Filed Pursuant to Rule 424(b)(4)
Registration No.: 333-111343
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$750,000,000
GRACECHURCH CARD FUNDING (NO. 6) PLC
Issuer
BARCLAYS BANK PLC
Transferor, Servicer and Trust Cash Manager
$675,000,000 Class A Floating Rate Asset-Backed Notes
$37,500,000 Class B Floating Rate Asset-Backed Notes
$37,500,000 Class C Floating Rate Asset-Backed Notes
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Price To Public Underwriting Proceeds To
Class Interest Rate Per Note Discount Per Note Issuer Per Note
One-month USD
A LIBOR plus 0.03% 100% 0.175% $998.25
annually
One-month USD
B LIBOR plus 0.19% 100% 0.2% $998.00
annually
One-month USD
C LIBOR plus 0.45% 100% 0.3% $997.00
annually
* The ultimate source of payment on the notes will be collections on
consumer credit and charge card accounts owned by Barclaycard and opened
in the United Kingdom.
* The transaction documents will be governed by the laws of England and
Wales.
* A separate currency swap for each class of the notes will be used to
convert the sterling amounts received from the series 04-1 medium term
note certificate into U.S. dollar amounts for payment on the notes.
PLEASE CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 16 IN THIS
PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying receivables
are insured or guaranteed by any United Kingdom or United States governmental
agency.
THE NOTES OFFERED IN THIS PROSPECTUS WILL BE OBLIGATIONS OF THE ISSUER ONLY.
THE ISSUER WILL ONLY HAVE A LIMITED POOL OF ASSETS TO SATISFY ITS OBLIGATIONS
ON THE NOTES. THE NOTES WILL NOT BE OBLIGATIONS OF BARCLAYS BANK PLC OR ANY OF
ITS AFFILIATES.
The total price to the public is $750,000,000 the total amount of the
underwriting discount is $1,368,750, and the total amount of proceeds plus
accrued interest and before deduction of expenses is $748,631,250.
We have applied to the UK Listing Authority to have the notes for series 04-1
listed and to the London Stock Exchange plc to have the notes for series 04-1
admitted to trading.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITERS OF THE CLASS A NOTES
BARCLAYS CAPITAL
JPMORGAN LEHMAN BROTHERS
UNDERWRITER OF THE CLASS B NOTES AND CLASS C NOTES
BARCLAYS CAPITAL
4 March 2004
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
We include cross-references to captions in this prospectus where you can find
further related discussions. The following table of contents provides the pages
on which these captions are located.
TABLE OF CONTENTS
Prospectus Summary........................................................... 6
Series Structure............................................................ 6
Program Structural Summary.................................................. 7
Structural Diagram of Barclays Bank PLC Securitisation Program.............. 8
The Issuer.................................................................. 9
The Note Trustee, Principal Paying Agent and Agent Bank..................... 9
The Notes................................................................... 9
Previous Series............................................................. 10
The Closing Date............................................................ 11
The MTN Issuer and Initial Investor Beneficiary............................. 11
The Medium Term Note Certificate............................................ 11
The Security Trustee........................................................ 12
The Receivables............................................................. 12
The Initial Transferor, Servicer, Trust Cash Manager and Excess Interest
Beneficiary................................................................. 12
The Receivables Trustee..................................................... 12
The Receivables Trust....................................................... 13
The Investor Certificate.................................................... 13
The Swap Counterparty....................................................... 13
Swap Agreements............................................................. 13
Optional Early Redemption................................................... 14
Notices..................................................................... 14
United Kingdom Tax Status................................................... 14
United States Federal Income Tax Status..................................... 14
ERISA Considerations for Investors.......................................... 15
Ratings of the Notes........................................................ 15
Application for Admission to the Official List and Admission to Trading..... 15
Risk Factors................................................................. 16
Introduction................................................................. 30
U.S. Dollar Presentation..................................................... 30
Dollar/Sterling Exchange Rate History....................................... 30
The Issuer................................................................... 31
Directors and Secretary..................................................... 31
Capitalisation and Indebtedness............................................. 32
Management's Discussion and Analysis of Financial Conditions and Results of
Operation................................................................... 32
Use Of Proceeds............................................................. 32
Expenses Loan Agreement..................................................... 33
The MTN Issuer............................................................... 34
Capitalisation and Indebtedness............................................. 34
Critical Accounting Policies................................................ 35
Management's Discussion and Analysis of Financial Conditions and Results of
Operations.................................................................. 36
Recent Accounting Developments.............................................. 38
Directors and Secretary..................................................... 40
The Receivables Trustee...................................................... 42
Directors and Secretary..................................................... 42
Management and Activities................................................... 42
Litigation.................................................................. 43
Barclays Bank PLC............................................................ 44
Business.................................................................... 44
Credit Card Usage in the United Kingdom...................................... 45
Barclaycard and the Barclaycard Card Portfolio............................... 45
General..................................................................... 45
2
Description of Experian, part of the Great Universal Stores Group........... 46
Acquisition and Use of Credit Card Accounts................................. 46
Description of Processing................................................... 46
Billing and Payment......................................................... 47
Delinquency and Loss Experience............................................. 47
Delinquency Experience-Securitised Portfolio................................ 49
Loss Experience Securitised Portfolio....................................... 50
The Receivables.............................................................. 51
Assignment of Receivables to the Receivables Trustee........................ 51
Redesignation and Removal of Accounts....................................... 53
Discount Option Receivables................................................. 54
Special Fees and Annual Fees................................................ 54
Interchange................................................................. 55
Reductions in Receivables, Early Collections and Credit Adjustments......... 55
Representations............................................................. 55
Amendments to Card Agreement and Card Guidelines............................ 57
Summary of Securitised Portfolio............................................ 58
Composition by Account Balance -- Securitised Portfolio..................... 59
Composition by Credit Limit -- Securitised Portfolio........................ 59
Composition by Account Age -- Securitised Portfolio......................... 60
Geographic Distribution of Accounts -- Securitised Portfolio................ 60
Maturity Assumptions......................................................... 61
Cardholder Monthly Payment Rates -- Securitised Portfolio................... 61
Receivables Yield Considerations............................................. 62
Yield Experience -- Securitised Portfolio................................... 63
The Receivables Trust........................................................ 64
General Legal Structure..................................................... 64
The Receivables Trust's Property............................................ 66
General Entitlement of Beneficiaries to Trust Property...................... 66
Allocation and Application of Collections................................... 67
Acquiring Additional Entitlements to Trust Property and Payments for
Receivables................................................................. 69
Non-Petition Undertaking of Beneficiaries................................... 70
Trust Pay Out Events........................................................ 70
Termination of the Receivables Trust........................................ 71
Amendments to the Declaration of Trust and Trust Cash Management Agreement.. 72
Disposals................................................................... 72
Trustee Payment Amount...................................................... 73
Servicing of Receivables and Trust Cash Management........................... 74
General -- Servicing........................................................ 74
General -- Trust Cash Management............................................ 75
Servicing and Trust Cash Manager Compensation............................... 76
Termination of Appointment of Servicer...................................... 76
Termination of Appointment of Trust Cash Manager............................ 78
Series 04-1.................................................................. 81
General..................................................................... 81
Beneficial Entitlement of the MTN Issuer to Trust Property other than in
respect of the
Excess Interest............................................................ 81
Allocation, Calculation and Distribution of Finance Charge Collections to
the MTN Issuer............................................................. 83
Class A Investor Interest................................................... 84
Class B Investor Interest................................................... 86
Class C Investor Interest................................................... 87
Revolving Period............................................................ 88
Controlled Accumulation Period.............................................. 89
Regulated Amortisation Period............................................... 89
Rapid Amortisation Period................................................... 90
Allocation, Calculation and Distribution of Principal Collections to the MTN
Issuer..................................................................... 90
Postponement of Controlled Accumulation Period.............................. 94
Unavailable Principal Collections........................................... 95
Shared Principal Collections................................................ 95
Defaulted Receivables; Investor Charge-Offs................................. 96
3
Excess Spread............................................................... 98
Extra Amount................................................................ 99
Aggregate Investor Indemnity Amount......................................... 99
Principal Funding Account................................................... 99
Reserve Account............................................................. 100
Spread Account.............................................................. 101
Distribution Ledgers........................................................ 103
Trustee Payment Amount...................................................... 103
Qualified Institutions...................................................... 103
Series 04-1 Pay Out Events.................................................. 103
Entitlement of MTN Issuer to Series 04-1 Excess Interest.................... 106
Your Payment Flows.......................................................... 106
The Trust Deed............................................................... 111
The Notes.................................................................... 113
Terms and Conditions of The Notes............................................ 118
The Swap Agreements.......................................................... 131
General..................................................................... 131
Common Provisions of the Swap Agreements.................................... 132
The Medium Term Note Certificate............................................. 135
Material Legal Issues........................................................ 138
Material Legal Aspects of The Receivables.................................... 139
Consumer Credit Act 1974.................................................... 139
Transfer of Benefit of Receivables.......................................... 140
United Kingdom Taxation Treatment of The Notes............................... 141
Overview.................................................................... 141
Taxation of US Residents.................................................... 141
Taxation of Interest Paid................................................... 141
Provision of Information.................................................... 142
Proposed European Union Savings Directive................................... 142
Other Rules Relating to United Kingdom Withholding Tax...................... 142
Ownership and Disposal, Including Redemption, of the Notes by United Kingdom
Tax Payers.................................................................. 143
United Kingdom Inheritance Tax.............................................. 143
Taxation of the MTN Issuer and the Issuer................................... 143
Taxation of Receivables Trustee............................................. 144
Material United States Federal Income Tax Consequences....................... 145
Overview.................................................................... 145
Tax Status of the Receivables Trust, the MTN Issuer and the Issuer.......... 145
United States Holders....................................................... 146
Non-United States Holders................................................... 149
Backup Withholding and Information Reporting................................ 149
Certain ERISA and other Considerations....................................... 151
Enforcement of Foreign Judgements in England and Wales....................... 153
Underwriting................................................................. 154
United Kingdom.............................................................. 155
General..................................................................... 155
Ratings Of The Notes......................................................... 157
Experts...................................................................... 157
Legal Matters................................................................ 158
Reports To Noteholders....................................................... 158
Where You Can Find More Information.......................................... 158
Listing And General Information.............................................. 158
CUSIPS and ISINS............................................................ 158
Significant or Material Change.............................................. 159
Documents Available for Inspection.......................................... 159
Index Of Terms For Prospectus................................................ 162
Index Of Appendices.......................................................... 166
4
Appendix A -- Report Of Independent Accountants for Gracechurch Card Funding
Appendix A -- (No. 6) PLC................................................... A-1
Appendix B -- Balance Sheet of Gracechurch Card Funding (No. 6) PLC......... B-1
Appendix C -- Notes to Financial Statement.................................. C-1
Appendix D -- Report of Independent Accounts for Barclaycard Funding PLC and
Appendix D -- subsidiary.................................................... D-1
Appendix E -- Unaudited Financial Statements of Barclaycard Funding PLC and
subsidiary
for the six months ended 30 June 2003......................... E-1
Appendix F -- Notes to Financial Statements for the six months ended 30 June
2003.......................................................... F-1
Appendix G -- Report of Independent Accountants for Barclaycard Funding and
subsidiary.................................................... G-1
Appendix H -- Financial Statements of Barclaycard Funding PLC and
Appendix E -- subsidiary for the years ended 14 December 2002, 2001 and 2000 H-1
Appendix I -- Notes to Financial Statements for the years ended 14 December
2002,
2001 and 2000................................................. I-1
Appendix J -- Other Series Issued and Outstanding........................... J-1
5
PROSPECTUS SUMMARY
The following is a brief overview of the key aspects of the class A notes, the
class B notes and the class C notes, which we refer to as the notes. You need
to read all of this prospectus to fully understand the terms of the notes.
SERIES STRUCTURE
Initial Principal
Class of Notes Balance % of Total
Class A $ 675,000,000 90%
Class B $ 37,500,000 5%
Class C $ 37,500,000 5%
----------------- ----------
Total $ 750,000,000 100%
================= ==========
Class A Notes Class B Notes Class C Notes
Anticipated Ratings: "Aaa" from Moody's and "A1" from Moody's and "Baa1" from Moody's and
"AAA" from Standard & "A" from Standard & "BBB" from Standard &
Poor's. Poor's. Poor's.
Credit Enhancement: Subordination of the class Subordination of the class Spread Account.
B notes and class C notes. C notes.
Interest Rate: One-month USD LIBOR, One-month USD LIBOR, One-month USD LIBOR,
plus 0.03 per cent. plus 0.19 per cent. plus 0.45 per cent.
annually, except for the annually, except for the annually, except for the
first interest period, first interest period, first interest period,
where LIBOR will be where LIBOR will be where LIBOR will be
based on the linear based on the linear based on the linear
interpolation of two-month interpolation of two-month interpolation of two-month
and three-month and three-month and three-month
USD LIBOR. USD LIBOR. USD LIBOR.
Interest Accrual Method: Actual/360. Actual/360. Actual/360.
Interest Payment Dates: The 15th day of each The 15th day of each The 15th day of each
calendar month. calendar month. calendar month.
First Interest Payment Date: 17 May 2004 interest 17 May 2004 interest 17 May 2004 interest
payment date. payment date. payment date.
Scheduled Redemption Date: 15 February 2007 interest 15 February 2007 interest 15 February 2007 interest
payment date. payment date. payment date.
Legal Final Redemption Date: 17 February 2009 interest 17 February 2009 interest 17 February 2009 interest
payment date. payment date. payment date.
Clearance/Settlement: DTC/Euroclear/ DTC/Euroclear/ DTC/Euroclear/
Clearstream, Clearstream, Clearstream,
Luxembourg. Luxembourg. Luxembourg.
Minimum Denomination: $1,000. $1,000. $1,000.
Tax Treatment: Debt for United States Debt for United States Debt for United States
federal income tax federal income tax federal income tax
purposes, subject to the purposes, subject to the purposes, subject to the
important considerations important considerations important considerations
contained in "Material contained in "Material contained in "Material
United States Federal United States Federal United States Federal
Income Tax Income Tax Income Tax
Consequences". Consequences". Consequences".
ERISA Eligible: Yes, subject to the Yes, subject to the Yes, subject to the
important considerations important considerations important considerations
in "Certain ERISA and in "Certain ERISA and in "Certain ERISA and
other Considerations". other Considerations". other Considerations".
6
PROGRAM STRUCTURAL SUMMARY
The following is a brief summary description of the Barclaycard securitisation
program, of which your notes will form a part.
Barclaycard, a division of Barclays Bank PLC, and called "Barclays", has
previously assigned all of its present and future beneficial interest in
receivables in designated revolving credit and charge card accounts owned by
Barclaycard and opened in the United Kingdom. Only the receivables were
assigned. The accounts were retained by Barclaycard.
The receivables were assigned to a special purpose company, incorporated in
Jersey, Channel Islands, acting as receivables trustee. The receivables trustee
holds the receivables on trust for Barclaycard, as transferor beneficiary and
excess interest beneficiary, and a special purpose subsidiary of Barclays
called the "MTN Issuer", as investor beneficiary. Barclaycard will separately
transfer its entitlement to receive excess interest attributable to series 04-1
to the MTN Issuer.
The receivables trustee may issue multiple series of investor certificates to
the MTN Issuer. Each series of investor certificates will represent an
undivided beneficial interest in the receivables trust. They will entitle the
MTN Issuer to payments of interest and principal payable from collections on
the receivables.
The MTN Issuer will finance its acquisition of an undivided beneficial interest
in the receivables trust, evidenced by the issuance of each series of investor
certificates, by issuing series of limited recourse medium term notes or
certificates to individual issuers and credit enhancement providers, if any.
The limited recourse nature of the medium term notes or certificates will
ensure that the MTN Issuer is only ever liable under a series of medium term
notes or certificates for payments of principal and interest equal to what is
paid under the corresponding series of investor certificates.
The issuers, in turn, will finance their purchases of each series of medium
term notes or certificates by issuing series of notes to investors. Your series
of notes, series 04-1, will be the sixth series of notes issued under this
program.
7
STRUCTURAL DIAGRAM OF BARCLAYS BANK PLC SECURITISATION PROGRAM
[ LOGO structural_diagram ]
1 Barclays Bank PLC will transfer excess interest attributable to series 04-1
to the MTN Issuer pursant to an agreement between beneficiaries.
2 Series 99-1 was repaid in full on 15 November 2002.
8
THE ISSUER
Gracechurch Card Funding (No. 6) PLC is a public limited company incorporated
in England and Wales. Its registered office is at 54 Lombard Street, London
EC3P 3AH. Its telephone number is +44 (0)20 7699 5000.
The issuer is a newly created special purpose company. One share of the issuer
is held by a share trustee under the terms of a share declaration of trust. The
remaining issued shares of the issuer are held by Gracechurch Card (Holdings)
Limited. The shares of Gracechurch Card (Holdings) Limited are in turn held by
SFM Corporate Services Limited as trustee for a charitable trust. The purpose
of the issuer is to issue the notes which represent its asset-backed debt
obligations. The issuer will not engage in any unrelated activities.
This prospectus including the appendices comprises listing particulars given in
compliance with the listing rules made by the UK Listing Authority under Part
VI of the Financial Service and Markets Act 2000 for the purposes of giving
information about the issuer and the notes. The issuer accepts responsibility
for the information contained in this document. To the best of the knowledge
and belief of the issuer, which has taken all reasonable care to ensure that
such is the case, the information contained in this document is in accordance
with the facts and does not omit anything likely to affect the import of such
information. The issuer accepts responsibility accordingly.
THE NOTE TRUSTEE, PRINCIPAL PAYING AGENT AND AGENT BANK
The note trustee, principal paying agent and agent bank is The Bank of New
York, London Branch. The note trustee will act as trustee for the noteholders
under the trust deed. The principal paying agent will make payments on the
notes. The agent bank will calculate the interest rate on the notes. The Bank
of New York, London Branch's address is One Canada Square, London E14 5AL,
United Kingdom. Its telephone number is +44 (0)20 7570 1784.
THE NOTES
In this document, we are offering three classes of notes:
* class A floating rate asset-backed notes with an initial principal
balance of $675,000,000.
* class B floating rate asset-backed notes with an initial principal
balance of $37,500,000.
* class C floating rate asset-backed notes with an initial principal
balance of $37,500,000.
The notes represent asset-backed debt obligations of the issuer. The notes are
secured by payments received by the issuer from the series 04-1 medium term
note certificate and payments received from the swap counterparty. The issuer's
ability to make these payments will ultimately be dependent upon collections
Barclaycard receives on the receivables.
We will issue the notes under the trust deed. The notes will also be subject to
a paying agency and agent bank agreement. The security for the notes will be
created under a deed of charge and a pledge agreement between the issuer and
the note trustee. The terms of the notes will be contained in the trust deed,
the paying agency and agent bank agreement and the deed of charge.
The class B notes will be subordinated to the class A notes. The class C notes
will be subordinated to both the class A notes and the class B notes.
If there is an event of default under the notes, the note trustee, on your
behalf, can appoint a receiver of the issuer who would continue to collect
amounts paid by the MTN Issuer under the series 04-1 medium term note
certificate. The note trustee would also be able to sell the series 04-1 medium
term note certificate. In addition, pursuant to the trust deed, the note
trustee may give an enforcement notice to the issuer declaring the notes to be
immediately due and payable. A declaration that the notes have become
immediately due and payable will not, of itself, accelerate the timing or
amount of redemption of the notes.
In this prospectus, we will refer to the owners of interests in the class A
notes, the class B notes and the class C notes as the class A noteholders, the
class B noteholders and the class C noteholders, respectively, and together as
the noteholders.
9
PREVIOUS SERIES
Five previous series of notes have been issued by five previous note issuers,
Gracechurch Card Funding (No. 1) PLC, Gracechurch Card Funding (No. 2) PLC,
Gracechurch Card Funding (No. 3) PLC, Gracechurch Card Funding (No. 4) PLC and
Gracechurch Card Funding (No. 5) PLC respectively, in relation to the
receivables trust. The first series, called series 99-1, was issued on 23
November 1999 and repaid in November 2002. Series 99-1 is described in more
detail at Appendix G. The second series, called 02-1, was issued on 24 October
2002. The third series, called 03-1, was issued on 8 April 2003. The fourth
series, called 03-2, was issued on 13 June 2003. The fifth series, called 03-3,
was issued on 18 September 2003. Series 02-1, Series 03-1, Series 03-2 and
Series 03-3 are described in more detail at Appendix G.
The proceeds of the series 99-1 notes were used by Gracechurch Card Funding
(No. 1) PLC to purchase, respectively, corresponding series of medium term
notes issued in three classes, which we shall refer to as the "series 99-1
medium term notes", issued by the MTN Issuer. The series 99-1 medium term notes
issued by the MTN Issuer were called the class A medium term note, the class B
medium term note and the class C medium term note, respectively. The MTN Issuer
invested the proceeds from the issue of the series 99-1 medium term notes in
the receivables trust by paying the proceeds to the receivables trustee and
becoming an investor beneficiary with an aggregate investor interest in the
receivables trust. This aggregate investor interest entitles the MTN Issuer to
payments arising out of its entitlement to receivables in the receivables
trust.
The class A medium term note, the class B medium term note and the class C
medium term note were each secured in favour of a trustee for the benefit of
the secured creditors in relation to the class A notes, the class B notes and
the class C notes of series 99-1. The security for each class of notes issued
for series 99-1 was the class A medium term note, the class B medium term note
and the class C medium term note, respectively. Series 99-1 was finally repaid
in full on the interest payment date falling in November 2002.
The proceeds of the series 02-1 notes were used by Gracechurch Card Funding
(No. 2) PLC to purchase a corresponding series medium term note certificate,
which we shall refer to as the "series 02-1 medium term note certificate",
issued by the MTN Issuer. The MTN Issuer invested the proceeds from the issue
of the series 02-1 medium term note certificate in the receivables trust by
paying the proceeds to the receivables trustee and becoming an investor
beneficiary with an aggregate investor interest in the receivables trust. This
aggregate investor interest entitles the MTN Issuer to payments arising out of
its entitlement to receivables in the receivables trust.
The series 02-1 medium term note certificate, is secured in favour of a trustee
for the benefit of the secured creditors in relation to the class A notes, the
class B notes and the class C notes of series 02-1. The security for each class
of notes issued for series 02-1 is the series 02-1 medium term note
certificate. The security for the notes issued for series 02-1 will not be
cross-collateralised with the security for your notes.
The proceeds of the series 03-1 notes were used by Gracechurch Card Funding
(No. 3) PLC to purchase a corresponding series medium term note certificate,
which we shall refer to as the "series 03-1 medium term note certificate",
issued by the MTN Issuer. The MTN Issuer invested the proceeds from the issue
of the series 03-1 medium term note certificate in the receivables trust by
paying the proceeds to the receivables trustee and becoming an investor
beneficiary with an aggregate investor interest in the receivables trust. This
aggregate investor interest entitles the MTN Issuer to payments arising out of
its entitlement to receivables in the receivables trust.
The series 03-1 medium term note certificate, is secured in favour of a trustee
for the benefit of the secured creditors in relation to the class A notes, the
class B notes and the class C notes of series 03-1. The security for each class
of notes issued for series 03-1 is the series 03-1 medium term note
certificate. The security for the notes issued for series 03-1 will not be
cross-collateralised with the security for your notes.
The proceeds of the series 03-2 notes were used by Gracechurch Card Funding
(No. 4) PLC to purchase a corresponding series medium term note certificate,
which we shall refer to as the "series 03-2 medium term note certificate",
issued by the MTN Issuer. The MTN Issuer invested the proceeds from the issue
of the series 03-2 medium term note certificate in the receivables trust by
paying the proceeds to the receivables trustee and becoming an investor
beneficiary with an aggregate investor interest in the receivables trust. This
aggregate investor interest entitles the MTN Issuer to payments arising out of
its entitlement to receivables in the receivables trust.
10
The series 03-2 medium term note certificate, is charged in favour of a trustee
for the benefit of the noteholders in relation to the class A notes, the class
B notes and the class C notes of series 03-2. The security for each class of
notes issued for series 03-2 is the series 03-2 medium term note certificate.
The security for the notes issued for series 03-2 will not be cross-
collateralised with the security for your notes.
The proceeds of the series 03-3 notes were used by Gracechurch Card Funding
(No. 5) PLC to purchase a corresponding series medium term note certificate,
which we shall refer to as the "series 03-3 medium term note certificate",
issued by the MTN Issuer. The MTN Issuer invested the proceeds from the issue
of the series 03-3 medium term note certificate in the receivables trust by
paying the proceeds to the receivables trustee and becoming an investor
beneficiary with an aggregate investor interest in the receivables trust. This
aggregate investor interest entitles the MTN Issuer to payments arising out of
its entitlement to receivables in the receivables trust.
The series 03-3 medium term note certificate, is charged in favour of a trustee
for the benefit of the noteholders in relation to the class A notes, the class
B notes and the class C notes of series 03-3. The security for each class of
notes issued for series 03-3 is the series 03-3 medium term note certificate.
The security for the notes issued for series 03-3 will not be cross-
collateralised with the security for your notes.
THE CLOSING DATE
We will issue the notes on or about 11 March 2004.
THE MTN ISSUER AND INITIAL INVESTOR BENEFICIARY
The MTN Issuer is Barclaycard Funding PLC, a public limited company
incorporated in England and Wales. Its registered office is located at 54
Lombard Street, London EC3P 3AH. The MTN Issuer is a subsidiary of Barclays.
The MTN Issuer was established to issue series of secured limited recourse
medium term notes or certificates under a program.
THE MEDIUM TERM NOTE CERTIFICATE
On the closing date, the MTN Issuer will sell to the issuer one limited
recourse medium term note certificate issued as a series under its medium term
note or certificate program. This limited recourse medium term note
certificate, approximately in the amount of the sterling equivalent of
$750,000,000, using the fixed exchange rate in the swap agreements, will be
called the series 04-1 medium term note certificate. The series 04-1 medium
term note certificate is governed by English law and is subject to the English
courts in the event of proceedings relating to the Series 04-1 medium term note
certificate.
The issuer will make payments of interest and principal on the class A notes,
the class B notes and the class C notes from payments of interest and principal
made by the MTN Issuer on the series 04-1 medium term note certificate,
including MTN Issuer additional interest payments, and from amounts paid by the
swap counterparty. The issuer will also make payment of the deferred
subscription price in respect of the series 04-1 medium term note certificate
out of unutilised MTN Issuer additional interest payments received by it.
If an event of default occurs under the series 04-1 medium term note
certificate, the security trustee, on behalf of the issuer as holder of the
series 04-1 medium term note certificate, may appoint a receiver of the MTN
Issuer who would continue to collect amounts paid on the investor certificate.
The security trustee would also be able to sell the investor certificate. In
addition, pursuant to the Series 04-1 Supplement the security trustee may give
an enforcement notice to the MTN Issuer declaring the series 04-1 medium term
note certificate to be immediately due and payable. A declaration that the
series 04-1 medium term note certificate has become immediately due and payable
will not, of itself, accelerate the timing or amount of redemption of the
series
04-1 medium term note certificate.
THE SECURITY TRUSTEE
The security trustee is The Bank of New York, London Branch. The security
trustee will act as trustee for the holder of the series 04-1 medium term note
certificate under the security trust deed and MTN Issuer cash management
agreement.
11
THE RECEIVABLES
The receivables consist of amounts charged by cardholders to designated
MasterCard* and VISA* revolving credit and charge card accounts of Barclaycard
originated or acquired in the United Kingdom for the acquisition of
merchandise, services and cash advances. The receivables also include the
periodic finance charges and fees charged to the credit and charge card
accounts and interchange.
THE INITIAL TRANSFEROR, SERVICER, TRUST CASH MANAGER, MTN ISSUER CASH MANAGER
AND EXCESS INTEREST BENEFICIARY
Barclays Bank PLC originates or acquires the credit and charge card receivables
through its business unit, Barclaycard. Barclaycard's principal place of
business is located at 1234 Pavilion Drive, Northampton NN4 7SG, United
Kingdom. Barclaycard has previously transferred its present and future interest
in the credit and charge card receivables to the receivables trustee.
Barclaycard is the initial transferor of the receivables trust.
Barclaycard currently services the receivables in the receivables trust.
Barclaycard may not resign as servicer, but its appointment as servicer may be
terminated and a successor servicer may be appointed in its place if a servicer
default occurs. In the future additional transferors, if any, may act as co-
servicers.
Barclaycard was also appointed as the initial trust cash manager to manage the
bank accounts of the receivables trustee for each series of investor
certificates. Barclaycard may not resign as trust cash manager, but its
appointment as trust cash manager may be terminated and a successor trust cash
manager may be appointed in its place if a trust cash manager default occurs.
In the future additional transferors, if any, may act as co-trust managers.
Barclaycard will be the excess interest beneficiary of the receivables trust,
but will transfer its entitlement to the portion of the excess interest
attributable to series 04-1 to the MTN Issuer under an agreement between
beneficiaries.
Barclays Bank PLC has also been appointed as MTN Issuer cash manager pursuant
to the security trust deed and the MTN Issuer cash management agreement dated
23 November 1999. The MTN Issuer cash manager may not resign unless its
activities are no longer permissible under the applicable law. No such
resignation shall become effective until a successor MTN Issuer cash manager
shall have assumed the responsibilities and obligations of the MTN Issuer cash
manager.
Barclays Bank PLC is a bank incorporated in England and Wales and has a long
term unsecured debt rating of Aa1 by Moody's and AA by Standard and Poor's. Its
head office is located at 54 Lombard Street, London EC3P 3AH, United Kingdom.
It is regulated in the United Kingdom by the Financial Services Authority. Its
telephone number is +44 (0)20 7699 5000.
THE RECEIVABLES TRUSTEE
Gracechurch Receivables Trustee Limited, the receivables trustee, is a private
limited liability company incorporated under the laws of Jersey, Channel
Islands on 29 September 1999. Its registered office is located at 26 New
Street, St. Helier, Jersey JE2 3RA. The shares of the receivables trustee are
held by a professional trustee company -- not affiliated with Barclays -- as
trustee on trust for charitable purposes. This means that any profits received
by the receivables trustee, after all amounts have been paid on the investor
certificates and in meeting the costs and expenses of the receivables trustee,
will be available to be dividended to the trustee for distribution for
charitable purposes or to charities exclusively for charitable purposes
selected at the discretion of the receivables trustee. The payments on your
notes will not be affected by this arrangement. The receivables trustee acts as
trustee of the receivables trust.
* MasterCard and VISA are US federally registered servicemarks of MasterCard
International Inc. and VISA USA Inc. respectively and are registered
trademarks in the United Kingdom of MasterCard International Inc. and VISA
International Service Association.
