following month, the deposit targeted for that class or
subclass of notes with respect to that month is equal to the aggregate
nominal liquidation amount of that class or subclass of notes.
(2) Budgeted Deposits. Each month beginning with the twelfth month before
the expected principal payment date of a class or subclass of Class A
notes, the deposit targeted to be made into the principal funding
subaccount for that class or subclass will be the monthly accumulation
amount for that class or subclass specified in the applicable
supplement to this prospectus or, if no amount is specified, equal to,
in the case of a single issuance series, one-eleventh, and in the case
of a multiple issuance series, one-twelfth, of the projected
outstanding dollar principal amount of that class or subclass of notes
as of its expected principal payment date, after deducting any amounts
already on deposit in the applicable principal funding subaccount.
66
The issuer may postpone the date of the targeted deposits under the
previous sentence. If the issuer and the master trust determine that
less than eleven months or twelve months, as applicable, would be
required to accumulate the principal collections necessary to pay a
class of notes on its expected principal payment
date, using conservative historical information about payment rates of
principal receivables under the master trust, and after taking into
account all of the other expected payments of principal of master trust
investor certificates and notes to be made in the next eleven months or
twelve months, as applicable, then the start of the accumulation period
may be postponed each month by one month, with proportionately larger
accumulation amounts for each month of postponement.
(3) Prefunding of the Principal Funding Account for Senior Classes. If the
issuer determines that any expected principal payment date, early
redemption event, event of default or other date on which principal is
payable because of a mandatory or optional redemption with respect to
any class or subclass of Class C notes will occur at a time when the
payment of all or part of that class or subclass of Class C notes would
be prohibited because it would cause a deficiency in the required
subordinated amount of the Class A notes or Class B notes of the same
series, the targeted deposit amount for the Class A notes and Class B
notes of that series will be an amount equal to the portion of the
nominal liquidation amount of the Class A notes and Class B notes that
would have to cease to be outstanding in order to permit the payment of
that class of Class C notes.
If the issuer determines that any expected principal payment date,
early redemption event, event of default or other date on which
principal is payable because of a mandatory or optional redemption with
respect to any Class B notes will occur at a time when the payment of
all or part of that class or subclass of Class B notes would be
prohibited because it would cause a deficiency in the required
subordinated amount of the Class A notes of that series, the targeted
deposit amount for the Class A notes of that series will be an amount
equal to the portion of the nominal liquidation amount of the Class A
notes that would have to cease to be outstanding in order to permit the
payment of that class of Class B notes.
Prefunding of the principal funding subaccount for the senior classes
of a series will continue until
. enough notes of senior classes of that series are repaid so that
the subordinated notes that are payable are no longer necessary to
provide the required subordinated amount of the outstanding senior
notes; or
. in the case of multiple issuance series, new classes of
subordinated notes of that series are issued so that the
subordinated notes that are payable are no longer necessary to
provide the required subordinated amount of the outstanding senior
notes; or
. the principal funding subaccounts for the senior classes of notes
of that series are prefunded so that none of the subordinated
notes that are paid are necessary to provide the required
subordinated amount.
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When the prefunded amounts are no longer necessary, they will be
withdrawn from the principal funding account and treated as principal
collections for allocation to other classes of notes as described in
"Deposit and Application of Funds--Allocation of Principal Collections
to Accounts," or reinvested in the collateral certificate.
If any class of senior notes becomes payable as a result of an early
redemption event, event of default or other optional or mandatory
redemption, or upon reaching its expected principal payment date, any
prefunded amounts on deposit in its principal funding subaccount will
be paid to senior noteholders of that class and deposits to pay the
notes will continue as necessary to pay that class.
(4) Event of Default, Early Redemption Event or Other Optional or Mandatory
Redemption. If any class or subclass of notes has been accelerated
after the occurrence of an event of default during that month, or if
any class or subclass of notes is required to be redeemed following an
early redemption event or other optional or mandatory redemption, the
deposit targeted for that class or subclass of notes with respect to
that month is equal to the nominal liquidation amount of that class or
subclass of notes.
Payments Received from Derivative Counterparties for Principal
It is unlikely that any class or subclass of U.S. dollar notes will have a
derivative agreement for principal. Payments received under derivative
agreements for principal of foreign currency notes will be made directly to the
applicable paying agent for payment to the holders of the applicable class or
subclass of notes, or as otherwise specified in the applicable supplement to
this prospectus.
Deposits of Withdrawals from the Class C Reserve Account to the Principal
Funding Account
Withdrawals from any Class C reserve subaccount will be deposited into the
applicable principal funding subaccount to the extent described under
"--Withdrawals from the Class C Reserve Account."
Deposits of Proceeds of the Sale of Credit Card Receivables
The net proceeds of the sale of any credit card receivables by the master
trust that are received by the issuer will be deposited into the applicable
principal funding subaccount. See "--Sale of Credit Card Receivables."
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Reallocation of Funds on Deposit in the Principal Funding Subaccounts
Funds on deposit in the principal funding account each month will be
allocated, and a portion deposited in the principal funding subaccount
established for each class or subclass of notes, based on the following rules:
(1) Deposits Equal Targeted Amounts. If the aggregate deposit to the
principal funding account is equal to the sum of the deposits targeted
by each class or subclass of notes, then the targeted amount is
deposited in the principal funding subaccount established for each
class or subclass.
(2) Deposits Are Less Than Targeted Amounts. If the amount on deposit in
any principal funding subaccount for a class of Class A notes of a
series is less than the sum of the deposits targeted with respect to
that class, other than the amount targeted for deposit with respect to
an optional redemption of that class to the extent specified in the
applicable supplement to this prospectus, then amounts on deposit or to
be deposited in the principal funding subaccounts established for Class
B notes and Class C notes for that series will be reallocated to make
the targeted deposit into the Class A principal funding subaccount, to
be made first from the Class C principal funding subaccount in that
series and second from Class B principal funding subaccount in that
series, in each case, to the extent of the required subordinated amount
of the Class A notes of that series. If more than one subclass of Class
A notes of a series needs to use amounts on deposit in the principal
funding subaccount for the Class B notes and the Class C notes of that
series, then withdrawals will be allocated pro rata based on the
nominal liquidation amounts of the classes or subclasses of Class A
notes that require funding.
If the amount on deposit in any principal funding subaccount for a
class of Class B notes of a series is less than the sum of the deposits
targeted with respect to that class, other than the amount targeted for
deposit with respect to an optional redemption of that class to the
extent specified in the applicable supplement to this prospectus, then
amounts on deposit or to be deposited in the principal funding
subaccount established for Class C notes of that series will be
reallocated to make the targeted deposit into the Class B principal
funding subaccount to the extent of the required subordinated amount of
the Class B Notes of that series. If more than one subclass of Class B
notes of a series needs to use amounts on deposit in the principal
funding subaccount for the Class C notes of that series, then
withdrawals will be allocated pro rata based on the nominal liquidation
amounts of the classes or subclasses of Class B notes that require
funding.
(3) Proceeds of Sales of Credit Card Receivables. Proceeds of sales of
credit card receivables on deposit in the principal funding subaccount
for a class of notes may not be reallocated to the principal funding
subaccount for any senior class but may be reallocated to be treated as
finance charge collections to pay interest on senior classes of notes
of the same series or to reimburse charge-offs of principal receivables
in the master trust. See "--Sale of Credit Card Receivables."
69
(4) Other Funds not Reallocated. Funds on deposit in a principal funding
subaccount from withdrawals from the Class C reserve account or
payments received from derivative counterparties will not be
reallocated to other principal funding subaccounts.
Because the nominal liquidation amount of a class of notes is reduced by
amounts on deposit in that class's principal funding subaccount, the deposit of
principal collections into the principal funding subaccount for a subordinated
class of notes initially reduces the nominal liquidation amount of that
subordinated class. However, if funds are reallocated from the principal
funding subaccount for a subordinated class to the principal funding subaccount
for a senior class of the same series, the result is that the nominal
liquidation amount of the senior class, and not of the subordinated class, is
reduced by the amount of the reallocation.
If the nominal liquidation amount of a subordinated class of notes has been
reduced by charge-offs of principal receivables in the master trust and
reallocations of principal collections to pay interest on senior classes of
notes, and then reimbursed from Excess Finance Charge Collections, the
reimbursed portion is no longer subordinated to notes of the senior classes of
the same series that were outstanding on the date of that reimbursement. This
reimbursed amount will not be reallocated to any notes that were outstanding
before the date of that reimbursement. However, in a multiple issuance series,
the reimbursed amount is subordinated to any notes of the senior classes of the
same series that were issued after the date of that reimbursement, and may be
reallocated to those notes.
Withdrawals from Principal Funding Account
After giving effect to all deposits and reallocations of funds in the
principal funding account in a month, the following withdrawals from the
applicable principal funding subaccount will be made, but in no event more than
the amount on deposit in the applicable principal funding subaccount. A class
or subclass of notes may be entitled to more than one of the following
withdrawals in a particular month. Notes other than the notes offered by this
prospectus may be entitled to different withdrawals.
(1) Withdrawals for U.S. Dollar Notes with no Derivative Agreement for
Principal. On each applicable principal payment date, or a date
specified in the applicable supplement to this prospectus, with respect
to each class or subclass of U.S. dollar notes that has no derivative
agreement for principal, an amount equal to the principal due on the
applicable class or subclass of notes on the applicable principal
payment date will be withdrawn from the applicable principal funding
subaccount and paid to the applicable paying agent, or as otherwise
provided in the applicable supplement to this prospectus.
(2) Withdrawals for Notes with Performing Derivative Agreement for
Principal. On each date on which a payment is required under the
applicable derivative agreement, or a date specified in the applicable
supplement to this prospectus, with respect to any class or subclass of
notes that has a Performing derivative
70
agreement for principal, an amount equal to the amount of the payment
to be made under the applicable derivative agreement will be withdrawn
from the applicable principal funding subaccount and paid to the
applicable derivative counterparty, or as otherwise provided in the
applicable supplement to this prospectus.
(3) Withdrawals for Foreign Currency Notes with Non-Performing Derivative
Agreements for Principal. On each principal payment date with respect
to a class or subclass of foreign currency notes that has a
non-Performing derivative agreement for principal, or a date specified
in the applicable supplement to this prospectus, an amount equal to the
amount of U.S. dollars necessary to be converted at the applicable
exchange rate to pay the foreign currency principal due on that class
or subclass of notes on the applicable principal payment date will be
withdrawn from the applicable principal funding subaccount and
converted to the applicable foreign currency at the prevailing spot
exchange rate and paid to the applicable paying agent, or as otherwise
provided in the applicable supplement to this prospectus. Any excess
U.S. dollar amount will be retained on deposit in the applicable
principal funding subaccount to be applied to make principal payments
on later principal payment dates.
(4) Withdrawal of Prefunded Amount. If prefunding of the principal funding
subaccounts for senior classes of notes is no longer necessary as a
result of payment of senior notes or issuance of additional
subordinated notes, as described under "--Targeted Deposits of
Principal Collections to the Principal Funding Account--Prefunding of
the Principal Funding Account for Senior Classes," the prefunded
amounts will be withdrawn from the principal funding account and
treated as principal collections for allocation to other classes of
notes as described in "--Allocation of Principal Collections to
Accounts," or reinvested in the collateral certificate.
(5) Withdrawal of Proceeds of Sales of Credit Card Receivables. If a
subordinated class of notes has directed the master trust to sell
credit card receivables as described in "--Sale of Credit Card
Receivables," the proceeds of that sale will be withdrawn from the
principal funding subaccount to the extent those proceeds are required
to be treated as finance charge collections to make targeted deposits
in the interest funding account as described in "--Allocation of
Finance Charge Collections to Accounts" for the benefit of senior
classes of the same series, and to the extent required to reimburse the
master trust for credit card charge-offs allocated to the senior
classes of the same series.
After payment in full of any class or subclass of notes, any amount
remaining on deposit in the applicable principal funding subaccount will be
treated as finance charge collections.
71
Limit on Reallocations of Principal Collections from Subordinated Classes Taken
to Benefit Senior Classes of Single Issuance Series
For single issuance series, the amount of principal collections that may be
reallocated from subordinated classes of notes to senior classes of the same
series is limited as follows:
With respect to any Class A notes of a single issuance series, the
aggregate amount of
. all principal collections reallocated from Class C notes of that series
to the interest funding subaccounts for Class A notes or Class B notes
of that series; and
. all reductions in the nominal liquidation amount of the Class C notes
of that series from allocations of charge-offs of principal receivables
in the master trust
may not exceed the initial dollar principal amount of Class C notes for that
series, plus, in the case of discount notes, accretions of principal thereon.
Likewise the aggregate amount of
. all principal collections reallocated from Class B notes of that series
to the interest funding subaccounts for Class A notes of that series;
and
. all reductions in the nominal liquidation amount of the Class B notes
of that series from allocations of charge-offs of principal receivables
in the master trust
may not exceed the initial dollar principal amount of Class B notes for that
series, plus, in the case of discount notes, accretions of principal thereon.
With respect to any Class B notes of a single issuance series, the
aggregate amount of
. all principal collections reallocated from Class C notes of that series
to the interest funding subaccounts for Class A notes or Class B notes
of that series; and
. all reductions in the nominal liquidation amount of the Class C notes
of that series from allocations of charge-offs of principal receivables
in the master trust
may not exceed the initial dollar principal amount of Class C notes for that
series, plus, in the case of discount notes, accretions of principal thereon.
Proceeds of the sale of credit card receivables as described under "--Sale of
Credit Card Receivables" that are reallocated from a subordinated class of
notes to a senior class of notes are treated the same as reallocated principal
collections for purposes of computing the limits on reallocations.-
72
Limit on Reallocations of Principal Collections from Subordinated Classes Taken
to Benefit Senior Classes of Multiple Issuance Series
For multiple issuance series, the amount of principal collections that may
be reallocated from subordinated classes of notes to senior classes of the same
series is limited as follows:
Limit on Reallocations to a Subclass of Class A Notes from Class C
Notes. Principal collections that would otherwise have been allocated to the
Class C notes of a series may be reallocated to the interest funding subaccount
for a subclass of Class A notes of the same series only to the extent, after
giving effect to that reallocation, that the Class A usage of the Class C
subordinated amount is not greater than the required subordinated amount of
Class C notes for that subclass of Class A notes. For this purpose, Class A
usage of Class C subordinated amount is equal to the sum of the following
amounts:
. the cumulative sum of principal collections previously reallocated from
Class C notes of that series to the interest funding subaccount for
that subclass of Class A notes.
. plus, a portion of each reallocation of principal collections from
Class C notes of that series to the interest funding subaccounts for
Class B notes of that series while that subclass of Class A notes is
outstanding. These amounts will be treated as usage of the Class A
required subordinated amount of Class C notes pro rata based on the
ratio of the Class A required subordinated amount of Class B notes to
the aggregate outstanding dollar principal amount of all Class B notes
of that series.