12
THE RECEIVABLES TRUST
The receivables trust was established on 1 November 1999 under the terms of a
declaration of trust under which Barclays and the MTN Issuer each received an
undivided interest in the trust property equal to the proportion of their
contributions to the receivables trust. The declaration of trust was amended
and restated by a declaration of trust and trust cash management agreement on
23 November 1999. The declaration of trust and trust cash management agreement
has been and will be supplemented by series supplements for each series of
investor certificates issued by the receivables trust.
The receivables trustee has been established for the purpose of acquiring
credit and charge card receivables of Barclaycard and any additional
transferors and to hold those receivables and the collections from them on
trust for the beneficiaries under the terms of the receivables trust set out in
the declaration of trust and trust cash management agreement and to make
payments on the investor certificates. The receivables trustee may issue other
series of investor certificates, representing undivided beneficial interests in
the receivables trust, from time to time. The receivables trustee may not
engage in any unrelated activities.
THE INVESTOR CERTIFICATE
The MTN Issuer will pay the proceeds of the series 04-1 medium term note
certificate to the receivables trustee to acquire a separate, undivided
beneficial interest in the receivables trust. This undivided beneficial
interest will be the sixth series of the receivables trust, of which only five
are outstanding, and will be represented by the investor certificate. The
receivables trustee may issue other series of investor certificate(s) from time
to time.
The MTN Issuer will make payments of principal and interest on the series 04-1
medium term note certificate from payments made on the investor certificate.
The payments on the investor certificate will be made from payments of
principal and interest on the receivables.
The receivables trustee will be entitled to use the proceeds of the investor
certificate paid to it by the MTN Issuer -- together with monies paid to it by
the other beneficiaries of the receivables trust -- to accept an offer by the
transferor to assign to the receivables trustee the present and future
receivables generated by the designated credit and charge card accounts of the
transferor.
The investor certificate will entitle the MTN Issuer to receive payment of a
designated portion of collections of the credit and charge card receivables
assigned by the transferor to the receivables trustee. The MTN Issuer will use
those collections for the redemption of the series 04-1 medium term note
certificate.
If a pay out event occurs, the rapid amortisation period or the regulated
amortisation period may begin, which could cause an early redemption of your
notes. If Barclays as the transferor beneficiary or the excess interest
beneficiary were to become insolvent, the receivables trustee may be required
to liquidate the receivables. In addition, some breaches of representations
made by the transferor will require the transferor to repurchase the
receivables.
THE SWAP COUNTERPARTY
The swap counterparty for the notes will be Barclays Bank PLC acting through
Barclays Capital, its investment banking division in the United Kingdom. The
swap counterparty's address is 5 The North Colonnade, Canary Wharf, London E14
4BB, United Kingdom.
SWAP AGREEMENTS
Barclaycards' cardholders will make payments to Barclaycard in pounds sterling.
Accordingly, payments on the investor certificate and the series 04-1 medium
term note certificate will also be made in sterling. So that you can receive
payments on your notes in United States dollars, the issuer will enter into a
swap agreement with the swap counterparty.
Under the swap agreement for the notes, the issuer will pay to the swap
counterparty the sterling amounts received on the series 04-1 medium term note
certificate, less certain amounts representing the issuer's costs and expenses
and required earnings and less MTN Issuer additional interest payments not
required to pay amounts owing to the swap counterparty, and the swap
counterparty will convert those sterling amounts into dollars.
OPTIONAL EARLY REDEMPTION
The issuer has the option to redeem all of the remaining notes when their
principal balance is reduced to less than 10 per cent. of their original
principal balance.
13
If an optional early redemption occurs, you will receive a final distribution
equal to the entire unpaid principal balance of your notes plus any accrued and
unpaid interest.
NOTICES
Any notices that are required to be given by the term of your notes will be
deemed to be validly given if they are published in the Financial Times or
another leading English language daily newspaper in London.
UNITED KINGDOM TAX STATUS
Subject to important qualifications and conditions set out under "United
Kingdom Taxation Treatment of the Notes", including as to final documentation
and assumptions, Clifford Chance Limited Liability Partnership, as special UK
tax advisers, are of the opinion that:
* U.S. persons who have no connection with the United Kingdom will not be
subject to United Kingdom taxation in respect of payment of principal and
interest on the notes as described more fully in the section of this
prospectus headed "United Kingdom Taxation Treatment of the Notes";
* If and for so long as the notes are listed on the Official List of the UK
Listing Authority and admitted to trading on the London Stock Exchange no
UK withholding in respect of tax will be required in respect of payments
on the notes; if these conditions are not satisfied UK withholding tax at
the current rate of 20 per cent. may be required in respect of these
payments;
* If the notes do not continue to be so listed, an exemption from UK
withholding tax may be available where payments are made (inter alia) to
a company resident within the United Kingdom or, although not resident,
carrying on a trade in the United Kingdom and which company brings the
interest into account in computing its profits chargeable to corporation
tax. This is described in further detail in the section of this
prospectus "United Kingdom Taxation Treatment of the Notes";
* No UK stamp duty or stamp duty reserve tax is payable on the issue of the
global notes or on the issue or transfer of an individual note
certificate;
* The MTN Issuer and the issuer will be subject to UK corporation tax, at a
maximum rate of currently 30 per cent., on the profit reflected in their
respective profit and loss accounts as increased by the amounts of any
non-deductible expenses or losses. The profit in the profit and loss
account should not exceed 0.01 per cent. of the principal amount
outstanding on the medium term notes or certificates in the case of the
MTN Issuer, or on the notes in the case of the issuer. Examples of non-
deductible expenses and losses may include, for the MTN Issuer: (1)
amounts paid by the MTN Issuer to the receivables trustee to cover the
receivables trustee's fees and expenses, and (2) any losses of principal
which cannot be met out of excess spread; and for the issuer, certain
expenses relating to cash management; and
* The receivables trustee will have no UK tax liabilities and accordingly,
the receivables trustee will have no liability to UK tax in relation to
amounts which it receives on behalf of the MTN Issuer or amounts which it
is obliged to pay to the MTN Issuer.
Subject to finalisation of documents, including those which are exhibits to the
registration statement of which this prospectus forms a part, in a form
satisfactory to them and which is not inconsistent with the descriptions in
this prospectus, Clifford Chance Limited Liability Partnership, as special UK
tax advisers, expect to give an opinion at closing by reference to the final
documentation and based on certain assumptions listed in that opinion, which
will cover in detail the matters referred to under this heading "-- United
Kingdom Tax Status". See "Risk Factors: Taxable Nature of the MTN Issuer and
Issuer Could Cause a Loss on Your Notes".
UNITED STATES FEDERAL INCOME TAX STATUS
As is further described herein, Clifford Chance U.S. LLP, ("U.S. tax counsel")
is of the opinion that each of the receivables trust, the MTN Issuer and the
issuer will not be subject to U.S. federal income tax.
The issuer intends to treat the notes as debt for U.S. federal income tax
purposes. Each noteholder, by holding a beneficial interest in a note, will
agree to conform to that treatment. However, no ruling will be obtained from
the IRS on the characterisation of the notes for federal income tax purposes.
U.S. tax counsel is of the opinion that, although there is no governing
authority
14
addressing the classification of securities similar to the notes, under current
law, the notes will be treated as indebtedness for U.S. federal income tax
purposes. Unlike a tax ruling, an opinion of U.S. tax counsel is not binding on
the IRS, and no assurance can be given that the characterisation of the notes
as debt would prevail if the issue were challenged by the IRS. United States
holders (as described in "Material United States Federal Income Tax
Consequences") of notes that are treated as equity in the issuer, particularly
the class C notes, are likely to be treated as owning shares in a passive
foreign investment company.
If the notes were treated as equity in a passive foreign investment company, in
particular, the class C notes, all or a portion of both distributions and gains
on the notes generally would be taxable to the holder as ordinary income, and
would be taxable at the highest marginal rates applicable to current and prior
years during the holding period (and not as dividend taxable at the long-term
capital gain rates in the hands of non-corporate United States holders).
Further, all or a portion of the distributions could be subject to the
additional interest charge tax. This interest charge regime may be avoided by
an investor treated as owning equity in a passive foreign investment company if
that investor makes an effective qualified electing fund, or QEF, election;
however, as a technical matter, a QEF election generally may only be made if
the passive foreign investment company provides certain information to its
investors, and the issuer does not intend to do so. Alternatively, it may be
possible for an investor to avoid the interest charge regime applicable to
equity in a passive foreign investment company by making an election to account
for its investment using a mark-to-market method of tax accounting, under which
the investor would take into account accrued gains and losses on its investment
in the notes during the tax years to which they relate, treating all related
income and loss as ordinary income and loss. However, the applicability of the
mark-to-market election is dependent upon certain facts -- such as the
frequency of secondary market trading of the notes -- as to which there is
uncertainty and, accordingly, as to which no assurance is possible. Should
neither of the foregoing elections effectively be made, investors whose notes
were treated as equity would be subject to the tax rules applicable to
investors in passive foreign investment companies described above.
U.S. tax counsel has prepared and reviewed the summary of federal income tax
consequences in this prospectus and renders the U.S. federal income tax
opinions contained in this prospectus.
See "Material United States Federal Income Tax Consequences".
ERISA CONSIDERATIONS FOR INVESTORS
Subject to important considerations described under "Certain ERISA and other
Considerations" in this prospectus, the notes are eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts.
RATINGS OF THE NOTES
Each class of notes will be rated by Moody's Investors Services Limited and
Standard & Poor's Ratings Group. In this prospectus, we will refer to Moody's
Investors Services Limited as Moody's and Standard & Poor's Ratings Group as
Standard & Poor's, both of which we will refer to together as the rating
agencies.
On issue, the issuer expects the notes to be assigned the following ratings:
Class A Class B Class C
Moody's Aaa A1 Baa1
Standard & Poor's AAA A BBB
APPLICATION FOR ADMISSION TO THE OFFICIAL LIST AND ADMISSION TO TRADING
The issuer has applied to have the notes listed on the Official List of the UK
Listing Authority and admitted to trading on the London Stock Exchange. The
issuer expects the notes to be approved for listing on or about 12 March 2004.
15
RISK FACTORS
You should carefully consider the following risk factors before deciding to
invest in the notes offered by this prospectus.
YOU MAY NOT BE ABLE TO There currently is no secondary market for the notes.
SELL The underwriters expect, but are not obligated, to
YOUR NOTES make a market in the notes. If no secondary market
develops, you may not be able to sell your notes prior
to maturity. We cannot offer any assurance that one
will develop or, if one does develop, that it will
continue.
ALLOCATIONS OF We anticipate that the servicer will charge off or
CHARGED-OFF write off as uncollectable some of the receivables.
RECEIVABLES COULD Each class of investor interest in the receivables
REDUCE YOUR trust will be allocated a portion of those charged-off
PAYMENTS receivables. If the amount of charged-off receivables
allocated to the investor interest exceeds the amount
of funds available to cover those charge-offs, the
investor interest will be reduced. This could cause
the holders of the notes to not receive the full
amount of principal and interest due to them. Any loss
will be borne by the noteholders in the order of
subordination of the notes, with the class C notes
bearing the first losses, followed by the class B
notes and finally the class A notes. See "Series 04-1:
Defaulted Receivables; Investor Charge-Offs".
THE CLASS B NOTES AND The class B notes are subordinated in right of payment
THE CLASS of principal and interest to the class A notes.
C NOTES BEAR Principal payments to the class B noteholders will not
ADDITIONAL RISK be made until the class A noteholders are paid in
BECAUSE THEY ARE full. On each payment date interest is paid to the
SUBORDINATED class A noteholders before payments of interest are
made to the class B noteholders. This could cause the
class B noteholders not to receive the full amount of
principal or interest due to them.
The class C notes are subordinated in right of payment
of principal and interest to the class A notes and the
class B notes. Principal payments to the class C
noteholders will not be made until the class A
noteholders and the class B noteholders are paid in
full. On each payment date interest is paid to the
class A noteholders and the class B noteholders before
payments of interest are made to the class C
noteholders. This could cause the class C noteholders
not to receive the full amount of principal or
interest due to them.
INABILITY OF Some series 04-1 pay out events will cause the start
NOTEHOLDERS TO of the regulated amortisation period rather than the
RECEIVE THE FULL rapid amortisation period. During a regulated
PERCENTAGE amortisation period, not all of the principal
ALLOCATION OF collections allocated to the investor interest may be
PRINCIPAL COLLECTIONS used to make payments of principal to the MTN Issuer
DURING THE REGULATED as they would be during a rapid amortisation period.
AMORTISATION PERIOD Instead, principal payments to the MTN Issuer -- and
COULD DELAY thus ultimately on your notes -- will be limited to
PAYMENTS ON YOUR NOTES the controlled deposit amount. This could cause you to
OR receive payments of principal more slowly than you
CAUSE A LOSS ON YOUR would during a rapid amortisation period. Since some
NOTES of the series 04-1 pay out events that result in the
start of a regulated amortisation period are caused by
a deterioration in the performance of the receivables,
a delay in the principal payments on your notes could
expose you to an increased risk of losses on your
notes or a delay in payment on your notes.
GROUPING OF THE MTN Contractual provisions will be contained in the
ISSUER WITH BARCLAYS security trust deed and MTN Issuer cash management
FOR TAX PURPOSES agreement and the other agreements to which the MTN
COULD JEOPARDISE THE Issuer is a party by which the other parties to those
BANKRUPTCY REMOTE agreements agree not to take any actions against the
STATUS OF THE MTN MTN Issuer that might lead to its bankruptcy.
ISSUER CAUSING AN Furthermore, the MTN Issuer will be contractually
EARLY REDEMPTION OF restricted from undertaking any business other than in
YOUR NOTES OR A LOSS connection with the financings
ON YOUR NOTES
16
described in this prospectus. In particular, the MTN
Issuer will be expressly prohibited from incurring any
additional indebtedness, having any employees, owning
any premises and establishing or acquiring any
subsidiaries. Together, these provisions ensure that
the likelihood of the MTN Issuer becoming insolvent or
bankrupt is remote.
Notwithstanding the steps that have been and may be
taken to ensure that the insolvency of the MTN Issuer
will be remote, the MTN Issuer is included in the
Barclays Group registration for VAT purposes. As a
company included in that group registration, broadly,
it will be liable, on a joint and several basis with
all other companies in the VAT group registration, for
the VAT liability of the representative member of the
VAT group -- Barclays Bank PLC -- arising only during
the MTN Issuer's period of membership. Accordingly,
these secondary liabilities for VAT could increase the
likelihood of the MTN Issuer becoming insolvent. In
addition, there are provisions in the UK tax code that
are designed to enable the UK Inland Revenue to
collect corporation tax from one member of a group
where another member of the group has failed to
discharge certain taxes due and payable by it within a
specified time period.
If the MTN Issuer were required to pay any VAT due
from the representative member of the Barclays VAT
group or to become liable for corporation tax
liabilities of another member in the Barclays Group,
which the MTN Issuer was unable to meet, the UK HM
Customs & Excise or Inland Revenue could seek to put
the MTN Issuer into insolvency. This could cause an
early redemption of your notes or a loss on your
notes.
ISSUANCE OF ADDITIONAL The MTN Issuer has issued five previous series (of
SERIES MAY which four remain outstanding as series 99-1 was
ADVERSELY AFFECT YOUR repaid in November 2002) and may issue additional
RIGHTS BY series of medium term notes or certificates in
DILUTING YOUR VOTING connection with the issuance of other series of
POWER investor certificates. The holder of the medium term
notes or certificates of each series -- including the
issuer -- may require the MTN Issuer, as investor
beneficiary, to take action or direct actions to be
taken under the declaration of trust and trust cash
management agreement or a supplement. However, the
consent or approval of holders of a percentage of the
total principal balance of the medium term notes or
certificates of all series might be necessary to
require or direct those actions. These actions include
terminating the appointment of the servicer under the
beneficiaries servicing agreement or the trust cash
manager under the declaration of trust and trust cash
management agreement. Thus, the holder of any new
series of medium term notes or certificates will have
voting rights that will reduce the percentage interest
of the issuer as holder of the series 04-1 medium term
note certificate. Holders of medium term notes or
certificates of other series -- or persons with the
power to direct their actions -- may have interests
that do not coincide with the interests of the issuer
-- or the persons with the power to direct the issuer.
This may restrict your ability to ultimately direct
the MTN Issuer to take the actions referred to above.
INSOLVENCY OF THE None of the MTN Issuer, the receivables trustee or the
TRANSFEROR MAY issuer has undertaken or will undertake any
RESULT IN AN INABILITY investigations, searches or other actions to verify
TO the details of the receivables -- other than steps
REPURCHASE RECEIVABLES taken by the issuer to verify the details of the
receivables that are presented in this prospectus --
or to establish the creditworthiness of any cardholder
on the designated accounts. The MTN Issuer,
17
receivables trustee and the issuer will rely solely on
the representations given by the transferor to the
receivables trustee about the receivables, the
cardholders on the designated accounts, the designated
accounts and the effect of the assignment of the
receivables.
If any representation made by the transferor about the
receivables proves to have been incorrect when made,
the transferor will be required to repurchase the
affected receivables from the receivables trustee. If
the transferor becomes bankrupt or insolvent, the
receivables trustee may be unable to compel the
transferor to repurchase receivables, and you could
incur a loss on your notes or an early redemption of
your notes.
INSOLVENCY OF THE The ability of each of the issuer, the MTN Issuer and
ISSUER, THE MTN the receivables trustee to meet its obligations under
ISSUER OR THE the notes, the series 04-1 medium term note
RECEIVABLES TRUSTEE certificate and the receivables securitisation
COULD CAUSE AN EARLY agreement and the declaration of trust and trust cash
REDEMPTION management agreement will depend upon their continued
OF YOUR NOTES OR A solvency.
LOSS ON YOUR
NOTES
A company that has assets in the United Kingdom will
be insolvent if its liabilities exceed its assets or
if it is unable to pay its debts as they fall due.
Each of the issuer, the MTN Issuer and the receivables
trustee have been structured so that the likelihood of
their becoming insolvent is remote. Each of these
entities will be contractually restricted from
undertaking any business other than in connection with
the financings described in this prospectus. They each
will be expressly prohibited from incurring any
additional indebtedness, having any employees, owning
any premises and establishing or acquiring any
subsidiaries. Contractual provisions will be contained
in each of the agreements other than your notes, to
which each of these entities is a party which will
prohibit the other parties to those agreements from
taking any actions against these entities that might
lead to their insolvency. Together, these provisions
help ensure that the likelihood of any of these
entities becoming insolvent or bankrupt is remote.
Notwithstanding these actions, it is still possible
that the issuer, the MTN Issuer or the receivables
trustee could become insolvent. If this were to occur,
you could suffer a loss on your notes or an early
redemption of your notes.
APPLICATION OF THE There is an increasing volume of legislation devoted
CONSUMER to dealing with consumer credit in the United Kingdom.
CREDIT ACT 1974 MAY Of particular importance are the Consumer Credit Act
IMPEDE 1974 (the "CONSUMER CREDIT ACT") and the related
COLLECTION EFFORTS AND Unfair Terms in Consumer Contracts Regulations 1999
COULD and Consumer Credit (Cancellation Notices and Copies
CAUSE EARLY REDEMPTION of Documents) Regulations 1983 (together, the
OF YOUR "REGULATIONS")). The Consumer Credit Act and
NOTES OR A LOSS ON Regulations are administered by, amongst others, the
YOUR NOTES Office of Fair Trading (the "OFT"). The Consumer
Credit Act and Regulations apply, in whole or in part,
to the transactions occurring on the designated
accounts and to the credit or charge card agreements.
The effect of the application of the Consumer Credit
Act and the Regulations on the relevant underlying
charge card agreements may result in adverse
consequences for your investment in the notes, because
of the possible unenforceability of, or possible
liabilities for misrepresentation or breach of
contract in relation to, an underlying credit or
charge card agreement.
18
If a credit or charge card agreement has not been
executed or modified in accordance with the Consumer
Credit Act, it may be unenforceable against a
cardholder without a court order -- and in some
instances may be completely unenforceable. As is
common with many other UK credit card issuers, some of
Barclaycard's credit and charge card agreements do not
comply in all respects with the Consumer Credit Act,
the Regulations or other related legislation. In
addition, Barclaycard, in common with many other UK
credit card issuers, has received and expects to
continue to receive correspondence from and to have
discussions with, the OFT in relation to concerns the
OFT may raise from time to time in respect of
compliance of Barclaycard's credit and charge card
agreements with the Consumer Credit Act, the
Regulations or other related legislation, or any other
concerns that the OFT may have in respect of
Barclaycard's credit and charge card agreements or
Barclaycard's advertising, marketing or administration
thereof. Barclaycard has worked and expects to
continue to work with the OFT to settle concerns which
may be raised from time to time. However, as a result
of any non-compliance, credit and charge card
agreements may be unenforceable by Barclaycard against
the cardholders without a court order. The transferor
gives no guarantee that a court order could be
obtained if required.
With respect to those credit or charge card agreements
which may not be compliant, such that a court order
would not be obtained, the transferor estimates that
this would apply to less than 1 per cent. of the
aggregate principal receivables in the designated
accounts on 31 December, 2003. Barclaycard does not
anticipate any material increase in the percentage of
these receivables in the securitised portfolio. The
accounts that do not comply with the Consumer Credit
Act or Regulations are still legal, valid and binding
obligations of the cardholder and it will still be
possible to collect payments and demand arrears from
cardholders who are falling behind with their
payments. The transferor will have no obligation to
repay or account to a cardholder for any payments
received by a cardholder because of this non-
compliance with the Consumer Credit Act or
Regulations. However, if losses arise on these
accounts, they will be written off and borne by the
investor beneficiary and transferor beneficiary based
on their interests in the receivables trust.
Accordingly, if this were to occur, you could suffer a
loss on your notes or an early redemption on your
notes.
Transactions involving the use of a credit card in the
United Kingdom may constitute transactions under
debtor-creditor-supplier agreements for the purposes
of section 75 of the Consumer Credit Act. A debtor-
creditor-supplier agreement includes an agreement by
which the creditor, with knowledge of its purpose,
advances funds to finance the debtor's purchase of
goods or services from a supplier.
Section 75 of the Consumer Credit Act provides that if
a supplier breaches a contract between the supplier
and a cardholder in a transaction under certain
debtor-creditor-supplier agreements, or if the
supplier makes a misrepresentation about the contract,
the creditor may also be liable to the cardholder for
the breach or misrepresentation. An example of a
supplier's breach of contract would include the
supplier selling the cardholder merchandise that is
defective or unsuitable for its purpose. In these
circumstances, the cardholder may have the right to
reduce the amount owed to the transferor under his or
her credit or charge card account. This
19
right would survive the sale of the receivables to the
receivables trustee. As a result, the receivables
trustee may not receive the full amount otherwise owed
by a cardholder. However, the creditor will not be
liable where the cash price of the item or service
supplied underlying the claim is [GBP]100 or less, or
greater than [GBP]30,000.
The receivables trustee has agreed on a limited
recourse basis to indemnify the transferor for any
loss suffered by the transferor from a cardholder
claim under section 75 of the Consumer Credit Act.
This indemnity cannot exceed the original outstanding
principal balance of the affected charges on a
designated account.
The receivables trustee's indemnity will be payable
only from and to the extent of excess spread on the
receivables. Any amounts that the transferor recovers
from the supplier will reduce the transferor's loss
for purposes of the receivables trustee's indemnity.
This is described under "Series 04-1: Aggregate
Investor Indemnity Amount". The transferor will have
rights of indemnity against suppliers under section 75
of the Consumer Credit Act. The transferor may also be
able to charge-back the transaction in dispute to the
supplier under the operating regulations of VISA or
MasterCard.
If the transferor's loss for purposes of the
receivables trustee's indemnity exceeds the excess
spread available to satisfy the loss, the transferor
interest in the receivables trust will be reduced by
the amount of the excess loss.
Satisfaction by the receivables trustee of any such
indemnity payment (as described above) could have the
effect of reducing or eliminating excess spread which
might otherwise have been available to the MTN Issuer.
These consequences could result in you incurring a
loss on your investment or an early redemption of your
notes.
FAILURE TO NOTIFY The transfer by the transferor to the receivables
CARDHOLDERS OF trustee of the benefit of the receivables is governed
THE TRANSFER OF by English law and does not give the receivables
RECEIVABLES COULD trustee full legal title to the receivables. Notice to
DELAY OR REDUCE the cardholders of the transfer would perfect the
PAYMENTS ON legal title of the receivables trustee to the
YOUR NOTES receivables. The receivables trustee has agreed that
notice of the transfer will not be given to
cardholders unless the transferor's long-term senior
unsecured indebtedness as rated by Moody's, Standard &
Poor's or Fitch were to fall below Baa2, BBB or BBB,
respectively. The lack of notice has several legal
consequences that could delay or reduce payments on
your notes.
Until notice is given to a cardholder, the cardholder
will discharge his or her obligation under the
designated account by making payment to the
transferor.
Prior to the insolvency of the transferor, unless
notice was given to a cardholder who is a depositor or
other creditor of the transferor, equitable set-offs
may accrue in favour of the cardholder against his or
her obligation to make payments to the transferor
under the designated account. These rights may result
in the receivables trustee receiving reduced payments
on the receivables. The transfer of the benefit of any
receivables to the receivables trustee will continue
to be subject both to any prior equities that a
cardholder had and to any equities the cardholder may
become entitled to after the transfer. Where notice of
the transfer is given to a cardholder, however, some
rights of set-off may not arise after the date notice
is given.
20
Failure to give notice to the cardholder means that
the receivables trustee would not take priority over
any interest of a later encumbrancer or transferee of
the transferor's rights who has no notice of the
transfer to the receivables trustee. This could lead
to a loss on your notes.
Failure to give notice to the cardholder also means
that the transferor or the cardholder can amend the
card agreement without obtaining the receivables
trustee's consent. This could adversely affect the
receivables trustee's interest in the receivables,
which could lead to a loss on your notes.
COMPETITION IN THE UK The credit and charge card industry in the United
CREDIT Kingdom is highly competitive. There is increased
CARD INDUSTRY COULD competitive use of advertising, target marketing and
LEAD TO pricing competition in interest rates and cardholder
EARLY REDEMPTION OF fees as both traditional and new card issuers seek to
YOUR NOTES expand or enter the UK market and compete for
customers.
New card issuers may rely on customer loyalty and may
have particular ways of reaching and attracting
customers. For example, major supermarket retailers
are promoting the use of their own cards through
extensive in-store campaigns and low introductory
interest rates. Also, in the last few years a number
of new card issuers have entered the UK market from
the United States and have sought to build market
share primarily through aggressive pricing. As a
result of this competition, certain competitors offer
cards to selected customers at lower interest rates
than those offered by Barclaycard.
This competitive environment may affect the
originator's ability to originate new accounts and
generate new receivables if the rate at which new
receivables are generated declines significantly and
if the transferor is unable to nominate additional
accounts or product lines for the receivables trust, a
series 04-1 pay out event could occur. A series 04-1
pay out event could result in an early redemption of
your notes.
SOCIAL, LEGAL, Changes in card use, payment patterns, amounts of
POLITICAL AND yield on the card portfolio generally and the rate of
ECONOMIC FACTORS defaults by cardholders may result from a variety of
AFFECT CARD social, legal, political and economic factors in the
PAYMENTS AND ARE United Kingdom. Social factors include changes in
UNPREDICTABLE public confidence levels, attitudes toward incurring
debt and perception of the use of credit and charge
cards. Economic factors include the rate of inflation,
the unemployment rate and relative interest rates
offered for various types of loans. Political factors
include lobbying from interest groups, such as
consumers and retailers, and government initiatives in
consumer and related affairs. We are unable to
determine and have no basis on which to predict
accurately whether, or to what extent, social, legal,
political or economic factors will affect the future
use of credit, default rates, the yield on the card
portfolio generally or cardholder repayment patterns.
REDUCTION IN THE RATE Barclaycard receives fees called "interchange" from
OF the banks that clear transactions for merchants as
INTERCHANGE CAUSED BY partial compensation for amongst other things, taking
POTENTIAL credit risk and absorbing fraud losses. See "The
ADVERSE REGULATORY Receivables." There is a current United Kingdom Office
RULINGS MAY of Fair Trading examination of whether the rates of
ADVERSELY AFFECT interchange paid by retailers in respect of MasterCard
PAYMENTS ON credit and charge cards in the United Kingdom are too
YOUR NOTES high. The preliminary conclusion of this examination
is that the rates are too high which will, if such
preliminary conclusion is not changed or if agreement
is reached on a lower rate of interchange, adversely
affect the yield
21
on UK credit card portfolios. The European Commission
has also concluded an examination of the level of
cross-border interchange within the European Union in
respect of VISA credit and charge cards and its
findings will lead to a phased reduction in the rate
of interchange to be paid by retailers in the future.
A reduction in the rate of interchange as a result of
these findings could affect the future yield on the
card portfolio and adversely affect payment on your
notes.
SECRETARY OF STATE FOR In December 2003, the Secretary of State for Trade and
TRADE AND Industry in the United Kingdom published a report
INDUSTRY WHITE PAPER entitled "Fair, Clear and Competitive: The Consumer
DATED Credit Market in the 21st Century". This report sets
DECEMBER 2003 COULD forth a number of government goals to reform the the
RESULT IN consumer credit industry, including the provision of
REFORMS TO THE CREDIT credit under credit cards, loans and overdrafts. This
CARD report does not constitute draft legislation or
INDUSTRY WHICH MAY regulation. This report requests comments from
ADVERSELY industry participants by March 2004 and sets a
AFFECT FEE INCOME IN recommended schedule for legislative and regulatory
RELATION TO reform throughout 2004. There can be no assurance that
CREDIT CARD PORTFOLIOS either the reforms, or the desired legislative reform
schedule, set forth in the report will be met. The
report's stated goals for reform include: (1) measures
designed to ensure greater clarity, consistency and
transparency in credit advertising; (2) clarification
and improved presentation for consumers in respect of
various interest rates that can apply to separate
elements of a credit card; (3) standardisation and
improved transparency in the market in respect of
annual percentage rate (or APR) and interest rate
calculation on credit cards; (4) introduction of
details of various repayment scenarios in customers'
regular statements; (5) improvements to consumer
redress, including strengthening (and expansion) of
legislative and Office of Fair Trading definitions of
"unfair credit transactions" as well as proposals for
establishment of an alternative dispute resolution
system for the consumer credit industry; and (6)
measures to encourage competition in the credit
market. We are unable to determine and have no basis
on which to predict accurately whether, or to what
extent, such reforms (if enacted as contemplated by
the report) may have on the future generation by the
originator of new credit card accounts, the use of
credit, default rates, or yield on the card portfolio
or cardholder repayment patterns; however, such
reforms, if effected, may adversely affect timing and
amount of payment on your notes. In addition, such
legislative reforms may affect the originator's
ability to originate new accounts and/or to generate
new receivables; if the rate at which new receivables
are generated declines significantly and if the
originator is unable to nominate additional accounts
or product lines for the receivables trust, a series
04-1 pay out event could occur. A series 04-1 pay out
event could result in an early redemption of your
notes.