. plus, the portion of the cumulative amount of charge-offs of principal
receivables in the master trust that is treated as usage of the Class A
required subordinated amount of Class C notes. This amount is equal to
the sum of the following amounts, and is calculated on each day on
which there is an allocation of charge-offs of principal receivables in
held in the master trust:
-- the amount of charge-offs of principal receivables in the master
trust that are initially allocated to that subclass of Class A
notes but then reallocated to Class C notes of that series.
-- plus, a portion of the charge-offs of principal receivables in the
master trust that are initially allocated to Class B notes of that
series but then reallocated to Class C notes of that series. These
amounts will be treated as usage of the Class A required
subordinated amount of Class C notes pro rata based on the ratio
of the Class A required subordinated amounts of Class B notes to
the aggregate outstanding dollar principal amount of the Class B
notes of that series.
-- plus, a portion of the charge-offs of principal receivables in the
master trust that are initially allocated to Class C notes of that
series. These amounts will be treated as usage of the Class A
required subordinated amount of Class C notes pro rata based on
the ratio of the Class A required subordinated amounts of Class C
notes to the aggregate outstanding dollar principal amount of the
Class C notes of that series.
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Limit on Reallocations to a Subclass of Class A Notes from Class B
Notes. Principal collections that would otherwise have been allocated to the
Class B notes of a series may be reallocated to the interest funding subaccount
for a subclass of Class A notes of the same series only to the extent, after
giving effect to that reallocation, that the Class A usage of the Class B
subordinated amount is not greater than the required subordinated amount of
Class B notes for that subclass of Class A notes. For this purpose, Class A
usage of Class B subordinated amount is equal to the sum of the following
amounts:
. the cumulative sum of principal collections reallocated from Class B
notes of that series to the interest funding subaccount for that
subclass of Class A notes.
. plus, the portion of the charge-offs of principal receivables in the
master trust that is treated as usage of the Class A required
subordinated amount of Class B notes. This amount is equal to the sum
of the following amounts, and is calculated on each day on which there
is an allocation of charge-offs of principal receivables in held in the
master trust:
-- the amount of charge-offs of principal receivables in the master
trust that are initially allocated to that subclass of Class A
notes but then reallocated to Class B notes of that series.
-- plus, a portion of the charge-offs of principal receivables in the
master trust that are initially allocated to Class B notes of that
series and not reallocated to Class C notes of that series. These
amounts will be treated as usage of the Class A required
subordinated amount of Class B notes pro rata based on the ratio
of the Class A required subordinated amounts of Class B notes to
the aggregate outstanding dollar principal amount of the Class B
notes of that series.
Limit on Reallocations to a Subclass of Class B Notes from Class C
Notes. Principal collections that would otherwise have been allocated to the
Class C notes of a series may be reallocated to the interest funding subaccount
for a subclass of Class B notes of the same series only to the extent, after
giving effect to that reallocation, that the Class B usage of the Class C
subordinated amount is not greater than the required subordinated amount of
Class C notes for that subclass of Class B notes. For this purpose, Class B
usage of Class C subordinated amount is equal to the sum of the following
amounts:
. the cumulative sum of principal collections reallocated from Class C
notes of that series to the interest funding subaccount for that
subclass of Class B notes.
. plus, a portion of each reallocation of principal collections from
Class C notes of that series to the interest funding subaccounts for
Class A notes of that series while that subclass of Class B notes is
outstanding. These amounts will be treated as usage of the Class B
required subordinated amount of Class C notes pro rata based on the
ratio of the nominal liquidation amount of that subclass of Class B
notes to the aggregate nominal liquidation amount of all Class B notes
of that series. However, because some of the issuer's Class A
notes--not offered by this prospectus--do not have the benefit of
subordination protection of any Class B notes, reallocations of
principal collections from Class C notes to those Class A notes does
not count as Class B usage of Class C subordinated amount.
74
. plus, the portion of the charge-offs of principal receivables in the
master trust that is treated as usage of the Class B required
subordinated amount of Class C notes. This amount is equal to the sum
of the following amounts, and is calculated on each day on which there
is an allocation of charge-offs of principal receivables in the master
trust:
-- the amount of charge-offs of principal receivables in the master
trust that are initially allocated to that subclass of Class B
notes but then reallocated to Class C notes of that series.
-- plus, a portion of the charge-offs of principal receivables in the
master trust that are initially allocated to Class A notes of that
series but then reallocated to Class C notes of that series. These
amounts will be treated as usage of the Class B required
subordinated amount of Class C notes pro rata based on the ratio
of nominal liquidation amount of that subclass of Class B notes to
the aggregate nominal liquidation amount of the Class B notes of
that series. However, because some of the issuer's Class A
notes--not offered by this prospectus--do not have the benefit of
subordination protection of any Class B notes, charge-offs of
principal receivables reallocated from those Class A notes to
Class C notes do not count as Class B usage of Class C
subordinated amount.
-- plus, a portion of the charge-offs of principal receivables in the
master trust that are initially allocated to Class C notes of that
series. These amounts will be treated as usage of the Class B
required subordinated amount of Class C notes pro rata based on
the ratio of the Class B required subordinated amounts of Class C
notes to the aggregate outstanding dollar principal amount of the
Class C notes of that series.
Proceeds of the sale of credit card receivables as described under "--Sale
of Credit Card Receivables" that are reallocated from a subordinated class of
notes to a senior class of notes are treated the same as reallocated principal
collections for purposes of computing the limits on reallocations.
Limit on Repayments of Subordinated Classes of Single Issuance Series
In general, in the case of a single issuance series, no funds on deposit in
a principal funding subaccount will be applied to pay principal of any Class B
note of that series or to make a payment under a derivative agreement with
respect to principal for any Class B note of that series, and no Class B note
of that series held by the issuer, the Banks or their
affiliates will be canceled, unless, immediately before giving effect to that
payment or cancellation, no Class A notes of that series are outstanding.
However, funds on deposit in a principal funding subaccount may be applied to
pay principal of any Class B note of a single issuance series:
. to the extent that amounts on deposit in the principal funding
subaccount for the Class B notes are attributable to reimbursements of
earlier reductions in the nominal liquidation amount of the Class B
notes; or
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. if the Class A principal funding account has been prefunded as
described in "--Targeted Deposits of Principal Collections to the
Principal Funding Account--Prefunding of the Principal Funding Account
for Senior Classes."
In general, in the case of a single issuance series, no funds on deposit in
a principal funding subaccount will be applied to pay principal of any Class C
note of that series or to make a payment under a derivative agreement with
respect to principal for any Class C note of that series, and no Class C note
of that series held by the issuer, the Banks or their affiliates will be
canceled, unless, immediately before giving effect to that payment or
cancellation, no Class A or Class B notes of that series are outstanding.
However, funds on deposit in a principal funding subaccount may be applied to
pay principal of any Class C note of a single issuance series:
. to the extent that amounts on deposit in the principal funding
subaccount for the Class C notes are attributable to reimbursements of
earlier reductions in the nominal liquidation amount of the Class C
notes;
. if the Class A and Class B principal funding subaccounts have been
prefunded as described in "--Targeted Deposits of Principal Collections
to the Principal Funding Account--Prefunding of the Principal Funding
Account for Senior Classes," or
. with funds available from the applicable Class C reserve subaccount.
Limit on Repayments of Subordinated Classes of Multiple Issuance Series
In the case of a multiple issuance series, in general, no funds on deposit
in a principal funding subaccount will be applied to pay principal of any note
of a subordinated class of that series or to make a payment under a derivative
agreement with respect to principal for any note of a subordinated class of
that series, and no note of a subordinated class of that series held by the
issuer, the Banks or their affiliates will be canceled, unless, following that
payment or cancellation, the remaining available subordinated amount of notes
of that subordinated class of that series is at least equal to the required
subordinated amount for the outstanding notes of the senior classes of that
series.
For determining whether Class B notes may be repaid or canceled while Class
A notes of the same series are outstanding, the remaining available
subordinated amount of Class B notes is equal to the sum of:
. the aggregate nominal liquidation amount of all Class B notes of that
series that will remain outstanding after giving effect to the
repayment or cancellation of the Class B notes to be repaid or canceled
in that month;
. plus, the aggregate amount on deposit in the principal funding
subaccounts for all Class B notes of that series after giving effect to
the repayment or cancellation of all Class B notes that are to be
repaid or canceled in that month (other than receivables sales proceeds
on deposit in those subaccounts);-
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. plus, the amount of Class A usage of Class B required subordinated
amount in that series, as described in "--Limit on Reallocations of
Principal Collections from Subordinated Classes Taken to Benefit Senior
Classes of Multiple Issuance Series."
For determining whether Class C notes may be repaid or canceled while Class
A notes of the same series are outstanding, the remaining available
subordinated amount of Class C notes is equal to the sum of:
. the aggregate nominal liquidation amount of all Class C notes of that
series that will remain outstanding after giving effect to the
repayment or cancellation of the Class C notes of that series to be
repaid or canceled in that month;
. plus, the aggregate amount on deposit in the principal funding
subaccounts for all Class C notes of that series after giving effect to
the repayment or cancellation of all Class C notes that are to be
repaid or canceled in that month (other than receivables sales proceeds
on deposit in those subaccounts);
. plus, the amount of Class A usage of Class C required subordinated
amount in that series, as described in "--Limit on Reallocations of
Principal Collections from Subordinated Classes Taken to Benefit Senior
Classes of Multiple Issuance Series."
For determining whether Class C notes may be repaid or canceled while Class
B notes of the same series are outstanding, the remaining available
subordinated amount of Class C notes is equal to the sum of:
. the aggregate nominal liquidation amount of all Class C notes of that
series that will remain outstanding after giving effect to the
repayment or cancellation of the Class C notes of that series to be
repaid or canceled in that month;
. plus, the aggregate amount on deposit in the principal funding
subaccounts for all Class C notes of that series after giving effect to
the repayment or cancellation of all Class C notes that are to be
repaid or canceled in that month (other than receivables sales proceeds
on deposit in those subaccounts);
. plus, the amount of Class B usage of Class C required subordinated
amount in that series that directly benefits Class B notes of that
series, as described in "--Limit on Reallocations of Principal
Collections from Subordinated Classes Taken to Benefit Senior Classes
of Multiple Issuance Series."
In determining whether Class C notes of a multiple issuance series may be
repaid or canceled, the remaining available subordinated amount is compared to
the Class B required subordinated amount of Class C notes for the issuance of
Class B notes, not the maximum subordinated amount of Class C notes that the
Class B notes share with Class A notes of that series. See "The
Notes--Issuances of New Series, Classes and Subclasses of Notes--Required
Subordination Protection in Multiple Issuance Series" and "--Required
Subordinated Amount."
There are exceptions to the limit on repayment of subordinated classes of a
multiple issuance series described in this subheading. These are when the
senior classes of notes have
77
been prefunded as described in "--Targeted Deposits of Principal Collections to
the Principal Funding Account--Prefunding of the Principal Funding Account for
Senior Classes," when Class C notes are paid with funds available from the
applicable Class C reserve subaccount as described in "--Withdrawals from the
Class C Reserve Account" and when the subordinated notes reach their legal
maturity date.
Subordinated notes that reach their expected principal payment date, or
that have an early redemption event, event of default or other optional or
mandatory redemption, will not be paid on the next following Monthly Principal
Date to the extent that they are necessary to provide the required subordinated
amount to senior classes of notes of the same series. If a class of
subordinated notes cannot be paid because of the subordination provisions of
the indenture, prefunding of the principal funding subaccounts for the senior
notes of the same series will begin, as described in "--Targeted Deposits of
Principal Collections to the Principal Funding Account." Thereafter, the
subordinated notes will be paid on following Monthly Principal Dates only if:
. enough notes of senior classes of that series are repaid so that the
subordinated notes that are paid are no longer necessary to provide the
required subordinated amount of the remaining senior notes; or
. new classes of subordinated notes of that series are issued so that the
subordinated notes that are paid are no longer necessary to provide the
required subordinated amount of the outstanding senior notes; or
. the principal funding accounts of the senior classes of notes of that
series are prefunded so that none of the subordinated notes that are
paid are necessary to provide the required subordinated amount for
senior notes of the same series; or
. the subordinated notes reach their legal maturity date.
On the legal maturity date of a class of notes, all amounts on deposit in the
principal funding subaccount for that class, after giving effect to
allocations, reallocations, deposits and sales of receivables, will be paid to
the noteholders of that class, even if payment would reduce the amount of
subordination protection below the required subordinated amount of the senior
classes of notes of that series. See "--Targeted Deposits of Principal
Collections to the Principal Funding Account--Prefunding of the Principal
Funding Account for Senior Classes," "--Sale of Credit Card Receivables" and
"--Final Payment of the Notes."
Limit on Allocations of Principal Collections of All Classes or Subclasses of
Notes
No principal collections will be allocated to a class or subclass of notes
with a nominal liquidation amount of zero, even if the stated principal amount
of that class or subclass of notes has not been paid in full. However, any
funds in the applicable principal funding subaccount that are not reallocated
to other classes of that series, any funds in the applicable interest funding
subaccount, and in the case of Class C notes, any funds in the applicable
Class C reserve account, will still be available to pay principal of and
interest on that class of
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notes. If the nominal liquidation amount of a class of notes has been reduced
due to reallocation of principal collections to pay interest on senior classes
of notes or charge-offs of principal receivables in the master trust, it is
possible for that class's nominal liquidation amount to be increased by
allocations of Excess Finance Charge Collections.
Targeted Deposits to the Class C Reserve Account
The Class C reserve account will initially not be funded. The Class C
reserve account will not be funded unless and until finance charge collections
generated by the master trust fall below a level specified in the applicable
supplement to this prospectus. The Class C reserve account will be funded each
month, as necessary, from finance charge collections allocated to the
collateral certificate that month after payment of fees and expenses of the
master trust servicer and the indenture trustee, targeted deposits to the
interest funding account, reimbursement of charge-offs of principal receivables
in the master trust that are allocated to the collateral certificate and
reimbursement of any deficits in the nominal liquidation amounts of the notes.
The aggregate deposit to be made to the Class C reserve account in each
month from finance charge collections will be the sum of Class C reserve
account deposits targeted to be made for each class or subclass of Class C
notes. The amount of that deposit and the circumstances that require that
deposit to be made will be set forth in the applicable supplement to this
prospectus.
If the aggregate deposit made to the Class C reserve account is less than
the sum of the targeted deposits for each class of Class C notes, then the
amount available will first be allocated to each class that requires a deposit
pro rata based on the ratio of the nominal liquidation amount of that class to
the aggregate nominal liquidation amount of all Class C notes that have a
targeted deposit. Any amount in excess of the amount targeted to be deposited
to the Class C reserve subaccount for any class of notes will be reallocated to
classes of notes that did not receive their targeted deposits as a result of
the initial allocation on the same basis until all available funds are applied.
In addition, if a new issuance of notes of a multiple issuance series
results in an increase in the funding deficit of the Class C reserve account
for any subclass of Class C notes of that series, the issuer will make a cash
deposit to that Class C reserve account in the amount of that increase. See
"The Notes--Issuances of New Series, Classes and Subclasses of Notes."
Withdrawals from the Class C Reserve Account
Withdrawals will be made from the Class C reserve subaccounts, but in no
event more than the amount on deposit in the applicable Class C reserve
subaccount, in the following order:
. Interest, Payments with Respect to Derivative Agreements for Interest
and Accretion on Discount Notes. If the amount on deposit in the
interest funding subaccount for any class or subclass of Class C notes
is insufficient to pay in full the amounts for
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which withdrawals are required, the amount of the deficiency will be
withdrawn from the applicable Class C reserve subaccount and deposited
into the applicable interest funding subaccount.
. Payments of Principal and Payments with Respect to Derivative
Agreements for Principal. If the amount on deposit in the principal
funding subaccount for any class or subclass of Class C notes is
insufficient to pay in full the amounts for which withdrawals are
required, an amount equal to the lesser of (i) the amount of the
deficiency and (ii) the amount by which the nominal liquidation amount
of the class or subclass of Class C notes plus funds on deposit in the
applicable Class C principal funding subaccount is less than the
outstanding dollar principal amount of the subclass of Class C notes
will be withdrawn from the applicable Class C reserve subaccount and
deposited into the applicable principal funding subaccount.
. Amounts Treated as Finance Charge Collections. If at any time the
amount on deposit in a Class C reserve subaccount is greater than the
required amount, the excess will be withdrawn and treated as finance
charge collections. In addition, after payment in full of any class or
subclass of Class C notes, any amount remaining on deposit in the
applicable Class C reserve subaccount will be withdrawn and treated as
finance charge collections.
Sale of Credit Card Receivables
If a class of notes has an event of default and is accelerated before its
legal maturity date, the master trust may sell credit card receivables--or an
interest in credit card receivables if appropriate tax opinions are
received--if the conditions described in "Covenants, Events of Default and
Early Redemption Events--Events of Default" are satisfied. This sale will take
place at the option of the indenture trustee or at the direction of the holders
of a majority of aggregate outstanding dollar principal amount of notes of that
class. Those majority holders will also have the power to determine the time of
the sale, except that any sale of receivables for a subordinated class of notes
will be delayed until the senior classes of notes of the same series are
prefunded to such an extent that the proceeds of the receivables are sufficient
to provide the required subordination protection for the non-prefunded portion
of the senior classes of that series. If principal of or interest on a class of
notes has not been paid in full on the legal maturity date, the sale will
automatically take place on that date. There may be only one sale of credit
card receivables for each class of notes.
The amount of credit card receivables sold will be up to 110% of the
nominal liquidation amount of the class of notes that directed the sale to be
made. The proceeds of the sale of receivables will be deposited into the
principal funding account for the applicable class up to the outstanding dollar
principal amount of the applicable class. Any excess will be deposited into the
interest funding subaccount for that class, to be applied to future payments of
interest and to reimburse withdrawals of proceeds of the sale of receivables
from the principal funding subaccount of that class.
In the case of any accelerated class of Class A notes, or any class of
notes that has reached its legal maturity date, or any class of notes that is
not prevented from being repaid by
80
virtue of the subordination provisions of the indenture, the master trust will
sell either an ownership interest in specific principal receivables and finance
charge receivables, or an amortizing undivided interest in the pool of
receivables in the master trust. In any other case, the master trust will sell
a undivided interest in the pool of receivables in the master trust that is
initially a revolving undivided interest in the pool of receivables in the
master trust, that then converts either to an ownership interest in specific
receivables or to an amortizing undivided interest in receivables. In this
case, the undivided interest would revolve from the date of the sale until the
earlier of the legal maturity date of the affected class of notes and the date
when the affected class of notes is not prevented from being paid by the
subordination provisions of the indenture. While an undivided interest is
revolving, the principal collections allocated to it by the master trust will
be treated as principal collections that are allocated to the notes and applied
as described in item second under "--Allocation of Principal Collections to
Accounts" or reinvested in credit card receivables in the master trust. In the
case of an amortizing undivided interest, the principal collections allocated
to it by the master trust will be paid to the purchaser, and will not be
available to noteholders or reinvested. For both revolving and amortizing
undivided interests, the finance charge collections allocated to the undivided
interest will be paid to the purchaser, and will not be available to the
noteholders. Both revolving and amortizing undivided interests will be reduced
by a pro rata allocation of charged-off credit card receivables in the master
trust.
The nominal liquidation amount of the class of notes that directed the sale
to be made will be reduced to zero. No more principal collections will be
allocated to that class.
The only sources of funds to pay principal of a class of notes that has
directed a sale of credit card receivables will be the proceeds of the sale of
receivables, receipts under derivative agreements, funds available in any
applicable reserve account and funds available under item third under
"--Allocation of Finance Charge Collections to Accounts" to reimburse amounts
withdrawn from the principal funding subaccount of that class to provide
subordination protection for senior classes of the same series. That class will
not receive any further distributions of principal collections under the
collateral certificate. Interest on that class of notes will be paid only with
funds on deposit in that class's interest funding subaccount, investment
earnings on funds in that class's principal funding subaccount, receipts under
any derivative agreement and funds available in any applicable reserve account.
If Class A notes direct a sale of credit card receivables to be made, the
proceeds will be paid out on the next Monthly Principal Date following the date
of the sale. However, proceeds of a sale directed by a subordinated class of
notes will not be paid before the legal maturity date of that class, to the
extent those notes are necessary to provide the required subordinated amount of
a senior class of notes of the same series. If a class of notes cannot be paid
because of the subordination provisions of the indenture, prefunding of the
principal funding subaccounts for the senior notes of the same series--which
will have begun when the subordinated class had its event of default--will
continue as described in "--Targeted Deposits of Principal Collections to the
Principal Funding Account." Thereafter, receivables sales proceeds will be paid
to the applicable noteholders when the subordination provisions of the
indenture permit, or on the legal maturity date of the applicable notes. On the
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legal maturity date of a subordinated class of notes, any funds on deposit in
that class's principal funding subaccount will be paid to the noteholders of
that class, even if payment would reduce the amount of subordination protection
below the required subordinated amount of the senior classes of that series.
So long as the proceeds of sales of credit card receivables are on deposit
in the principal funding subaccount for a subordinated class of notes, those
funds will be treated like principal collections for purposes of reallocations
to pay interest on senior classes of notes, or to reimburse charge-offs of
principal receivables in the master trust, to the extent that the nominal
liquidation amount of that class would have been available for the same
purposes. The proceeds of sales of credit card receivables on deposit in the
principal funding subaccount for a subordinated class of notes will not be
reallocated to the principal funding subaccount for a senior class if the
senior classes of notes of that series have reached their expected principal
payment date, or have an early redemption event, event of default or other
optional or mandatory redemption, or require prefunding, or for the other
purposes described under "--Targeted Deposits of Principal Collections to the
Principal Funding Account."
If a class of notes directs a sale of credit card receivables, then that
class will no longer be entitled to subordination protection from subordinated
classes of notes of the same series. However, the proceeds of the sale of
credit card receivables on deposit in the principal funding subaccount for a
subordinated class of notes continue to provide subordination protection to the
senior classes of notes of the same series until the legal maturity date of the
subordinated class of notes.
Classes of notes that have directed sales of credit card receivables are
generally not considered to be outstanding under the indenture, including for
purposes of
. allocations of finance charge collections and principal collections,
. computing the required subordinated amount available for new issuances
of senior notes of a multiple issuance series, and
. computing Surplus Finance Charge Collections and the weighted average
interest rate of the notes.
After giving effect to a sale of receivables for a class of notes, the
amount of proceeds on deposit in a principal funding subaccount may be less
than the outstanding dollar principal amount of that class. This deficiency can
arise because the nominal liquidation amount of that class was reduced before
the sale of receivables or if the sale price for the receivables was low. These
types of deficiencies will not be reimbursed. A deficiency can also arise if
proceeds on deposit in a subordinated class's principal funding subaccount have
been reallocated to pay interest on senior classes of notes or reimburse
charge-offs of principal receivables in the master trust. Until the legal
maturity date of a class of notes, finance charge collections under item third
under "--Allocation of Finance Charge Collections to Accounts" that are
available to reimburse reductions in the nominal liquidation amount of the
notes will be shared pro rata to reimburse this kind of deficiency.
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Final Payment of the Notes
Noteholders will not be entitled to payment of principal, or in the case of
foreign currency notes, to have any payment made by the issuer under a
derivative agreement with respect to principal, in excess of the highest
outstanding dollar principal amount of that class
. minus, any unreimbursed reductions in the nominal liquidation amount of
that class from charge-offs of principal receivables in the master
trust;
. minus, any unreimbursed reallocations of principal collections to pay
interest on senior classes of notes; and
. plus, in the case of classes of Class C notes, funds in the applicable
Class C reserve account.
As an exception to this rule, the proceeds of a sale of receivables
following acceleration or on the legal maturity date of a class of notes will
be available to the extent necessary to pay the outstanding dollar principal
amount of that class on the date of the sale.
A class of notes will be considered to be paid in full, the holders of
those notes will have no further right or claim, and the issuer will have no
further obligation or liability for principal or interest, on the earliest to
occur of
. the date of the payment in full of the stated principal amount of and
all accrued interest on that class of notes;
. the date on which the outstanding dollar principal amount of that class
of notes is reduced to zero, and all accrued interest on that class of
notes is paid in full; or
. on the legal maturity date of that class of notes, after giving effect
to all deposits, allocations, reallocations, sales of credit card
receivables and payments to be made on that date.
Pro Rata Payments Within a Class or Subclass
With respect to single issuance series, all notes of a class will receive
payments of principal and interest pro rata based on the outstanding dollar
principal amount of each note in that class. With respect to multiple issuance
series, all notes of a subclass will receive payments of principal and interest
pro rata based on the outstanding dollar principal amount of each note in that
subclass.
COVENANTS, EVENTS OF DEFAULT AND
EARLY REDEMPTION EVENTS
Issuer Covenants
The issuer will not, among other things
. except as expressly permitted by the indenture or related documents,
sell, transfer, exchange or otherwise dispose of any of the assets of
the issuer that constitutes collateral for the notes, unless directed
to do so by the indenture trustee,
83
. claim any credit on or make any deduction from the principal and
interest payable on the notes, other than amounts withheld under the
Internal Revenue Code or other applicable tax law,
. voluntarily dissolve or liquidate, or
. permit (A) the validity or effectiveness of the indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the notes under the indenture except as may
be expressly permitted by the indenture, (B) any lien, charge, excise,
claim, security interest, mortgage or other encumbrance to be created
on or extend to or otherwise arise upon or burden the collateral for
the notes or proceeds thereof except as may be created by the terms of
the indenture or (C) the lien of the indenture not to constitute a
valid security interest in the assets of the issuer that secure the
notes.
The issuer may not engage in any activity other than the activities
specified under "The Issuer." The issuer will not incur, assume or guarantee
any indebtedness for borrowed money other than indebtedness incurred on the
notes and under the indenture.
Events of Default
Each of the following events is an "event of default" for any class of
notes:
. the issuer's failure, uncured after five business days, to pay interest
on any note of that class when due;
. the issuer's failure to pay the stated principal amount of any note of
that class on its legal maturity date;
. the issuer's default in the performance, or breach, of any other of its
covenants or warranties in the indenture, uncured 60 days after written
notice by the indenture trustee or by the holders of 10% of the
aggregate outstanding dollar principal amount of the outstanding notes
of the affected class--other than a covenant or warranty included in
the indenture solely for the benefit of series or classes of notes
other than that particular class--and that default or breach is
materially adverse to those noteholders;
. the occurrence of some events of bankruptcy, insolvency or
reorganization of the issuer; and
. any additional events of default specified in the applicable supplement
to this prospectus for that class.
Notes other than the notes offered by this prospectus may have different
events of default, to the extent acceptable to the rating agencies.
Failure to pay the full stated principal amount of a note on its expected
principal payment date will not constitute an event of default. An event of
default with respect to one class of notes will not necessarily be an event of
default with respect to any other class of notes.
84
The occurrence of some events of default involving the bankruptcy or
insolvency of the issuer results in an automatic acceleration of all of the
notes. If other events of default occur and are continuing with respect to any
class, either the indenture trustee or the holders of more than 50% in
aggregate outstanding dollar principal amount of the notes of that class may
declare the principal of all those outstanding notes to be immediately due and
payable. This declaration of acceleration may generally be rescinded by the
holders of a majority in aggregate outstanding dollar principal amount of
outstanding notes of that class.
If a class of notes is accelerated before its legal maturity date, the
indenture trustee may at any time thereafter, and at the direction of the
holders of a majority of aggregate outstanding dollar principal amount of notes
of that class at any time thereafter will, direct the master trust to sell
credit card receivables--or an interest in credit card receivables if
appropriate tax opinions are received--as described in "Deposit and Application
of Funds--Sale of Credit Card Receivables," but only if at least one of the
following conditions is met:
. 90% of the holders of the accelerated class of notes consent; or
. the proceeds of the sale would be sufficient to pay all outstanding
amounts due on the accelerated class of notes; or
. the indenture trustee determines that the funds to be allocated to the
accelerated class of notes, taking into account finance charge
collections and principal collections allocable to the collateral
certificate, payments to be received under derivative agreements and
amounts on deposit in the applicable principal funding subaccount and
interest funding subaccount and, in the case of Class C notes, the
applicable Class C reserve subaccount is not likely to be sufficient to
make payments on the accelerated notes when due, and the holders of
66 2/3% of the aggregate outstanding principal dollar amount of notes
of the accelerated class consent to the sale.
If net sale proceeds of the credit card receivables would be less than the
nominal liquidation amount of accelerated subordinated notes, prefunding of the
principal funding subaccounts for the senior classes will begin and continue
until the principal funding subaccounts have been prefunded to the extent
necessary to permit the sale of the applicable credit card receivables and
deposit of proceeds of the sale to the principal funding subaccount for the
subordinated class. See "Deposit and Application of Funds--Targeted Deposits of
Principal Collections to the Principal Funding Account--Prefunding of the
Principal Funding Account for Senior Classes." The sale of credit card
receivables will be delayed until the prefunding is complete or until the legal
maturity date of the accelerated notes.
In addition, as a condition to a sale of an undivided interest in
receivables rather than an absolute ownership, the indenture trustee must
obtain appropriate tax opinions.
If a sale of credit card receivables does not take place following an
acceleration of a class of notes, then:
. The issuer will continue to hold the collateral certificate, and
distributions on the collateral certificate will continue to be applied
in accordance with the distribution provisions of the indenture.
85
. Principal and interest will be paid monthly on the accelerated class of
notes to the extent funds are received from the master trust and
available to the accelerated class after giving effect to all
allocations and reallocations and to the extent payment is permitted by
the subordination provisions of the accelerated class.
. If the accelerated notes are of a subordinated class, and subordination
requirements prevent the payment of the accelerated subordinated class,
prefunding of the senior classes of that series will begin, as
described in "Deposit and Application of Funds--Targeted Deposits of
Principal Collections to the Principal Funding Account." Thereafter,
payment will be made to the extent described in "Deposit and
Application of Funds--Limit on Repayments of Subordinated Classes of
Single Issuance Series" and "--Limit on Repayments of Subordinated
Classes of Multiple Issuance Series."