A CHANGE IN THE TERMS Only the receivables arising under the designated
OF THE RECEIVABLES MAY accounts are transferred to the receivables trustee.
ADVERSELY AFFECT THE The originator will continue to own those accounts. As
AMOUNT OR TIMING OF the owner of the accounts, the originator retains the
COLLECTIONS AND MAY right to change the terms of the accounts. For
CAUSE AN EARLY example, the originator could change the monthly
REDEMPTION OF YOUR interest rate, increase or reduce the credit limits on
NOTES OR A DOWNGRADE the accounts, reduce or eliminate fees on the accounts
OF YOUR NOTES or reduce the required minimum monthly payment.
22
The originator may change the terms of the accounts to
maintain its competitive position in the UK credit and
charge card industry. Changes in interest and fees
could lower the amount of finance charge receivables
generated by those accounts. This could cause a pay
out event to occur, which might cause an early
redemption of your notes. This could also cause a
reduction in the credit ratings on your notes.
PRINCIPAL ON YOUR The receivables in the receivables trust may be paid
NOTES MAY BE at any time and we cannot assure you that new
PAID EARLIER THAN receivables will be generated or will be generated at
EXPECTED -- levels needed to maintain the receivables trust. To
CREATING A prevent the early redemption of the notes, new
REINVESTMENT RISK TO receivables must be generated and added to the
YOU -- OR LATER THAN receivables trust or new accounts must be nominated
EXPECTED for the receivables trust. The receivables trust is
required to maintain a minimum amount of receivables.
The generation of new receivables or receivables in
new accounts is affected by the originator's ability
to compete in the current industry environment and by
customers changing borrowing and payment patterns. If
there is a decline in the generation of new
receivables or new accounts, you may be repaid your
principal before the expected date.
One factor that affects the level of finance charge
and principal collections is the extent of convenience
usage. Convenience use means that the cardholders pay
their account balances in full on or prior to the due
date. The cardholder, therefore, avoids all finance
charges on his or her account. An increase in the
convenience usage by cardholders would decrease the
effective yield on the accounts and could cause a pay
out event and therefore possibly an early redemption
of your notes.
No premium will be paid upon an early redemption of
your notes. If you receive principal on your notes
earlier than expected, you may not be able to reinvest
the principal at a similar rate of return.
Alternatively, a decrease in convenience usage may
reduce the principal payment rate on the accounts.
This could result in you receiving the principal on
your notes later than expected.
CREDIT ENHANCEMENT MAY Credit enhancement for your notes is limited. The only
BE INSUFFICIENT TO assets that will be available to make payment on your
PREVENT A LOSS ON notes are the assets of the issuer pledged to secure
YOUR NOTES payment of your notes. If problems develop with the
receivables, such as an increase in losses on the
receivables, or if there are problems in the
collection and transfer of the receivables to the
trust, or if the swap counterparty fails to make
payments on the swap agreement, it is possible that
you may not receive the full amount of interest and
principal that you would otherwise receive.
ISSUANCE OF ADDITIONAL Series 04-1 is the sixth series (of which only five
SERIES BY are outstanding) created within the receivables trust.
THE RECEIVABLES Additional series may from time to time be created
TRUSTEE ON BEHALF within the receivables trust. Any new series of
OF THE RECEIVABLES investor certificates -- and medium term notes or
TRUST MAY certificates and notes -- will also be payable from
ADVERSELY AFFECT the receivables in the receivables trust. The
PAYMENTS ON principal terms of any new series of investor
YOUR NOTES certificates will be contained in a new series
supplement to the declaration of trust and trust cash
management agreement. The terms of a new series
contained in the new supplement to the declaration of
trust and trust cash management will not be subject to
your prior review or consent.
23
The principal terms of a new series may include
methods for determining investor percentages and
allocating collections, provisions creating different
or additional security or other credit enhancement for
the new series, provisions subordinating the new
series to other series, and other amendments or
supplements to the declaration of trust and trust cash
management agreement that apply only to the new
series. It is a condition to the issuance of a new
series that each rating agency that has rated any debt
ultimately payable from a prior series of investor
certificates that is outstanding -- including your
notes -- confirms in writing that the issuance of the
new series will not result in a reduction or
withdrawal of its rating.
However, the terms of a new series could adversely
affect the timing and amounts of payments on any other
outstanding series, including series of which your
notes are a part.
CREDIT QUALITY OF THE The transferor may designate additional credit or
RECEIVABLES charge card accounts as designated accounts and offer
TRUST'S ASSETS MAY BE the receivables trustee an assignment of the
ERODED BY receivables arising under the additional accounts. The
THE ADDITION OF NEW transferor may be required at times to nominate
ACCOUNTS additional accounts as designated accounts. These
WHICH COULD ADVERSELY accounts may include accounts that were originated or
AFFECT acquired using criteria that are different from those
COLLECTIONS OF applicable to the accounts from which receivables were
RECEIVABLES originally assigned to the receivables trustee. For
example, they could be originated at a different date
with different underwriting standards, or they could
be acquired from another institution that used
different underwriting standards. Consequently, there
can be no assurance that accounts that become
designated accounts in the future will have the same
credit quality as the designated accounts on the
closing date. This could adversely affect collections
on the receivables. If this occurred you could suffer
a loss on your notes.
INTEREST RATE PAYABLE In line with the rest of the UK market, Barclaycard
ON THE may apply differential interest rates to each product
SERIES 04-1 MEDIUM offering, some of which may be fixed for predetermined
TERM NOTE periods. The majority of the designated accounts have
CERTIFICATE MAY monthly interest rates that are constant, except for
INCREASE WITHOUT Barclaycard's ability to change the interest rate at
A CORRESPONDING CHANGE its discretion. The interest rate paid on the series
IN CARD 04-1 medium term note certificate will be based on the
RATES POTENTIALLY London interbank offered rate for deposits in
CAUSING A LOSS sterling, which changes from time to time.
ON YOUR NOTES OR EARLY Accordingly, the interest payable on the series 04-1
REDEMPTION OF YOUR medium term note certificate could increase without a
NOTES corresponding increase in the amount of finance charge
collections. If this occurred, you could suffer a loss
on your notes or a pay out event could occur causing
an early redemption of your notes.
COMMINGLING OF Collections from cardholders for the designated
COLLECTIONS WITH accounts and other Barclaycard cardholders will
TRANSFEROR MAY DELAY initially be paid to an operating account of the
OR REDUCE transferor. The transferor has declared a trust over
PAYMENTS ON YOUR NOTES the operating account in favour of the receivables
trustee for collections that are deposited in it.
Collections on the designated accounts will be
transferred to the trustee collection account within
two business days of being identified.
For the limited time that collections on the
designated accounts are in the operating account, they
may be commingled with other funds of the transferor
or future beneficiaries and they may be untraceable.
Consequently, if the transferor were to become
insolvent, there may be a delay in the transfer of
collections to the receivables trustee if the
transferor -- or a liquidator or
24
administrator of the transferor -- attempted to freeze
the operation of the operating account pending
completion of any rights of tracing. This could
ultimately cause a delay or reduction in the payments
you receive on your notes.
IF THE TRANSFEROR OPTS The transferor may opt to cause a percentage of
TO TREAT A receivables that would otherwise be treated as
PORTION OF PRINCIPAL principal receivables to be treated as finance charge
RECEIVABLES receivables. If the transferor were to exercise this
AS FINANCE CHARGE option, it could prevent a pay out event from
RECEIVABLES, occurring because of a reduction of the portfolio
AN EARLY REDEMPTION OF yield, which could delay an early redemption of your
YOUR NOTES COULD OCCUR notes at a time when the performance of the
OR COULD BE DELAYED receivables is deteriorating. Once this option is
exercised, the transferor may also reduce the
percentage or stop using the percentage at any time.
However, this option, if exercised, will reduce the
aggregate amount of principal receivables, which may
increase the likelihood that the transferor will be
required to designate additional accounts from which
receivables will be assigned to the receivables
trustee. If the transferor were unable to designate
additional accounts, a pay out event could occur and
you could receive payments of principal on your notes
before you expect them.
IF OPTIONAL EARLY When the total principal balance of the notes is
REDEMPTION reduced to less than 10 per cent. of their original
OCCURS, IT WILL RESULT principal balance, the issuer has the option to redeem
IN AN EARLY the notes in full. This early redemption may result in
REDEMPTION OF YOUR an early return of your investment. No premium will be
NOTES CREATING A paid in the event of an exercise of the early
REINVESTMENT RISK redemption option. If you receive principal on your
notes earlier than expected, you may not be able to
reinvest the principal at a rate of return similar to
that on your notes.
IF CARDHOLDERS ARE If the receivables trust has a high concentration of
CONCENTRATED receivables from cardholders located in a single
IN A GEOGRAPHIC region, an economic downturn in that region may have a
REGION, ECONOMIC magnified adverse effect on the receivables trust
DOWNTURN IN THAT because of that concentration. This prospectus
REGION MAY ADVERSELY contains a geographic breakdown of accounts and the
AFFECT COLLECTIONS OF amount of receivables generated in the regions of the
RECEIVABLES United Kingdom. See "The Receivables: Geographic
Distribution of Accounts -- Securitised Portfolio".
As determined from postcode information for the
location of cardholders as of 31 December 2003, the
three largest concentrations of cardholders as at 31
December 2003 were London representing 18.6 per cent.
of total outstanding balances, the South East of
England with 16.5 per cent. of total outstanding
balances and the East of England with 11.4 per cent.
of total outstanding balances. No other region
currently accounts for more than 10 per cent. of the
outstanding balance of the receivables. These
concentration levels may change in the future.
Future adverse economic conditions affecting any of
these regions or any of the other regions, however,
could adversely affect the performance of the
receivables which could result in a loss on your
notes.
ADOPTION OF THE EURO Before your notes have matured, the euro could become
BY THE UNITED KINGDOM the lawful currency of the United Kingdom. If that
WOULD HAVE UNCERTAIN were to happen, all amounts payable on the series 04-1
EFFECTS ON YOUR NOTES medium term note certificate -- including the sterling
payments owed to the swap counterparty on the swap
agreements but not any dollar payments made by the
swap counterparty to the issuer -- may become payable
in euro. If the series 04-1 medium term note
certificate is outstanding when the euro becomes the
lawful currency of the United Kingdom, we intend to
make payments on the series 04-1 medium term note
25
certificate and the swap agreements according to the
then market practice of payment on debts or, as the
case may be, swaps. We are uncertain what effect, if
any, the adoption of the euro by the United Kingdom
may have on your notes.
TAXABLE NATURE OF THE As explained in "Prospectus Summary: United Kingdom
MTN ISSUER OR THE Tax Status" above, the MTN Issuer and the issuer will
ISSUER COULD CAUSE be liable to UK corporation tax at the maximum rate of
A LOSS ON YOUR NOTES currently 30 per cent. on the profit reflected in
their respective profit and loss accounts as increased
to take account of any non- deductible expenses or
losses; which profit before any such increase is not
expected to exceed 1 basis point of the principal
amount outstanding on the medium term notes and
certificates and the notes respectively.
If the taxable profits of the MTN Issuer or the issuer
are greater than expected, because either the profit
shown in the profit and loss account is greater than 1
basis point of the principal amount outstanding, or
non-deductible expenses or losses are greater than
expected, the MTN Issuer or the issuer, as the case
may be, will be subject to corporation tax on the
greater amount at the maximum rate of currently 30 per
cent., and you could suffer losses on your notes as a
result.
In order for the closing of the sale of the notes to
occur, an opinion must be obtained from UK tax
advisers covering the matters described under the
heading "Prospectus Summary: United Kingdom Tax
Status" above, and in particular confirming the
expected tax treatment of the MTN Issuer and the
issuer and analysing in detail the sorts of expenses
which either entity can incur which may not be
deductible. Subject to finalisation of documents
including those which are exhibits to the registration
statement of which this prospectus forms a part in a
form which is satisfactory to them and not
inconsistent with the descriptions set out in the body
of this prospectus, Clifford Chance Limited Liability
Partnership, as special UK tax advisers, expect to
deliver this tax opinion which will allow the notes to
be assigned the appropriate rating.
CHANGE IN THE TAXABLE If there is a relevant change of law in the United
NATURE OR BASIS OF Kingdom or Jersey, or change of practice of the United
TAXATION OF THE Kingdom Inland Revenue, or change in the accounting
RECEIVABLES TRUSTEE, treatment of the MTN Issuer or the issuer, this could
MTN ISSUER OR ISSUER result in the taxable profits of the MTN Issuer or the
COULD CAUSE A LOSS ON issuer being greater than expected and you could
YOUR NOTES suffer losses on your notes as a result.
An opinion of UK tax advisers, however, is not binding
on the UK Inland Revenue or the courts, and no
specific transaction rulings on this issue will be
obtained from the UK Inland Revenue. In addition,
there is no case law authority on a number of features
of the transactions that raise difficult questions.
LIMITED NATURE OF Each credit rating assigned to your notes reflects the
CREDIT RATINGS rating agency's assessment only of the likelihood that
ASSIGNED TO YOUR NOTES interest and principal will be paid to you by the
final redemption date, not that it will be paid when
expected or scheduled. These ratings are based on the
rating agencies' determination of the value of the
receivables, the reliability of the payments on the
receivables, the creditworthiness of the swap
counterparty and the availability of credit
enhancement.
The ratings do not address the following:
* the likelihood that the principal or interest on
your notes will be redeemed or paid, as expected, on
the scheduled redemption dates;
26
* the possibility of the imposition of United Kingdom
or European withholding tax;
* the marketability of the notes, or any market price;
or
* that an investment in the notes is a suitable
investment for you.
A rating is not a recommendation to purchase, hold or
sell notes.
RATINGS CAN BE LOWERED Any rating agency may lower its rating or withdraw its
OR WITHDRAWN AFTER YOU rating if, in the sole judgement of the rating agency,
PURCHASE YOUR NOTES the credit quality of the notes has declined or is in
question or for other tangible and intangible reasons.
If any rating assigned to your notes is lowered or
withdrawn, the market value of your notes may be
reduced.
Pursuant to the swap agreements the swap counterparty
may assign the swap agreements to a replacement swap
counterparty if the long-term credit rating of the
swap counterparty is withdrawn or reduced below "A1"
by Moody's or its short-term credit rating is
withdrawn or reduced below "P-1" by Moody's or its
short-term credit rating is reduced below "A-1+" by
Standard & Poor's and the swap counterparty has not
remedied the event or conducted such other actions
(such as collateralisation or the obtaining of a
guarantor) set out under the terms of the swap
agreements. We cannot assure you, however, that the
swap counterparty will be able to find a replacement
counterparty and assign the swap agreements in this
event or that the ratings of your notes will not be
withdrawn or reduced in this event.
Termination of the A swap agreement may be terminated, but only if the
Swap Agreements Could issuer has been directed to do so by the relevant
Result in an Early noteholders, if as a result of a change in applicable
Redemption of Your law, withholding taxes would be imposed -- by any
Notes jurisdiction -- on payments to the issuer under the
series 04-1 medium term note certificate or on any
payments made or required to be made to the issuer by
the swap counterparty or by the issuer to the swap
counterparty under the swap agreement and there are
not any reasonable measures that the swap counterparty
or the issuer can take to avoid their imposition. In
addition, a swap agreement may be terminated, but only
if the issuer has been directed to do so by the
relevant noteholders, if as a result of a change in
applicable law, the issuer or any paying agent has or
will become obligated to deduct or withhold amounts
from payments on the related class of notes to be made
to any of the related noteholders on the next interest
payment date, for any tax, assessment or other
governmental charge imposed by the United Kingdom or
any political subdivision or taxing authority of the
United Kingdom on the payments and there are no
reasonable measures the issuer can take to avoid the
tax or assessment.
A payment default by the swap counterparty or a
default in the payment in respect of interest by the
issuer to the swap counterparty, if funds are
available to the issuer to make that payment, will
result in a termination of a swap agreement. The swap
agreements may also terminate following a material
breach of a representation or covenant by the swap
counterparty, the insolvency of the issuer or the swap
counterparty or changes in law resulting in
illegality.
The swap agreement may also be terminated if certain
other events described under "The Swap Agreements:
Common Provisions of the Swap Agreements" occur.
27
The termination without replacement of any of the swap
agreements will result in an event of default under
the notes and a pay out event that results in a rapid
amortisation period. We cannot assure you that any of
the swap agreements will not terminate prior to the
payment in full of the principal balance of your
notes. If any of the swap agreements terminates prior
to the payment in full of the principal balance of
your notes, you could receive payments of principal on
your notes before you expect them.
CHANGE IN LAW MAY The issuer and the swap counterparty will each
RESULT IN WITHHOLDING represent and warrant in each swap agreement that,
TAXES ON SWAP under current applicable law, each of them is entitled
PAYMENTS OR THE SERIES to make all payments required to be made by them under
04-1 MEDIUM TERM NOTE the swap agreement free and clear of, and without
CERTIFICATE AND THIS deduction for or on account of, any taxes, assessments
MAY REDUCE THE AMOUNT or other governmental charges -- which we refer to as
YOU ARE PAID ON YOUR withholding taxes. However, neither the issuer nor the
NOTES swap counterparty will be required to indemnify the
other party for any withholding taxes imposed on
payments under a swap agreement as a result of a
change in applicable law.
If any withholding taxes would be imposed -- by any
jurisdiction -- on payments to the issuer under the
Series 04-1 medium term note as a result of a change
in applicable law, then the MTN Issuer additional
interest payments, to the extent available, will be
converted at the spot exchange rate in US dollars to
cover the shortfall in the amounts available for
payment to the noteholders caused by the amount
withheld. If the MTN Issuer additional interest
payments are not sufficient to cover the shortfall,
then payments to first the class C noteholders, second
the class B noteholders and finally the class A
noteholders will be reduced by the amount withheld
that is not covered by the MTN Issuer additional
interest payments.
If any withholding tax would be imposed -- by any
jurisdiction -- on any payments made or required to be
made by the swap counterparty to the issuer or by the
issuer to the swap counterparty under a swap agreement
as a result of a change in applicable law and the
obligation to deduct or withhold cannot be avoided by
the swap counterparty or the issuer, then the amount
to be paid by the other party will be reduced also pro
rata by any amount withheld for any withholding taxes.
In that event the MTN Issuer additional interest
payments, to the extent available, will be converted
at the spot exchange rate in US dollars to cover the
shortfall in the amounts available for payment to the
noteholders caused by the amount withheld. If the MTN
Issuer additional interest payments are not sufficient
to cover the shortfall, then payments to first the
class C noteholders, second the class B noteholders
and finally the class A noteholders will be reduced by
the amount withheld that is not covered by the MTN
Issuer additional interest payments. See "The Swap
Agreements -- Taxation"
Alternatively, the issuer may terminate the swap
agreement but only if it has been directed to do so by
the relevant noteholders. See "The Swap Agreements".
28
CHANGE IN LAW MAY If any UK withholding taxes are imposed on any
RESULT IN WITHHOLDING payments made or required to be made by the issuer or
TAXES ON YOUR NOTES any paying agent on any class of notes, then payments
AND THIS MAY REDUCE to that class of noteholders will be reduced pro rata
THE AMOUNT YOU ARE by any amount withheld for any withholding taxes, and
PAID ON YOUR NOTES in addition, if the relevant noteholders so elect to
direct the issuer, the issuer will terminate the swap.
see "The Swap Agreements."
PAYMENT OF AN EARLY If a swap agreement is terminated before its scheduled
TERMINATION PAYMENT termination date, the issuer or the swap counterparty
TO THE SWAP may be liable to make an early termination payment to
COUNTERPARTY MAY the other party. The amount of any early termination
REDUCE PAYMENTS ON payment will be based on the market value of the
YOUR NOTES terminated swap agreement. This market value will be
computed on the basis of market quotations of the cost
of entering into a swap transaction with the same
terms and conditions that would have the effect of
preserving the respective full payment obligations of
the parties. Any early termination payment could, if
the sterling/dollar exchange rate has changed
significantly, be substantial.
Any early termination payment made by the issuer to
the swap counterparty under a swap agreement will be
made first from MTN Issuer additional interest
payments and second from repayments of principal on
the series 04-1 medium term note certificate equal to
the amount of principal repayments received by the
issuer on the series 04-1 medium term note
certificate. That could cause the sterling amounts
available for conversion to dollars, and possibly your
payments, to be reduced -- perhaps substantially. If
the amount of available MTN Issuer additional interest
payments and repayments of principal on the series 04-
1 medium term note certificate is insufficient to pay
the early termination payment under the relevant swap
agreement, the balance of the early termination
payment will be paid to the extent that such amounts
are available on the next interest payment date
together with interest. See "The Swap Agreements".
YOU WILL NOT RECEIVE Unless the global note certificates are exchanged for
PHYSICAL NOTES, WHICH individual note certificates, which will only occur
MAY CAUSE DELAYS IN under a limited set of circumstances, your beneficial
DISTRIBUTIONS AND ownership of the notes will only be registered in
HAMPER YOUR ABILITY TO book-entry form with DTC, Euroclear or Clearstream,
PLEDGE OR RESELL THE Luxembourg. The lack of physical notes could, among
other things:
* result in payment delays on the notes because we
will be sending distributions on the notes to DTC,
Euroclear or Clearstream, Luxembourg instead of
directly to you;
* make it difficult for you to pledge or otherwise
grant security over the notes if physical notes are
required by the party demanding the pledge or other
security; and
* hinder your ability to resell the notes because some
investors may be unwilling to buy notes that are not
in physical form.
29
INTRODUCTION
You can find a listing of the pages where terms used in this prospectus are
defined under the caption "Index Of Terms For Prospectus" beginning on page
157.
U.S. DOLLAR PRESENTATION
Unless this prospectus provides a different rate, the translations of pounds
sterling into dollars have been made at the rate of 0.5371, which is the
closing price on 20 February 2004 for the dollar/sterling exchange rate as
displayed on the Bloomberg Service under USD--GBP Currency HP. Using this rate
does not mean that pound sterling amounts actually represent those U.S. dollar
amounts or could be converted into U.S. dollars at that rate.
References throughout this document to "[GBP]", "pounds", "sterling" or "pounds
sterling" are to the lawful currency of the United Kingdom of Great Britain and
Northern Ireland. References in this document to "U.S.$", "$" "U.S. dollars" or
"dollars" are to the lawful currency of the United States of America.
References in this document to "euro", "euros" or "[e]" are to the single
currency introduced at the third stage of European Economic and Monetary Union
pursuant to the Treaty establishing the European Communities, as amended by the
Treaty on European Union.
The following table sets forth the history of the dollar/sterling exchange
rates for the five most recent years.
DOLLAR/STERLING EXCHANGE RATE HISTORY(1)
December November October September August
January 2004 2003 2003 2003 2003 2003
Last(2) 0.5483 0.5609 0.5807 0.5895 0.6018 0.6341
Average(3) 0.5492 0.5704 0.5918 0.5960 0.6197 0.6276
High 0.5609 0.5812 0.6007 0.6019 0.6370 0.6366
Low 0.5412 0.5609 0.5807 0.5883 0.6010 0.6198
Year ended 31 December
2003 2002 2001 2000 1999 1998
Last(2) 0.5600 0.6209 0.6875 0.6698 0.6180 0.6025
Average(3) 0.6120 0.6661 0.6943 0.6609 0.6183 0.6035
High 0.6434 0.7101 0.7282 0.7153 0.6451 0.6200
Low 0.5600 0.6209 0.6650 0.6047 0.5972 0.5843
Notes
(1) Data obtained from Bloomberg USD--GBP "CRNCY" HP screen (Mid London
Composite).
(2) Last is the closing exchange rate on the last business day of each of the
periods indicated.
(3) Average is the average daily exchange rate during the periods indicated.
30
THE ISSUER
The issuer was formed in England and Wales on 1 September 2003 under the name
of Cardgrange PLC with registered number 4883336 as a public company with
limited liability under the Companies Acts 1985 and 1989, which is also the
primary legislation under which the issuer operates. It passed a special
resolution to change its name to Gracechurch Card Funding (No. 6) PLC on 14
November 2003. Its registered office and principal place of business are
located at 54 Lombard Street, London EC3P 3AH, United Kingdom. The issuer has
no subsidiaries.
The Company was incorporated with an authorised share capital of [GBP]50,000,
comprising 50,000 ordinary shares of [GBP]1 each. Two ordinary shares were
allotted for cash, and fully paid, on incorporation. On 14 November 2003,
49,998 ordinary shares were resolved to be allotted and on 20 February 2004
were each quarter called and paid. 49,999 shares are held by Gracechurch Card
(Holdings) Limited and one share is held by a share trustee under the terms of
a share declaration of trust. It has a fiscal year end date of 31 December.
There is no loan capital, borrowing, other indebtedness, contingent liabilities
or guarantees as at the date of this prospectus in respect of this company.
There has been no material change in the capitalisation, indebtedness,
guarantees and contingent liabilities and the issuer has not traded since 1
September 2003.
The issuer was formed principally to:
* issue the notes;
* enter into all financial arrangements in order to issue the notes;
* purchase the series 04-1 medium term note certificate; and
* enter into all the documents necessary to purchase the series 04-1 medium
term note certificate.
DIRECTORS AND SECRETARY
The following sets out the directors of the issuer and their business addresses
and principal activities. Because the issuer is organised as a special purpose
company and will be largely passive, it is expected that the directors of the
issuer in that capacity will participate in its management to a limited extent.
Name Nationality Business Address Principal Activities
Richard Francis Sommers British 1234 Pavilion Drive, Finance Director,
Northampton NN4 7SG Barclaycard
Timothy Gaffney British 1234 Pavilion Drive, Treasury Manager,
(alternate director) Northampton NN4 7SG Barclaycard
SFM Directors Limited British Blackwell House, Guildhall Director of special
Yard, London EC2V 5AE purpose companies
SFM Directors (No. 2) Limited British Blackwell House, Guildhall Director of special
Yard, London EC2V 5AE purpose companies
The directors of SFM Directors Limited and SFM Directors (No. 2) Limited are
Jonathan Keighley, James Macdonald and Robert Berry. Their principal activities
include the provision of directors and corporate management services to
structured finance transactions as directors on the boards of SFM Directors
Limited and SFM Directors (No. 2) Limited. The business address of the
directors of SFM Directors Limited and SFM Directors (No. 2) Limited is
Blackwell House, Guildhall Yard, London EC2V 5AE.
Barcosec Limited will provide the issuer with general secretarial, registrar
and company administration services. The fees of Barcosec Limited for providing
such services will be included in the MTN Issuer Costs Amounts. See "Series 04-
1: Allocation, Calculation and Distribution of Finance Charge Collections to
the MTN Issuer".
31
The secretary of the issuer:
Name Business Address
Barcosec Limited 54 Lombard Street, London EC3P 3AH
The net proceeds of the sale of the notes converted into sterling under the
swap agreement together with a drawing under the expenses loan agreement will
be used by the issuer to purchase the series 04-1 medium term note certificate.
The issuer will be prohibited by the trust deed and the terms and conditions of
the notes from engaging in business other than:
* the business described in this prospectus;
* preserving and exercising its rights under the notes, the deed of charge,
the paying agency and agent bank agreement, the trust deed, the expenses
loan agreement, the swap agreements, the corporate services agreement and
the underwriting agreements for the notes; and
* purchasing the series 04-1 medium term note certificate.
The issuer's ability to incur, assume or guarantee debt will also be restricted
by the trust deed and the terms and conditions of the notes.
Barclays does not own, directly or indirectly, any of the share capital of the
issuer.
CAPITALISATION AND INDEBTEDNESS
As at the date of this prospectus, the issuer has no loan capital outstanding
or created but unissued, no term loans outstanding and no other borrowings or
indebtedness in the nature of borrowings guaranteed or unguaranteed, secured or
unsecured nor any contingent liabilities.
Two ordinary shares were allotted for cash, and fully paid, on incorporation.
On 14 November 2003, 49,998 ordinary shares were resolved to be allotted, and
on 20 February 2004 were each quarter called and paid.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Sources of Capital and Liquidity
The issuer's source of capital will be the net proceeds of the offering of the
notes.
The issuer's primary sources of liquidity will be payments of interest and
principal on the series
04-1 medium term note certificate and borrowings under the expenses loan
agreement.
Results of Operations
As of the date of this prospectus, the issuer does not have an operating
history. The issuer has not traded since its date of incorporation being 1
September 2003. Because the issuer does not have an operating history, we have
not included in this prospectus any historical or pro forma ratio of earnings
to fixed charges. The earnings on the series 04-1 medium term note certificate,
the interest costs of the notes and the related operating expenses will
determine the issuer's results of operations in the future. The income
generated on the series 04-1 medium term note certificate will be used to pay
principal and interest on the notes.
Litigation
There are no, nor since the issuer's incorporation on 1 September 2003 have
there been any, legal or arbitration proceedings, including any proceedings
that are pending or threatened of which the issuer is aware, which may have, or
have had in the recent past, a significant effect on the issuer's financial
position.
USE OF PROCEEDS
The net proceeds of the issue of the notes will be $748,631,250. The fees and
commissions payable on the issue of the notes in an amount equal to $1,368,750
will be deducted from the gross proceeds of the issue. The issuer will use its
reasonable endeavours to make a drawing under the expenses loan agreement of at
least an amount equal to the fees and commissions payable on the notes, such
that the net proceeds and such expenses loan drawing will in aggregate be equal
to $750,000,000. The issuer will use the net proceeds of the issue of the notes
converted into sterling
32
under the swap agreements together with the drawing under the expenses loan
agreement to purchase the series 04-1 medium term note certificate from the MTN
Issuer on or about 11 March 2004 -- called the "closing date".
EXPENSES LOAN AGREEMENT
On the closing date, the issuer -- as borrower -- will enter into a loan
agreement with Barclays -- as lender -- under which Barclays will lend to the
issuer up to a maximum amount of [GBP]2,500,000 to be used by the issuer to meet
its costs and expenses relating to issuing the notes. This loan agreement is
called the "expenses loan agreement". The amount outstanding under the expenses
loan agreement will bear interest at the rate of one-month sterling LIBOR plus a
margin of 1.35 per cent. per annum. The payment of interest under the expenses
loan agreement will be paid monthly on each distribution date. To the extent the
issuer has insufficient funds left after making all payments of principal and
interest on the notes, the amount of that interest will be deferred until the
next distribution date. The principal amount outstanding under the expenses loan
agreement will not fall due for repayment until all principal, interest and
other amounts due on the notes have been paid in full. The principal amount
outstanding under the expenses loan agreement will be repaid out of amounts
received by the issuer on the series 04-1 medium term note certificate, which
will include MTN Issuer additional interest amounts.