. On the legal maturity date of the accelerated notes, if the notes have
not been paid in full and if the notes have a nominal liquidation
amount in excess of zero, the indenture trustee will direct the master
trust to sell credit card receivables as described under "Deposit and
Application of Funds--Final Payment of the Notes."
The holders of a majority in aggregate outstanding dollar principal amount
of any accelerated class of notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the indenture
trustee, or exercising any trust or power conferred on the indenture trustee.
However, this right may be exercised only if the direction provided by the
noteholders does not conflict with applicable law or the indenture or have a
substantial likelihood of involving the indenture trustee in personal liability.
Generally, if an event of default occurs and any notes are accelerated, the
indenture trustee is not obligated to exercise any of its rights or powers
under the indenture unless the holders of affected notes offer the indenture
trustee reasonable indemnity. Upon acceleration of the maturity of a series or
class of notes following an event of default, the indenture trustee will have a
lien on the collateral for those notes ranking senior to the lien of those
notes for its unpaid fees and expenses.
If an event of default occurs consisting of failure to pay principal of or
interest on a class of notes in full on the legal maturity date, the issuer
will automatically direct the master trust to sell credit card receivables on
that date, as described in "Deposit and Application of Funds--Sale of Credit
Card Receivables."
The indenture trustee has agreed, and the noteholders will agree, that they
will not at any time institute against the issuer, the Banks or the master
trust any bankruptcy, reorganization or other proceeding under any federal or
state bankruptcy or similar law.
Early Redemption Events
The issuer is required to redeem in whole or in part, to the extent that
funds are available for that purpose, any class of notes of a series upon the
occurrence of an early redemption event with respect to that class. Early
redemption events include the following:
. the occurrence of a note's expected principal payment date;
86
. each of the early amortization events applicable to the collateral
certificate, as described under "The Master Trust--Early Amortization
Events";
. mandatory prepayment of the entire collateral certificate resulting
from a breach of a representation or warranty by the Banks under the
pooling and servicing agreement;
. the amount of Surplus Finance Charge Collections averaged over any
three consecutive months being less than the Required Surplus Finance
Charge Amount for the most recent month;
. with respect to any subclass of notes, at any time when the issuer has
requested the master trust to make a payment of principal collections
to the principal funding subaccount for that subclass of notes, the
Portfolio Yield for any month is less than the weighted average
interest rates for all notes of the same group as of the last day of
the month, taking into account all net payments to be made or received
under Performing derivative agreements;
. the issuer becoming an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
. with respect to any subclass of notes that has funds on deposit in its
principal funding subaccount on the last day of any month, other than
any proceeds of the sale of receivables as described under "Deposit and
Application of Funds--Sale of Credit Card Receivables," the amount of
the designated sellers' interest described under "Deposit and
Application of Funds--Deposit of Principal Funding Subaccount Earnings
in Interest Funding Subaccounts; Principal Funding Subaccount Earnings
Shortfall" is less than the aggregate amount of those principal funding
subaccount deposits; or
. any additional early redemption event specified in a supplement to this
prospectus.
Notes other than the notes offered by this prospectus may have different
early redemption events, to the extent acceptable to the rating agencies.
The redemption price of a note so redeemed will be the outstanding dollar
principal amount of that note, plus accrued interest--or, in the case of
discount notes, principal accreted--but unpaid on that note to but excluding
the date of redemption, which will be the next Monthly Principal Date. If the
amount of principal collections and finance charge collections of credit card
receivables allocable to the class of notes to be redeemed, together with funds
on deposit in the applicable principal funding subaccount, interest funding
subaccount and, in the case of Class C notes, the Class C reserve account are
insufficient to pay the redemption price in full on the next Monthly Principal
Date after giving effect to subordination and allocations to any other notes
ranking equally with that note, monthly payments on the notes to be redeemed
will thereafter be made on each Monthly Principal Date until the outstanding
dollar principal amount of the notes plus all accrued and unpaid interest is
paid in full, or the legal maturity date of the notes occurs, whichever is
earlier.
No principal collections will be allocated to a class of notes with a
nominal liquidation amount of zero, even if the outstanding dollar principal
amount of that class has not been paid
87
in full. However, any funds in the applicable principal funding subaccount that
are not reallocated to other classes of that series, and any funds in the
applicable interest funding subaccount and, in the case of Class C notes, the
Class C reserve account will still be available to pay principal of and
interest on that class of notes. In addition, if Excess Finance Charge
Collections are available, they can be applied to reimburse reductions in the
nominal liquidation amount of that class resulting from reallocations of
principal collections to pay interest on senior classes of notes, or from
charge-offs of principal receivables in the master trust.
Payments on redeemed notes will be made in the same priority as described
in "The Notes--Subordination of Principal." The issuer will give notice to
holders of the affected notes before an early redemption date.
MEETINGS, VOTING AND AMENDMENTS
Meetings
The indenture trustee may call a meeting of the holders of notes of a
series or class at any time. The indenture trustee will call a meeting upon
request of the issuer or the holders of at least 10% in aggregate outstanding
dollar principal amount of the outstanding notes of the series or class. In any
case, a meeting will be called after notice is given to holders of notes in
accordance with "Notices and Reports--Notices."
The quorum for a meeting is a majority of the holders of the outstanding
dollar principal amount of the notes, the series of notes or the class of notes
that is to have the meeting, as the case may be, unless a higher percentage is
specified for approving action taken at the meeting, in which case the quorum
is the higher percentage.
Voting
Any action or vote to be taken by the holders of a majority or larger
specified percentage of the notes, any series of notes or any class of notes
may be adopted by the affirmative vote of the holders of a majority or the
applicable larger specified percentage in aggregate outstanding dollar
principal amount of the outstanding notes, of that series or of that class, as
the case may be.
Any action or vote taken at any meeting of holders of notes duly held in
accordance with the indenture will be binding on all holders of the affected
notes or the affected series or class of notes, as the case may be.
Notes held by the issuer, either Bank, or their affiliates will not be
deemed outstanding for purposes of voting or calculating quorum at any meeting
of noteholders.
Amendments to the Pooling and Servicing Agreement
The Banks and the master trust trustee may amend the pooling and servicing
agreement and any supplement to that agreement without the consent of the
master trust investor
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certificateholders so long as the master trust trustee receives an opinion of
counsel that the amendment will not materially adversely affect the interests
of the investor certificateholders and the rating agencies confirm that the
amendment will not cause the rating assigned to any outstanding series or class
to be withdrawn or reduced. Accordingly, neither the issuer nor any holder of
any note will be entitled to vote on any such amendment.
The pooling and servicing agreement and any supplement to that agreement
may also be amended with the consent of master trust investor
certificateholders holding not less than 66 2/3% of the aggregate outstanding
dollar principal amount of the investor certificates of all adversely affected
series for the purpose of adding, changing or eliminating any provisions of the
agreement or any supplement or of modifying the rights of those investor
certificateholders. However, no amendment may
. reduce the amount of, or delay the timing of, any distribution to be
made to investor certificateholders or the amount available under any
series enhancement without the consent of each affected investor
certificateholder,
. change the definition or the manner of calculating the interest of any
investor certificate without the consent of each affected investor
certificateholder,
. reduce the percentage of investor certificateholders required to
consent to any amendment without the consent of each investor
certificateholder, or
. adversely affect the rating of any series or class of investor
certificates without the consent of investor certificateholders holding
not less than 66 2/3% of the aggregate outstanding dollar principal
amount of that series or class.
For purposes of any vote or consent under the pooling and servicing
agreement
. that requires the consent or vote of each holder of a master trust
investor certificate, each holder of a note will be treated as a holder
of an investor certificate under the pooling and servicing agreement;
. that requires the consent or vote of any series of investor
certificates, each series of notes will be treated as a series of
investor certificates under the pooling and servicing agreement;
. that requires the consent or vote of any class of investor
certificates, each class of notes of a single issuance series and each
subclass of notes of a multiple issuance series will be treated as a
class of investor certificates under the pooling and servicing
agreement; and
. any notes owned by the issuer, the Banks or any of their affiliates
will be deemed not to be outstanding.
Amendments to the Indenture
The issuer and the indenture trustee may modify and amend the indenture or
any supplemental indenture with the consent of the holders of not less than a
majority in aggregate dollar principal amount of the outstanding notes of each
series affected by that modification or
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amendment. However, if the modification or amendment would result in any of the
following events occurring, it may be made only with the consent of the holders
of each outstanding note affected by the modification or amendment:
. a change in any date scheduled for the payment of interest on any note,
the expected principal payment date or legal maturity date of any note,
or the date determined for any mandatory or optional redemption of any
note;
. a reduction of the stated principal amount, outstanding dollar
principal amount or nominal liquidation amount of, or interest rate on,
any note;
. an impairment of the right to institute suit for the enforcement of any
payment on any note;
. a reduction of the percentage in outstanding dollar principal amount of
notes of any series or class, the consent of whose holders is required
for modification or amendment of the indenture or any supplemental
indenture or for waiver of compliance with provisions of the indenture
or supplemental indenture or for waiver of defaults;
. permission is given to create any lien ranking senior to the lien of
the indenture or terminate the lien of the indenture;
. a change in any obligation of the issuer to maintain an office or
agency in the places and for the purposes required by the indenture; or
. a change in the method of computing the amount of principal of, or
interest on, any note on any date.
The issuer and the indenture trustee may also amend, supplement or
otherwise modify the indenture without the consent of any noteholders in any
manner that would not adversely affect, in any material respect, the interests
of the noteholders, including for purposes of curing ambiguities, making minor
corrections, and providing for the new issuances of notes. In addition, without
the consent of any noteholders, the issuer may amend the indenture to change
the amount of subordination required or available for any class of notes of a
multiple issuance series, or the method of computing the amount of that
subordination, so long as the issuer has received confirmation from the rating
agencies that the change will not result in the rating assigned to any
outstanding notes to be withdrawn or reduced.
The holders of a majority in aggregate outstanding dollar principal amount
of the notes of a series may waive, on behalf of the holders of all the notes
of that series, compliance by the issuer with specified restrictive provisions
of the indenture.
The holders of a majority in aggregate outstanding dollar principal amount
of the notes of an affected series or class may, on behalf of all holders of
notes of that series or class, waive any past default under the indenture with
respect to notes of that series or class. However, the consent of the holders
of all outstanding notes of a class is required to waive any past default in
the payment of principal of, or interest on, any note of that class or in
respect of a covenant or provision of the indenture that cannot be modified or
amended without the consent of the holders of each outstanding note of that
class.
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Amendments to the Trust Agreement
The Banks and the issuer trustee may amend the trust agreement without the
consent of the noteholders so long as the indenture trustee receives an opinion
of counsel that the amendment will not adversely affect in any material respect
the interests of the noteholders and the rating agencies confirm that the
amendment will not cause the rating assigned to any outstanding series or class
of notes to be withdrawn or reduced. Accordingly, neither the indenture trustee
nor any holder of any note will be entitled to vote on any such amendment.
The trust agreement may also be amended with the consent of noteholders
holding not less than 66 2/3% of the aggregate outstanding dollar principal
amount of the notes of all adversely affected series for the purpose of adding,
changing or eliminating any provisions of the agreement or of modifying the
rights of those investor certificateholders.
Tax Opinions for Amendments
No amendment to the indenture or the trust agreement will be effective
unless the issuer has delivered to the indenture trustee and the rating
agencies an opinion of counsel that:
. for federal and South Dakota income and franchise tax purposes (1) the
amendment will not adversely affect the characterization as debt of any
outstanding series or class of master trust investor certificates
issued by the master trust, other than the collateral certificate, (2)
the amendment will not cause a taxable event to holders of master trust
investor certificates, and (3) following the amendment, the master
trust will not be an association, or publicly traded partnership,
taxable as a corporation; and
. for federal and Delaware income and franchise tax purposes (1) the
amendment will not adversely affect the characterization of the notes
of any outstanding series or class as debt, (2) the amendment will not
cause a taxable event to holders of any outstanding notes, and (3)
following the amendment, the issuer will not be an association, or
publicly traded partnership, taxable as a corporation.
NOTICES AND REPORTS
Notices
Notices to holders of notes will be given by mail sent to the addresses of
the holders as they appear in the note register.
Issuer's Annual Compliance Statement
The issuer is required to furnish annually to the indenture trustee a
statement concerning its performance or fulfillment of covenants, agreements or
conditions in the indenture as well as the presence or absence of defaults
under the indenture.
Indenture Trustee's Annual Report
The indenture trustee, to the extent required under the Trust Indenture Act
of 1939, will mail each year to all registered noteholders a report concerning
. its eligibility and qualifications to continue as trustee under the
indenture,
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. any amounts advanced by it under the indenture,
. the amount, interest rate and maturity date or indebtedness owing by
the issuer to it in the indenture trustee's individual capacity,
. the property and funds physically held by it as indenture trustee,
. any release or release and substitution of collateral subject to the
lien of the indenture that has not previously been reported, and
. any action taken by it that materially affects the notes and that has
not previously been reported.
List of Noteholders
Three or more holders of notes of any series, each of whom has owned a note
for at least six months, may, upon written request to the indenture trustee,
obtain access to the current list of noteholders of the issuer for purposes of
communicating with other noteholders concerning their rights under the
indenture or the notes. The indenture trustee may elect not to give the
requesting noteholders access to the list if it agrees to mail the desired
communication or proxy to all applicable noteholders.
Reports
Monthly reports containing information on the notes and the collateral
securing the notes will be filed with the Securities and Exchange Commission.
These reports will not be sent to noteholders. See "Where You Can Find
Additional Information" for information as to how these reports may be accessed.
On or before January 31 of each calendar year, the paying agent, on behalf
of the indenture trustee, will furnish to each person who at any time during
the prior calendar year was a noteholder of record a statement containing the
information required to be provided by an issuer of indebtedness under the
Internal Revenue Code. See "Tax Matters."
THE MASTER TRUST
Citibank Credit Card Master Trust I is a New York common law trust formed
by Citibank (South Dakota) and Citibank (Nevada) in May 1991 to securitize a
portion of their portfolios of credit card receivables. The master trust is
operated pursuant to a pooling and servicing agreement among Citibank (South
Dakota), as seller and servicer, Citibank (Nevada), as seller, and Bankers
Trust Company, as trustee.
The Banks have acquired, and may acquire in the future, credit card
receivables in accounts owned by their affiliates and transfer those
receivables to the master trust. In addition, other affiliates of the Banks may
in the future sell credit card receivables to the master trust by becoming
additional sellers under the pooling and servicing agreement.
The master trust does not engage in any activity other than acquiring and
holding trust assets and the proceeds of those assets, issuing series of
investor certificates, making distributions and related activities.
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The master trust has no employees and does not conduct unrelated business
activities.
Master Trust Assets
The master trust assets consist primarily of credit card receivables
arising in a portfolio of revolving consumer credit card accounts, and
collections on the accounts. The Banks sell and assign the credit card
receivables to the master trust. The receivables arise in accounts that are
generated under MasterCard International or VISA programs. The accounts are
originated by Citibank (South Dakota) or one of its affiliates or purchased
from other credit card issuers.
Citibank (South Dakota) is the owner of all of the credit card accounts
designated to the master trust, but has sold a participation in the credit card
receivables in some of the accounts to Citibank (Nevada) before their
conveyance to the master trust.
Some of the accounts designated to the master trust were originated and
owned by Universal Bank, N.A., an affiliate of the Banks which merged into
Citibank (South Dakota) on January 7, 2002. These Universal accounts consist
solely of MasterCard and VISA revolving credit card accounts originated under
the AT&T Universal Card program. The AT&T Universal Card combines a credit card
and a separate AT&T calling card. The calling card feature allows cardholders
to charge local, long distance and international calls and other
telecommunications services to their accounts.
Calling card receivables in the designated Universal accounts are not
initially included in the master trust's assets. However, to the extent the
cardholder finances the calling card transaction--that is, does not pay it in
full when billed--the receivable and its related finance charges become assets
of the master trust. As described in "The Master Trust Receivables and
Accounts" attached as Annex I to the supplement to this prospectus, minimum
monthly payments required from cardholders of the AT&T Universal Card cover all
calling card transactions, and payments received from cardholders are credited
against calling card transactions first.
Accounts designated to the master trust must meet the eligibility
requirements specified in the pooling and servicing agreement. Eligible
accounts are revolving credit card accounts that
. are in existence and maintained by Citibank (South Dakota) or one of
its affiliates,
. are payable in U.S. dollars,
. in the case of the initial accounts designated to the master trust,
have a cardholder with a billing address located in the United States
or its territories or possessions or a military address,
. have a cardholder who has not been identified as being involved in a
voluntary or involuntary bankruptcy proceeding,
. have not been identified as an account with respect to which the
related card has been lost or stolen,
. have not been sold or pledged to any other party except for any sale to
the Banks,
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. do not have receivables that have been sold or pledged to any other
party other than any sale of receivables to the Banks, and
. in the case of the initial accounts designated to the master trust, are
MasterCard or VISA revolving credit card accounts.
Citibank (South Dakota) believes that the accounts are representative of
the eligible accounts in its portfolio and that the inclusion of the accounts,
as a whole, does not represent an adverse selection by it from among the
eligible accounts. See "The Master Trust Receivables and Accounts" attached as
Annex I to the supplement to this prospectus for financial information on the
receivables and the accounts.
The Banks are compensated for the transfer of the credit card receivables
to the master trust from two sources: (1) the net cash proceeds received by the
Banks, as owners of the sellers' interest, from the sale to third party
investors of certificates representing beneficial ownership interests in
receivables held through the master trust and (2) the increase in the amount of
the sellers' interest, which represents the beneficial interest in the pool of
receivables retained by the Banks and not sold to third party investors.
The Banks may, at their option, designate additional credit card accounts
to the master trust, the receivables in which will be sold and assigned to the
master trust. This type of designation is referred to as a "lump addition."
Since the creation of the master trust, the Banks have made lump additions and
may make lump additions in the future.
In addition, the Banks are required to make a lump addition if as of the
end of any calendar week the total amount of principal receivables in the
master trust is less than the amount required by the rating agencies that rate
the certificates purchased by the investors. After a required lump addition,
the total amount of principal receivables in the master trust will be at least
equal to the required amount. A lump addition consists of
. credit card receivables arising in eligible accounts in Citibank (South
Dakota)'s or another affiliate's credit card portfolio,
. credit card receivables arising in portfolios of revolving credit card
accounts acquired by the Banks from other credit card issuers,
. credit card receivables arising from nonpremium and premium MasterCard
and VISA credit card accounts previously transferred by the Banks to
other trusts formed by the Banks that have reached their maturity dates,
. credit card receivables arising in any other revolving credit card
accounts of a type that has previously not been included in the
accounts, and
. participations representing undivided interests in a pool of assets
primarily consisting of revolving credit card accounts and collections
on those accounts.
The Banks may also designate newly originated credit card accounts--or "new
accounts"--to be included as accounts, if they meet the conditions in the
pooling and
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servicing agreement. The number of new accounts designated for any quarterly
period may not exceed 15% of the number of accounts as of the first day of that
period, and the number of new accounts designated during any calendar year may
not exceed 20% of the number of accounts as of the first day of that calendar
year, unless the rating agencies otherwise consent. Since the creation of the
master trust, the Banks have designated new accounts and the Banks may continue
to do so in the future.
Credit card accounts designated to the master trust in the future may have
different eligibility criteria from those used in selecting the initial
accounts and may not be accounts of the same type previously included in the
master trust. Therefore, we cannot provide any assurance that additional
accounts will be of the same credit quality as the accounts currently
designated to the master trust. These additional accounts may contain
receivables that consist of fees, charges and amounts that are different from
the fees, charges and amounts applicable to the accounts previously designated
to the master trust. These additional accounts may also have different credit
limits, balances and ages. In addition, the inclusion in the master trust of
additional accounts with lower periodic finance charges may reduce the
Portfolio Yield of the master trust receivables. The Banks intend to file with
the Securities and Exchange Commission, on behalf of the master trust, a
Current Report on Form 8-K with respect to any addition of accounts that would
have a material effect on the composition of the accounts.
The Banks may remove the receivables in some of the credit card accounts,
if they meet the conditions in the pooling and servicing agreement. These
conditions include:
. the rating agencies confirm that the removal will not cause the rating
assigned to any outstanding series or class of master trust investor
certificates to be withdrawn or reduced, and
. the Banks deliver an officers' certificate that the Banks reasonably
believe that the removal will not (1) cause an early amortization event
or a reduction of the amount of finance charge collections for any
series of master trust investor certificates below the level required
by the rating agencies that have rated the certificates issued by the
master trust or (2) adversely affect the amount or timing of payments
to investor certificateholders of any series.
Citibank (South Dakota)--and any affiliate that owns accounts designated to
the master trust--has the right to change or terminate any terms, conditions,
services or features of the accounts, including increasing or decreasing
periodic finance charges or minimum payments.
Citibank (South Dakota) has agreed--and each affiliate that owns accounts
designated to the master trust will agree--that, except as otherwise required
by law or it deems necessary to maintain its credit card business on a
competitive basis, it will not take actions that reduce the Portfolio Yield on
the receivables in the master trust to be less than the sum of
. the weighted average certificate rate of each class of investor
certificates of each series, and
. the weighted average of the net servicing fee rate allocable to each
class of investor certificates of each series.
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In addition, Citibank (South Dakota) has agreed--and each affiliate that
owns accounts designated to the master trust will agree--that, unless required
by law, it will not reduce the Portfolio Yield to less than the highest
certificate rate for any outstanding series or class of master trust investor
certificates. Citibank (South Dakota) has also agreed--and each affiliate that
owns accounts designated to the master trust will agree--that it will change
the terms relating to the credit card accounts designated to the master trust
only if that change is made applicable to a comparable segment of the portfolio
of accounts with similar characteristics owned or serviced by it, and not only
to the accounts designated to the master trust.
On the issuance date for a series of master trust investor certificates the
Banks make representations and warranties to the master trust relating to the
credit card receivables and accounts, including the following:
. each account was an eligible account generally as of the date the
receivables arising in that account were initially conveyed to the
master trust,
. each of the receivables then existing in the accounts is an eligible
receivable, and
. as of the date of creation of any new receivable, that receivable is an
eligible receivable.
Eligible receivables are credit card receivables
. that have arisen under an eligible account,
. that were created in compliance in all material respects with all
requirements of law and pursuant to a credit card agreement that
complies in all material respects with all requirements of law,
. with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority
required to be obtained or given in connection with the creation of
that receivable or the execution, delivery, creation and performance by
Citibank (South Dakota) or by the original credit card issuer, if not
Citibank (South Dakota), of the related credit card agreement have been
duly obtained or given and are in full force and effect,
. as to which at the time of their transfer to the master trust, the
Banks or the master trust have good and marketable title, free and
clear of all liens, encumbrances, charges and security interests,
. that have been the subject of a valid sale and assignment from the
Banks to the master trust of all the Banks' right, title and interest
in the receivable or the grant of a first priority perfected security
interest in the receivable and its proceeds,
. that will at all times be a legal, valid and binding payment obligation
of the cardholder enforceable against the cardholder in accordance with
its terms, except for certain bankruptcy-related matters,
. that at the time of their transfer to the master trust, have not been
waived or modified except as permitted under the pooling and servicing
agreement,
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. that are not at the time of their transfer to the master trust subject
to any right of rescission, set off, counterclaim or defense, including
the defense of usury, other than certain bankruptcy-related defenses,
. as to which the Banks have satisfied all obligations to be fulfilled at
the time it is transferred to the master trust,
. as to which the Banks have done nothing, at the time of its transfer to
the master trust, to impair the rights of the master trust or investor
certificateholders, and
. that constitutes an "account" under the Uniform Commercial Code in
effect in the States of Nevada and South Dakota.
If the Banks breach any of these representations or warranties and the breach
has a material adverse effect on the investor certificateholders' interest, the
receivables in the affected account will be reassigned to the Banks if the
breach remains uncured after a specified cure period. In general, the sellers'
interest will be reduced by the amount of the reassigned receivables. However,
if there is not sufficient sellers' interest to bear the reduction, the Banks
are obligated to contribute funds equal to the amount of the deficiency.
Each Bank also represents and warrants to the master trust that as of the
issuance date for a series of investor certificates the pooling and servicing
agreement and related series supplement create a valid sale, transfer and
assignment to the master trust of all right, title and interest of that Bank in
the receivables or the grant of a first priority perfected security interest in
those receivables under the Uniform Commercial Code. If the Banks breach this
representation and warranty and the breach has a material adverse effect on the
investor certificateholders' interest, the master trust trustee or the holders
of the investor certificates may direct the Banks to accept the reassignment of
the receivables in the master trust. The reassignment price will generally be
equal to the aggregate invested amount of all series of investor certificates,
including the collateral certificate, issued by the master trust, plus accrued
and unpaid interest on those certificates.
We cannot assure that all of the credit card accounts designated to the
master trust will continue to meet the eligibility requirements that were
satisfied upon their inclusion in the master trust throughout the life of the
master trust.
The Servicer
The pooling and servicing agreement designates Citibank (South Dakota) to
service the credit card accounts on behalf of the master trust. The servicer is
required to service the accounts in accordance with customary and usual
procedures for servicing credit card receivables. Its duties include billing,
collecting and recording payments on the receivables, communicating with
cardholders, investigating payment delinquencies on accounts, maintaining
records for each cardholder account and other managerial and custodial
functions.
The servicer also deposits collections on the receivables into a collection
account maintained for the master trust, calculates amounts from those
collections to be allocated to each series of investor certificates issued by
the master trust and prepares monthly reports.
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If the servicer defaults in the performance of its duties then the servicer
may be terminated and the master trust trustee or a third party meeting the
eligibility requirements specified in the pooling and servicing agreement will
replace the servicer.
The servicer receives a monthly fee as compensation for its servicing
activities. For each series of master trust investor certificates, including
the collateral certificate, the servicer receives monthly compensation
generally equal to
. 0.37% per annum of the invested amount of the investor certificates of
that series so long as Citibank (South Dakota) or an affiliate is the
servicer, or 0.77% per annum if there is a different servicer,
. plus, the investor certificateholders portion of finance charge
collections that is attributable to interchange up to a maximum amount
equal to 1.50% per annum of the invested amount of the investor
certificates of that series.
The servicer's fee is paid from the finance charge collections allocated to
each series. The servicer is responsible to pay from its servicing compensation
expenses of the master trust, including the fees and expenses of the master
trust trustee and independent accountants.
For a description of the credit card business conducted by the servicer,
see "The Credit Card Business of Citibank (South Dakota)" attached as Annex I
to this prospectus.
Master Trust Issuances; Sellers' Interest
The master trust is permitted to issue multiple series of investor
certificates. Each series represents an undivided ownership interest in the
assets of the master trust. The terms of each series are determined at the time
of issuance and are contained in a supplement to the pooling and servicing
agreement.
The collateral certificate--which is the issuer's primary source of funds
for payments on the notes--is a series of investor certificates.
The ability of the master trust to issue a new series of investor
certificates is limited by some conditions, including the conditions that the
Banks deliver the required tax opinions, the Banks' remaining interest in the
principal receivables not being reduced to less than 2% of the total amount of
principal in the master trust, and the issuance not cause the rating assigned
to any outstanding series or class of investor certificates by the rating
agencies to be withdrawn or reduced.
The sellers' interest is the economic interest in the master trust
remaining after subtracting from the aggregate economic interests in the master
trust the interests represented by the collateral certificate and all other
investor certificates issued by the master trust. The sellers' interest is
owned by the Banks.
Allocation of Collections, Losses and Fees
Cardholder payments received each month are separated into principal
collections and finance charge collections.
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In general, finance charge collections, principal collections, losses and
expenses are allocated to the master trust investor certificates, including the
collateral certificate, and to the sellers' interest as follows:
. first, collections of finance charge receivables and collections of
principal receivables are allocated among the different series of
certificates issued by the master trust, including the collateral
certificate, pro rata based on the invested amount of each series; and
. second, following the allocation to each series, collections of finance
charge receivables and principal receivables are further allocated
between the investors in the series and the sellers' interest on a
similar basis.
There is an exception to the pro rata allocations described in the
preceding paragraph. In the master trust, when the principal amount of an
investor certificate other than the collateral certificate begins to amortize,
a special allocation procedure is followed. In this case, collections of
principal receivables continue to be allocated between investors in the series
and the sellers' interest as if the invested amount of the series had not been
reduced by principal collections deposited to a principal funding subaccount or
paid to investors. Allocations of principal collections between the investors
in a series and the sellers' interest is based on the invested amount of the
series "fixed" at the time immediately before the first deposit of principal
collections into a principal funding account or the time immediately before the
first payment of principal collections to investors. Distributions of ongoing
collections of finance charge receivables, as well as losses and expenses,
however, are not allocated on this type of a fixed basis. In the case of the
collateral certificate, each class of notes is treated as a separate series of
investor certificates that becomes "fixed" immediately before the issuer begins
to allocate principal collections to the principal funding subaccount for that
class, whether for budgeted deposits or prefunding, or upon the occurrence of
the expected principal payment date, an early redemption event, event of
default or other optional or mandatory redemption.
Principal collections that are allocated to any series of master trust
investor certificates, including the collateral certificate, are first used to
pay any principal of those investor certificates, or in the case of the
collateral certificate, the notes, if due, and any excess is then reallocated
to pay principal of any other series of investor certificates that has a
shortfall of principal collections, including the collateral certificate.
Principal collections that are not needed to pay investor certificates or notes
are generally reinvested in newly generated credit card receivables.
For the application of finance charge collections and principal collections
that are allocated to the collateral certificate, see "Deposit and Application
of Funds."