33
THE MTN ISSUER
The MTN Issuer was formed in England and Wales on 13 August 1990 as Barshelfco
(No. 28) Limited, with registered number 2530163, as a company with limited
liability under the Companies Acts 1985 and 1989, which is the primary
legislation under which the MTN Issuer operates. It re-registered as a public
limited company and changed its name to Barclaycard Funding PLC on 19 October
1999. Its registered office and principal place of business are located at 54
Lombard Street, London EC3P 3AH, United Kingdom. The MTN Issuer has an interest
in a non-qualifying special purpose entity the results of which are included in
the financial statements of the MTN Issuer.
The MTN Issuer has a fiscal year end of 31 December. The board of directors has
approved a change in the fiscal year end from 14 December to 31 December to
align the fiscal year end with that of Barclays Bank PLC. Subsequent reports
will be prepared on the basis of the new fiscal year. The period from 15
December 2002 to 31 December 2002 is less than one month and will be covered in
the annual report for 31 December 2003.
Pursuant to Section 13a-10 of the United States Securities Exchange Act of 1934
the interim prior period results have been included in these consolidated
financial statements for the six months ended 14 June 2002. It is not
practicable or cost-justifiable to include the financial statements for the
corresponding prior period ended 30 June 2002.
The comparability of the 2003 information with the prior period, as presented,
has been impacted by the factors noted below that are not attributable to the
transition period arising on change in the fiscal year end.
On 15 November 2002 the $1bn series 99-1 asset backed notes that were
consolidated in the financial statements of Barclaycard Funding PLC were
redeemed in full.
When compared to the corresponding prior periods, the interim financial
information for 2003 therefore excludes interest and other fees in respect of
series 99-1 together with foreign exchange differences on the series 99-1 asset
backed notes in issue and the gains and losses on derivative instruments that
matured on the redemption of the series 99-1 notes.
The series 02-1, series 03-1 and series 03-2 issued after 30 June 2002 and that
are still in issue as at 30 June 2003 are not consolidated in the financial
statements of the MTN Issuer. The interim financial information for 2003
includes the relevant balances and transactions arising from the unconsolidated
series 02-1, series 03-1, series 03-2 and series 03-3 when compared with the
corresponding prior periods.
The MTN Issuer was formed principally to:
* issue medium term notes or certificates from time to time in series;
* enter into the financial arrangements to issue the medium term notes or
certificates;
* purchase series of investor certificates from time to time representing a
beneficial interest in the receivables trust; and
* enter into the documents and exercise its powers connected to the above.
The MTN Issuer has not engaged in any activities since its incorporation other
than the above.
The [GBP]12,500 called up share capital of the MTN Issuer comprises 50,000
ordinary [GBP]1 shares that have been authorised, issued and quarter called and
paid.
Barclays holds 75 per cent. of the issued share capital of the MTN Issuer,
representing 51 per cent. of the issued voting share capital and a 49 per cent.
entitlement to distributable profits. The remaining share capital is held by
Structured Finance Management Limited.
The annual accounts of the MTN Issuer for the last three financial years have
been audited.
Capitalisation and Indebtedness
Set out below is the unaudited capitalisation and indebtedness statement of the
MTN Issuer as at 31 December 2003 extracted without material adjustment from
its unaudited accounting records under UK GAAP adjusted for the series 04-1
medium term note certificate to be issued.
34
SHARE CAPITAL
Total authorised and issued share capital (being 37,500 A ordinary shares and
12,500 B ordinary shares quarter paid) [GBP]12,500
LOAN NOTE CERTIFICATE (ISSUED 18 OCTOBER 2002)***
[GBP]643,624,895 series 02-1 floating rate medium term note certificate due 2007 [GBP]643,624,895
LOAN NOTE CERTIFICATE (ISSUED 8 APRIL 2003)***
[GBP]637,064,407 series 03-1 floating rate medium term note certificate due 2008 [GBP]637,064,407
LOAN NOTE CERTIFICATE (ISSUED 19 JUNE 2003)***
[GBP]599,448,507 series 03-2 floating rate medium term note certificate due 2006 [GBP]599,448,507
LOAN NOTE CERTIFICATE (ISSUED 18 SEPTEMBER 2003)***
[GBP]628,140,704 series 03-3 floating rate medium term note certificate due 2006 [GBP]628,140,704
Accrued fees and charges 452,837
Interest payable 4,511,135
Bank loan 16,920
----------------
Capitalisation and indebtedness as at 31 December 2003 2,513,271,905
LOAN NOTE CERTIFICATE (NOW BEING ISSUED)***
[GBP]404,312,668* series 04-1 floating rate medium term note certificate due
15 February 2007 [GBP]404,312,668
-------------------
TOTAL CAPITALISATION AND INDEBTEDNESS [GBP]2,917,584,573
===================
* This amount is the sterling equivalent of $750,000,000, converted using the
exchange rate referred to under "U.S. Dollar Presentation". The actual sterling
principal amount of the series 04-1 medium term note certificate will be the
sterling equivalent of $1,000,000,000, using the fixed exchange rate in the swap
agreements.
** Save as disclosed herein, there has been no material change in the
capitalisation, indebtedness, guarantees and contingent liabilities of the MTN
Issuer since 31 December 2003.
*** Under US GAAP, the Loan Note Certificates described above (Series 02-1,
Series 03-1, Series 03-2, Series 03-3 and Series 04-1) have been derecognised
in the balance sheet of the MTN Issuer.
There are no other outstanding loans or subscriptions, allotments or options in
respect of the MTN Issuer. Save as disclosed herein, as at the date of this
prospectus, the MTN Issuer has no loan capital outstanding. There are no
guarantees, other borrowings or indebtedness in the nature of borrowings
guaranteed or unguaranteed, secured or unsecured, no unsecured or guaranteed
issued loan capital or contingent liabilities in respect of the MTN Issuer.
There is no goodwill in the balance sheet of the MTN Issuer, nor will any
goodwill need to be written off upon the issue of the series 04-1 medium term
note certificate.
CRITICAL ACCOUNTING POLICIES
Barclaycard Funding PLC and subsidiary (the "Group")'s accounting policies are
fundamental to understanding management's discussion and analysis of results of
operations and financial conditions. The Group has identified two policies as
being significant because they require management to make subjective and/or
complex judgments about matters that are inherently uncertain.
(a) Derivatives
The fair value of cross currency swaps used by the Group is determined using a
discounted cash flow model as quoted marked prices are not available. Since
these swaps do not qualify for hedge accounting under SFAS No.133 due to the
lack of underlying documentation, the derivatives are recorded on the balance
sheet at fair value with changes reflected in the income statement. The main
areas of judgement in applying this model are estimating future cash flows and
choosing an appropriate discount rate for the instrument. The use of different
pricing models and assumptions
35
could produce materially different estimates of fair value. This will result in
changes in the carrying value of the derivative on the balance sheet and
therefore a different amount reported in the income statement.
(b) Derecognition of financial assets
Where Barclaycard Funding PLC is a transferor of financial assets to an SPE,
the assets sold are derecognised and the SPE is not consolidated on its balance
sheet when the assets are: (1) legally isolated from the Company's creditors,
(2) the accounting criteria for a sale are met, and (3) the SPE is a qualifying
special-purpose entity (QSPE) under SFAS 140. When an SPE does not meet the
formal definition of a QSPE, the decision whether or not to consolidate depends
on the applicable accounting principles for non-QSPEs, including a judgmental
determination regarding the nature and amount of investment made by third
parties in the SPE.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The MTN Issuer was formed principally to issue medium term notes or
certificates in series (and to enter into the financial arrangements for such
issue) and to purchase series of investor certificates from time to time
representing a beneficial interest in the receivables trust (and to enter into
documentation and exercise powers in relation to such issue and purchase). The
MTN Issuer has not engaged in any activities since its incorporation other than
the above.
Unless otherwise specified, the selected financial statistics and the results
presented and discussed below in relation to the MTN Issuer are presented on a
consolidated basis under US GAAP. The MTN Issuer had no operations prior to the
issuance of the series 99-1 medium term notes in November 1999 and accordingly
all selected financial statistics and results presented and discussed below are
from this date.
The earnings on its interest in the receivables trust property, the interest
costs of the issued term advances it pays to the issuer pursuant to the series
04-1 medium term note certificate and the interest costs of the previous term
advances it pays to the previous issuers pursuant to the series 02-1, 03-1, 03-
2 and 03-3 medium term notes and the related operating expenses are the
principal components of the MTN Issuer's results of operations. The income
generated on its interest in the trust property will be used to pay interest
and repay principal on the series 04-1 medium term note certificate to the
issuer and on the series 02-1, 03-1, 03-2 and 03-3 medium term note
certificates to the previous issuers.
The following are selected financial data in relation to the MTN Issuer. Other
than the dollar/sterling exchange rate information, the financial data has been
extracted, without material adjustment, from its audited financial statements
for each of the four years ended 14 December 2002 and the unaudited interim
financial statements for the six months ended 30 June 2003. The dollar/sterling
exchange rates have been extracted from the Bloomberg Service under USD-GBP
Currency HP.
Unaudited
6 months
ended 30 June, Year ended 14 December
2003 2002 2001 2000 1999*
Net income 31,125 16,717 7,713 6,712 2,986
Common Stock 12,500 12,500 12,500 12,500 12,500
Number of Shares 50,000 50,000 50,000 50,000 50,000
Dividend per share Nil Nil Nil Nil Nil
Shareholders' equity 68,709 34,128 29,911 22,198 15,486
Average shareholders' equity 51,419 32,020 26,055 18,842 7,743
Total assets 137,961 169,626 691,244,222 674,654,273 615,423,828
Average total assets 153,794 345,706,924 682,949,248 645,039,051 307,711,914
Net Income as a percentage of:
- -- Average total assets 20% 0.005% 0.001% 0.001% 0.001%
- -- Average shareholders' equity 61% 52% 30% 36% 39%
- -- Average shareholders' equity as a
percentage of average total assets 33% 0.009% 0.004% 0.003% 0.003%
Average US dollar exchange rate used
in preparing the accounts (being the average
daily exchange rate during the year ended
31 December) 0.6208 0.6661 0.6943 0.6609 0.6183
Closing US dollar exchange rate at
31 December 0.6043 0.6209 0.6875 0.6698 0.6180
High US dollar exchange rate during
the year ended 31 December 0.6434 0.7101 0.7282 0.7153 0.6451
Low US dollar exchange rate during
the year ended 31 December 0.5933 0.6209 0.6650 0.6047 0.5972
*There were no operating activities before 1999
36
The ratio of earnings to fixed charges for the MTN Issuer is as follows: (a)
for the six months ended 30 June 2003, 102.62%; (b) for the year ended 14
December 2002, 292.50%; (c) for the year ended 14 December 2001, 147.11%; (d)
for the year ended 14 December 2000, 220.79%; (e) for the year ended 14
December 1999, 377.02%.
The changes in net income, shareholders' equity and total assets (and hence to
average shareholders' equity and average total assets) between 1999 and 2000
were mainly attributable to the issue of the $1bn Series 99-1 floating rate
asset backed notes on 23 November 1999.
The changes in net income, shareholders' equity and total assets (and hence to
average shareholders' equity and average total assets) between 2001 and 2002
were predominately attributable to (a) the redemption of the Series 99-1 Loan
Capital on 15 November 2002 and (b) the issue of the Series 2002-1 Loan Note
Certificates on 24 October 2002 (driving increases in net income but with the
Loan Note Certificate being derecognised in the balance sheet of the MTN
issuer).
The changes in net income, shareholders' equity and total assets (and hence to
average shareholders' equity and average total assets) between the year ended
31 December 2002 and the six months ended 30 June 2003 were predominately
attributable to (a) the 30 June 2003 information representing net income for
only six months compared with full year information in previous period (b) the
redemption of the Series 99-1 Loan Capital on 15 November 2002; (c) the issue
of the Series 02-1 Loan Note Certificate on 24 October 2002 (driving increases
in net income for the full period in 2003); and (d) the issue of the Series 03-
1 and Series 03-2 Loan Note Certificates on 8 April 2003 and 19 June 2003
respectively (driving increases in net income during 2003. The Series 02-1,
Series 03-1 and Series 03-2 Loan Note Certificates have been derecognised in
the balance sheet of the MTN Issuer).
For the [GBP]643,624,895 series 02-1, the [GBP]637,064,407 series 03-1, the
[GBP]599,448,507 series 03-2 and the [GBP]628,140,704 series 03-3 limited
recourse medium term note certificates, following the accumulation period of
principal collections due in 2009, 2010, 2008 and 2005 respectively, the MTN
Issuer will pass the amounts received on repayment of its share of the investor
interests in respect of series 02-1, series 03-1, series 03-2 and series 03-3
from the receivables trustee to the relevant issuer of the 02-1, 03-1, 03-2 and
03-3 series respectively.
In the periods up until 2009, up until 2010, up until 2008 and up until 2005
the MTN Issuer passes amounts received from the receivable trustee in
connection with the investor interest to the series 02-1, the series 03-1, the
series 03-2 and the series 03-3 issuers respectively the rate of return on
which is at a variable rate of interest, as outlined below. The payment of
interest and repayment of principal on the advance to the investor certificates
is dependent upon payment of interest and repayment of principal due under the
credit card receivables held pursuant to the receivables trust, and is
therefore subject to the risk of non-payment of the credit card receivables.
Certain events could alter the exposure and change the payment profile or any
other financial positions including the rapid amortisation period as triggered
by a pay-out event see "Risk factors".
The [GBP]643,624,895 series 02-1 medium term note certificate has the following
interest rates:
* for the first interest period from 24 October 2002 to 15 December 2002,
the interest rate applicable was an interpolation between one and two
month LIBOR - plus 0.19345%.
* for the second interest period, from 15 December 2002 to 15 January 2003,
the interest rate applicable was one month LIBOR - plus 0.19345%.
* for the third and subsequent monthly interest periods, the interest rate
applicable is three month LIBOR - plus 0.19345%.
The [GBP]637,064,407 series 03-1 medium term note certificate has the following
interest rates:
* for the first interest period from 8 April 2003 to 15 June 2003, the
interest rate applicable was an interpolation between two and three month
LIBOR - plus 0.20214%.
* for the second and subsequent monthly interest periods, the interest rate
applicable will be three month LIBOR -- plus 0.20214%.
The [GBP]599,448,507 series 03-2 medium term note certificate has the following
interest rates:
* for the first interest period from 19 June 2003 to 15 August 2003, the
interest rate applicable will be an interpolation between one and two
month LIBOR -- plus 0.14069%.
37
* for the second interest period from 15 August 2003 to 15 September 2003,
the interest rate applicable will be one month LIBOR -- plus 0.14069%.
* for the third and subsequent monthly interest periods, the interest rate
applicable will be three month LIBOR -- plus 0.14069%.
The [GBP]628,140,704 series 03-3 medium term note certificate has the following
interest rates:
* for the first interest period from 18 September 2003 to 15 November 2003,
the interest rate applicable will be an interpolation between one and two
month LIBOR -- plus 0.1129%.
* for the second and subsequent monthly interest periods, the interest rate
applicable will be three month LIBOR -- plus 0.1129%.
The [GBP]404,312,668.46 series 04-1 medium term note certificate will have the
following interest rates:
* for the first interest period from 11 March 2004 to 17 May 2004, the
interest rate applicable will be an interpolation between two and three
month LIBOR -- plus 0.1076%.
* for the second and subsequent monthly interest periods, the interest rate
applicable will be three month LIBOR -- plus 0.1076%.
The trend in payments passed from the MTN Issuer to the relevant issuers in
relation to the series 99-1 medium term notes, series 02-1, the 03-1, the 03-2
and the 03-3 medium term note certificates and subsequent issuances are related
to fluctuations in LIBOR.
Derivatives are held for non-trading purposes. On the redemption of the series
99-1 notes a realised loss on maturity of cross currency derivatives was
[GBP]54,583,230 offset by the foreign exchange gains on the series 99-1
intercompany note of [GBP]54,588,608.
The MTN Issuer considers related parties to be entities which the MTN Issuer
can significantly influence or has an ownership interest in that allows it
influence to an extent that the other party might be prevented from fully
pursuing its own separate interests. Examples of related parties include
affiliates of the company; entities for which investments are accounted for by
the equity method by the MTN Issuer; trusts for the benefit of employees,
principal owners of the enterprise; its management; and members of the
immediate families of principal owners of the enterprise and its management.
Parties are considered to be related if one party, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with an enterprise.
The related party transactions of the MTN Issuer comprise some transfers in
relation to the investor interest; derivative transactions; bank accounts; and
loan arrangements.
The MTN Issuer's primary source of liquidity are payments of principal and
interest on the series of investor certificates.
RECENT ACCOUNTING DEVELOPMENTS
1. GUARANTOR ACCOUNTING AND DISCLOSURES
In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on the disclosures to be made by the guarantor about
its obligations under certain guarantees that it has issued effective for
financial statements for periods ending after 15 December 2002. This
interpretation also clarifies that a guarantor is required to recognize, at the
inception of the guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee effective as of 1 January 2003. Management
does not expect the adoption of this interpretation to have a material effect
on the MTN Issuer's financial position or results of operations.
The MTN Issuer is a participant in a Group banking arrangement under which all
surplus cash balances are held as collateral for bank facilities advanced to
Group members. In addition, the MTN Issuer has issued an unlimited guarantee to
the bank to support these Group facilities. As at 30 June 2003 this surplus
cash balance amounted to [GBP]131,701 (14 December 2002: [GBP]160,280).
In the series 99-1 issue the relevant issuer's proceeds of the debt issuance
were used to purchase intercompany notes from the MTN Issuer. In the series 02-
1, 03-1 03-2 and 03-3 issues, the relevant issuers purchased the interests in a
pool of credit card receivables via the purchase of the
38
series 02-1, series 03-1, series 03-2 and series 03-3 limited recourse medium
term note certificates respectively from the MTN Issuer. Under SFAS 140 the
equity interests under these medium term note certificates are allowable QSPE
interests.
2. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of
Variable Interest Entities -- An interpretation of ARB No. 51" ("FIN 46"). This
pronouncement modifies the framework for determining consolidation of certain
entities that meet the definition of a variable interest entity ("VIE"). This
is met where the entity either does not have sufficient equity of the
appropriate nature to support its expected losses, or its equity investors lack
certain characteristics which would be expected to be present within a
controlling financial interest. Entities which do not meet this definition
would continue to apply the voting interest model.
The provisions of FIN 46 are immediately effective for VIEs created after 31
January 2003. Following revisions to the effective date of FIN 46 approved by
the FASB in October and December 2003, the Standard will be applied by the
Group to other entities existing as of 31 January 2003 in the Group's first
interim or annual reporting period within 2004.
Management does not expect the adoption of this interpretation to have a
material effect on the Group's financial position or results of operations.
FIN 46 requires transitional disclosure which includes the maximum risk of loss
an entity can incur in relation to VIEs that it has a significant interest in.
The maximum exposure to loss represents a "worst case" scenario in the event
that all such vehicles simultaneously fail. It does not provide an indication
of ongoing exposure which is managed within the company's risk management
framework.
The variable interest entities that the group is involved with, provide
financing to the company via the issuance of asset backed debt. The proceeds of
the debt issuance from the series 99-1 issuer were used to purchase
intercompany notes. The group used the proceeds of the debt issuance from the
series 02-1 issuer, the series 03-1 issuer, the series 03-2 issuer and the
series 03-3 issuer to purchase beneficial interests in pools of credit card
receivables.
The proceeds of the series 99-1 notes were used by the 99-1 issuer to purchase,
respectively, corresponding series of medium term notes issued by the MTN
Issuer. The purchase was deemed a financing transaction between the two parties
and consequently the accounts of series 99-1 issuer were consolidated into
those of the MTN Issuer.
The proceeds of the series 02-1 notes were used by the 02-1 issuer to purchase
from the MTN Issuer one limited recourse medium term note certificate. The
structure of this transaction achieved QSPE status under US GAAP.
The proceeds of the series 03-1 notes were used by the 03-1 issuer to purchase
from the MTN Issuer one limited recourse medium term note certificate. The
structure of this transaction achieved QSPE status under US GAAP.
The proceeds of the series 03-2 notes were used by the 03-2 issuer to purchase
from the MTN Issuer one limited recourse medium term note certificate. The
structure of this transaction achieved QSPE status under US GAAP.
The total assets of these vehicles as at 30 June 2003 was [GBP]1,889,933,354
(14 December 2002: [GBP]647,872,001) of which [GBP]10,468 (14 December 2002:
[GBP]23,283) was already consolidated by the Group under US GAAP. As at 30 June
2003, maximum exposure to loss was [GBP]1,882,908,875 (14 December 2002:
[GBP]647,549,639).
The proceeds of the series 03-3 notes issued on 18 September 2003 were used by
the 03-3 issuer to purchase from the MTN Issuer one limited recourse medium
term note certificate. The structure of this transaction achieved QSPE status
under US GAAP.
3. AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is effective
39
prospectively for contracts entered into or modified after June 30, 2003 and
prospectively for hedging relationships designated after June 30, 2003.
Management does not expect a material impact from the adoption of this
statement.
4. ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY
In May 2003, the FASB issued SFAS No. 150, Accounting For Certain Financial
Instruments with Characteristics of both Liabilities and Equity. The Statement
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity and requires that these
instruments be classified as liabilities in statements of financial position.
This Statement is effective prospectively for financial instruments entered
into or modified after May 31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. This statement shall
be implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. Management is currently assessing the impact of this statement.
DIRECTORS AND SECRETARY
The following sets out the directors of the MTN Issuer and their business
addresses and principal activities. Because the MTN Issuer is organised as a
special purpose company and will be largely passive, it is expected that the
directors of the MTN Issuer in that capacity will participate in its management
to a limited extent.
Name Nationality Business Address Principal Activities
Richard Francis Sommers British 1234 Pavilion Drive, Finance Director,
Northampton NN4 7SG Barclaycard
Barcosec Limited British 54 Lombard Street, Director
London EC3P 3AH
Barometers Limited British 54 Lombard Street, Director
London EC3P 3AH
Timothy Gaffney British 1234 Pavilion Drive, Treasury Manager,
(alternate director) Northampton NN4 7SG Barclaycard
SFM Directors Limited British Blackwell House, Guildhall Yard, Director of special
London EC2V 5AE purpose companies
The secretary of the MTN Issuer is:
Name Business Address
Barcosec Limited 54 Lombard Street, London EC3P 3AH
The directors of Barcosec Limited and Barometers Limited are Michelle Amey,
Alison Bibby, Clare Carson, Patrick Gonsalves, Simon Pordage, Sarah Sanders and
Geoffrey Smith. Their principal activities include the provision of corporate
secretarial services to the Barclays Group. The business addresses of the
directors of Barcosec Limited and Barometers Limited are 54 Lombard Street,
London EC3P 3AH. Barcosec Limited will provide the MTN Issuer with general
secretarial, registrar and company administration services. The fees of
Barcosec Limited for providing such services will be included in the MTN Issuer
Costs Amounts. The directors of SFM Directors Limited are Jonathan Keighley,
James Macdonald and Robert Berry. Their principal activities include the
provision of directors and corporate management services to structured finance
transactions as directors on the board of SFM Directors Limited. The business
address of the directors of SFM Directors Limited is Blackwell House, Guildhall
Yard, London EC2V 5AG. See "Series 04-1: Allocation, Calculation and
Distribution of Finance Charge Collections to the MTN Issuer".
The initial subscription proceeds of the sale of the series 04-1 medium term
note certificate will be used by the MTN Issuer to acquire a certificate
representing a beneficial interest in series 04-1 of the receivables trust --
called the "investor certificate". The deferred subscription price payable for
the series 04-1 medium term note certificate will be used by the MTN Issuer to
pay deferred consideration to Barclaycard for the transfer of its entitlement
to receive excess interest attributable to series 04-1.
40
LITIGATION
There are no, nor since the MTN Issuer's incorporation on 13 August 1990 have
there been any, legal or arbitration proceedings, including any proceedings
that are pending or threatened of which the MTN Issuer is aware, which may
have, or have had in the recent past, covering at least the previous 12 months,
a significant effect on the MTN Issuer's financial position.
41
THE RECEIVABLES TRUSTEE
The receivables trustee was formed under the laws of Jersey, Channel Islands on
29 September 1999. Its registered office is at 26 New Street, St Helier, Jersey
JE2 3RA and you can inspect its memorandum and articles of association at the
offices of Clifford Chance Limited Liability Partnership at 10 Upper Bank
Street, London E14 5JJ, United Kingdom.
All of the issued share capital of the receivables trustee is held by a trust
company formed in Jersey, Bedell Cristin Trustees Limited, on the terms of a
general charitable trust.
The receivables trustee was formed principally to:
* act as a trustee of the receivables trust;
* purchase and accept transfer of the receivables from the transferor;
* issue series of investor certificates from time to time on behalf of the
receivables trust; and
* enter into transaction documents incidental to or relating to those
activities.
DIRECTORS AND SECRETARY
Bedell Cristin Trust Company Limited, a company formed under the laws of
Jersey, provides the receivables trustee with company secretarial, registrar
and company administration services. Its fees for providing these services are
included in the fees paid to the receivables trustee. See the section "The
Receivables Trust: Trustee Payment Amount". The company secretary is Bedell
Cristin Secretaries Limited, a company formed under the laws of Jersey.
The following sets out the directors of the receivables trustee and their
business addresses and principal activities. The receivables trustee is
organised as a special purpose company and is largely passive, engaging only in
the types of transactions described in this prospectus. The receivables trustee
is managed and controlled by its directors in Jersey; however it is expected
that it will require only a small amount of active management.
Name Nationality Business Address Principal Activities
Richard Francis Sommers British 1234 Pavilion Drive, Finance Director
Northampton NN4 7SG
Michael Henry Richardson British 26 New Street, St. Helier, Advocate of the
Jersey JE2 3RA Royal Court of Jersey
Richard Charles Gerwat British 26 New Street, St. Helier, Advocate of the
Jersey JE2 3RA Royal Court of Jersey
Michael Henry Richardson and Richard Charles Gerwat are also directors of
Bedell Cristin Trustees Limited, Bedell Cristin Secretaries Limited and Bedell
Cristin Trust Company Limited and partners in the law firm Bedell Cristin.
The directors of the receivables trustee do not have a specific term of office
but each may be removed by a resolution passed at a shareholders' meeting.
Barclays Bank PLC does not own, directly or indirectly, any of the share
capital of the receivables trustee.
MANAGEMENT AND ACTIVITIES
The receivables trustee has been established specifically to act as trustee of
the receivables trust. Its activities are restricted by the declaration of
trust and trust cash management agreement and the related supplements.
Since it was formed, the receivables trustee has:
* engaged in activities incidental to the declaration of the receivables
trust;
* obtained the necessary consumer credit licence and data protection
registrations in the United Kingdom and/or Jersey;
* authorised and executed the documents that it is a party to in order to
establish the receivables trust;
* purchased and accepted transfers of the receivables from the transferors;
* issued certificates to beneficiaries in respect of their interests in the
receivables trust;
* established and maintained a register of the entitlements of
beneficiaries under the receivables trust;
42
* engaged in activities incidental to the transfer to it of receivables
under the designated accounts; and
* authorised and executed the other documents to which it is party.
The receivables trustee has not engaged in any activities since its
incorporation other than the above and matters incidental to the above.
The receivables trustee has made a number of covenants in the declaration of
trust and trust cash management agreement, including that it will not without
the prior written consent of each of the beneficiaries of the receivables
trust:
* carry on any business other than as trustee of the receivables trust and
will not engage in any activity or do anything at all except:
(1) hold and exercise its rights in the trust property of the
receivables trust and perform its obligations for the receivables
trust's property;
(2) preserve, exercise and enforce any of its rights and perform and
observe its obligations under the declaration of trust and trust
cash management agreement, the receivables sale agreement, the
master definitions schedule, each supplement and each other related
document, including any documents secured directly or indirectly by
a series of investor certificates issued under the receivables
trust, any mandate and other agreement about a Trust Account or a
bank account in which the receivables trustee has a beneficial
interest, the trust section 75 indemnity, and any other document
contemplated by and executed in connection with any of the
preceding documents. We refer to these documents collectively as
"relevant documents";
(3) pay dividends or make other distributions to the extent required by
applicable law;
(4) use, invest or dispose of any of its property or assets in the
manner provided in or contemplated by the relevant documents; and
(5) perform any and all acts incidental to or otherwise necessary in
connection with (1), (2), (3) or (4) above;
* incur any debt other than debt that is described by this prospectus or a
supplement or contemplated by the relevant documents;
* give any guarantee or indemnity in respect of any debt;
* create any mortgage, charge, pledge, lien or other encumbrance securing
any obligation of any person or other type of preferential arrangement
having similar effect, over any of its assets, or use, invest, sell or
otherwise dispose of any part of its assets, including any uncalled
capital, or undertaking, present or future, other than as expressly
contemplated by the relevant documents;
* consolidate or merge with any other person or convey or transfer its
properties or assets to any person;
* permit the validity or effectiveness of the receivables trust to be
supplemented, amended, varied, terminated, postponed or discharged --
other than as expressly contemplated in the declaration of trust and
trust cash management agreement or in any supplement; or
* have an interest in any bank account other than a Trust Account and its
own bank account opened for the purpose of receiving and making payments
to be made otherwise than in its capacity as receivables trustee --
including paying the servicing fee to the servicer or cash management fee
to the trust cash manager and the annual fee due to Bedell Cristin Trust
Company Limited for the provision of corporate services to the
receivables trustee.
LITIGATION
There are no, nor since the receivables trustee's incorporation on 29 September
1999 have there been any, legal or arbitration proceedings, including any
proceedings that are pending or threatened of which the receivables trustee is
aware, which may have, or have had in the recent past, covering at least the
previous 12 months, a significant effect on the receivables trustee's financial
position.
43
BARCLAYS BANK PLC
Barclays Bank PLC will perform the following roles in connection with the
issuance of the notes:
* initial transferor;
* servicer;
* cash manager for the receivables trust and the medium term notes and
certificates;
* transferor beneficiary and excess interest beneficiary;
* swap counterparty;
* lender under expenses loan agreement; and
* an underwriter.
BUSINESS
Barclays Bank PLC is a public limited company registered in England and Wales
under number 1026167. The liability of the members of Barclays Bank PLC is
limited. It has its registered and head office at 54 Lombard Street, London
EC3P 3AH. Barclays Bank PLC was incorporated on 7 August, 1925 under the
Colonial Bank Act 1925 and on 4 October, 1971 was registered as a company
limited by shares under the Companies Acts 1948 to 1967. Under the Barclays
Bank Act 1984, on 1 January, 1985, Barclays Bank PLC was re-registered as a
public limited company and its name was changed from "Barclays Bank
International Limited" to "Barclays Bank PLC".
Barclays Bank PLC and its subsidiary undertakings are, together, called the
Barclays Group. The Barclays Group is an international financial services group
engaged primarily in banking, investment banking and asset management. In terms
of assets employed, it is one of the largest financial services groups in the
United Kingdom. The Barclays Group also operates in many other countries around
the world and is a leading provider of co-ordinated global services to
multinational corporations and financial institutions in the world's main
financial centres. The whole of the issued ordinary share capital of Barclays
Bank PLC is owned by Barclays PLC which is the ultimate holding company of the
Barclays Group.