Early Amortization Events
An early payout of principal to master trust investor certificateholders of
a series, including the collateral certificate, will occur under the
circumstances specified in the pooling
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and servicing agreement. Each condition is described as an "early amortization
event." Early amortization events include:
. the failure of either Bank to (1) make any payment or deposit required
under the pooling and servicing agreement or the related series
supplement within five business days after the payment or deposit was
required to be made or (2) observe or perform any of its other
covenants or agreements in the pooling and servicing agreement or
series supplement, and that failure has a material adverse affect on
investors and continues unremedied for 60 days after notice;
. a breach of any representation or warranty made by the Banks in the
pooling and servicing agreement or related series supplement that
continues to be incorrect in any material respect for 60 days after
notice;
. the occurrence of some bankruptcy events relating to either Bank,
referred to as "insolvency events";
. the failure by the Banks to make a lump addition of credit card
receivables to the master trust within five business days after the
date it was required to be made;
. the master trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
. the occurrence of a servicer default by Citibank (South Dakota); and
. either of the Banks is unable to transfer credit card receivables to
the master trust.
A series of master trust investor certificates may have additional early
amortization events applicable to that series. The collateral certificate does
not have any additional amortization events applicable to it, but your notes
may have early redemption events or events of default that may cause an early
payment of principal of your notes.
After an early amortization event occurs, principal collections will be
used to make monthly payments of principal to the master trust investor
certificateholders of that series until the earlier of payment of the
outstanding principal amount of the certificates of that series and its legal
maturity date. See "--Optional Termination; Final Payment of Master Trust
Investor Certificates." An early amortization event for the collateral
certificate is also an early redemption event for the notes. See "Covenants,
Events of Default and Early Redemption Events--Early Redemption Events."
In addition to the consequences of an early amortization event described in
the preceding paragraph, if an insolvency event occurs the Banks will
immediately cease to transfer credit card receivables to the master trust.
After that time, the master trust trustee will sell the credit card receivables
in the master trust in a commercially reasonable manner and on commercially
reasonable terms unless holders of more than 50% of the unpaid principal amount
of investor certificates of each class of each series including the collateral
certificate, the Banks--other than the insolvent Bank--and each other holder,
if any, of an interest in the master trust, give the master trust trustee other
instructions. The proceeds of that sale or liquidation will be applied to
payments on the investor certificates.
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Optional Termination; Final Payment of Master Trust Investor Certificates
The Banks may repurchase the master trust investor certificates of a
series--other than the collateral certificate--if the invested amount of the
certificates of that series is five percent or less of the initial aggregate
principal amount of the investor certificates. The purchase price will be equal
to the invested amount, plus accrued interest.
If the invested amount of the master trust investor certificates of a
series is greater than zero on its legal maturity date, the master trust
trustee will sell credit cards receivables in an amount, generally, of up to
110% of the invested amount. The net proceeds of the sale will be allocated to
the investor certificates. Sale proceeds allocable to the collateral
certificate will be treated as principal collections and allocated to the
notes. The legal maturity date of the collateral certificate is September 7,
2020, but may be extended from time to time by notice from the issuer to the
master trust, with the consent of the rating agencies that rate the notes and
the delivery of the type of federal tax opinions needed for the issuance of a
new series of notes. See "The Notes--Issuances of New Series, Classes and
Subclasses of Notes."
TAX MATTERS
This section summarizes the material U.S. federal income tax consequences
to noteholders. However, the discussion is limited in the following ways:
. The discussion only covers you if you buy your notes in the initial
offering--including the initial offering of additional notes of an
outstanding subclass.
. The discussion only covers you if you hold your notes as a capital
asset--that is, for investment purposes--and if you do not have a
special tax status.
. The discussion does not cover tax consequences that depend upon your
particular tax circumstances. You should consult your tax advisor about
the consequences of holding notes in your particular situation.
. The discussion is based on current law. Changes in the law may change
the tax treatment of the notes.
. The discussion does not cover state, local or foreign law.
. The discussion does not cover every type of note that the issuer might
issue. For example, it does not cover notes with an expected principal
payment date within one year of issuance, foreign currency notes, or
notes that are not to be characterized as debt for federal income tax
purposes. If your notes are of a type not described in this summary,
additional tax information will be provided in the applicable
supplement to this prospectus.
. The discussion does not apply to the initial issuance of a new subclass
of notes issued at more than a small discount from their stated
principal amount. More precisely, the discussion applies only if the
discount is less than 1/4% times the number of full years from the
issue date to the expected principal payment date of
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the notes. This discount is referred to as "de minimis OID." If the
discount on the initial issuance of a new subclass of notes exceeds
this de minimis amount, the original issue discount (OID) rules of the
Internal Revenue Code will apply and additional information will be
provided in a supplement to this prospectus.
. There is no authority concerning many of the tax issues concerning the
issuer and the notes. We have not requested a ruling from the Internal
Revenue Service on the tax consequences of owning the notes. As a
result, the Internal Revenue Service could disagree with portions of
this discussion.
Because of these limitations, and because of the uncertainties described
under "--Other Possible Tax Characterizations," we strongly encourage you to
consult your tax advisor before purchasing notes.
Tax Characterization of the Notes
Cravath, Swaine & Moore, special federal tax counsel to the Banks and the
issuer, referred to in this capacity as "tax counsel," will provide an opinion
to the issuer that the notes are properly characterized as indebtedness for
federal income tax purposes. In addition, noteholders will agree, by acquiring
notes, to treat the notes as debt of the Banks for federal, state and local
income and franchise tax purposes. The Banks agree to treat the notes in the
same manner for these purposes, although they will treat the notes as equity
for some nontax purposes.
Tax Characterization of the Issuer
Tax counsel will provide an opinion that the issuer will not be an
association--or publicly traded partnership--taxable as a corporation for
federal income tax purposes. As a result, the issuer will not have to pay
federal income tax.
The precise tax characterization of the issuer for federal income tax
purposes is not certain. The Banks intend that the issuer be disregarded and
treated as merely holding assets on behalf of the Banks as collateral for notes
issued by the Banks. On the other hand, the issuer could be viewed as a
separate entity for tax purposes, probably a partnership, issuing its own
notes. This distinction, however, should not have a significant tax effect on
noteholders except as stated under "--Other Possible Tax Characterizations."
U.S. and Non-U.S. Noteholders
Many of the tax consequences of your owning notes depend upon whether you
are a "U.S. noteholder" or a "non-U.S. noteholder."
A "U.S. noteholder" is (a) an individual U.S. citizen or resident alien;
(b) a corporation, or entity taxable as a corporation for U.S. federal income
tax purposes, that was created under U.S. law, whether federal or state; or (c)
an estate or trust that must pay U.S. federal income tax on its worldwide
income.
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A "non-U.S. noteholder" is a person or entity that is not a U.S. noteholder.
If a partnership holds notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding notes should consult their tax
advisors.
Tax Consequences to U.S. Noteholders
Interest
Unless the OID rules apply as described in the next paragraph:
. If you are a cash method taxpayer--which includes most individual
noteholders--you must report interest on the notes in your income when
you receive it.
. If you are an accrual method taxpayer, you must report interest on the
notes in your income as it accrues.
Possible OID on the Notes
Your notes might be treated as having OID, even if they satisfy the
requirement for de minimis OID described in the seventh bullet point under
"--Tax Matters." This result could arise in two ways:
. Interest on your notes is not paid in full on a scheduled payment date.
Your notes might then be treated as having OID from that date until
their principal is fully paid.
. All notes might have OID from their date of issuance, because interest
is only payable out of specified cash flows allocated to the collateral
certificate. However, the Banks intend to take the position that OID
does not arise under this rule.
If your note has OID, all interest on the note would be taxable in
accordance with the rules for accruing OID. In general, there would not be a
significant adverse effect on you. However:
. You would have to report interest income on the note as it accrues
rather than when it is paid, even if you are on the cash method of
accounting.
. If the note was issued at a small discount from its face amount--that
is, with de minimis OID--you would have to accrue that discount into
income over the life of the note.
Premium and Discount
If you buy a note for more than its stated principal amount--disregarding
accrued interest that you pay--the excess amount you pay will be "bond premium."
. You can elect to use bond premium to reduce your taxable interest
income from your note. Under the election, the total premium will be
allocated to interest periods, as an offset to your interest income, on
a "constant yield" basis over the life of your
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note. Under this rule, there is a smaller offset in the early periods
and a larger offset in the later periods.
. You make this election on your tax return for the year in which you
acquire the note. If you make the election, it automatically applies to
all debt instruments with bond premium that you own during that year or
that you acquire at any time thereafter, unless the Internal Revenue
Service permits you to revoke the election.
You may be subject to the "market discount" rules of the Internal Revenue
Code if you buy a note in an offering for less than its principal amount, and
either:
. youbuy the note in the initial offering of a subclass of notes and you pay
less than the initial offering price, or
. you buy the note in an offering of additional notes of an outstanding
subclass and you pay less than the initial offering price when the
subclass was originally issued.
The market discount rules apply as follows:
. Market discount is the excess of the principal amount of a note over
your purchase price. However, market discount is disregarded under a de
minimis rule if it is less than 1/4% of the principal amount
multiplied by the number of full years from your purchase date to the
expected principal payment date of the note.
. You are not required to accrue market discount into income on a current
basis, although you can elect to do so. Unless you elect to do so, you
may have ordinary income--to the extent of the accrued market
discount-- on your sale, retirement or other disposition of your note,
or on your receipt of a partial principal payment on your note. In
addition, if you have any indebtedness allocable to your note, a
portion of your interest deduction on that debt--to the extent of
accrued and untaxed market discount on the note--may be deferred.
Appropriate adjustments to tax basis are made in these situations.
Noteholders in these situations should consult their tax advisors.
Sale or Retirement of Notes
On your sale or retirement of your note:
. You will have taxable gain or loss equal to the difference between the
amount received by you and your tax basis in the note.
. Your tax basis in your note is your cost, after taking into account
adjustments for OID, premium and discount.
. Your gain or loss will generally be capital gain or loss, and will be
long-term capital gain or loss if you held your note for more than one
year. For an individual, the maximum tax rate on long term capital
gains is 20%--or 18% if the note is acquired on or after January 1,
2001 and held for more than five years. Gain equal to accrued market
discount will generally be ordinary income, as discussed under
"--Premium and Discount."
. If your note was issued at a de minimis OID, you must report that
discount in your income as taxable gain on a proportionate basis as you
receive principal of the note.
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. If you sell a note between interest payment dates, a portion of the
amount you receive reflects interest that has accrued on the note but
has not yet been paid by the sale date. That amount is treated as
ordinary interest income and not as sale proceeds.
Information Reporting and Backup Withholding
Under the tax rules concerning information reporting to the Internal
Revenue Service:
. Assuming you hold your notes through a broker or other securities
intermediary, the intermediary must provide information to the Internal
Revenue Service and to you on Form 1099 concerning interest, OID and
retirement proceeds on your notes, unless an exemption applies. You may
need to make adjustments to this information before filing your own tax
return.
. Similarly, unless an exemption applies, you must provide the
intermediary with your Taxpayer Identification Number for its use in
reporting information to the Internal Revenue Service. If you are an
individual, this is your social security number. You are also required
to comply with other Internal Revenue Service requirements concerning
information reporting.
. If you are required to comply with these requirements but do not
comply, the intermediary must withhold up to 31% of all amounts payable
to you on the notes, including principal payments. This is called
"backup withholding." If the intermediary withholds payments, you may
use the withheld amount as a credit against your federal income tax
liability.
. All individual U.S. noteholders are required to comply with these
requirements. Some U.S. noteholders, including all corporations,
tax-exempt organizations and individual retirement accounts, are exempt
from these requirements.
Other Possible Tax Characterizations
Since we are not obtaining a ruling from the Internal Revenue Service on
the tax consequences of the notes, the Internal Revenue Service could disagree
with the intended tax consequences or with the opinions of tax counsel
described under "--Tax Characterization of the Notes" and "--Tax
Characterization of the Issuer." As a result:
. The notes might be treated as equity interests in a partnership rather
than debt for tax purposes. Noteholders would then be treated as
partners in a partnership, with possible adverse tax results. In
particular, individual noteholders would be required to include income
of the issuer or the master trust in their own income as it accrues
rather than when it is paid, and might not be allowed a deduction for
certain expenses of the issuer or the master trust, resulting in a
greater amount of taxable income than cash received.
. The issuer--and possibly the master trust--might initially or in the
future be treated as a taxable corporation, with the notes treated as
debt or equity in the corporation.
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Tax imposed on the issuer or the master trust could significantly
reduce the amount of cash otherwise available for payment to
noteholders.
Tax Consequences to Non-U.S. Noteholders
Withholding Taxes
Generally, assuming the notes are debt for federal income tax purposes--as
provided in the opinion of tax counsel--no U.S. taxes are required to be
withheld from payments of principal and interest on the notes.
However, for the exemption from withholding taxes to apply to you, you must
meet one of the following requirements.
. You provide a completed Form W-8BEN--or substitute form--to the bank,
broker or other intermediary through which you hold your notes. The
Form W-8BEN contains your name, address and a statement that you are
the beneficial owner of the notes and that you are not a U.S.
noteholder.
. You hold your notes directly through a "qualified intermediary," and
the qualified intermediary has sufficient information in its files
indicating that you are not a U.S. noteholder. A qualified intermediary
is a bank, broker or other intermediary that (a) is either a U.S. or
non-U.S. entity, (b) is acting out of a non-U.S. branch or office and
(c) has signed an agreement with the Internal Revenue Service providing
that it will administer all or part of the U.S. tax withholding rules
under specified procedures.
. You are entitled to an exemption from withholding tax on interest under
a tax treaty between the U.S. and your country of residence. To claim
this exemption, you must complete Form W-8BEN and claim this exemption
on the form. In some cases, you may instead be permitted to provide
documentary evidence of your claim to the intermediary.
. The interest income on the notes is effectively connected with the
conduct of your trade or business in the U.S., and is not exempt from
U.S. tax under a tax treaty. To claim this exemption, you must complete
Form W-8ECI.
Even if you meet one of the above requirements, interest paid to you will
be subject to withholding tax under any of the following circumstances:
. The withholding agent or an intermediary knows or has reason to know
that you are not entitled to an exemption from withholding tax.
Specific rules apply for this test.
. The Internal Revenue Service notifies the withholding agent that
information that you or an intermediary provided concerning your status
is false.
. An intermediary through which you hold the notes fails to comply with
the procedures necessary to avoid withholding taxes on the notes. In
particular, an
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intermediary is generally required to forward a copy of your Form
W-8BEN--or other documentary information concerning your status--to the
withholding agent for the notes. However, if you hold your notes
through a qualified intermediary--or if there is a qualified
intermediary in the chain of title between yourself and the withholding
agent for the notes--the qualified intermediary will not generally
forward this information to the withholding agent.
. You (a) own 10% or more of the voting stock of Citigroup Inc., (b) are
a "controlled foreign corporation" with respect to Citigroup, (c) are
related to holders of any equity interest in the issuer other than the
Banks, (d) are related to holders of any equity interest in the master
trust other than the issuer or the Banks, or (e) are a bank making a
loan in the ordinary course of its business. In these cases, you will
be exempt from withholding taxes only if you are eligible for a treaty
exemption or if the interest income is effectively connected with your
conduct of a trade or business in the U.S., as discussed above.