The short-term unsecured debt obligations of Barclays Bank PLC are rated A-1+
by Standard and Poor's, P-1 by Moody's and F1+ by Fitch Ratings Limited and the
long-term unsecured debt obligations of Barclays Bank PLC are rated AA by
Standard & Poor's, Aa1 by Moody's and AA+ by Fitch Ratings Limited.
Based on the audited consolidated financial statements as at and for the year
ended 31 December 2003, prepared in accordance with UK GAAP, Barclays PLC had
total assets of [GBP]443,361 million, total net loans and advances of
[GBP]288,743 million, total deposits of [GBP]278,960 million, and shareholders'
funds or shareholders' equity of [GBP]16,473 million. The profit before
taxation of Barclays PLC for the year ended 31 December 2003 was [GBP]3,845
million after charging net provisions for bad and doubtful debts of [GBP]1,347
million. Under UK GAAP, as at 31 December 2002, Barclays PLC had total assets
of [GBP]403,062 million, total net loans and advances of [GBP]260,572 million,
total deposits of [GBP]258,932 million and shareholders' funds of [GBP]15,201
million. The profit before taxation of Barclays PLC for the year ended 31
December 2002 was [GBP]3,205 million after charging net provisions for bad and
doubtful debts of [GBP]1,484 million.
The annual report on Form 20-F for the year ended 31st December, 2002 of
Barclays PLC and Barclays Bank PLC is on file with the Securities and Exchange
Commission, and the Securities and Exchange Commission has been furnished with
the interim report on Form 6-K for the semi-annual period ended 30 June 2003 of
Barclays PLC and Barclays Bank PLC. Barclays will provide, without charge to
each person to whom this prospectus is delivered, on the request of that
person, a copy of the Form 20-F and Form 6-K referred to in the previous
sentence. Written requests should be directed to: Barclays Bank PLC, 54 Lombard
Street, London, EC3P 4AH, England, Attention: Barclays Group Corporate
Secretariat.
Neither the class A notes, the class B Notes nor the class C notes will be
obligations of Barclays Bank PLC, Barclays PLC or any of their affiliates.
44
CREDIT CARD USAGE IN THE UNITED KINGDOM
The United Kingdom credit card market is the largest and most developed in
Europe. The total population of the United Kingdom is approximately 58 million
with the adult population accounting for about 60 per cent. of this. It is
estimated that 49 per cent. of the adult British population holds at least one
credit card.
The total number of credit, charge and corporate cards in issue in the UK has
grown steadily since 1976 and exceeded 60 million in 2002. Of these, about 66
per cent. carried the VISA service mark and 31 per cent. the MasterCard service
mark, with the remainder comprised of corporate and charge cards.
The number of cards issued has grown by 35 million since 1993 to about 64
million today. The rate of increase accelerated in 1994 and has continued to do
so as the credit and charge card sector grows and diversifies. Purchases in the
UK, in the twelve months to June 2003, totalled almost [GBP]131 billion. UK
credit card borrowings have more than doubled since 1994, and were
approximately [GBP]50 billion in June 2003.
UK consumers use their card in a variety of ways. Figures from a trade
organisation in England show that in the year to June 2003, the average
transaction was for about [GBP]77. About 51 per cent. of these transactions
were in relation to retail sales, compared with 14 per cent. in the travel
sector, 11 per cent. on motoring and 4 per cent. in hotels.
BARCLAYCARD AND THE BARCLAYCARD CARD PORTFOLIO
GENERAL
Barclaycard, a division of Barclays Bank PLC, is one of the UK's leading credit
card issuers. In addition, Barclaycard issues cards in a number of other
countries, offers fixed term unsecured loans in the UK and is one of the UK's
largest merchant acquirers. Barclaycard is based in Northampton, England and
has in excess of 4000 employees in the UK and the rest of Europe. In 1966,
Barclaycard issued the UK's first credit card and as of 31 December 2003
Barclaycard, on a managed basis, had [GBP]12,610,573,758 of gross customer
receivables in the UK and the rest of Europe, including consumer loans. Of this
amount, [GBP]8,809,951,299 were MasterCard and VISA credit and charge card
receivables originated in the UK and included in the receivables trust.
Barclaycard offers over 30 credit card products and services to individual and
corporate customers. The average UK customer has had a Barclaycard for in
excess of 10 years. An enabling Act introduced by Barclays was passed by the UK
Parliament following Barclays acquisition of Woolwich PLC. This Act facilitates
a reorganisation of Barclays Group's legal structure, involving, depending on
Barclays determining in the future to use all or any of the powers that are
conferred by the Act, the transfer of certain undertakings and parts of
undertakings within the Barclays Group. The undertakings could include
Barclaycard, which is a division of Barclays Bank PLC.
The receivables being securitised come from transactions made by MasterCard and
VISA card accountholders.
A cardholder may use his or her card for both purchases and cash advances. A
purchase is when cardholders use their cards to acquire goods or services. A
cash advance is when cardholders use their cards to get cash from a financial
institution or automated teller machine or use credit card cheques issued by
Barclaycard drawn against their credit lines. Cardholders may draw against
their credit lines by transferring balances owed to other creditors to their
Barclaycard accounts.
See "Servicing of Receivables and Trust Cash Management" for a description of
how Barclaycard services receivables included in the securitisation.
Barclaycard undertakes all the processing and administering of accounts making
use of external suppliers as appropriate. In particular, initial datacapture of
applicants is undertaken by Equifax, an outsource partner of Barclaycard, and
cardholder payment processing is undertaken for Barclaycard by Experian, part
of the Great Universal Stores Group, a company not affiliated with Barclaycard.
45
DESCRIPTION OF EXPERIAN, PART OF THE GREAT UNIVERSAL STORES GROUP
Barclaycard is a party to an agreement with Experian, under which they provide
Barclaycard with certain processing services. Under this agreement, Experian
collects and processes all postal remittances arising from Barclaycard's credit
and charge card portfolio through facilities located in Bolton, England. The
Great Universal Stores Group has been providing these services to Barclaycard
since February 1996.
ACQUISITION AND USE OF CREDIT CARD ACCOUNTS
Barclaycard uses a brand led, value driven marketing strategy to focus new
origination campaigns. This process is assisted by the use of financial
forecasting models for each method it uses to solicit cardholders. Barclaycard
recruits a significant proportion of its customers by introductions from
Barclays branches. It also uses, among others, targeted mailing, media inserts
and the internet.
When received, credit application details are screened by a combination of
system based checking, external credit bureau data and manual verification,
where appropriate.
Barclaycard uses a range of application scorecards to assess the credit quality
of new account applications, each of which are tailored towards different
market segments. Scorecards are derived using a combination of factors in
respect of each relevant customer including their Barclays account history,
annual income, time at and place of residence, current employment and credit
bureau data. A proprietary cash flow model is used to help determine the
acceptance score levels for each scorecard. Acceptance score levels are
reviewed at least quarterly by committee.
Barclaycard aims to maximise enterprise value through managing the relationship
between volumes and margins. Recent yield experience reflects adjustments to
interest rate discounts and fee waiver thresholds to optimise this position.
The initial limit of an account is determined using credit score and income
matrices. Initial limits are set at comparatively low levels. Limits are
increased in a controlled and regular manner using behaviour score and credit
bureau data. Behaviour scoring was introduced in 1989 and is one of the key
tools used by Barclaycard in risk management and underpins all risk decisions
applied to accounts once they have been opened. Barclaycard currently use
behaviour scorecards developed in conjunction with Fair, Isaacs International
UK Corporation, an independent firm experienced in developing credit scoring
models.
The behaviour scorecards are monitored using retrospective sampling which
allows a comparison of actual to expected performance over predetermined time
periods. This analysis allows the effectiveness of the scorecards to be
measured on a regular basis, and underpins the decisions on scorecard
development.
Credit limits are adjusted based upon Barclaycard's continuing evaluation of an
account holder's credit behaviour and suitability using Triad V, the latest
account management system developed by the Fair, Isaacs Companies.
Each cardholder has a card agreement with Barclaycard governing the terms and
conditions of their MasterCard or VISA account. Under each card agreement,
Barclaycard is able, if it gives advance notice to the cardholder, to add or
change any terms, conditions, services or features of the MasterCard or VISA
accounts at any time. This includes increasing or decreasing periodic finance
charges, or minimum payment terms. Each card agreement enables Barclaycard to
apply charges to current outstanding balances as well as to future
transactions.
Barclaycard regularly reviews its credit and charge card agreement forms to
determine their compliance with applicable law and the suitability of their
terms and conditions. If they need to be updated or amended, this will be done
on a timetable consistent with the issues identified.
DESCRIPTION OF PROCESSING
Barclaycard settlement systems have links to VISA and MasterCard to enable
cardholder transactions to be transferred. Barclaycard also acquires
transactions from merchants. Transactions acquired in this way relating to
Barclaycard cardholders are passed to the card account processing systems
directly rather than via VISA or MasterCard.
46
BILLING AND PAYMENT
Barclaycard generates and mails monthly statements to cardholders which give
details of the transactions for that account.
Cardholders get up to 56 days interest free on purchases before they are
required to make a payment.
At the moment, cardholders must make a monthly minimum payment which is at
least equal to the greater of:
* 2 per cent. -- on platinum and gold, 2.5 per cent. -- on classic, 3 per
cent. -- on choice -- of the statement balance; and
* the stated minimum payment, which is currently [GBP]5.
Notwithstanding the above, in the case of the Premier Card, Barclaycard's
charge card product, cardholders must pay the statement balance in full, which
is collected via direct debit 14 days after the date of the statement.
Certain eligible cardholders may be given the option to take a payment holiday.
Barclaycard charges late and over-limit fees as well as charges for returned
cheques and returned direct debits. Charges may also be made, to a lesser
extent, for copy statements and copy vouchers. Whilst Barclaycard does not
charge an annual fee on all products, annual fees can be up to [GBP]80 on those
products on which an annual fee is charged. Barclaycard also assesses a cash
advance fee which ranges from 1.5 per cent. to 2.5 per cent., with minimum
charges ranging from [GBP]2 to [GBP]2.50.
The finance charges on purchases assessed monthly are calculated by multiplying
the account's average daily purchase balance over the billing period by the
applicable monthly rate. Finance charges are calculated on purchases from the
date the purchase is debited to the relevant account. Monthly periodic finance
charges are not assessed on purchases if all balances shown in the billing
statement are paid by the date they are due. This is usually 25 days after the
billing date.
The finance charges on cash advances assessed monthly are calculated by
multiplying the account's average daily balance of cash advances over the
billing period by the applicable monthly rate. Finance charges are calculated
on cash advances from the date of the transaction -- except for cash advances
by use of credit card cheques, where finance charges are usually calculated
from the date the transaction is debited to the relevant account.
The interest rates on Barclaycard's credit card accounts may be changed by
Barclaycard and are not currently linked to any index. This is market practice
in the United Kingdom. At the moment, the standard annual percentage rate of
charge on accounts ranges from 9.9 to 24.9 per cent. (excluding introductory
offers). Barclaycard may sometimes offer temporary promotional rates.
Barclaycard also offers activation programs and other incentives.
Pricing decisions are based upon:
* actual and anticipated movements in underlying interest rates;
* marketing strategies and recruitment campaigns; and
* competitive environment.
English law does not prescribe a maximum rate that may be charged as interest
for a debt. However, the obligation to make interest payments will not be
enforceable to the extent that the interest rate is extortionate. An interest
rate will be extortionate if it requires the debtor or a relative of the debtor
to make payments -- whether unconditionally or on certain contingencies --
which are grossly exorbitant, or which otherwise grossly contravene ordinary
principles of fair dealing. Barclaycard believes that the interest rates
charged on its cards do not contravene any laws relating to extortionate credit
agreements.
DELINQUENCY AND LOSS EXPERIENCE
An account is contractually delinquent if the minimum payment is not received
by the due date indicated on the customer's statement. An account does not
actually become delinquent until a new customer statement is sent following a
missed payment on the account. Once an account is recognised as delinquent, the
account is electronically flagged as delinquent. The basis upon which the
account is transferred to a collections team within Barclaycard may include the
product type, the age of the account, the amount outstanding, the past
performance and behaviour score, and
47
any information that is available from external credit bureaus or Barclays
Bank. The collections team utilise a strategic decision making process to
determine the timing and type of contact that will be made to the customer in
respect of the delinquency.
Efforts to deal with delinquent receivables occur at each stage of delinquency.
Activities include statement messages, telephone calls, formal letters, SMS
Text Messages, calling cards, tele-messages and e-mail. This process is
normally completed after anywhere between 120 and 180 days of delinquency, at
which point an account is charged-off. Accounts are automatically charged off
at 180 days of delinquency unless there is specialist activity in place. An
account may be charged off before it is 180 days delinquent. This decision is
based upon an assessment of the likelihood of recovery and rehabilitation of
the individual account and may occur at any point in the process. In certain
circumstances, in particular where notification of bankruptcy or death is
received, charge-off is immediate. In addition, there are instances where
accounts are not charged-off after 180 days of delinquency because of the
presence of "specialist activities". Specialist activities include insurance
claims, authorised user disputes, voucher disputes and complaints. Barclaycard
may reduce the minimum repayment terms for an account and place the account on
a repayment program if it is believed that this would improve the likelihood of
returning the account to performing status.
As part of any recovery activity, accounts may be passed to external debt
collection agencies to seek recovery.
Once charged-off, the receivables are typically sold to debt collection
agencies to maximise recoveries. Post charge-off account rehabilitation may
occur where improved credit circumstances and significant recovery occurs.
However, charging privileges can only be re-instated once the cardholder has
been accepted for a new account.
The following tables set forth the delinquency and loss experience of
Barclaycard's securitised portfolio of VISA and MasterCard credit and charge
card accounts denominated in pounds sterling -- called the "securitised
portfolio" -- for each of the periods shown. The securitised portfolio includes
platinum, gold and classic VISA and MasterCard credit cards and the Premier
VISA charge card. The securitised portfolio currently does not include the
portfolio of credit card accounts acquired by Barclaycard with Barclays PLC's
purchase of Woolwich in October 2000 or the portfolio of credit card accounts
purchased from Providian's UK operations in April 2002 or the portfolio of
store card accounts purchased from Clydesdale Financial Services in May 2003.
Because the economic environment may change, we cannot assure you that the
delinquency and loss experience of the securitised portfolio will be the same
as the historical experience set forth below.
Delinquency statistics for 1997 and 1998 show accounts on repayments programs
under a separate heading and represent a month end position. Repayment programs
are arrangements that are made with customers who fall into financial
difficulty and are aimed at managing risk whilst maintaining a relationship
with the customer. Customers on repayment programs are subject to minimum
regular monthly payments.
Availability of analysis of repayment programs by delinquency cycle after 1998
means that accounts on repayment programs are reported as part of the normal
delinquency cycles for 1999, 2000, 2001, 2002 and 2003. The delinquency
statistics for these years are obtained from billing cycle information as
opposed to month end positions.
48
DELINQUENCY EXPERIENCE SECURITISED PORTFOLIO
As of 31 December 2003 As of 31 December 2002
Table Currency -- GBP Total Receivables Percentage of Total Receivables Percentage of
Total Receivables Total Receivables
Receivables Outstanding 8,809,951,299 8,134,903,782
Receivables Delinquent:
30-59 Days 207,010,453 2.35% 155,461,496 1.91%
60-89 Days 91,920,270 1.04% 66,573,436 0.82%
90-119 Days 60,220,345 0.68% 41,953,754 0.52%
120-149 Days 47,130,304 0.53% 26,300,258 0.32%
150 Days or more 37,899,670 0.43% 44,022,007 0.54%
----------------- ---------------- ----------------- ----------------
Total 444,181,042 5.04% 334,310,951 4.11%
================= ================ ================= ================
Repayment Program account
As of 31 December 2001 As of 31 December 2000
Table Currency -- GBP Total Receivables Percentage of Total Receivables Percentage of
Total Receivables Total Receivables
Receivables Outstanding 7,486,117,963 7,502,452,285
Receivables Delinquent:
30-59 Days 164,292,364 2.19% 189,371,628 2.52%
60-89 Days 83,167,801 1.11% 87,542,594 1.12%
90-119 Days 49,797,514 0.67% 47,189,100 0.63%
120-149 Days 30,585,515 0.41% 32,390,920 0.43%
150 Days or more 50,072,686 0.67% 38,501,570 0.51%
----------------- ---------------- ----------------- ----------------
Total 377,915,880 5.05% 394,995,812 5.26%
================= ================ ================= ================
Repayment Program account
As of 31 December 1999 As of 31 December 1998
Table Currency -- GBP Total Receivables Percentage of Total Receivables Percentage of
Total Receivables Total Receivables
Receivables Outstanding 6,494,394,988 5,497,050,076
Receivables Delinquent:
30-59 Days 168,547,680 2.60% 96,181,749 1.75%
60-89 Days 77,811,020 1.20% 48,349,021 0.88%
90-119 Days 42,074,473 0.65% 28,976,605 0.53%
120-149 Days 29,214,222 0.45% 19,732,893 0.36%
150 Days or more 66,768,145 1.03% 29,578,486 0.54%
----------------- ---------------- ----------------- ----------------
Total 384,415,541 5.92% 222,818,755 4.05%
================= ================ ================= ================
Repayment Program account 45,265,877 0.82%
As of 31 December 1997
Table Currency -- GBP Total Receivables Percentage of
Total Receivables
Receivables Outstanding 4,814,397,271
Receivables Delinquent:
30-59 Days 62,509,347 1.30%
60-89 Days 25,829,909 0.54%
90-119 Days 16,969,010 0.35%
120-149 Days 11,538,118 0.24%
150 Days or more 31,356,841 0.65%
----------------- ----------------
Total 148,203,226 3.08%
================= ================
Repayment Program account 21,156,286 0.44%
Notes
(1) Receivable and delinquent balances are as at the latest billing date
before the dates shown.
(2) Includes accounts on repayment program.
(3) Repayment Program information is compiled at latest account billing date.
49
LOSS EXPERIENCE SECURITISED PORTFOLIO
Year ended Year ended
Year ended 31 December 31 December
31 December 2003 2002 2001
Average Receivables Outstanding [GBP]8,274,113,241 [GBP]7,466,182,635 7,230,221,277
Total Gross charge-offs [GBP]419,075,172 [GBP]413,019,402 275,553,687
Recoveries [GBP]94,921,378 [GBP]83,583,630 67,564,936
Total net charge-offs [GBP]324,153,794 [GBP]329,435,772 207,988,751
Total net charge-offs as a percentage of average receivables outstanding 3.92% 4.41% 2.88%
Year ended Year ended Year ended
31 December 31 December 31 December
2000 1999 1998
Average Receivables Outstanding 6,835,091,131 5,830,909,491 4,993,628,117
Total Gross charge-offs 303,082,666 246,344,011 176,491,237
Recoveries 64,702,065 61,724,737 56,731,717
Total net charge-offs 238,380,601 184,619,274 119,759,520
Total net charge-offs as a percentage of average receivables outstanding 3.49% 3.17% 2.40%
Year ended
31 December 1997
Average Receivables Outstanding 4,356,173,242
Total Gross charge-offs 112,800,299
Recoveries 49,836,792
Total net charge-offs 62,963,507
Total net charge-offs as a percentage of average receivables outstanding 1.45%
Notes
(1) Average receivables outstanding is the average monthly receivable balance
during the periods indicated.
(2) Receivables are total receivables generated from the portfolio, finance
charges and principal. Also includes recoveries charged off before 23rd
November 1999.
50
THE RECEIVABLES
ASSIGNMENT OF RECEIVABLES TO THE RECEIVABLES TRUSTEE
Under the terms of a receivables securitisation agreement dated 23 November
1999 and amended and restated on 7 July 2000 -- which we will call the
"receivables securitisation agreement" -- Barclaycard as the initial transferor
offered on 23 November 1999 -- called the "initial closing date" -- to the
receivables trustee an assignment of all receivables that had arisen or would
arise in accounts originated under the designated product lines, where such
accounts were in existence on or before October 1999 -- called the "pool
selection date". Under the terms of a deed of assignment of receivables dated 7
July 2000, called the "Future Receivables Transfer", Barclaycard as initial
transferor assigned to the receivables trustee all receivables that would arise
on all accounts opened on or after 1 August 2000 on certain product lines
designated in the Future Receivables Transfer. An account of the initial
transferor will be designated as a "designated account" if the account has been
originated under and continues to conform to the credit card and charge card
products described in this prospectus, comes within a product line named in an
accepted offer or transfer and has not been identified on the initial
transferor's system as being excluded from such accepted offer or transfer.
Only credit and charge card products available to the transferor's individual
account holders may be designated.
Under the terms of the Future Receivables Transfer whenever Barclays creates a
new product line, Barclays will be able, if it so chooses, to allocate to that
product line one of the codes referred to in the Future Receivables Transfer,
being a code which has not previously been allocated to any product line. By
allocating, or not allocating, one of those codes to the new product line,
Barclays will be able to choose whether or not to nominate the receivables on
that product line as being included in the sale to the receivables trustee. If
Barclays chooses to make a nomination, it will be able to do so by allocating
one of the relevant product line codes to the product line in question. Once
one of the relevant product line codes has been attached to a particular
product line, all receivables arising thereafter on all accounts opened
thereafter on that product line will be included in the sale to the receivables
trustee in accordance with the terms of the receivables securitisation
agreement. Further, where Barclaycard acquires new portfolios of credit card
accounts, it can elect to transfer those portfolios onto one of the product
codes referred to in the Future Receivables Transfer, and if those accounts are
eligible, to designate those accounts and to include the receivables arising on
those accounts in the sale to the receivables trustee.
If for any reason there are receivables from designated accounts that cannot be
assigned to the receivables trustee, the transferor will hold those
receivables, and any collections on those receivables, on trust for the
receivables trustee. These collections will be treated as if the receivables
had been properly assigned.
Under the terms of the receivables securitisation agreement, the transferor
also has the right to select accounts that conform to the conditions in the
first paragraph above and that are not designated and nominate them to be
designated accounts by offering the receivables trustee an assignment of all
future and existing receivables in these accounts. These accounts are called
"additional accounts". An additional account will be treated as a designated
account from the date on which its receivables are offered to the receivables
trustee, assuming that such offer is accepted. This date is called the
"addition date". When additional accounts are nominated the transferor must,
amongst other things:
* provide the receivables trustee with a certificate stating that it is
solvent;
* confirm, in the document that offers to assign the receivables in the
additional accounts to the receivables trustee, that:
(1) the offer of the receivables in the additional accounts meets the
Maximum Addition Amount criteria; or
(2) if the offer does not meet the Maximum Addition Amount criteria,
the rating agencies have confirmed that the designation of
additional accounts will not result in a reduction or withdrawal of
the current rating of any outstanding debt that is secured directly
or indirectly by the receivables in the receivables trust,
including your notes.
* obtain a legal opinion addressed to the receivables trustee about any
receivables from a jurisdiction outside of the United Kingdom.
51
* in relation to a nomination made in accordance with the terms of the
Future Receivables Transfer, obtain a legal opinion addressed to the
receivables trustee in respect of the Future Receivables Transfer in a
form satisfactory to the receivables trustee.
Any of these preconditions may be waived by the receivables trustee if the
rating agencies confirm in writing that the waiver will not result in the
reduction or withdrawal of their rating on any related beneficiary debt. At the
time that it is nominated, each additional account must also meet the
eligibility criteria as at the time of its designation. These criteria are
explained in "-- Representations" below. Additional accounts may have been
originated or purchased using underwriting standards that are different from
the underwriting standards used by Barclaycard in selecting the original
designated accounts. As a result, additional accounts that are selected in
future may not have the same credit quality.
"Maximum Addition Amount" means, for any addition date, the number of
additional accounts originated by the transferor after the pool selection date
and nominated as additional accounts without prior rating agency confirmation
that would either:
* for any three consecutive monthly periods starting with the monthly
period beginning on the first day of the month before the pool selection
date, exceed 15 per cent. of the number of designated accounts at the end
of the ninth monthly period before the start of such three monthly
periods;
* for any twelve-month period, be equal to 20 per cent. of the designated
accounts as of the first day of the twelve-month period, or if later, as
of the pool selection date.
Notwithstanding what we just said, if the total principal balance of
receivables in the additional accounts described in either of the two prior
bullet points is more than either:
(1) 15 per cent. of the total amount of eligible principal receivables
determined as of the later of the pool selection date and the first day
of the third preceding monthly period, minus the amount of eligible
principal receivables in each additional account that was nominated since
the later of the initial closing date and the first day of the third
preceding monthly period -- calculated for each additional account on its
addition date; or
(2) 20 per cent. of the total amount of eligible principal receivables as of
the later of the initial closing date and the first day of the calendar
year in which the addition date occurs, minus the total amount of
eligible principal receivables in each additional account that was
nominated since the later of the initial closing date and the first day
of the calendar year, calculated for each additional account as of its
addition date,
then the Maximum Addition Amount will be the lesser of (1) or (2) above.
Every offer of receivables to the receivables trustee under the receivables
securitisation agreement will comprise offers of the following:
* all existing receivables in the designated accounts;
* all future principal receivables under the designated accounts, until the
first to occur of (1) the time a designated account becomes a
redesignated account, (2) the receivables trust is terminated or (3) an
Insolvency Event occurs;
* all future finance charge receivables under those designated accounts
that have accrued on receivables that have been assigned to the
receivables trustee as described in the two prior bullet points;
* if capable of being assigned, the benefit of any guarantee or insurance
policy obtained by the transferor for any obligations owed by a
cardholder on a designated account; and
* the benefit of all amounts representing Acquired Interchange for the
relevant monthly period.
The transferor will ensure that each redesignated account is identified on the
transferor's computer system on the date that a designated account becomes a
redesignated account.
Throughout the term of the receivables trust, the designated accounts from
which the receivables will arise will be the designated accounts plus any
additional accounts designated by the transferor from time to time, minus any
redesignated accounts.
Existing receivables and future receivables arising under the designated
accounts are either principal receivables or finance charge receivables.
"Principal receivables" are receivables that are not finance charge
receivables. Principal receivables are amounts owing by cardholders for the
purchase of
52
merchandise or services and from cash advances, including foreign exchange
commissions charged for merchandise and services payable, or cash advances
denominated in, a currency other than sterling. They are reduced by any credit
balance on the designated account on that day.
"Finance charge receivables" are amounts owing from cardholders for transaction
fees, periodic finance charges, special fees and annual fees -- see "-- Special
Fees and Annual Fees" below -- and any interchange and Discount Option
Receivables.
Under the receivables securitisation agreement, each offer of receivables made
by the transferor may be accepted by paying the purchase price for the offered
receivables. If the receivables trustee chooses to accept the offer, payment
for existing receivables has to be made no later than the business day
following the date on which the offer is made. Alternatively, the parties can
agree to a longer period of time for payment. Payment for future receivables
that become existing receivables must be made no later than two business days
after the date of processing for those receivables. Alternatively, the parties
can agree to a longer period if the rating agencies consent. Payment is made
monthly for the assignment of the benefit of Acquired Interchange to the
receivables trustee.
A "business day" is a day other than a Saturday, a Sunday or a day on which
banking institutions in London, England, or New York, New York are authorised
or obliged by law or executive order to be closed.
It was agreed between the transferor and the receivables trustee that, for the
purposes of the offer made on the initial closing date:
(1) the receivables trustee was entitled to use the collections in the
designated accounts before the date that the offer was accepted as if the
offer had been accepted on the initial closing date;
(2) the amount paid on the initial closing date for the designated accounts
equalled the outstanding face amount of all existing principal
receivables, together with an obligation of the receivables trustee to
pay for all future receivables generated on the designated accounts that
were part of the offer on an ongoing, daily basis when those future
receivables are generated.
The payments in (2) are net of any payments made in (1), subject to a minimum
of [GBP]1.
The amount payable by the receivables trustee to the transferor if it chooses
to accept an offer or to make payment for any future receivables will be
reduced by the amount of any shortfall in the amount funded by the transferor
as a beneficiary, providing that the Transferor Interest is increased
accordingly.
REDESIGNATION AND REMOVAL OF ACCOUNTS
Each designated account will continue to be a designated account until such
time as the transferor reclassifies it as being no longer a designated account
- -- called a "redesignated account".
A designated account becomes a redesignated account on the date specified by
the transferor. No designated account will become a redesignated account this
way unless (1) it has become a cancelled account, a defaulted account or a zero
balance account or (2) the transferor delivers an officer's certificate
confirming the following conditions are satisfied:
* the redesignation will not cause a Pay Out Event to occur;
* the transferor has represented that its selection procedures for the
selection of designated accounts for redesignation are not believed to
have any material adverse effect on any investor beneficiary;
* the rating agencies have confirmed that the action will not result in a
downgrade in rating of any outstanding debt that is secured directly or
indirectly by the receivables in the receivables trust; and
* the transferor and the servicer can certify that collections equal to the
outstanding face amount of each principal receivable and the outstanding
balance of each finance charge receivable have been received by the
receivables trustee on all receivables assigned for that account other
than any receivables charged off as uncollectable.
A "cancelled account" is a designated account that has had its charging
privileges permanently withdrawn. A "defaulted account" is a designated account
where the receivables have been charged off by the servicer as uncollectable in
line with the credit and charge card guidelines or the usual servicing
procedures of the servicer for similar credit and charge card accounts. A "zero
balance
53
account" is a designated account that has had a nil balance of receivables for
a considerable period of time and has been identified by the servicer as a zero
balance account under the credit and charge card guidelines or the usual
servicing procedures of the servicer.
Redesignated accounts include all accounts that become cancelled accounts,
defaulted accounts and zero balance accounts from the date on which they are
redesignated in any of these ways. The principal receivables that exist before
the date of redesignation will be paid for by the receivables trustee. Any
future receivables that come into existence after that time will not be
assigned to the receivables trustee as set out in the receivables
securitisation agreement. No receivable that has been assigned to the
receivables trustee will be reassigned to the transferor except in the limited
circumstances described under the heading "-- Representations".
Until money has been received for the assigned receivables that have not been
charged off, a redesignated account will not be identified as having been
removed. The amount identified will be equal to the outstanding face amount of
each principal receivable and finance charge receivable. Once these payments
have been received or any reassignment has occurred, the account will be
identified to indicate that it has become a redesignated account.
DISCOUNT OPTION RECEIVABLES
The transferor may, by giving at least thirty days' prior notice to the
servicer, the receivables trustee and the rating agencies, nominate a fixed or
variable percentage -- called the "Discount Percentage" -- of principal
receivables in the designated accounts. If a Discount Percentage has been
nominated previously, an extension to the period for which it applies can be
applied for in the same way. From the date and for the length of time stated in
the notice:
* the amount payable by the receivables trustee to accept an offer of
receivables will be reduced by a percentage amount equal to the Discount
Percentage; and
* a percentage of the principal receivables equal to the Discount
Percentage will be treated by the receivables trustee as finance charge
receivables. These are called "Discount Option Receivables".
The nomination of a Discount Percentage or increase in the time it is in place
will be effective only if the rating agencies consent to the proposed
nomination or increase and confirm that it will not result in the downgrade or
withdrawal of the current rating of any debt that is secured directly or
indirectly by the receivables in the receivables trust, including your notes.
The transferor must also provide the receivables trustee with a certificate
confirming:
* that the performance of the portfolio of designated accounts, in their
reasonable opinion, is not generating adequate cash flows for the
beneficiaries of the receivables trust and the size of the Discount
Percentage is not intended solely to accelerate distributions to the
excess interest beneficiary; and
* that the transferor is solvent and will remain so following the
nomination or increase.
The transferor may have different reasons to designate a Discount Percentage.
The finance charge collections on the designated accounts may decline for
various reasons or may stay constant. The notes have interest rates that are
variable and that could increase. Any of these variables could cause a Series
04-1 Pay Out Event to occur based in part on the amount of finance charge
collections and the interest rate on the notes. The transferor could avoid the
occurrence of this Series 04-1 Pay Out Event by designating a Discount
Percentage, causing an increase in the amount of finance charge collections.
The transferor, however, is under no obligation to designate a Discount
Percentage and we cannot assure you that the transferor would designate a
Discount Percentage to avoid a Series 04-1 Pay Out Event.
SPECIAL FEES AND ANNUAL FEES
The transferor charges special fees -- currently late and over limit fees -- on
its credit or charge card accounts. These special fees as well as additional
special fees may be assessed at one time or on an ongoing basis. Certain of the
receivables assigned or to be assigned to the receivables trustee include
annual fees on a small number of the designated accounts. Any special fees and
annual fees that are charged on designated accounts are regarded as finance
charge receivables and collections of these special fees are treated as finance
charge collections. The transferor may, however, decide that these special fees
or annual fees will be viewed as principal receivables and collections on them
54
will be allocated accordingly. This can be done only if the transferor
certifies that it has an opinion from legal counsel that the special fees or
annual fees amount to repayment, for United Kingdom tax purposes, in whole or
in part of an advance to a cardholder.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive fees
called "interchange" as partial compensation, for amongst other things, taking
credit risk and absorbing fraud losses. Under the VISA and MasterCard systems,
interchange is passed from the banks that clear the transactions for merchants
to card issuing banks. Interchange fees are calculated as a percentage of the
amount of a credit or charge card transaction for the purchase of goods or
services. This percentage varies from time to time.
On each transfer date the transferor will deposit into the Trustee Collection
Account an amount equal to the interchange received for the preceding monthly
period. This amount is called the "Acquired Interchange". Interchange is
received by Barclaycard on a daily basis and is posted to the general ledger
with a flag identifying the product to which it relates. The amount of Acquired
Interchange applicable to the receivables in the trust is arrived at monthly by
interrogation of the general ledger. All interchange relating to products
included in the trust is extracted and posted to the Trustee Collection
Account.
REDUCTIONS IN RECEIVABLES, EARLY COLLECTIONS AND CREDIT ADJUSTMENTS
If a principal receivable that has been assigned to the receivables trustee is
reduced -- for reasons other than because of Section 75 of the Consumer Credit
Act or a credit adjustment -- after the offer date because of set-off,
counterclaim or any other matter between the cardholder and the transferor, and
the transferor has received a benefit, then the transferor will pay an amount
equal to that reduction to the receivables trustee. Similarly, if an existing
receivable has already been assigned and the transferor has received full or
partial payment of that receivable before the date that the receivable was
purportedly assigned, then the transferor will pay the amount of that
collection to the receivables trustee.
If any principal receivable assigned to the receivables trustee is reduced for
credit adjustment reasons after the offer date, then the transferor will pay
that amount to the receivables trustee. A credit adjustment is the outstanding
face amount of a principal receivable that:
* was created by virtue of a sale of merchandise that was subsequently
refused or returned by a cardholder or against which the cardholder has
asserted any defence, dispute, set-off or counterclaim;
* is reduced because the cardholder had received a rebate, refund, charge-
back or adjustment; or
* is fraudulent or counterfeit.
Alternatively, instead of paying these amounts to the receivables trustee, the
transferor can reduce the Transferor Interest by the amount of the credit
adjustment, but not below zero.
REPRESENTATIONS
Each offer of receivables to the receivables trustee under the receivables
securitisation agreement and the Future Receivables Transfer includes
representations by the transferor about the offer or transfer of the existing
receivables and the future receivables. The representations for the existing
receivables were or will be given as of the pool selection date or an addition
date, as applicable, and the representations for the future receivables are
given on the date they are processed, and include, in each case, that:
* unless identified as an ineligible receivable, the receivable is an
eligible receivable and has arisen from an eligible account in the amount
specified in the offer or daily activity report, as applicable;
* each assignment passes good and marketable title for that receivable to
the receivables trustee, together with the benefit of all collections and
other rights in connection with it, free from encumbrances of any person
claiming on it through the transferor to the receivables and, unless such
receivable does not comply with the Consumer Credit Act, nothing further
needs to be done to enforce these rights in the courts of England and
Wales, Scotland or
55
Northern Ireland, or any permitted additional jurisdiction, without the
participation of the transferor, except for payment of any United Kingdom
stamp duty and giving a notice of assignment to the cardholders and
subject to any limitations arising on enforcement in the jurisdiction of
the relevant cardholder;
* the assignment complies with all applicable laws on the date of
assignment; and
If a representation relating to the eligibility criteria given in connection
with any principal receivable proves to be incorrect when made, then the
transferor is obliged to pay the receivables trustee an amount equal to the
face value of that receivable on the following business day. A receivable of
this type will afterwards be treated as an ineligible receivable.
The transferor's obligation to pay amounts due as a result of any breach of a
representation can be fulfilled, in whole or in part, by a reduction in the
amount of the Transferor Interest. The Transferor Interest, however, may not be
reduced below zero. If the transferor meets a payment obligation in this way,
the receivables trustee will have no further claim against the transferor for
the breached representation. However, a breach of a representation may result
in a Series 04-1 Pay Out Event.
If:
* all principal receivables arising under a designated account become
ineligible as a result of incorrect representations;
* that account has become a redesignated account; and
* the transferor has complied with the payment obligations for the
principal receivables;
then the transferor can require the receivables trustee to reassign all those
receivables to the transferor.
The receivables trustee has not made and will not make any initial or periodic
examination of the receivables to determine if they are eligible receivables or
if the transferor's representations and warranties are true.
The term "eligible account" means, as of the pool selection date, an addition
date or date on which the account is opened, as applicable, a credit or charge
card account:
* where the cardholder is not a company or partnership for the purposes of
Section 349(2) of the Income and Corporation Taxes Act 1988;
* which, except in the case of a future designated account as defined in
any offer or a relevant account as defined in the Future Receivables
Transfer, was in existence and maintained with the transferor before it
became a designated account;
* which is payable in pounds sterling or the currency of the permitted
additional jurisdiction where the account is in a permitted additional
jurisdiction, as applicable;
* which is governed by one of the transferor's standard form card
agreements or, if it was acquired by the transferor, it is originated on
contractual terms not materially different from that standard form;
* which is governed in whole or in part by the Consumer Credit Act and
creates legal, valid and binding obligations between the transferor and
the cardholder which, except in the case of an account on which
restricted eligible receivables arise, is enforceable against the
cardholder in accordance with the relevant card agreement and the
Consumer Credit Act, subject to bankruptcy laws, general principles of
equity and limitations on enforcement in any cardholder jurisdiction and
was otherwise created and complies with all other applicable laws;
* where the cardholder's most recent billing address is located in England,
Wales, Scotland, Northern Ireland, or a permitted additional jurisdiction
or a restricted additional jurisdiction;
* which has not been classified by the transferor as counterfeit,
cancelled, fraudulent, stolen or lost;
* which has been originated or purchased by the transferor;
* which has been operated in all material respects in accordance with the
transferor's policies and procedures and usual practices for the
operation of its credit and charge card business; and
* the receivables in respect of which have not been charged off by the
transferor on the date the account is specified as a designated account.
56
If all these conditions have not been satisfied, then an account may still be
an eligible account if each rating agency gives their approval.
A "restricted eligible receivable" is a receivable arising on an eligible
account, the terms of which fail to comply with the Consumer Credit Act, such
that a court would have no discretion to grant a court order.
A "defaulted receivable" is any receivable in a defaulted account.
A "permitted additional jurisdiction" is a jurisdiction -- other than England
and Wales, Scotland and Northern Ireland -- agreed by the transferor and the
receivables trustee, and which each rating agency has confirmed in writing that
its inclusion as a permitted additional jurisdiction will not result in its
withdrawing or reducing its rating on any related beneficiary debt.
A "restricted additional jurisdiction" is a jurisdiction -- other than England,
Wales, Scotland and Northern Ireland or a permitted additional jurisdiction --
which together with each other account with a billing address in that
jurisdiction and any other jurisdiction other than England, Wales, Scotland,
Northern Ireland or a permitted additional jurisdiction represent less than 5
per cent. by outstanding receivables balance.
A "notice of assignment" means a notice given to a cardholder of the assignment
of the receivables -- and the benefit of any guarantees -- to the receivables
trustee.
An "eligible receivable" means a receivable that:
* has arisen under an eligible account;
* was originated under one of the transferor's standard form credit or
charge card agreements and is governed, in whole or in part, by the
Consumer Credit Act, or else, if the related account was acquired by the
transferor, contractual terms that are materially the same as the
standard form credit or charge card agreements and are governed, in whole
or in part, by the Consumer Credit Act;
* was otherwise created in compliance with all other applicable laws;
* was originated in accordance with the transferor's policies and
procedures and usual practices for its credit and charge card business;
* is not a defaulted receivable as at the offer date or addition date, as
applicable;
* is free of any encumbrances exercisable against the transferor arising
under or through the transferor or any of its affiliates;
* to which the transferor has good and marketable title;
* is the legal obligation of the cardholder, enforceable -- except in the
case of restricted eligible receivables -- in accordance with the terms
of the credit or charge card agreement, subject to bankruptcy, general
principles of equity and limitations on enforcement in any cardholder
jurisdiction; and
* is not currently subject to any defence, dispute, event, set-off,
counterclaim or enforcement order.
As is market practice in the United Kingdom for credit and charge card
securitisation transactions, principal receivables that are delinquent will
still constitute eligible receivables if they comply with the eligibility
requirements. See the table captioned "Delinquency Experience -- Securitised
Portfolio" in "Barclaycard and the Barclaycard Card Portfolio -- Delinquency
and Loss Experience" above for data showing the percentage of delinquent
receivables.
"Ineligible receivables" means principal receivables which arise under a
designated account but which do not comply with all the criteria set out in the
definition of eligible receivables as at the pool selection date or an addition
date, as applicable.
AMENDMENTS TO CARD AGREEMENTS AND CARD GUIDELINES
The transferor may amend the terms and conditions of its standard form card
agreements or change its policies and procedures and usual practices for its
general card business. These amendments may include reducing or increasing the
amount of monthly minimum required payments required or may involve changes to
periodic finance charges or other charges that would
57
apply to the designated accounts. See "Risk Factors: A Change in the Terms of
the Receivables May Adversely Affect the Amount or Timing of Collections and
May Cause an Early Redemption of Your Notes or a Downgrade of Your Notes".
SUMMARY OF SECURITISED PORTFOLIO
The tables that follow summarise the securitised portfolio by various criteria
as of the billing dates of accounts in the month ending on 31 December 2003.
Because the future composition of the securitised portfolio may change over
time, these tables are not necessarily indicative of the composition of the
securitised portfolio at any time after 31 December 2003.
58
COMPOSITION BY ACCOUNT BALANCE
SECURITISED PORTFOLIO
Balance Banding Total Number of Accounts Percentage of Total Number of Accounts Receivables
Credit Balance 341,755 3.7% ([GBP]19,692,210)
Nil Balance 2,827,452 30.9% [GBP]0
[GBP]0.01 to [GBP]5,000.00 5,614,188 61.4% [GBP]5,842,156,140
[GBP]5,000.01 to [GBP]10,000.00 331,208 3.6% [GBP]2,258,958,801
[GBP]10,000.01 to [GBP]15,000.00 32,147 0.4% [GBP]365,398,211
[GBP]15,000.01 to [GBP]20,000.00 2,884 0.0% [GBP]48,726,380
[GBP]20,000.01 to [GBP]25,000.00 843 0.0% [GBP]18,670,354
[GBP]25,000.01 and over 383 0.0% [GBP]12,518,571
------------------------ -------------------------------------- ------------------
Grand Total 9,150,860 100.0% [GBP]8,526,736,246
======================== ====================================== ==================
Balance Banding Percentage of Total Receivables
Credit Balance (0.2)%
Nil Balance 0.0%
[GBP]0.01 to [GBP]5,000.00 68.5%
[GBP]5,000.01 to [GBP]10,000.00 26.5%
[GBP]10,000.01 to [GBP]15,000.00 4.3%
[GBP]15,000.01 to [GBP]20,000.00 0.6%
[GBP]20,000.01 to [GBP]25,000.00 0.2%
[GBP]25,000.01 and over 0.1%
-------------------------------
Grand Total 100.0%
===============================
COMPOSITION BY CREDIT LIMIT
SECURITISED PORTFOLIO
Credit Limit Total Number of Accounts Percentage of Total Number of Accounts Receivables
Up to [GBP]500.00 1,076,155 11.8% [GBP]201,636,541
[GBP]500.01 to [GBP]1,000.00 956,166 10.4% [GBP]288,737,495
[GBP]1,000.01 to [GBP]1,500.00 778,697 8.5% [GBP]276,011,960
[GBP]1,500.01 to [GBP]2,000.00 587,667 6.4% [GBP]349,459,787
[GBP]2,000.01 to [GBP]2,500.00 665,414 7.3% [GBP]340,973,882
[GBP]2,500.01 to [GBP]3,000.00 816,730 8.9% [GBP]439,290,956
[GBP]3,000.01 to [GBP]3,500.00 823,483 9.0% [GBP]539,152,481
[GBP]3,500.01 to [GBP]4,000.00 641,354 7.0% [GBP]515,912,046
[GBP]4,000.01 to [GBP]4,500.00 392,215 4.3% [GBP]397,878,001
[GBP]4,500.01 to [GBP]5,000.00 390,559 4.3% [GBP]449,944,012
[GBP]5,000.01 to [GBP]10,000.00 1,741,232 19.0% [GBP]3,623,382,054
[GBP]10,000.01 to [GBP]15,000.00 236,454 2.6% [GBP]925,812,231
[GBP]15,000.01 to [GBP]20,000.00 33,902 0.4% [GBP]117,475,584
[GBP]20,000.01 to [GBP]25,000.00 7,740 0.1% [GBP]41,111,661
[GBP]25,000.01 and over 3,092 0.0% [GBP]19,957,555
------------------------ -------------------------------------- ------------------
Grand Total 9,150,860 100.0% [GBP]8,526,736,246
======================== ====================================== ==================
Credit Limit Percentage of Total Receivables
Up to [GBP]500.00 2.4%
[GBP]500.01 to [GBP]1,000.00 3.4%
[GBP]1,000.01 to [GBP]1,500.00 3.2%
[GBP]1,500.01 to [GBP]2,000.00 4.1%
[GBP]2,000.01 to [GBP]2,500.00 4.0%
[GBP]2,500.01 to [GBP]3,000.00 5.2%
[GBP]3,000.01 to [GBP]3,500.00 6.3%
[GBP]3,500.01 to [GBP]4,000.00 6.1%
[GBP]4,000.01 to [GBP]4,500.00 4.7%
[GBP]4,500.01 to [GBP]5,000.00 5.3%
[GBP]5,000.01 to [GBP]10,000.00 42.5%
[GBP]10,000.01 to [GBP]15,000.00 10.9%
[GBP]15,000.01 to [GBP]20,000.00 1.4%
[GBP]20,000.01 to [GBP]25,000.00 0.5%
[GBP]25,000.01 and over 0.2%
-------------------------------
Grand Total 100.0%
===============================
59
COMPOSITION BY ACCOUNT AGE
SECURITISED PORTFOLIO
Account Age Total Number of Accounts Percentage of Total Number of Accounts Receivables
0 to 3 Months 300,984 3.3% [GBP]253,539,114
3 to 6 months 358,121 3.9% [GBP]373,410,128
6 to 9 months 264,857 2.9% [GBP]253,617,361
9 to 12 months 240,611 2.6% [GBP]175,302,156
12 to 15 months 274,364 3.0% [GBP]178,603,318
15 to 18 months 234,985 2.6% [GBP]158,993,380
18 to 21 months 213,759 2.3% [GBP]156,860,625
21 to 24 months 204,156 2.2% [GBP]149,038,610
2 to 3 years 569,603 6.2% [GBP]422,906,520
3 to 4 years 580,371 6.3% [GBP]542,210,295
4 to 5 years 487,268 5.3% [GBP]457,950,287
5 to 10 years 1,740,759 19.0% [GBP]1,792,010,857
Over 10 years 3,681,022 40.2% [GBP]3,612,293,597
------------------------ -------------------------------------- ------------------
Grand Total 9,150,860 100.0% [GBP]8,526,736,246
======================== ====================================== ==================
Account Age Percentage of Total Receivables
0 to 3 Months 3.0%
3 to 6 months 4.4%
6 to 9 months 3.0%
9 to 12 months 2.1%
12 to 15 months 2.1%
15 to 18 months 1.9%
18 to 21 months 1.8%
21 to 24 months 1.7%
2 to 3 years 5.0%
3 to 4 years 6.4%
4 to 5 years 5.4%
5 to 10 years 21.0%
Over 10 years 42.4%
-------------------------------
Grand Total 100.0%
===============================
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
SECURITISED PORTFOLIO
Region Total Number Of Accounts Percentage Of Total Number Of Accounts Receivables
East 1,048,882 11.5% [GBP]975,743,887
East Midlands 541,001 5.9% [GBP]509,853,829
London 1,622,573 17.7% [GBP]1,586,074,570
North East 485,643 5.3% [GBP]435,054,702
North West 818,706 8.9% [GBP]752,844,950
Northern Ireland 86,963 1.0% [GBP]89,179,146
Rest of UK 38,953 0.4% [GBP]39,221,206
Scotland 290,117 3.2% [GBP]320,355,921
South East 1,444,417 15.8% [GBP]1,409,702,877
South West 744,303 8.1% [GBP]677,696,193
Wales 413,127 4.5% [GBP]348,064,062
West Midlands 739,084 8.1% [GBP]656,038,444
Yorks & Humb 553,571 6.0% [GBP]514,584,135
Unknown Postcode 124,438 1.4% [GBP]94,288,494
Non UK 199,082 2.2% [GBP]118,033,832
------------------------ -------------------------------------- ------------------
Grand Total 9,150,860 100.0% [GBP]8,526,736,246
======================== ====================================== ==================
Region Percentage Of Total Receivables
East 11.4%
East Midlands 6.0%
London 18.6%
North East 5.1%
North West 8.8%
Northern Ireland 1.0%
Rest of UK 0.5%
Scotland 3.8%
South East 16.5%
South West 7.9%
Wales 4.1%
West Midlands 7.7%
Yorks & Humb 6.0%
Unknown Postcode 1.1%
Non UK 1.4%
-------------------------------
Grand Total 100.0%
===============================
60
MATURITY ASSUMPTIONS
On each transfer date during the Controlled Accumulation Period an amount equal
to the Controlled Deposit Amount will be deposited in the Principal Funding
Account until the balance of the Principal Funding Account equals the Investor
Interest. Although it is anticipated that principal collections will be
available on each transfer date during the Controlled Accumulation Period to
make a deposit of the Controlled Deposit Amount and that the Investor Interest
will be paid to the MTN Issuer on the series 04-1 scheduled redemption date,
allowing the MTN Issuer to redeem the series 04-1 medium term note certificate
fully, no assurance can be given that sufficient principal collections will be
available. If the amount required to pay the Investor Interest in full is not
available on the series 04-1 scheduled redemption date, a Series 04-1 Pay Out
Event will occur and the Rapid Amortisation Period will begin.
If a Regulated Amortisation Trigger Event occurs during the Controlled
Accumulation Period, the Regulated Amortisation Period will begin. If any other
Pay Out Event occurs during the Controlled Accumulation Period, the Rapid
Amortisation Period will begin. In each case, any amount on deposit in the
Principal Funding Account will be paid to the MTN Issuer for the Investor
Interest on the first payment date relating to the Regulated Amortisation
Period or the Rapid Amortisation Period. In addition, to the extent that the
Investor Interest for each class has not been distributed in full, the MTN
Issuer will be entitled to monthly distributions of principal collections
during the Rapid Amortisation Period equal to the Available Investor Principal
Collections until the Investor Interest has been distributed in full or, during
the Regulated Amortisation Period, an amount equal to the Controlled Deposit
Amount until the Investor Interest has been distributed in full. A Pay Out
Event occurs, either automatically or after specified notice, after a Trust Pay
Out Event or a Series 04-1 Pay Out Event occurs. See "The Receivables Trust:
Trust Pay Out Events" and "Series 04-1: Series 04-1 Pay Out Events". If a
Series 04-1 Pay Out Event occurs, it will automatically trigger an early
redemption event under the series 04-1 medium term note certificate.
The following table presents the highest and lowest cardholder monthly payment
rates for the bank portfolio during any month in the period shown and the
average cardholder monthly payment rates for all months during the periods
shown. These are calculated as a percentage of total opening receivables
balances during the periods shown. The payment rates are based on amounts which
would be deemed payments of principal collections and finance charge
collections for the related accounts.
CARDHOLDER MONTHLY PAYMENT RATES
SECURITISED PORTFOLIO
Year ended 31 December
2003 2002 2001 2000 1999 1998 1997
Lowest Month 20.68% 19.61% 20.83% 21.16% 22.01% 25.09% 26.64%
Highest Month 24.84% 26.26% 26.34% 26.09% 28.94% 31.02% 36.47%
Monthly Average 22.79% 22.97% 23.42% 23.91% 25.74% 28.80% 32.01%
Collections may vary from month to month due to:
* seasonal variations;
* promotional offerings -- such as payment holidays;
* general economic conditions; and
* payment habits of individual cardholders.
There is no guarantee that the future monthly payment rates for the securitised
portfolio will be similar to the historical experience set forth in the table
above or that there will be enough principal collections to deposit the
Controlled Deposit Amount into the Principal Funding Account each month to
fully redeem your notes by the series 04-1 scheduled redemption date. If a Pay
Out Event occurs, the average life and maturity of your notes could be
significantly reduced, since you may start receiving principal distributions
before the series 04-1 scheduled redemption date.
Because there may be a slowdown in the payment rate below the payment rates
used to determine the Controlled Deposit Amount or a Pay Out Event may occur
which would start the Rapid Amortisation Period or the Regulated Amortisation
Period, there is no guarantee that the actual
61
number of months elapsed from the closing date to the final distribution date
for your notes will equal the expected number of months. As described under
"Series 04-1: Postponement of Controlled Accumulation Period", if the servicer
shortens the Controlled Accumulation Period there is no guarantee that there
will be enough time to accumulate all amounts necessary to fully pay the
Investor Interest on the series 04-1 scheduled redemption date. See "Risk
Factors: Principal on your Notes May Be Paid Earlier Than Expected Creating a
Reinvestment Risk to You or Later than Expected".
RECEIVABLES YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
portfolio of credit and charge card accounts for the twelve months ended 31
December 2003 and for each of the calendar years ended 31 December, 2002, 31
December, 2001, 31 December, 2000, 31 December, 1999, 31 December, 1998 and 31
December, 1997 are presented in the following table below, except that the
yield for the calendar years ended 31 December 1999, 31 December 1998 and 31
December 1997 are accruals based and the data after 31 December 1999 is cash
based to reflect that calendar year 2000 is the first full year of the
receivables trust.
Prior to the creation of the receivables trust, Barclaycard recorded yield
information on an accruals basis, which includes earned but not necessarily
paid finance charges and fees. A system change to allocate cash in priority
against finance charges ahead of principal was made in October 1999. This
resulted in increased yield in 2000. Cash yields from 2000 onwards include
principal and interest recovered on charged-off accounts, which typically
results in higher cash yields than accrual yields. The yield on both an accrual
and a cash basis will be affected by many factors, including the monthly
periodic finance charges on the receivables, the amount of the annual fees and
other fees, changes in the delinquency rate on the receivables and the
percentage of cardholders who pay their balances in full each month and do not
incur monthly periodic finance charges. For example, the transferor could
change the monthly interest rate applied to the accounts or reduce or eliminate
fees on the accounts. See "Risk Factor: A Change in the Terms of the
Receivables May Adversely Affect the Amount or Timing of Collections and May
Cause an Early Redemption or a Downgrade of Your Notes".
The following tables set forth the revenue for the securitised portfolio of
card accounts. The revenue is comprised of monthly periodic finance charges,
card fees, special fees, annual fees and interchange. These revenues vary for
each account based on the type and volume of activity for each account. See
"Barclaycard and the Barclaycard Card Portfolio".
62
CARDHOLDER MONTHLY ACCRUED YIELDS BANK PORTFOLIO
Year Ended Year Ended Year Ended Year Ended
31 December 31 December 31 December 31 December
2003 2002 2001 2000
Finance charges and fees(1)(2) [GBP]1,314,105,516 [GBP]1,243,628,614 [GBP]1,247,138,637 [GBP]1,413,692,116
Average receivables outstanding3 [GBP]8,274,113,241 [GBP]7,466,182,635 [GBP]7,230,221,277 [GBP]6,835,091,131
Yield from finance charges and fees4 15.88% 16.66% 17.25% 20.68%
Interchange [GBP]191,405,583 [GBP]187,437,923 [GBP]186,525,567 [GBP]183,408,157
Yield from interchange(5) 2.31% 2.51% 2.58% 2.68%
Yield from finance charges, fees and interchange 18.20% 19.17% 19.83% 23.37%
Year Ended Year Ended Year Ended
31 December 31 December 31 December
1999 1998 1997
Finance charges and fees(1)(2) [GBP]892,725,062 [GBP]863,715,430 [GBP]759,622,104
Average receivables outstanding3 [GBP]5,830,909,491 [GBP]4,993,628,117 [GBP]4,356,173,242
Yield from finance charges and fees4 15.31% 17.30% 17.44%
Interchange [GBP]175,240,543 [GBP]169,283,993 [GBP]164,663,349
Yield from interchange(5) 3.01% 3.39% 3.78%
Yield from finance charges, fees and interchange 18.32% 20.69% 21.22%
Revenues vary for each account based on type and volume of activity for each
account. See "Barclaycard and the Barclaycard Portfolio".
Notes
(1) Finance charges and fees are comprised of monthly periodic finance
charges, annual fees and other card fees.
(2) Accrued finance charges and fees are presented net of adjustments made
pursuant to Barclaycard's normal servicing procedures.
(3) Average receivables outstanding is the average monthly receivable balance
during the periods indicated.
(4) Yield from finance charges and fees is the result of dividing the accrued
finance charges and fees by the average receivables outstanding for the
period.
(5) Yield from interchange is the result of dividing revenue attributable to
interchange received during the period by the average outstanding for the
period.
63
THE RECEIVABLES TRUST
GENERAL LEGAL STRUCTURE
The receivables trust was constituted on 1 November 1999 and is a trust formed
under English law by the receivables trustee as trustee and Barclays as trust
cash manager, initial transferor, transferor beneficiary and excess interest
beneficiary. The receivables trust was declared for the financings described in
this prospectus. The terms and conditions of the receivables trust are
contained in the declaration of trust dated 1 November 1999 as amended and
restated by the declaration of trust and trust cash management agreement dated
23 November 1999, and supplemented by the series supplements to the declaration
of trust and trust cash management agreement, which are governed by English
law. This section will describe to you the material terms of the receivables
trust and declaration of trust and trust cash management agreement. The terms
of the declaration of trust and trust cash management agreement may be varied
or added to by executing a supplement -- but only for the series of investor
certificates issued under the supplement. A precondition to the receivables
trustee entering into a supplement is obtaining confirmation from the rating
agencies that entering into the supplement will not result in any rating agency
withdrawing or downgrading its rating of any debt that is ultimately secured by
the receivables in the receivables trust. Under the declaration of trust and
trust cash management agreement, the receivables trustee holds all of the
receivables trust's property on trust for:
* the initial transferor beneficiary and the excess interest beneficiary as
the initial beneficiaries of the trust; and
* for any other person who may become an additional transferor beneficiary
or additional beneficiary of the trust as allowed by the declaration of
trust and trust cash management agreement.
Other than the excess interest beneficiary and a transferor beneficiary, the
two categories of beneficiary are:
* an investor beneficiary, which may include any investor beneficiary
subordinate to another investor beneficiary as a provider of credit
enhancement; or
* an enhancement provider for a series of investor certificates, if
provided for in the supplement for that series.
The excess interest beneficiary and the initial transferor beneficiary are the
initial beneficiaries of the receivables trust. Any subsidiary of the initial
transferor that, with the prior written consent of all existing beneficiaries
of the receivables trust, accedes to the receivables securitisation agreement
as an additional transferor will upon its accession become an additional
transferor beneficiary of the receivables trust.
By making payments to the receivables trustee as a contribution to the
receivables trust's property, as set out in the declaration of trust and trust
cash management agreement, other persons can form a series of the receivables
trust. These persons are called additional beneficiaries. When payment is made,
the additional beneficiaries will be given a certificate evidencing a
beneficial interest in the receivables trust to show that they are an investor.
This process is called an acquisition and the certificate is called an investor
certificate. When an acquisition takes place a notice will be given that will
list the parties to the acquisition and anyone who is providing credit
enhancement for the series of investor certificates, called an enhancement
provider. A new supplement to the declaration of trust and trust cash
management agreement will govern each new series of the receivables trust that
is created.
Two types of acquisition may be made:
* the transferor beneficiary may direct the receivables trustee, in
exchange for tendering the certificate it holds showing its entitlement
to the receivables trust's property -- called the "transferor
certificate" -- to issue a new series of investor certificates and to
reissue the transferor certificate evidencing the transferor's beneficial
entitlement to the receivables trust's property. This is known as a
"transferor acquisition". Series 04-1 will be the sixth series of
investor certificates issued by the receivables trust and will be created
by a transferor acquisition occurring on the closing date. The first
series investor certificate (for series 99-1) is no longer in existence
as series 99-1 was fully paid out in November 2002.
64
* the second type of acquisition which may be made is an investor
acquisition where, if the supplement permits, an investor beneficiary
together with the transferor beneficiary may direct the receivables
trustee, in exchange for tendering their investor certificates and the
transferor certificate to issue one or more new investor certificates and
a reissued transferor certificate. The supplement for series 04-1 does
not provide for an investor acquisition.