Interest payments made to you will generally be reported to the Internal
Revenue Service and to you on Form 1042-S. However, this reporting does not
apply to you if one of the following conditions applies:
. You hold your notes directly through a qualified intermediary and the
applicable procedures are complied with.
. You file Form W-8ECI.
The rules regarding withholding are complex and vary depending on your
individual situation. They are also subject to change. In addition, special
rules apply to certain types of non-U.S. noteholders, including partnerships,
trusts and other entities treated as pass-through entities for U.S. federal
income tax purposes. We suggest that you consult with your tax advisor
regarding the specific methods for satisfying these requirements.
Sale or Retirement of Notes
If you sell a note or it is redeemed, you will not have to pay federal
income tax on any gain unless one of the following applies:
. The gain is connected with a trade or business that you conduct in the
U.S.
. You are an individual, you are present in the U.S. for at least 183
days during the year in which you dispose of the note, and other
conditions are satisfied.
. The gain represents accrued interest or OID, in which case the rules
for interest would apply.
U.S. Trade or Business
If you hold your note in connection with a trade or business that you are
conducting in the U.S.:
. Any interest on the note, and any gain from disposing of the note,
generally will be taxable as income as if you were a U.S. noteholder.
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. If you are a corporation, you may be required to pay the "branch
profits tax" on your earnings that are connected with your U.S. trade
or business, including earnings from the note. This tax is 30%, but may
be reduced or eliminated by an applicable income tax treaty.
Estate Taxes
If you are an individual, no U.S. estate tax will apply to your note when
you die. However, this rule only applies if, at your death, payments on the
note were not connected to a trade or business that you were conducting in the
U.S.
Information Reporting and Backup Withholding
U.S. rules concerning information reporting and backup withholding are
described under "--Tax Consequences to U.S. Noteholders." Under these rules:
. Principal and interest payments you receive will be automatically
exempt from the usual rules if you are a non-U.S. noteholder exempt
from withholding tax on interest, as described above. The exemption
does not apply if the withholding agent or an intermediary knows or has
reason to know that you should be subject to the usual information
reporting or backup withholding rules. In addition, as described above,
interest payments made to you may be reported to the Internal Revenue
Service on Form 1042-S.
. Sale proceeds you receive on a sale of your notes through a broker may
be subject to these rules if you are not eligible for an exemption. In
particular, information reporting and backup reporting may apply if you
use the U.S. office of a broker. Information reporting, but not backup
withholding, may apply if you use the foreign office of a broker that
has certain connections to the U.S. In general, you may file Form
W-8BEN to claim an exemption from information reporting and backup
withholding. You should consult your tax advisor concerning information
reporting and backup withholding on a sale.
Other Possible Tax Characterizations
If the issuer or the master trust is treated as a taxable corporation, the
tax liability of the issuer or the master trust could reduce the amount of cash
available to noteholders. In addition, if your notes are characterized as
equity rather than debt for federal income tax purposes, there could be
material adverse tax consequences to you. For example:
. If your notes were equity interests in a partnership, (a) 30% U.S.
withholding tax might apply to the gross amount of income of the issuer
allocable to you, or (b) you might have to file a tax return in the
U.S. and pay tax on your share of net income of the issuer as if that
income were your U.S. business income. A corporate noteholder might
also be required to pay the "branch profits tax."
. If your notes are equity interests in a corporation, all interest
payable to you might be treated as a dividend subject to 30%
withholding tax, or a lower rate provided for dividends by a tax treaty.
Non-U.S. noteholders should consult their tax advisors concerning these
risks.
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BENEFIT PLAN INVESTORS
Benefit plans are required to comply with restrictions under the Internal
Revenue Code and the Employee Retirement Income Security Act of 1974, known as
ERISA. These restrictions include rules concerning prudence and diversification
of the investment of assets of a benefit plan--referred to as "plan assets." A
benefit plan fiduciary should consider whether an investment by the benefit
plan in notes complies with these requirements.
In general, a benefit plan for these purposes includes:
. an employee benefit plan that is tax-qualified under the Internal
Revenue Code and provides deferred compensation to employees--such as a
pension, profit-sharing, section 401(k) or Keogh plan;
. an individual retirement account; and
. a collective investment fund or other entity, if (a) the fund or entity
has one or more benefit plan investors and (b) certain "look-through"
rules apply and treat the assets of the fund or entity as constituting
plan assets of the benefit plan investor.
However, a plan maintained by a government is not a benefit plan unless it
is tax-qualified under the Internal Revenue Code. A fund or other
entity--including an insurance company general account--considering an
investment in notes should consult its tax advisors concerning whether its
assets might be considered plan assets under these rules.
Prohibited Transactions
ERISA and the Internal Revenue Code also prohibit transactions of a
specified type between a benefit plan and a party in interest who is related in
a specified manner to the benefit plan. Violation of these prohibited
transaction rules may result in significant penalties. There are statutory
exemptions from the prohibited transaction rules, and the U.S. Department of
Labor has granted administrative exemptions of specified transactions.
Potential Prohibited Transactions from Investment in Notes
There are two categories of prohibited transactions that might arise from a
benefit plan's investment in notes. Fiduciaries of benefit plans contemplating
an investment in notes should carefully consider whether the investment would
violate these rules.
Prohibited transactions between the benefit plan and a party in interest
The first category of prohibited transaction could arise on the grounds
that the benefit plan, by purchasing notes, was engaged in a prohibited
transaction with a party in interest. A prohibited transaction could arise, for
example, if the notes were viewed as debt of the Banks and a Bank was a party
in interest as to the benefit plan. A prohibited transaction could also arise
if a Bank, the master trust trustee, the indenture trustee, the servicer or
another party with an economic relationship to the issuer or the master trust
either
. is involved in the investment decision for the benefit plan to purchase
notes or
. is otherwise a party in interest as to the benefit plan.
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If a prohibited transaction might result from the benefit plan's purchase
of notes, an administrative exemption from the prohibited transaction rules
might be available to permit an investment in notes. The exemptions that are
potentially available include the following prohibited transaction class
exemptions:
. 96-23, available to "in-house asset managers";
. 95-60, available to insurance company general accounts;
. 91-38, available to bank collective investment funds;
. 90-1, available to insurance company pooled separate accounts; and
. 84-14, available to "qualified professional asset managers."
However, even if the benefit plan is eligible for one of these exemptions,
the exemption may not cover every aspect of the investment by the benefit plan
that might be a prohibited transaction.
Prohibited transactions between the issuer or master trust and a party in
interest
The second category of prohibited transactions could arise if
. a benefit plan acquires notes, and
. under a Department of Labor plan asset regulation, assets of the issuer
or the master trust are treated as if they were plan assets of the
benefit plan.
In this case, every transaction by the issuer or the master trust would be
treated as a transaction by the benefit plan using plan assets.
If assets of the issuer or the master trust are treated as plan assets, a
prohibited transaction could result if the issuer or the master trust itself
engages in a transaction with a party in interest as to the benefit plan. For
example, if the master trust assets are treated as assets of a benefit plan and
the master trust holds a credit card receivable that is an obligation of a
participant in that same benefit plan, then there would be a prohibited
extension of credit between the benefit plan and a party in interest, the plan
participant.
As a result, if assets of the issuer or the master trust are treated as
plan assets, there would be a significant risk of a prohibited transaction.
Moreover, the prohibited transaction class exemptions referred to above could
not be relied on to exempt all the transactions of the issuer or the master
trust from the prohibited transaction rules. In addition, because all the
assets of the issuer or the master trust would be treated as plan assets,
managers of those assets might be required to comply with the fiduciary
responsibility rules of ERISA.
Under an exemption in the plan asset regulations, assets of the issuer or
master trust would not be considered plan assets, and so this risk of
prohibited transactions would not arise, if a benefit plan purchased a note that
. was treated as indebtedness under local law, and
. had no "substantial equity features."
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The issuer expects that all notes will be indebtedness under local law.
Likewise, although there is no authority directly on point, the issuer believes
that the notes should not be considered to have substantial equity features. As
a result, the plan asset regulations should not apply to cause assets of the
issuer or the master trust to be treated as plan assets.
Investment by Benefit Plan Investors
For the reasons described in the preceding sections, benefit plans can
purchase notes. However, the fiduciary of the benefit plan must ultimately
determine whether the requirements of the plan asset regulation are satisfied.
More generally, the fiduciary must determine whether the benefit plan's
investment in notes will result in one or more nonexempt prohibited
transactions or otherwise violate the provisions of ERISA or the Internal
Revenue Code.
Tax Consequences to Benefit Plans
In general, assuming the notes are debt for federal income tax purposes,
interest income on notes would not be taxable to benefit plans that were
tax-exempt under the Internal Revenue Code, unless the notes were
"debt-financed property" because of borrowings by the benefit plan itself.
However, if, contrary to the opinion of tax counsel, for federal income tax
purposes, the notes were equity interests in a partnership and the partnership
or the master trust were viewed as having other outstanding debt, then all or
part of the interest income on the notes would be taxable to the benefit plan
as "debt-financed income." Benefit plans should consult their tax advisors
concerning the tax consequences of purchasing notes.
PLAN OF DISTRIBUTION
The issuer may offer and sell the notes in any of three ways:
. directly to one or more purchasers;
. through agents; or
. through underwriters.
Any underwriter or agent that offers the notes may be an affiliate of the
issuer, Citibank (South Dakota) and Citibank (Nevada), and offers and sales of
notes may include secondary market transactions by these affiliates. These
affiliates may act as principal or agent in secondary market transactions.
Secondary market transactions will be made at prices related to prevailing
market prices at the time of sale.
A supplement to this prospectus will specify the terms of each offering,
including
. the name or names of any underwriters or agents,
. the public offering or purchase price,
. the net proceeds to the issuer from the sale,
111
. any underwriting discounts and other items constituting underwriters'
compensation,
. any discounts and commissions allowed or paid to dealers,
. any commissions allowed or paid to agents, and
. the securities exchanges, if any, on which the notes will be listed.
Dealer trading may take place in some of the notes, including notes not
listed on any securities exchange. Direct sales may be made on a national
securities exchange or otherwise. If the issuer, directly or through agents,
solicits offers to purchase notes, the issuer reserves the sole right to accept
and, together with its agents, to reject in whole or in part any proposed
purchase of notes.
The issuer may change any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers. If indicated in a
supplement to this prospectus, the issuer will authorize underwriters or agents
to solicit offers by certain institutions to purchase securities from the
issuer pursuant to delayed delivery contracts providing for payment and
delivery at a future date.
Any underwriter or agent participating in the distribution of securities,
including notes offered by this prospectus, may be deemed to be an underwriter
of those securities under the Securities Act of 1933 and any discounts or
commissions received by them and any profit realized by them on the sale or
resale of the securities may be deemed to be underwriting discounts and
commissions.
The issuer, Citibank (South Dakota) and Citibank (Nevada) may agree to
indemnify underwriters, agents and their controlling persons against certain
civil liabilities, including liabilities under the Securities Act of 1933 in
connection with their participation in the distribution of the issuer's notes.
Underwriters and agents participating in the distribution of the
securities, and their controlling persons, may engage in transactions with and
perform services for the issuer or its affiliates in the ordinary course of
business.
LEGAL MATTERS
John R. Dye, an Associate General Counsel--Corporate Law of Citigroup Inc.,
will pass upon the validity of the notes for the issuer. Cravath, Swaine &
Moore, New York, New York will pass upon the validity of the notes for any
agents or underwriters. Cravath, Swaine & Moore, New York, New York will also
pass upon certain federal income tax matters for the issuer. Mr. Dye
beneficially owns, or has the right to acquire under Citigroup's employee
benefit plans, an aggregate of less than 0.01% of Citigroup's outstanding
common stock.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by the Securities Act of 1933, we filed a registration
statement relating to the securities described in this prospectus with the
Securities and Exchange Commission. This prospectus is a part of that
registration statement, but the registration statement includes additional
information.
We will file all required annual, monthly and special reports and other
information with the SEC, which you may read and copy at the SEC's Public
Reference Room in Washington, D.C. You can also request copies of these
documents, upon payment of a duplicating fee, by writing to the Public
Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the SEC's Public Reference Rooms. These filings
are also available to the public on the SEC's Internet website,
http://www.sec.gov.
We "incorporate by reference" information we file with the SEC, which means
that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is a part of this
prospectus. Information that we file later with the SEC will update the
information in this prospectus. In all cases, you should rely on the later
information over different information included in this prospectus or any
supplement to this prospectus. We incorporate by reference in this prospectus
any future annual, monthly and special reports or proxy materials that we file
with the SEC before the termination of the offering of the securities described
in this prospectus.
You may request a copy of these SEC filings, at no cost, by writing or
telephoning the issuer at the following address:
Citibank Credit Card Issuance Trust
c/o Citibank (South Dakota), National Association, as managing beneficiary
701 East 60th Street, North
Mail Code 1251
Sioux Falls, South Dakota 57117
Telephone: (605) 331-1567
You should rely only on the information in this prospectus and any
supplement to this prospectus. We have not authorized anyone to provide you
with any other information.
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GLOSSARY OF DEFINED TERMS
"Excess Finance Charge Collections" means finance charge collections that
are allocated to the collateral certificate, and are not needed in the month of
allocation to pay the master trust servicer's fees and expenses, to reimburse
charge-offs of principal receivables in the master trust that are allocated to
the collateral certificate, to pay the indenture trustee's fees and expenses,
or to pay interest on notes.
"Invested Amount" of any investor certificate issued by the master trust,
including the collateral certificate, is the fluctuating amount representing
the investment of investors, other than the Banks, in the pool of credit card
principal receivables in the master trust. The Invested Amount of the
collateral certificate is equal to:
. the aggregate outstanding dollar principal amount of the notes;
. minus the amount of charge-offs of principal receivables in the master
trust allocated to the collateral certificate;
. minus the amount of reallocations of principal collections on the
collateral certificate that are applied to pay interest on the notes;
. plus the amount of Excess Finance Charge Collections that are allocated
to the collateral certificate to reimburse earlier charge-offs of
principal receivables and to reimburse reductions of the Invested
Amount from reallocations of principal collections to pay interest on
senior classes of notes; and
. minus the aggregate amount on deposit in the principal funding account
for the outstanding notes.
The Invested Amount of the collateral certificate will be increased by:
. the initial outstanding dollar principal amount of new issuances of
notes;
. accretions of principal on discount notes; and
. reimbursement of earlier reductions from Excess Finance Charge
Collections.
The Invested Amount of the collateral certificate will be decreased by:
. payments of principal collections to the issuer, including both
principal collections that are allocated to pay principal of the notes
and those reallocated to pay interest on the notes; and
. charge-offs of principal receivables in the master trust that are
allocated to the collateral certificate.
The Invested Amount of the collateral certificate will always be equal to
the sum of the nominal liquidation amounts for all series and classes of notes.