The receivables trustee will authenticate and deliver a series of investor
certificates only when it has first received:
* a supplement signed by the parties to the new series, including the
receivables trustee and the transferor beneficiary, specifying the
principal terms of the series;
* the credit enhancement, if any, and any agreement by which an enhancement
provider agrees to provide credit enhancement -- series 04-1 has
subordination and the Spread Account as credit enhancement and will not
have an enhancement provider or an enhancement agreement;
* a solvency certificate from the transferor and any additional
transferors;
* written confirmation from the rating agencies that the proposed
acquisition will not result in the reduction or withdrawal of their
ratings on any notes issued by the issuer or any other issuer of any
series of notes that is ultimately secured by the receivables in the
receivables trust -- called "related beneficiary debt";
* written confirmation from each additional beneficiary and enhancement
provider, if any, that:
(1) its usual place of abode is in the United Kingdom and it will be
within the charge to United Kingdom corporation tax for all amounts
regarded as interest for UK tax purposes received by it under the
transactions contemplated by the series of investor certificates;
or
(2) it is a bank, as defined for purposes of Section 349(3)(a) of the
Income and Corporation Taxes Act 1988, and it will be within the
charge to United Kingdom corporation tax for all amounts regarded
as interest for UK tax purposes received by it under the series of
investor certificates;
* the existing transferor certificate and, if it is an investor
acquisition, the applicable investor certificates;
* an officer's certificate provided by the transferor certifying either:
(1) that:
* each class of related beneficiary debt issued as part of the
acquisition and described in the related supplement will be
rated in one of the three highest rating categories by at least
one rating agency recognised in the United Kingdom;
* each investor beneficiary -- other than any enhancement
provider -- will have associated with it, either directly or
indirectly, a class of related beneficiary debt; and
* the enhancement for each series will be provided by any
combination of subordination, a letter of credit, a cash
collateral loan, a surety bond, an insurance policy, or a
spread or reserve account funded from excess finance charge
collections ultimately reverting to the excess interest
beneficiary or transferor to the extent not utilised as
enhancement, but through no other means; or
(2) it has determined that, based on legal advice, the acquisition is
in the best interests of the transferor beneficiary and its
affiliates.
Each supplement to the declaration of trust and trust cash management agreement
will specify the principal terms for its series of investor certificates,
including the accumulation period or amortisation period for the payment of
principal. For each series these may be of different lengths and begin on
different dates. Enhancement is specific to each series and will be held and
used by the receivables trustee only for the benefit of the relevant series.
Certain series may be subordinated to other series, and classes within a series
may have different priorities. Whether or not a series or class is subordinated
will be set out in the related supplement. Series 04-1 will not be subordinate
to any other series. There will be no limit on the number of acquisitions that
may be performed.
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The receivables trustee will not be able to arrange for additional supplements
without obtaining the consent of all the beneficiaries constituting each
existing series. Even if the receivables trustee receives all these consents,
no acquisition will be effective unless the rating agencies confirm that the
additional supplement will not result in the reduction or withdrawal of their
rating of any related beneficiary debt.
THE RECEIVABLES TRUST'S PROPERTY
The property of the receivables trust will include all present and future
receivables located on the Triumph accounting system or any other accounting
system used by the transferor from time to time, arising under all MasterCard
and VISA credit and charge card accounts of Barclaycard's individual
cardholders on designated product lines that have not been identified as non-
designated accounts and that are denominated in pounds sterling with a billing
address within England, Wales, Scotland, Northern Ireland or a permitted
additional jurisdiction or a restricted additional jurisdiction. We refer to
these accounts as the "designated accounts". See "The Receivables:
Representations". The receivables have been and will continue to be assigned to
the receivables trustee under the receivables securitisation agreement between
Barclaycard as transferor and the receivables trustee. The receivables
securitisation agreement is governed by English law. Occasionally some accounts
may be removed from the pool of designated accounts. These accounts we refer to
in this prospectus as the "redesignated accounts".
The transferor is required to ensure that any of Barclaycard's credit and
charge card accounts that are to be excluded from or otherwise outside the
scope of the offer or transfer to the receivables trustee under the receivables
securitisation agreement or that are to be removed from the pool of designated
accounts are identified on its computer system prior to the date of offer or
the date of transfer.
The property of the receivables trust will also include:
* all monies due in payment of the receivables under designated accounts
from time to time;
* all proceeds of the receivables and proceeds of any guarantees and
insurance policies for the receivables -- to the extent that they are
capable of assignment -- including proceeds of disposals by the
receivables trustee of charged-off receivables to Barclaycard;
* the benefit of any Acquired Interchange; see "The Receivables:
Interchange";
* all monies on deposit in the Trust Accounts;
* any credit enhancement for the benefit of any series or class of
beneficiary; and
* all monies provided by beneficiaries of the receivables trust to fund the
purchase of receivables, until these monies are applied as intended.
The receivables are divided into eligible receivables and ineligible
receivables. Each investor beneficiary, the excess interest beneficiary and the
transferor beneficiary are beneficially entitled to interests in the pool of
eligible receivables.
The transferor beneficiary is beneficially entitled to the entire pool of
ineligible receivables and is solely entitled to all collections of ineligible
receivables.
The total principal amount of the interest of the investor beneficiary in a
series is called the "investor interest" of that series and reflects that
series' entitlement to principal receivables. The investor beneficiaries'
aggregate entitlement under the receivables trust is called the "aggregate
investor interest" and comprises the aggregate of each entitlement under each
series supplement.
The total amount of the interest of the transferor beneficiary in the
receivables trust is called the "Transferor Interest" and reflects the
transferor beneficiary's entitlement to principal receivables not allocated to
each outstanding series.
GENERAL ENTITLEMENT OF BENEFICIARIES TO TRUST PROPERTY
The transferor beneficiary and each investor beneficiary will acquire undivided
interests in the receivables trust by making payments in favour of the
receivables trustee. Some of the receivables trust's property that will
constitute credit enhancement may be specified as being the beneficial
entitlement of particular beneficiaries or particular series only. The
beneficiaries of the receivables trust are each beneficially entitled to share
in the receivables trust's property and each beneficiary, other than an
enhancement provider, has or will acquire interests in the pool of eligible
receivables
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- -- called the "Eligible Receivables Pool". See "Series 04-1" for a description
of the beneficial entitlement of the issuer to receivables and for a
description of the manner in which collections will be allocated to the issuer.
Under the receivables trust as originally created, the beneficial entitlement
of Barclaycard as the excess interest beneficiary to the property of the
receivables trust at any time was called the "Excess Interest". The Excess
Interest consisted of a beneficial entitlement to the residue of the finance
charge collections and Acquired Interchange for each monthly period after
amounts have been allocated to each beneficiary forming part of that series or
group of series, if applicable, and have been used to make payments to the
enhancement provider, if it is not a beneficiary. These payments will include
amounts deemed to represent finance charge collections as stated in the
supplement for the series.
Because Barclaycard will transfer its entitlement to the portion of the excess
interest attributable to series 04-1 to the MTN Issuer, the portion of the
excess interest attributable to series 04-1 will be paid to the MTN Issuer.
To understand the beneficial entitlement of the transferor beneficiary and each
additional transferor beneficiary you have to understand the definition of
"Transferor Percentage". The Transferor Percentage is the percentage equal to
100 per cent. less the sum of the applicable Investor Percentages of each
outstanding series.
The aggregate beneficial entitlement of the transferor beneficiary at any time
consists of the following:
* the Transferor Percentage of eligible principal receivables; the
Transferor Percentage is calculated for this purpose using the Floating
Investor Percentage for the Investor Percentage of each series;
* the Transferor Percentage of finance charge receivables; the Transferor
Percentage is calculated for this purpose using the Floating Investor
Percentage as the Investor Percentage for each series;
* all ineligible receivables; and
* all monies held in the Trust Accounts that represent investment earnings
on permitted investments made using monies deposited in those Trust
Accounts, unless something else is provided for in the supplement; the
supplement for series 04-1 does not provide for something else.
"Permitted investments" means the following:
* demand or time deposits, certificates of deposit and other short-term
unsecured debt obligations at or of any institution that has unsecured
and unguaranteed debt obligations of A-1+ and P-1 by Standard & Poor's
and Moody's; and
* short-term unsecured debt obligations -- including commercial paper --
issued or guaranteed by any body corporate whose unsecured and
unguaranteed debt obligations are A-1+ and P-1 by Standard & Poor's and
Moody's.
The aggregate beneficial entitlement of the transferor beneficiary to any other
trust property at any time is equal to the proportion that the Transferor
Interest bears to the amount of eligible principal receivables at that time.
The initial transferor beneficiary's and each additional transferor
beneficiary's entitlement to the aggregate beneficial entitlement of the
transferor beneficiary is equal to its proportionate share described in the
transferor certificate.
ALLOCATION AND APPLICATION OF COLLECTIONS
The following accounts have been opened by the receivables trustee at 1234
Pavillion Drive, Northampton, NN4 7SG, England:
* a collection account called the "Trustee Collection Account", which is
where principal collections and finance charge collections are credited;
and
* the acquisition account called the "Trustee Acquisition Account", which
is where amounts are credited that can be used to purchase beneficial
interests in receivables for the investor or transferor beneficiaries.
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The Trustee Acquisition Account, the Trustee Collection Account and any
additional bank accounts of the receivables trust that the receivables trustee
may open for particular beneficiaries are collectively called "Trust Accounts".
The receivables trustee will have legal title to the funds on deposit in each
Trust Account.
Collections from cardholders for designated accounts and cardholders for other
card accounts of Barclaycard are initially paid to Barclaycard's bank accounts
before being cleared on a same-day basis to a bank account called the
"Barclaycard Operating Account". The Barclaycard Operating Account is currently
held by Barclaycard at its branch located at 1234 Pavillion Drive, Northampton
NN4 7SG, England. The transferor has declared a trust over the Barclaycard
Operating Account.
All money in the Barclaycard Operating Account will be held on trust for the
receivables trustee and transferred to the Trustee Collection Account within
two business days after processing. All money in the Trustee Collection Account
will be treated as collections from receivables of designated accounts unless
it has been incorrectly paid into the account. Incorrect payments will be
deducted from the appropriate collections on the business day on which the
error is notified to the receivables trustee.
Amounts incorrectly categorised as principal collections of eligible
receivables but which are really collections of ineligible receivables will be
given back to the transferor beneficiary, after making adjustments for errors
but before allocating amounts of principal collections that are property of the
receivables trust. The receivables trustee will treat all money deposited in
the Trustee Collection Account as property of the receivables trust unless
notified otherwise by the trust cash manager.
The Eligible Receivables Pool and the Transferor Interest are increased or
decreased, as applicable, to account for the errors made.
Eligible principal receivables in defaulted accounts are allocated between the
transferor beneficiary and each series of investor certificates in accordance
with their respective beneficial entitlements to the property of the
receivables trust at the time the account becomes a defaulted account. Credit
adjustments for principal receivables are allocated to the transferor
beneficiary as a reduction of the Transferor Interest until the Transferor
Interest reaches zero. Ineligible principal receivables in defaulted accounts
reduce the transferor's interest in ineligible receivables -- called the
"Transferor Ineligible Interest" -- until it reaches zero.
Collections that are property of the receivables trust are categorised as:
* principal collections;
* finance charge collections; or
* ineligible collections.
If a Discount Percentage is nominated by the transferor, the Discount
Percentage of principal collections will be treated as finance charge
collections. The transferor has no current intention to nominate a Discount
Percentage. See "The Receivables: Discount Option Receivables".
If the related supplement says so, each series will also be entitled to a
portion of Acquired Interchange. Series 04-1 will be allocated a portion of
Acquired Interchange as described in "Series 04-1". To the extent that any
Acquired Interchange is not allocated to all those series, it will be allocated
to the transferor beneficiary.
Each series will be entitled to receive varying percentages of principal
collections, finance charge collections and receivables in defaulted accounts.
Each of these percentages is called an "Investor Percentage". The transferor
beneficiary will be entitled to its applicable Transferor Percentage of
principal collections and finance charge collections and receivables in
defaulted accounts. The excess interest beneficiary is entitled to finance
charge collections allocated to a series that are not allocated to:
* any other beneficiary, whether or not a member of that series; or
* any enhancement provider, as set out in the supplement relating to that
series.
Each supplement will set out, for its series, the entitlement of each investor
beneficiary to principal collections, finance charge collections and Acquired
Interchange.
The transferor may fulfil any obligation to make payments to the receivables
trustee for principal receivables for which it has breached a warranty by:
* reducing the Transferor Interest -- but not below zero; and
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* increasing the Transferor Ineligible Interest.
However, if the Transferor Interest would be reduced below zero, the transferor
must make a similar payment in immediately available funds to the receivables
trustee under the declaration of trust and trust cash management agreement and
the receivables securitisation agreement.
The receivables trustee will pay the trust cash management fee to the trust
cash manager from payments made by the beneficiaries and this amount will be
deducted from the transferor beneficiary's and each series' portion of the
finance charge collections.
The receivables trustee will transfer money daily from the Trustee Collection
Account in the following priority:
(1) the amount of any incorrect payments notified to the receivables trustee
not previously allocated as collections, to the Barclaycard Operating
Account, after which the transferor beneficiary will own the money
absolutely;
(2) the amount of ineligible collections notified to the receivables trustee
not previously allocated as principal collections, to a bank account
opened in the name of the transferor to deposit the cash proceeds of the
purchase price of the receivables, called the "Barclaycard Proceeds
Account", after which the transferor beneficiary will own the money
absolutely;
(3) the total amount of principal collections allocated to the investor
interest of any outstanding series, minus the Investor Cash Available for
Acquisition of that series from the Principal Collections Ledger to the
account specified in the supplement for that series;
(4) the total amount of Investor Cash Available for Acquisition and
Transferor Cash Available for Acquisition needed on that day from the
ledger of the Trustee Collection Account for principal collections --
called the "Principal Collections Ledger" -- to the Trustee Acquisition
Account;
(5) the Transferor Percentage of finance charge collections and the amount of
Acquired Interchange deposited in the Trustee Collection Account not
allocated to the investor interest of any outstanding series, from the
ledger of the Trustee Collection Account for finance charge collections
-- called the "Finance Charge Collections Ledger" -- to the Barclaycard
Proceeds Account, or as the transferor beneficiary may direct, after
which the money will be owned by the transferor beneficiary absolutely;
and
(6) each finance charge amount and all Acquired Interchange allocable to any
outstanding series, from the Finance Charge Collections Ledger to any
account that may be specified in the supplement for that series.
ACQUIRING ADDITIONAL ENTITLEMENTS TO TRUST PROPERTY AND PAYMENTS FOR
RECEIVABLES
To understand what a revolving period is, see "Series 04-1: Allocation,
Calculation and Distribution of Principal Collections to the MTN Issuer".
During the revolving period for a series, the receivables trustee will use the
portion of principal collections allocated to the investor beneficiaries of
that series and which is available to fund the acquisition of the beneficial
entitlement to receivables to pay for the purchase of the beneficial
entitlement to receivables that are eligible. These available principal
collections are called "Investor Cash Available for Acquisition". No Investor
Cash Available for Acquisition will be used to fund ineligible receivables.
On any day a series may be allocated more money for acquisitions than is needed
to purchase existing or future receivables that are eligible and available for
a series to fund. In that case, that series will use the excess Investor Cash
Available for Acquisition to acquire available Transferor Interest from the
transferor beneficiary and, if allowed under its supplement, investor interest
from other designated series. Any money left over will be used to fund
acquisitions on subsequent business days.
The transferor beneficiary will fund the amount payable by the receivables
trustee for all the existing and future receivables that all series are unable
to fund plus the amount of any ineligible receivables that need to be funded.
Consequently, the amount payable by the receivables trustee to the transferor
for all existing and future receivables it is purchasing on any business day
will be funded first by the series to the extent of all of the Investor Cash
Available for Acquisition and then by the transferor beneficiary to the extent
of the Transferor Cash Available for Acquisition. "Transferor Cash Available
for Acquisition" for any day means an amount equal to the Transferor Percentage
of principal collections processed on that day.
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On each business day after making all adjustments, the beneficial interest of
each series in the Eligible Receivables Pool:
* will be decreased by the amount of principal collections allocated to
that series that constitutes Investor Cash Available for Acquisition; and
* will be increased by the amount of Investor Cash Available for
Acquisition used by the receivables trustee to pay for existing and
future receivables and the amount of Investor Cash Available for
Acquisition allocated to the Transferor Interest or the investor interest
of other series to increase the proportion of the beneficial interest of
that series.
These changes will not affect the beneficial entitlement of:
* any beneficiary to monies credited to any Trust Account to which it is
beneficially entitled; or
* any series to monies credited to any Trust Account to which the
beneficiaries constituting that series are together beneficially
entitled.
On each business day after making all adjustments, the beneficial interest of
the transferor beneficiary in the Eligible Receivables Pool:
* will be decreased by the amount of principal collections and Investor
Cash Available for Acquisition allocated to the transferor beneficiary;
and
* will be increased by the amount of Transferor Cash Available for
Acquisition and the increase in the Transferor Interest resulting from
the decrease described in the prior bullet point.
However, any change in the beneficial interest of the transferor beneficiary in
the Eligible Receivables Pool will not affect the beneficial entitlement of the
transferor beneficiary to money credited to any Trust Account to which it is
beneficially entitled.
The investor interest of each series and the beneficial interest in the
receivables trust of each additional beneficiary will increase or decrease as
described in the related supplement.
On each business day, after making all adjustments, the Transferor Interest:
* will be decreased by the amount of Transferor Cash Available for
Acquisition not used to pay for new receivables and Investor Cash
Available for Acquisition transferred to the transferor beneficiary by
credit to the Barclaycard Proceeds Account; and
* will be increased by the purchase price payable to the transferor by the
receivables trustee to be funded by the transferor beneficiary.
These changes will not affect the beneficial entitlement of the transferor
beneficiary to money credited to any Trust Account to which it is beneficially
entitled.
Other adjustments to the Transferor Interest are explained in "The Receivables
Trust: Allocation and Application of Collections".
NON-PETITION UNDERTAKING OF BENEFICIARIES
Each beneficiary of the receivables trust, including Barclaycard as transferor
beneficiary and excess interest beneficiary, the transferor, the trust cash
manager and any successor trust cash manager, by entering into a supplement,
will agree with the receivables trustee for itself and as trustee that it will
not attempt to take any action or legal proceedings for the winding up,
dissolution or re-organisation of, or for the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator, sequestrator or
similar officer for, any investor beneficiary, the receivables trustee or the
receivables trust. These parties will also agree not to seek to enforce any
judgements against any of those persons.
TRUST PAY OUT EVENTS
The following is a list of what we refer to in this prospectus as the "Trust
Pay Out Events":
(1) the transferor consents or takes any corporate action to appoint a
receiver, administrator, administrative receiver, liquidator, trustee or
similar officer of it or over all or substantially all of its revenues
and assets;
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(2) proceedings are started against the transferor under any applicable
liquidation, insolvency, composition or re-organisation or similar laws
for its winding up, dissolution, administration or re-organisation and
the proceedings are not discharged within 60 days, or a receiver,
administrator, administrative receiver, liquidator, trustee or similar
officer of it or relating to all or substantially all of its revenues and
assets is legally and validly appointed and is not discharged within 14
days;
(3) a duly authorised officer of the transferor admits in writing that the
transferor beneficiary or excess interest beneficiary is unable to pay
its debts when they fall due within the meaning of Section 123(1) of the
Insolvency Act 1986 or the transferor makes a general assignment for the
benefit of or a composition with its creditors or voluntarily suspends
payment of its obligations to generally readjust or reschedule its debt;
(4) the transferor cannot transfer receivables in the designated accounts to
the receivables trust in the manner described in the receivables
securitisation agreement;
(5) the transferor stops being either a resident in the United Kingdom for
tax purposes or liable for United Kingdom corporation tax; or
(6) either:
* a change in law or its interpretation or administration results in
the receivables trustee becoming liable to make any payment on
account of tax -- other than stamp duty payable in the United
Kingdom for the transfer of receivables under the receivables
securitisation agreement; or
* any tax authority asserts a tax liability or takes other actions
against Barclays or any of its subsidiaries in relation to the
transaction which would have an adverse affect on them which is
more than trivial, if Barclays obtains an opinion of counsel
stating that the tax liability would be due. This event will be
treated as occurring when Barclays, as transferor beneficiary,
gives written notice of it to the receivables trustee.
The Trust Pay Out Events in paragraphs (1), (2) and (3) are called "Insolvency
Events". If an Insolvency Event occurs, a Pay Out Event will occur for each
series, each beneficiary within a series and for the transferor beneficiary. If
any other Trust Pay Out Event occurs, a Pay Out Event will occur for each
series and each beneficiary within a series. Trust Pay Out Events will occur
without any notice or other action on the part of the receivables trustee or
any beneficiary, as soon as the event happens.
A "Pay Out Event" for series 04-1 means a Trust Pay Out Event or one of the
events listed in "Series 04-1: Series 04-1 Pay Out Events".
After an Insolvency Event, future receivables, other than finance charge
receivables accruing for principal receivables that have been assigned to the
receivables trustee, will no longer be assigned to the receivables trustee. The
receivables trustee will not be entitled to accept any more offers of
receivables after an Insolvency Event. Finance charge receivables accruing on
principal receivables that have been assigned to the receivables trustee before
the Insolvency Event will still be part of the receivables trust's property and
finance charge collections from them will continue to be allocated and applied
as set out in the declaration of trust and trust cash management agreement and
each supplement.
The receivables trustee will notify each beneficiary if an Insolvency Event
occurs and will dispose of the receivables on commercially reasonable terms,
unless within 60 days of that notice beneficiaries representing more than 50
per cent. of the investor interest of every series, both the transferor
beneficiary and the excess interest beneficiary -- in each case, if not subject
to an Insolvency Event -- and every other person identified in any supplement
disapproves of the liquidation of the receivables and wishes to continue with
the receivables trustee accepting offers and purchasing receivables under the
receivables securitisation agreement. Money from this sale will be treated as
collections on the receivables and will be distributed in accordance with the
provisions of the declaration of trust and trust cash management agreement and
each supplement. See "Series 04-1".
TERMINATION OF THE RECEIVABLES TRUST
If the receivables trust has not already been dissolved after an Insolvency
Event, then the transferor beneficiary can instruct the receivables trustee to
dissolve the receivables trust when:
* the total amount of all of the investor interests is reduced to zero;
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* there are no finance charge collections or other trust property allocated
to any beneficiaries other than the transferor beneficiary or the excess
interest beneficiary; and
* no beneficiary is committed to fund payments to the transferor for
purchases of receivables by the receivables trust.
After the receivables trust is dissolved, all of the receivables trust's
property will be controlled by the transferor beneficiary as residual
beneficiary, and the receivables securitisation agreement will be terminated.
For the purposes of Section 1 of the Perpetuities and Accumulations Act 1964,
the duration of the perpetuity period for the receivables trust's property will
be a period ending not later than 80 years from the date of execution of the
declaration of trust and cash management agreement. Any property of the
receivables trust after this period will vest in the current beneficiaries in
accordance with their entitlements to the receivables trust's property at that
date.
AMENDMENTS TO THE DECLARATION OF TRUST AND TRUST CASH MANAGEMENT AGREEMENT
The declaration of trust and trust cash management agreement may be amended
with the prior consent of each related beneficiary. No amendment will be
effective unless each rating agency has confirmed that the amendment will not
result in a reduction or withdrawal of its then current rating of any
outstanding related beneficiary debt.
No investor beneficiary will consent to any proposed amendment unless
instructed to do so by noteholders holding in total not less than two thirds of
the medium term notes or certificates then outstanding of each outstanding
series adversely affected. The investor beneficiary may not consent to any
proposed amendment that would:
* reduce or delay required distributions to any investor beneficiary for
the affected series;
* change the definition or the manner of calculating the investor interest,
the Investor Percentage or the investor default amount of the affected
series or any class of the affected series; or
* reduce the percentage required to consent to any amendment, unless
instructed to do so by all the noteholders of the medium term notes or
certificates then outstanding of the affected series.
DISPOSALS
Beneficiaries may not transfer or dispose of their beneficial entitlements in
the receivables trust or create any encumbrance over its beneficial
entitlement, except that:
* the transferor beneficiary or the Excess Interest beneficiary may dispose
of the Transferor Interest or the Excess Interest by transferring all or
substantially all of its properties and assets to any person, if that
person also expressly assumes the duties and obligations of the
transferor, the transferor beneficiary and the excess interest
beneficiary under the relevant documents; after the transfer, the new
person will be the person used to determine if an Insolvency Event has
occurred;
* the transferor beneficiary or the excess interest beneficiary may
transfer or create any encumbrance over the whole or any part of the
Transferor Interest or the Excess Interest with the consent of investor
beneficiaries representing in total more than one-half of the total
investor interest of each series; however, the rating agencies must first
confirm that the transfer or encumbrance will not result in a downgrade
or withdrawal of its rating of any outstanding related beneficiary debt;
and
* any beneficiary -- except for the transferor beneficiary or the excess
interest beneficiary -- may transfer all or any part of their beneficial
entitlement or grant an encumbrance over their beneficial entitlement
with the prior written consent of the transferor beneficiary, which
consent will not be unreasonably withheld; however, the receivables
trustee must first receive confirmation in writing from the person to
whom the transfer will be made or for whom the encumbrance will be
granted or created, that it complies with the criteria referred to in
fifth and sixth of the prerequisites to the completion of an issuance as
referred to in "-- General Legal Structure" above.
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The receivables trustee will, upon the direction of all of the beneficiaries,
be authorised to reassign to Barclaycard the beneficial interest in defaulted
receivables for a purchase price equal to the amount received or recovered, if
any, by Barclaycard from those defaulted receivables less the fees, costs and
expenses incurred by Barclaycard in the recovery of that amount.
TRUSTEE PAYMENT AMOUNT
The receivables trustee will be paid its remuneration, which is inclusive of
VAT, and reimbursed any costs and expenses incurred by it in connection with
its duties and activities as receivables trustee, including the part of these
costs and expenses that represents VAT (if any), from being indemnified under
the declaration of trust and trust cash management agreement out of the
property of the receivables trust allocated to the investor beneficiaries. The
receivables trustee will be paid monthly in arrears on each transfer date the
amounts certified by the trust cash manager to the receivables trustee by the
end of any monthly period as being due to it for that monthly period. This
payment is called the "Trustee Payment Amount". The proportion of the Trustee
Payment Amount to be paid by series 04-1 and the MTN Issuer is described in
"Series 04-1: Trustee Payment Amount".
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SERVICING OF RECEIVABLES AND TRUST CASH MANAGEMENT
GENERAL -- SERVICING
Barclaycard was appointed on the initial closing date by the beneficiaries of
the receivables trust as initial servicer under the terms of the beneficiaries
servicing agreement. Any additional transferor beneficiary or beneficiary must
accede to the beneficiaries servicing agreement. The servicer will service,
administer and manage the receivables and request and receive payments on the
receivables using its usual procedures and normal market practices for
servicing credit and charge card receivables comparable to the receivables in
the designated accounts. The servicer has full power and authority, acting
alone or through any other party properly designated, to undertake all actions
concerning the servicing, administration and management of the receivables it
considers necessary or desirable.
The servicer's duties include carrying out all servicing, administration and
management functions in relation to the receivables and, insofar as the
interests of the beneficiaries are affected, the designated accounts in
accordance with Barclaycard's policies and procedures from time to time and in
accordance with normal market practice, insofar as consistent with
Barclaycard's policy and procedures. These functions include:
* carrying out valuations of receivables on designated accounts for the
purpose of determining whether any receivables should be charged off in
accordance with Barclaycard's credit and charge card guidelines;
* ensuring that the interests of the beneficiaries are taken into account
in making decisions regarding the granting of credit to obligors;
* on its own behalf, preparing and keeping its own records as regards all
of these matters, including in particular but without limitation, the
matters referred to in the first two bullet points above;
* monitoring payments by obligors and notifying obligors of overdue
payments; and
* crediting and debiting obligors' accounts as appropriate.
The servicer will at all times be required to take all practicable steps to:
* ensure that payments made to the transferor by obligors are received into
the Barclaycard Operating Account;
* identify any funds in the Barclaycard Operating Account which are
required to be transferred to the trustee collection account for the
benefit of the beneficiaries; and
* ensure that such funds are so transferred when required.
The servicer will not resign from its obligations and duties as servicer under
the beneficiaries servicing agreement unless its performance is no longer
permitted under applicable law and there is no reasonable action that it could
take to make it permissible. The servicer's resignation will not be effective
until a successor servicer has been properly appointed. Barclaycard, as initial
servicer, performs account processing and administration in-house, but has
subcontracted some cardholder payment processing services, which are undertaken
on Barclaycard's behalf by Experian. See "Barclaycard and the Barclaycard Card
Portfolio: Description of Experian, part of the Great Universal Stores Group".
The servicer will indemnify each investor beneficiary against all reasonable
loss, liability, expense, damage or injury caused by the servicer's fraud,
wilful misconduct or negligence in performing its servicing functions. However,
the servicer will not indemnify any investor beneficiary:
* if any acts or omissions are caused by the negligence, fraud or wilful
misconduct of that investor beneficiary or its agents;
* for any liabilities, costs or expenses of the receivables trust for any
action taken by the receivables trustee at the request of any investor
beneficiary of any series to which that investor beneficiary belongs;
* for any loss, claims or damages that are incurred by any of them acting
in their capacity as beneficiaries, including those resulting from
defaulted accounts; or
* for any liabilities, costs or expenses arising under any tax law, or any
penalties or interest caused by a failure to comply with any tax law,
payable by it in connection with the beneficiaries servicing agreement to
any tax authority.
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The directors, officers, employees or agents of the servicer and the servicer
itself will not be under any liability to the receivables trustee, the
receivables trust, the investor beneficiaries, any enhancement provider or any
other person under the beneficiaries servicing agreement or any related
provider except in the case of intentional wrongdoing, bad faith or gross
negligence in performing its duties under the beneficiaries servicing
agreement.
Any person into which the servicer may be merged or consolidated, or any person
succeeding to or acquiring the business of the servicer in whole or in part,
after executing a supplemental agreement to the beneficiaries servicing
agreement and the delivery of a legal opinion, will become the successor to the
servicer or co-servicer with the servicer under the beneficiaries servicing
agreement.
GENERAL -- TRUST CASH MANAGEMENT
Barclaycard was appointed on the initial closing date by the receivables
trustee as initial trust cash manager under the terms of the declaration of
trust and trust cash management agreement. The trust cash manager will carry
out cash management functions in relation to the receivables on behalf of the
receivables trustee.
The trust cash manager's duties include but are not confined to:
* making calculations on the allocations of receivables; and
* advising the receivables trustee to transfer money between the Trust
Accounts and to make withdrawals and payments from the Trust Accounts as
set forth in the declaration of trust and trust cash management
agreement.