"Monthly Interest Date" means with respect to any class or subclass of
notes:
. for any month in which a scheduled interest payment date occurs, the
corresponding interest payment date, and
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. for any month in which no scheduled interest payment date occurs, the
date in that month corresponding numerically to the next scheduled
interest payment date for that class or subclass of notes, or in the
case of a class of zero-coupon discount notes, the expected principal
payment date for that class, unless otherwise specified in the
applicable prospectus supplement; but
-- if there is no numerically corresponding day in that month, then
the Monthly Interest Date will be the last business day of the
month, and
-- if the numerically corresponding day is not a business day with
respect to that class or subclass, the Monthly Interest Date will
be the next following business day, unless that business day would
fall in the following month, in which case the Monthly Interest
Date will be the last business day of the earlier month.
"Monthly Principal Date" means with respect to any class or subclass of
notes:
. for the month in which the expected principal payment date occurs, the
expected principal payment date, or if that day is not a business day,
the next following business day, and
. for any month in which no expected principal payment date occurs, the
date in that month corresponding numerically to the expected principal
payment date for that class or subclass of notes, unless otherwise
specified in the applicable prospectus supplement; but
-- if there is no numerically corresponding day in that month, then
the Monthly Principal Date will be the last business day of the
month, and
-- if the numerically corresponding day is not a business day with
respect to that class or subclass, the Monthly Principal Date will
be the next following business day, unless that business day would
fall in the following month, in which case the Monthly Principal
Date will be the last business day of the earlier month.
"Performing" means, with respect to any derivative agreement, that no
payment default or repudiation by the derivative counterparty has occurred, and
the derivative agreement has not been terminated.
"Portfolio Yield" of the master trust receivables means, for any month, the
annualized percentage equivalent of a fraction:
. the numerator of which is the amount of collections of finance charge
receivables during the immediately preceding month calculated on a cash
basis after subtracting the amount of principal receivables that were
charged off as uncollectible in that monthly period; and
. the denominator of which is the total amount of principal receivables
as of the last day of the immediately preceding month.
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"Required Surplus Finance Charge Amount" means, for any month, an amount
equal to one twelfth of
. the Invested Amount of the collateral certificate as of the last day of
the preceding month, times
. a decimal number, which will initially equal zero, but may be changed
by the issuer so long as the issuer reasonably believes that the change
will not
-- adversely affect the amount of funds available for distribution to
noteholders or the timing of the distribution of those funds,
-- result in an early redemption event or event of default or
-- adversely affect the security interest of the indenture trustee in
the collateral securing the outstanding notes.
"Surplus Finance Charge Collections" means, for any month, the amount of
finance charge collections allocated to the collateral certificate by the
master trust for that month, minus:
. the master trust servicer's fees and expenses for that month;
. the indenture trustee's fees and expenses for that month;
. the aggregate amount of targeted deposits to be made to the interest
funding account that month; and
. the amount of charge-offs of principal receivables in the master trust
allocated to the collateral certificate by the master trust for that
month.
One subclass of the issuer's notes--not offered by this prospectus--may not
have a targeted deposit to its interest funding subaccount every month. For
that subclass of notes, the weighted average interest rate of notes, rather
than the targeted deposit, will be used to calculate Surplus Finance Charge
Collections.
Solely for purposes of calculating Surplus Finance Charge Collections for
funding the Class C reserve account, the targeted deposit to be made to the
interest funding account for a class of notes that has the benefit of a
Performing derivative agreement will be deemed to be the greater of the amount
payable by the issuer under that derivative agreement or the amount that would
be payable by the issuer if the derivative agreement were non-Performing.
"Threshold Conditions" means:
. A rating of "AAA" for long-term Class A notes or at least "A-1+/P-1"
for commercial paper Class A notes, at least "A" for Class B notes, and
at least "BBB" for Class C notes, at the time of original issuance of
the note.
. The note to be issued does not have a yield (based on its initial yield
in the case of a floating rate note) in excess of the yield of United
States Treasury obligations for a comparable maturity plus 500 basis
points.
. The initial dollar principal amount of the class of notes to be issued
is less than $500 million for Class A notes, $250 million for Class B
notes, or $250 million for Class C notes.
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. The expected principal payment date of the note to be issued is no more
than ten years after the issuance date for Class B and Class C notes,
or twelve years after the issuance date for Class A notes.
. The note to be issued has a single expected principal payment date on
which all principal of that note is expected to be paid.
. The legal maturity date of the note to be issued is no more than two
years after its expected principal payment date.
. Unless the expected principal payment date of the note to be issued is
within one year of the issuance date, all interest on the note will be
payable on a current basis at least annually.
. If interest on the note to be issued is not at a single fixed rate, it
is a floating rate, reset at least annually, equal to (i) 100% of a
single market-based interest index such as LIBOR, the federal funds
rate, or the prime rate, (ii) plus or minus a single fixed spread, if
desired, and (iii) subject to a single fixed cap and/or single fixed
floor, if desired. Interest for the first period may be set at a rate
approximating the rate that would be set by the formula.
. No principal or interest payments on the note to be issued are subject
to any contingencies, other than in the case of payment of principal,
availability of funds and subordination.
. The issue price of the note to be issued is at least 90% of the
principal amount, and no more than 102% of the principal amount.
. The note to be issued is in registered--not bearer--form.
. In the case of a note which has the benefit of a derivative agreement,
provisions for payments after a derivative agreement default are as
described in this prospectus, and are not varied by a supplement to
this prospectus.
. At time of the issuance of the note, as to then-outstanding notes or
master trust investor certificates, (i) there are no outstanding rating
downgrades of notes or master trust investor certificates, and no notes
or master trust investor certificates are on credit watch with negative
implications by a rating agency that rates the outstanding notes or
master trust investor certificates, (ii) no series or class of notes or
master trust investor certificates is in early amortization or early
redemption or default, or will become so solely by the passage of time,
(iii) no unreimbursed draws have been made on any reserve account or
cash collateral account for any note or master trust investor
certificate, and (iv) the issuer and the master trust are not in
default in payments owed to any third party enhancer or derivative
counterparty. However, clauses (i), (ii), or (iii) will not apply if
(a) the event described therein is due solely to the credit of a third
party enhancer or derivative counterparty and/or the failure of that
enhancer or counterparty to make payments owed by it to the issuer or
the master trust, and (b) that derivative counterparty or third-party
enhancer does not provide a derivative agreement or third-party
enhancement with respect to the new issuance of notes.
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. The note to be issued has no material terms not described in this
prospectus, and its subordination features, acceleration provisions and
remedies are as described in this prospectus, with no variation by a
supplement to this prospectus.
. The note meets any other conditions that may be added from time to time
by a rating agency then rating the notes.
Any of the foregoing conditions may be eliminated or relaxed with the consent
of the rating agencies then rating the notes.
118
ANNEX I
This annex forms an integral part of the prospectus.
THE CREDIT CARD BUSINESS OF CITIBANK (SOUTH DAKOTA)
General
Citibank (South Dakota) is the master trust servicer as well as the owner
of all of the credit card accounts designated to the master trust. Citibank
(South Dakota) services credit card accounts at its facilities in Sioux Falls,
South Dakota, and through affiliated credit card processors pursuant to
interaffiliate service contracts.
Citibank (South Dakota) is a member of MasterCard International and VISA.
MasterCard and VISA credit cards are issued as part of the worldwide MasterCard
International and VISA systems, and transactions creating the receivables
through the use of those credit cards are processed through the MasterCard
International and VISA authorization and settlement systems. If either system
were to materially curtail its activities, or if Citibank (South Dakota) were
to cease being a member of MasterCard International or VISA, for any reason, an
early amortization event with respect to the Collateral Certificate could
occur, and delays in payments on the receivables and possible reductions in the
amounts of receivables could also occur.
The MasterCard and VISA credit card accounts owned by Citibank (South
Dakota) were principally generated through:
. applications mailed directly to prospective cardholders;
. applications made available to prospective cardholders at the banking
facilities of Citibank (South Dakota), at other financial institutions
and at retail outlets;
. applications generated by advertising on television, on radio and in
magazines;
. direct mail and telemarketing solicitation for accounts on a
pre-approved credit basis;
. solicitation of cardholders of existing nonpremium accounts for premium
accounts;
. applications through affinity and co-brand marketing programs; and
. purchases of accounts from other credit card issuers.
On February 26, 1999 the Banks and some of their affiliates entered into an
agreement with MasterCard International. As a result of this agreement, the
portfolio of credit card accounts owned by Citibank (South Dakota) is expected
to have a larger proportion of MasterCard accounts in the future. This shift
could be accompanied by some attrition of accounts. Based on current analyses,
the Banks do not expect their performance of this agreement or any related
attrition of accounts to have a material adverse effect on investors in the
master trust or the notes.
Acquisition and Use of Credit Cards
Each application for a new credit card account is reviewed for completeness
and creditworthiness. A credit report is generally obtained from an independent
credit reporting
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agency for each application for a new account. In the event there are
discrepancies between the application and the credit report steps are taken to
verify the information on the applicant before any account is opened.
The ability of an applicant for a credit card account to repay credit card
balances is determined by applying a credit scoring system using models
developed in-house and models developed with the assistance of an independent
firm with extensive experience in developing credit scoring models. Credit
scoring is intended to provide a general indication, based on the information
available, of the applicant's willingness and ability to repay his or her
obligations. Credit scoring evaluates a potential cardholder's credit profile
to arrive at an estimate of the associated credit risk. Models for credit
scoring are developed by using statistics to evaluate common characteristics
and their correlation with credit risk. The credit scoring model used to
evaluate a particular applicant is based on a variety of factors, including the
manner in which the application was made or the manner in which the account was
acquired as well as the type of residence of the applicant. From time to time
the credit scoring models used for credit card accounts are reviewed and, if
necessary, updated to reflect more current statistical information. Once an
application to open an account is approved an initial credit limit is
established for the account based on, among other things, the applicant's
credit score and the source from which the account was acquired.
New credit card accounts are generated through direct mail and
telemarketing solicitation campaigns directed at individuals who have been
pre-approved. In addition, new credit card accounts are obtained via
applications submitted over the internet. Potential cardholders for
pre-approved direct mail or telemarketing solicitation campaigns are identified
by supplying a list of credit criteria to a credit bureau which generates a
list of individuals who meet those criteria and forwards the list to a
processing vendor. The processing vendor screens the list in accordance with
the selected credit criteria to determine the eligibility of the individuals on
the list for a pre-approved solicitation. Individuals qualifying for
pre-approved direct mail or telemarketing solicitation are offered a credit
card without having to complete a detailed application. In the case of
pre-approved solicitations, a predetermined credit limit is reserved for each
member of the group being solicited, which credit limit may be based upon,
among other things, each member's individual credit profile, level of existing
and potential indebtedness relative to assumed income and estimated income and
the availability of additional demographic data for that member.
In recent years, Citibank (South Dakota) has added affinity and co-brand
marketing to its other means of business development. Affinity marketing
involves the solicitation of prospective cardholders from identifiable groups
with a common interest and/or common cause. Affinity marketing is conducted
through two approaches: the solicitation of organized membership groups with
the written endorsement of the group's leadership, and direct mail solicitation
of prospective cardholders through the use of a list purchased from a group.
Co-brand marketing is an outgrowth of affinity marketing. It involves the
solicitation of customers of a retailer, service provider or manufacturer which
has a recognizable brand name or logo. Consumers are likely to acquire and use
a co-branded card because of the benefits
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provided by the co-brander. The co-brander may play a major role in the
marketing and solicitation of co-branded cards. Solicitation activities used in
connection with affinity and co-brand marketing also include solicitations in
appropriate magazines, telemarketing and applications made available to
prospective cardholders in appropriate locations. In some cases, pre-approved
solicitations will be used in the same manner as described in the second
preceding paragraph.
Citibank (South Dakota) purchases credit card accounts that were originally
opened using criteria established by the institution from which the accounts
were purchased or by the institution from which the selling institution
originally purchased the accounts. Purchased accounts are screened against
criteria established at the time of acquisition to determine whether any of the
purchased accounts should be closed immediately. Any accounts failing the
criteria are closed and no further purchases or cash advances are authorized.
All other purchased accounts remain open. The credit limits on these accounts
are based initially on the limits established or maintained by the selling
institution.
Each cardholder is party to an agreement governing the terms and conditions
of the account. Each agreement provides that the credit card issuing bank may
change or terminate any terms, conditions, services or features of the
accounts, including increasing or decreasing periodic finance charges, other
charges or minimum payments. Credit limits may be adjusted periodically based
upon an evaluation of the cardholder's performance.
Collection of Delinquent Accounts
Generally, Citibank (South Dakota), as servicer, considers a MasterCard or
VISA credit card account delinquent if it does not receive the minimum payment
due by the due date indicated on the cardholder's statement. Personnel of
Citibank (South Dakota) and affiliated credit card processors pursuant to
interaffiliate service contracts, supplemented by collection agencies and
retained outside counsel, attempt to collect delinquent credit card
receivables. A request for payment of overdue amounts is included on all
billing statements issued after the account becomes delinquent, unless the
delinquency is due to bankruptcy.
While collection personnel may initiate telephone contact with cardholders
whose credit card accounts are as few as five days delinquent, based on credit
scoring criteria, generally contact is initiated when an account is 35 days or
more delinquent. In the event that initial telephone contact fails to resolve
the delinquency, efforts are made to contact the cardholder by telephone and by
mail. Generally, if an account is 15 days delinquent or if a cardholder exceeds
that cardholder's credit limit by more than 5%, no additional extensions of
credit through that account are authorized and, no more than 95 days after an
account becomes delinquent, the account is closed. Depending on the
cardholder's circumstances, arrangements may be made to extend or otherwise
change payment schedules. The current policy of the servicer is to charge-off
the receivables in an account when that account becomes 185 days delinquent or,
if the servicer receives notice that a cardholder has filed for bankruptcy or
has had a bankruptcy petition filed against it, the servicer will charge-off
the receivables in that account not later than 60 days after the servicer
receives notice.
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The credit evaluation, servicing and charge-off policies and collection
practices of Citibank (South Dakota) and its affiliated credit card processors
may change over time in accordance with their business judgment, applicable law
and guidelines established by applicable regulatory authorities.
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Citibank Credit Card Issuance Trust
$1,000,000,000 Floating Rate Class 2002-A2 Notes of February 2005
(Legal Maturity Date February 2007)
Citibank (South Dakota), National Association
Citibank (Nevada), National Association
Originators of the Trust
Prospectus Supplement
Dated February 12, 2002
Underwriters
Salomon Smith Barney
Lehman Brothers
Merrill Lynch & Co.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. No one
has been authorized to provide you with different information.
The notes are not being offered in any state where the offer is not
permitted.
The issuer does not claim the accuracy of the information in this
prospectus supplement and the accompanying prospectus as of any date other than
the dates stated on their respective covers.
Until the date which is 90 days after the date of this prospectus
supplement, all dealers effecting transactions in the notes, whether or not
participating in this distribution, may be required to deliver a prospectus
supplement and prospectus. This is in addition to the obligation of dealers to
deliver a prospectus supplement and prospectus when acting as underwriter of
the notes and with respect to their unsold allotments or subscriptions.