The trust cash manager will not resign from its obligations and duties as trust
cash manager under the declaration of trust and trust cash management agreement
unless its performance is no longer permitted under applicable law and there is
no reasonable action that it can take to remedy the situation. The trust cash
manager's resignation will not be effective until a successor trust cash
manager has been properly appointed.
The trust cash manager will indemnify the receivables trustee and the
receivables trust against all reasonable loss, liability, expense, damage or
injury, in each case including VAT, if any, caused by its fraud, wilful
misconduct or negligence in performing its cash management functions. However,
the trust cash manager will not indemnify the receivables trustee:
* if any acts or omissions are caused by the negligence, fraud or wilful
misconduct of the receivables trustee or its agents;
* for any liabilities, costs or other expenses of the receivables trust for
any action taken by the receivables trustee at the request of any
investor beneficiary of any series to which that investor beneficiary
belongs;
* for any losses, claims or damages incurred by the receivables trustee in
its capacity as a beneficiary of the receivables trust; or
* for any liabilities or other costs of it or the receivables trust arising
under any tax law or any penalties or interest caused by a failure to
comply with any tax law, payable by it or the receivables trust in
connection with the declaration of trust and trust cash management
agreement to any tax authority.
The directors, officers and other employees and agents of the trust cash
manager and the trust cash manager itself will not be under any liability to
the receivables trustee or the receivables trust or any other person under the
declaration of trust and trust cash management agreement except in the case of
intentional wrongdoing, bad faith or negligence in performing its duties under
the declaration of trust and trust cash management agreement.
Any person into which the trust cash manager may be merged or consolidated, or
any person succeeding to or acquiring the business of the trust cash manager in
whole or in part, after executing a supplemental agreement to the declaration
of trust and trust cash management agreement and the delivery of a legal
opinion, will become the successor to the trust cash manager or co-trust cash
manager under the declaration of trust and trust cash management agreement.
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SERVICING AND TRUST CASH MANAGER COMPENSATION
The servicer is entitled to receive an annual fee from the beneficiaries for
each monthly period. This fee is called the "servicing fee" and is payable
monthly on each transfer date, to the extent that those monies are available.
Any amounts payable in respect of the servicing fee will be inclusive of VAT,
if any. The servicing fee will be equal to one-twelfth of the product of:
* 0.75 per cent., or if Barclays Bank PLC is the servicer, such other
percentage which the rating agencies have confirmed will not result in a
downgrade or withdrawal of the rating of the notes or any related
beneficiary debt and legal counsel has confirmed that such percentage
will not prejudice tax treatment of the receivables trust or the
beneficiaries; and
* the average daily total outstanding face amount of principal receivables
during that monthly period.
The share of the servicing fee payable by the receivables trustee to the
servicer for series 04-1 on any transfer date is called the "investor servicing
fee" and will be equal to
* one-twelfth of the product of:
(1) 0.75 per cent.; or
(2) another percentage agreed with the investor beneficiaries as long
as Barclaycard is the servicer provided that the rating agencies
confirm in writing that the new percentage will not cause them to
reduce or withdraw their then current rating on any related
beneficiary debt; and
* the Adjusted Investor Interest as at the last day of the monthly period
before that transfer date.
On the first transfer date after the closing date the investor servicing fee
will be [GBP]422,539.88.
The balance of the servicing fee not payable in respect of series 04-1 or any
other series will be payable by the transferor and is called the "transferor
servicing fee". If the servicer is also the transferor beneficiary in any
monthly period, the transferor servicing fee for that monthly period will not
be payable.
The trust cash manager is entitled to receive a VAT inclusive fee from the
receivables trustee for each monthly period. This fee is called the "trust cash
management fee" and is payable monthly on each transfer date. The trust cash
management fee will be equal to one-twelfth of the product of the sum of the
annual fees in each supplement as being the investor trust cash management fees
for each series.
The share of the trust cash management fee payable by the receivables trustee
to the trust cash manager for series 04-1 on any transfer date for which series
04-1 agrees to indemnify the receivables trustee is called the "investor trust
cash management fee" and will be equal to one-twelfth of [GBP]6,000. The trust
cash management fee can be any other amount that the receivables trustee may
agree to as long as Barclaycard is the trust cash manager provided that the
rating agencies confirm in writing that the new amount will not cause them to
reduce or withdraw their then current rating on any related beneficiary debt.
On the first transfer date after the closing date the investor trust cash
management fee will be [GBP]836.07.
The balance of the trust cash management fee, in respect of which the
receivables trustee is not indemnified by series 04-1 or any other series, will
be payable by the transferor and is called the "transferor trust cash
management fee". If the trust cash manager is also the transferor beneficiary
in any monthly period, the transferor trust cash management fee for that
monthly period will not be paid.
TERMINATION OF APPOINTMENT OF SERVICER
The appointment of a transferor as servicer under the beneficiaries servicing
agreement and the appointment of any person as joint servicer to replace anyone
then acting as the servicer -- called a "successor servicer" -- will terminate
when a servicer default occurs and is continuing.
"Servicer default" means any one of the following events:
(1) failure on the part of the servicer duly to observe or perform in any
respect any other covenant or agreement of the servicer contained in the
beneficiaries servicing agreement, or any other relevant document, that
has a material adverse effect on the interests of the investor
beneficiaries of any outstanding series; this failure will constitute a
servicer default
76
only if it remains unremedied and continues to have an adverse effect on
the interests of the investor beneficiaries for 60 days after the receipt
of a notice of the failure is given by the investor beneficiaries to the
servicer; if the notice is given by the investor beneficiaries it will be
on the instruction of a group of holders of medium term notes or
certificates representing more than fifty per cent. of the total face
value of the medium term notes or certificates outstanding of any
outstanding series adversely affected;
(2) delegation by the servicer of its duties under the beneficiaries
servicing agreement to any other entity, except as permitted by the
beneficiaries servicing agreement;
(3) any relevant representation, warranty or certification made by the
servicer in the beneficiaries servicing agreement or in any certificate
delivered under the beneficiaries servicing agreement was incorrect when
made, which has a material adverse effect on the interests of the
investor beneficiaries of any outstanding series; this failure will only
be a servicer default if it remains unremedied and continues to have an
adverse effect on the interests of the investor beneficiaries for 60 days
after the receipt of a notice of the failure is given; the notice of the
failure will be given by either (1) the receivables trustee to the
servicer, or (2) the investor beneficiaries to the receivables trustee
and the servicer; if the notice is given by the investor beneficiaries it
will be on the instruction of holders of the series 04-1 medium term note
certificate representing more than fifty per cent. of the total face
value of the series 04-1 medium term note certificate outstanding of any
outstanding series adversely affected;
(4) any of the following:
* the servicer agrees to or takes any corporate action to appoint a
receiver, administrator, administrative receiver, trustee or
similar officer of it or of all of its revenues and assets; or
* an order of the court is made for its winding-up, dissolution,
administration or re-organisation that has remained in force
undischarged or unstayed for 60 days; or
* a receiver, administrator, administrative receiver, trustee or
similar officer of it or all of its revenues and assets, is
appointed; and
(5) any of the following:
* a duly authorised officer of the servicer admits in writing that
the servicer is unable to pay its debts as they fall due within the
meaning of Section 123(1) of the Insolvency Act 1986; or
* the servicer makes a general assignment for the benefit of or a
composition with its creditors or it voluntarily suspends payment
of its obligations with a view to the general readjustment or
rescheduling of its indebtedness.
In the case of (1), (2) or (3) above the grace period will be 60 business days.
The grace period is the extra number of days before a servicer default can be
called, allowing the servicer to remedy a servicer default that has been caused
by so-called acts of God or uncontrollable circumstances. These circumstances
are called force majeure events and are listed in the beneficiaries servicing
agreement.
Within two business days after the servicer becomes aware of any servicer
default, the servicer must notify the beneficiaries, each rating agency, the
security trustee and any enhancement provider as soon as possible in writing.
The beneficiaries must give each rating agency notice of any removal of the
servicer or appointment of a successor servicer.
Investor beneficiaries acting on the instructions of holders of medium term
notes or certificates representing in total more than two-thirds of the total
face value of medium term notes or certificates then outstanding of each series
adversely affected by any default by the servicer or the transferor in the
performance of its obligations under the beneficiaries servicing agreement and
any other relevant documents, may waive the default unless it is a failure to
make any required deposits, or payments of interest or principal for the
adversely affected series.
After the servicer receives a termination notice and a successor servicer is
appointed, the duties of acting as servicer of the receivables under the
beneficiaries servicing agreement will pass from the then servicer to the
successor servicer. The beneficiaries servicing agreement contains the
requirements for the transfer of the servicing role, including the transfer of
authority over collections, the transfer of electronic records and the
disclosure of information.
77
After it receives a termination notice, the servicer will continue to act as
servicer until agreed by it and the beneficiaries. The beneficiaries must try
to appoint a successor servicer that is an eligible servicer.
If the receivables trustee cannot appoint a successor servicer and the servicer
delivers a certificate that says it cannot in good faith cure the servicer
default, then the receivables trustee will start the process of selling the
receivables. The beneficiaries will notify any enhancement providers of the
proposed sale of the receivables by the receivables trustee to a third party
and will provide each enhancement provider an opportunity to bid on purchasing
the receivables.
The proceeds of the sale will be deposited in the Trust Accounts for
distribution to the beneficiaries as set out in the declaration of trust and
trust cash management agreement and the series supplements.
An "eligible servicer" means an entity that, when it is servicer:
* is servicing a portfolio of consumer revolving credit or charge card
accounts or other consumer credit accounts;
* is legally qualified and has the capacity to service the designated
accounts;
* is qualified or licensed to use the software that the servicer is then
currently using to service the designated accounts or obtains the right
to use, or has its own, software that is adequate to perform its duties
under the beneficiaries servicing agreement; and
* has, in the opinion of each rating agency, demonstrated the ability to
service, professionally and competently, a portfolio of similar accounts
in accordance with customary standards of skill and care.
TERMINATION OF APPOINTMENT OF TRUST CASH MANAGER
The appointment of the transferor as trust cash manager under the declaration
of trust and trust cash management agreement and the appointment of any person
as joint trust cash manager or to replace anyone then acting as the trust cash
manager -- called a "successor trust cash manager" -- will terminate when a
trust cash manager default occurs.
"Trust cash manager default" means any one of the following events:
(1) any failure by the trust cash manager to direct the making of any
payment, transfer or deposit or to give instructions or notice to the
receivables trustee pursuant to an agreed schedule of collections and
allocations; any failure by the trust cash manager to advise the
receivables trustee to make any required drawing, withdrawal, or payment
under any credit enhancement; these events will be considered failures if
they do not happen within five business days after the date that they
were supposed to happen under the terms of the declaration of trust and
trust cash management agreement or any other relevant document;
(2) failure on the part of the trust cash manager duly to observe or perform
in any respect any other covenant or agreement of the trust cash manager
contained in the declaration of trust and trust cash management
agreement, or any other relevant document, that has a material adverse
effect on the interests of the investor beneficiaries of any outstanding
series; this failure will constitute a servicer default only if it
remains unremedied and continues to have a material adverse effect on the
interests of the investor beneficiaries for 60 days after the receipt of
a notice of the failure is given; the notice of the failure will be given
by either (1) the receivables trustee to the trust cash manager, or (2)
the investor beneficiaries to the receivables trustee and the trust cash
manager; if the notice is given by the investor beneficiaries it will be
on the instruction of a group of holders of medium term notes or
certificates representing more than fifty per cent. of the total face
value of the medium term notes or certificates outstanding of any
outstanding series adversely affected;
(3) delegation by the trust cash manager of its duties under the declaration
of trust and trust cash management agreement to any other entity, except
as permitted by the declaration of trust and trust cash management
agreement;
(4) any relevant representation, warranty or certification made by the trust
cash manager in the declaration of trust and trust cash management
agreement or in any certificate delivered under the declaration of trust
and trust cash management agreement was incorrect when made, which has a
material adverse effect on the interests of the investor beneficiaries of
any outstanding series; this failure will be a trust cash manager default
only if it remains
78
unremedied and continues to have a material adverse effect on the
interests of the investor beneficiaries for 60 days after the receipt of
a notice of the failure is given; the notice of the failure will be given
by either (1) the receivables trustee to the trust cash manager, or (2)
the investor beneficiaries to the receivables trustee and the trust cash
manager; if the notice is given by the investor beneficiaries it will be
on the instruction of holders of medium term notes or certificates
representing more than fifty per cent. of the total face value of the
medium term notes or certificates outstanding of any outstanding series
adversely affected;
(5) any of the following:
* the trust cash manager agrees to or takes any corporate action to
appoint a receiver, administrator, administrative receiver,
liquidator, trustee or similar officer of it or of all of its
revenues and assets; or
* an order of the court is made for its winding-up, dissolution,
administration or re-organisation that has remained in force
undischarged or unstayed for 60 days; or
* a receiver, administrator, administrative receiver, liquidator,
trustee or similar officer of it or all of its revenues and assets
is appointed; and
(6) any of the following:
* a duly authorised officer of the trust cash manager admits in writing
that the trust cash manager is unable to pay its debts as they fall due
within the meaning of Section 123(1) of the Insolvency Act 1986; or
* the trust cash manager makes a general assignment for the benefit of or a
composition with its creditors or it voluntarily suspends payment of its
obligations with a view to the general readjustment or rescheduling of
its indebtedness.
In the case of (1) above the grace period will be 10 business days and in the
case of (2), (3) or (4) above it will be 60 business days. The grace period is
the extra number of days before a trust cash manager default will be effective
allowing the trust cash manager to remedy a trust cash manager default that has
been caused by so-called acts of God or uncontrollable circumstances. These
circumstances are called force majeure events and are listed in the declaration
of trust and trust cash management agreement.
Within two business days after the trust cash manager becomes aware of any
trust cash manager default, the trust cash manager must notify the receivables
trustee, each rating agency, each investor beneficiary and any enhancement
provider as soon as possible in writing. The receivables trustee must give each
investor beneficiary and rating agency notice of any removal of the trust cash
manager or appointment of a successor trust cash manager. The receivables
trustee must give each rating agency notice of any removal of the trust cash
manager.
Investor beneficiaries acting on the instructions of holders of medium term
notes or certificates representing in total more than two-thirds of the total
face value of medium term notes or certificates then outstanding of each series
adversely affected by any default by the trust cash manager or the transferor
in the performance of its obligations under the declaration of trust and trust
cash management agreement and any other relevant documents, may waive the
default unless it is a failure to make any required deposits, or payments of
interest or principal, for the adversely affected series.
After the trust cash manager receives a termination notice and a successor
trust cash manager is appointed, the duties of acting as trust cash manager of
the receivables under the declaration trust and trust cash management agreement
will pass from the then trust cash manager to the successor trust cash manager.
The declaration of trust and trust cash management agreement contains the
requirements for the transfer of the trust cash management role, including the
transfer of authority over collections, the transfer of electronic records and
the disclosure of information.
After it receives a termination notice, the trust cash manager will continue to
act as trust cash manager until a date agreed by the receivables trustee and
the trust cash manager. The receivables trustee must try to appoint a successor
trust cash manager that is an eligible trust cash manager.
If the receivables trustee cannot appoint a successor trust cash manager and
the trust cash manager delivers a certificate that says it cannot in good faith
cure the trust cash manager default, then the receivables trustee will start
the process of selling the receivables. The receivables trustee
79
will notify each enhancement provider of the proposed sale of the receivables
by the receivables trustee to a third party and will provide each enhancement
provider an opportunity to bid on purchasing the receivables.
The proceeds of the sale will be deposited in the Trust Accounts for
distribution to the beneficiaries as set out in the declaration of trust and
trust cash management agreement and the series supplements.
An "eligible trust cash manager " means an entity that, when it is trust cash
manager:
* is legally qualified and has the capacity to carry out the trust cash
management functions as set forth in the declaration of trust and trust
cash management agreement;
* is qualified or licensed to use the software that the trust cash manager
is then currently using to carry out cash management of the receivables
or obtains the right to use, or has its own, software that is adequate to
perform its duties under the declaration of trust and trust cash
management agreement; and
* has, in the opinion of each rating agency, demonstrated the ability to
professionally and competently act as a trust cash manager in accordance
with customary standards of skill and care.
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SERIES 04-1
GENERAL
The MTN Issuer is an investor beneficiary of the receivables trust. Its initial
beneficial interest was conferred under a series supplement called the series
99-1 supplement (series 99-1 was fully repaid in November 2002) and subsequent
beneficial interests were conferred under series supplements called the series
02-1, series 03-1, 03-2 and 03-3 supplements. The MTN Issuer will increase its
entitlement under the receivables trust under a series supplement called the
"Series 04-1 Supplement". The parties to the Series 04-1 Supplement are the
receivables trustee and Barclaycard as the transferor beneficiary, the excess
interest beneficiary, servicer, the trust cash manager and the transferor and
the MTN Issuer as the investor beneficiary.
The MTN Issuer will increase its beneficial entitlement as investor beneficiary
by paying a sterling amount equivalent to $750,000,000 using the fixed exchange
rate contained in the swap agreements to the receivables trustee on the closing
date; we call this amount the "Initial Investor Interest". For purposes of
making calculations about the performance of the undivided beneficial interest
of series 04-1 in the receivables trust, the Investor Interest will be
referable to notional classes called "Class A", "Class B" and "Class C".
The MTN Issuer will receive an investor certificate. This investor certificate
will be evidence of the initial investor beneficial interest for series 04-1 in
the receivables trust, calculated as referable to Class A, Class B and Class C,
and will be governed by English law.
The MTN Issuer will confirm the following in the Series 04-1 Supplement:
* that its usual place of abode is within the United Kingdom for the
purpose of Section 349 of the Income and Corporation Taxes Act 1988; and
* that it has a business establishment, for the purposes of Section 9 of
the Value Added Tax Act 1994, in the United Kingdom which is either its
sole business establishment, with no other fixed establishment anywhere
else in the world, or is its business or other fixed establishment at
which any services received by it as contemplated in the relevant
documents are most directly used or to be used or, as the case may be,
its business or other fixed establishment which is most directly
concerned with any services supplied by it as contemplated in the
relevant documents.
Series 04-1 will be included in group one, which included series 99-1 (now
repaid) and which includes series 02-1, series 03-1, series 03-2 and series 03-
3 and will not be subordinated to any other investor beneficiary or series. See
"-- Shared Principal Collections" for the ramifications of series 04-1 being
included in group one.
Following execution of the series 04-1 supplement the MTN Issuer will acquire
from Barclays Bank PLC as excess interest beneficiary that part of the rights
of Barclays Bank PLC to the excess interest attributable to series 04-1.
BENEFICIAL ENTITLEMENT OF THE MTN ISSUER TO TRUST PROPERTY OTHER THAN IN
RESPECT OF THE EXCESS INTEREST
In order to understand the beneficial entitlement of the MTN Issuer to the
property of the receivables trust you will need to understand the following
definitions.
The "Class A Floating Allocation", the "Class B Floating Allocation" and the
"Class C Floating Allocation" will each be calculated the same way and will be
equal to, for each notional class and for each monthly period, the following
fraction expressed as a percentage:
the Adjusted Investor Interest for the relevant notional class
--------------------------------------------------------------
Adjusted Investor Interest
where these amounts are calculated on the close of business on the last day of
the monthly period prior to the transfer date.
The floating allocation for each notional class for the first monthly period
will be calculated as follows:
the Initial Investor Interest for the relevant notional class
-------------------------------------------------------------
Initial Investor Interest
"Class A Initial Investor Interest" means the sterling equivalent of
$675,000,000 using the fixed exchange rate in the swap agreements.
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"Class A Investor Interest" means at any time an amount equal to:
(1) the Class A Initial Investor Interest, minus
(2) the total principal payments made to the MTN Issuer for the purposes of
calculation treated as referable to the Class A Investor Interest from
the property of the receivables trust, minus
(3) the total amount of Class A Investor Charge-Offs for all prior transfer
dates, plus
(4) the total amount of any reimbursements of Class A Investor Charge-Offs on
all prior transfer dates.
The Class A Investor Interest, however, may not be reduced below zero.
"Class A Adjusted Investor Interest" means at any time an amount equal to the
Class A Investor Interest minus the balance on deposit in the Principal Funding
Account, but not more than the Class A Investor Interest.
"Class A Investor Charge-Off" means a reduction in the Class A Investor
Interest on any transfer date by the amount, if any, by which the Class A
Investor Default Amount exceeds the total amount of Class A Available Funds,
Excess Spread, Reallocated Class B Principal Collections and Reallocated Class
C Principal Collections, the Class C Investor Interest and the Class B Investor
Interest, in each case available and allocated on that transfer date to fund
the Class A Investor Default Amount.
"Adjusted Investor Interest" means the sum of the Class A Adjusted Investor
Interest, the Class B Adjusted Investor Interest and the Class C Adjusted
Investor Interest.
"Investor Interest" means the sum of the Class A Investor Interest, the Class B
Investor Interest and the Class C Investor Interest.
The "Initial Investor Interest" equals the sum of the Class A Initial Investor
Interest, the Class B Initial Investor Interest and the Class C Initial
Investor Interest.
"Class B Initial Investor Interest" means the sterling equivalent of
$37,500,000 using the fixed exchange rate in the swap agreements.
"Class B Investor Interest" means, at any time, an amount equal to:
(1) the Class B Initial Investor Interest, minus
(2) the total principal payments made to the MTN Issuer, for the purposes of
calculation treated as referable to the Class B Investor Interest from
the property of the receivables trust, minus
(3) the total amount of Class B Investor Charge-Offs for all prior transfer
dates, minus
(4) the total amount of Reallocated Class B Principal Collections allocated
on all prior transfer dates that have been used to fund the Class A
Required Amount, excluding any Reallocated Class B Principal Collections
that have resulted in a reduction in the Class C Investor Interest, minus
(5) an amount equal to any reductions in the Class B Investor Interest on all
prior transfer dates to fund the Class A Investor Default Amount, plus
(6) the total amount of Excess Spread allocated and available on all prior
transfer dates to reimburse amounts deducted under (3), (4) and (5)
above.
The Class B Investor Interest, however, may not be reduced below zero.
"Class B Adjusted Investor Interest" means, at any time, an amount equal to the
Class B Investor Interest minus the balance on deposit in the Principal Funding
Account in excess of the Class A Investor Interest, but not more than the Class
B Investor Interest.
"Class B Investor Charge-Off" means a reduction in the Class B Investor
Interest on any transfer date by the amount, if any, by which the Class B
Investor Default Amount exceeds the total amount of Excess Spread, Reallocated
Class C Principal Collections and the Class C Investor Interest, in each case
available and allocated on that transfer date to fund the Class B Investor
Default Amount.
"Class C Initial Investor Interest" means the sterling equivalent of
$37,500,000 using the fixed exchange rate in the swap agreements.
"Class C Investor Interest" means at any time an amount equal to:
(1) the Class C Initial Investor Interest, minus
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(2) the total principal payments made to the MTN Issuer for the purposes of
calculation treated as referable to the Class C Investor Interest from
the property of the receivables trust, minus
(3) the total amount of Class C Investor Charge-Offs for all prior transfer
dates, minus
(4) the total amount of Reallocated Class B Principal Collections allocable
to the Class C Investor Interest and Reallocated Class C Principal
Collections on all prior transfer dates that have been used to fund the
Class A Required Amount or the Class B Required Amount, minus
(5) an amount equal to any reductions in the Class C Investor Interest on all
prior transfer dates to fund the Class A Investor Default Amount and the
Class B Investor Default Amount, plus
(6) the total amount of Excess Spread allocated and available on all prior
transfer dates to reimburse amounts deducted under (3), (4) and (5)
above.
The Class C Investor Interest, however, may not be reduced below zero.
"Class C Adjusted Investor Interest" means, at any time, an amount equal to the
Class C Investor Interest minus the balance on deposit in the Principal Funding
Account in excess of the sum of the Class A Investor Interest and the Class B
Investor Interest, but not more than the Class C Investor Interest.
"Class C Investor Charge-Off" means a reduction in the Class C Investor
Interest on any transfer date by the amount, if any, by which the Class C
Investor Default Amount exceeds the amount of Excess Spread available and
allocated on that transfer date to fund the Class C Investor Default Amount.
The beneficial entitlement of the MTN Issuer as the investor beneficiary for
series 04-1 to eligible principal receivables -- which includes principal
collections that are the property of the receivables trust but excludes the
amount on deposit in the Principal Funding Account -- is equal to the
proportion that the Adjusted Investor Interest bears to the amount of eligible
principal receivables assigned or purported to be assigned to the receivables
trust at any time. However, the beneficial entitlement for each notional class
will not exceed the Class A Adjusted Investor Interest, the Class B Adjusted
Investor Interest or the Class C Adjusted Investor Interest, as applicable, at
any time.
The beneficial entitlement of the MTN Issuer as the investor beneficiary for
series 04-1 to finance charge collections during any monthly period is equal to
the proportion that the floating allocation for each notional class bears to
the investor percentage of finance charge collections for such monthly period
credited to the Finance Charge Collections Ledger from time to time during that
monthly period. However, the beneficial entitlement will not exceed the sum of
the monthly required expense amount, the investor servicing fee, the investor
trust cash management fee and the Investor Default Amount for any notional
class of series 04-1 during any monthly period.
The beneficial entitlement of the MTN Issuer as the investor beneficiary for
series 04-1 at any time to any other property of the receivables trust not
separately held or segregated for any other beneficiary or series will be equal
to the proportion that the aggregate of the Class A Adjusted Investor Interest,
the Class B Adjusted Investor Interest and the Class C Adjusted Investor
Interest bears to the amount of eligible principal receivables from time to
time assigned or purported to be assigned to the receivables trust. The MTN
Issuer will not be entitled to the benefit of any credit enhancement for any
notional class available only for any other beneficiary, series other than
series 04-1 or classes within a series other than series 04-1, except to the
extent it is an investor beneficiary for another series.
The MTN Issuer will be beneficially entitled to all monies held in any Trust
Account other than:
* the Trustee Collection Account -- except for the distribution ledger for
each notional class; or
* the Trustee Acquisition Account;
that are expressly segregated by separate account or by ledger entry or
otherwise, as allocated to the MTN Issuer.
ALLOCATION, CALCULATION AND DISTRIBUTION OF FINANCE CHARGE COLLECTIONS TO THE
MTN ISSUER
On each day on which collections are transferred to the Trustee Collection
Account during the Revolving Period, the Controlled Accumulation Period and, if
applicable, the Regulated Amortisation Period or the Rapid Amortisation Period,
the receivables trustee will credit to the Finance Charge Collections Ledger
for series 04-1 an amount calculated as follows:
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A x B
Where:
A = the Floating Investor Percentage; and
B = the total amount of finance charge collections processed on
that date.
"Floating Investor Percentage" means, for any monthly period, the following
fraction expressed as a percentage
A
---------------------
the greater of B or C
Where:
A = the Adjusted Investor Interest;
B = the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections
standing to the credit of the Principal Collections Ledger
C = the sum of the numerators used to calculate the floating
investor percentages for all outstanding series.
These amounts will be calculated for any monthly period other than the first
monthly period as of the last day of the prior monthly period. For the first
monthly period, they will be calculated as of the closing date. The Floating
Investor Percentage will never exceed 100 per cent.
Notwithstanding the above, for a monthly period in which an addition date
occurs, B in the fraction used to calculate the Floating Investor Percentage
will be:
* for the period from the first day of the monthly period to the addition
date, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger at the close of business
on the last day of the prior monthly period; and
* for the period from the addition date through the last day of the monthly
period, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger on the addition date --
taking into account the eligible principal receivables added to the
receivables trust.
If, in any monthly period the Investor Interest would be zero if the payments
to be made on the distribution date in that monthly period were made on the
last day of the prior monthly period, the Floating Investor Percentage will be
zero.
CLASS A INVESTOR INTEREST
To understand the calculations and information delivered by the receivables
trustee regarding the amount of finance charge collections distributable to the
MTN Issuer that for the purposes of calculation is treated as referable to
Class A on any transfer date, you need to understand the following definitions
and cash flows.
The "Class A Monthly Required Expense Amount" for any transfer date will be the
sum of the following items:
* the Class A Trustee Payment Amount plus any unpaid Class A Trustee
Payment Amount from previous transfer dates; see "-- Trustee Payment
Amount";
* the MTN Issuer Costs Amount;
* the Class A Monthly Finance Amount;
* the Class A Deficiency Amount;
* the Class A Additional Finance Amount; and
* the Monthly Loan Expenses Amount.
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"Class A Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
-------------------------- x The Class A Finance Rate x The Class A Debt Amount
365 (366 in a leap year)
The "Class A Finance Rate" for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the first
Calculation Period, the linear interpolation of two-month and three-month
deposits, and (b) for any other interest period, for three-month deposits, in
each case for pounds sterling in the London interbank market, plus 0.0755 per
cent.
"Class A Deficiency Amount" is the excess, if any, of the Class A Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class A Trustee Payment Amount and the MTN Issuer Costs Amount --
over the funds referable to Class A actually credited to the Class A
Distribution Ledger for payment of the Class A Monthly Required Expense Amount
on that transfer date.
"Class A Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period The Class A Finance Rate Any unpaid Class A
-------------------------- x plus 2.0 per cent. x Deficiency Amount
365 (366 in a leap year) on the prior transfer date
The first "distribution date" or "interest payment date" will be 17 May 2004
or, if that day is not a business day, the next business day after the 15th,
and each subsequent distribution date or interest payment date will be the 15th
day of each calendar month, or if that day is not a business day, the next
business day after the 15th.
"Calculation Period" means, for any distribution date, the period from and
including the previous distribution date or, in the case of the first
distribution date, from and including the closing date, to but excluding that
distribution date.
"Class A Debt Amount" means the Class A Initial Investor Interest minus the
total principal payments made to the MTN Issuer referable to the Class A
Investor Interest from the property of the receivables trust. On the series 04-
1 termination date, the Class A Debt Amount will be zero.
"Monthly Loan Expense Amount" means, for any transfer date, the amount equal to
any monthly interest accrual which is due and payable, including any amount
outstanding in respect of previous transfer dates, if any, under the expenses
loan agreement.
"MTN Issuer Costs Amount" means the amounts certified by the security trustee
as being required to pay the fees, costs and expenses of the MTN Issuer accrued
and due and payable on a transfer date. This amount includes the fees, costs
and expenses of the security trustee and any receiver appointed pursuant to the
security trust deed and MTN Issuer cash management agreement, plus, any fees,
costs and expenses remaining unpaid from previous transfer dates together with
any VAT payable on any of the above items, where relevant.
"Class A Available Funds" for any monthly period equals the sum of the
following amounts credited to the Finance Charge Collections Ledger for that
monthly period:
* the Class A Floating Allocation of finance charge collections allocated
to series 04-1;
* the Class A Floating Allocation of Acquired Interchange allocated to
series 04-1;
* for any monthly period during the Controlled Accumulation Period before
payment in full of the Class A Investor Interest, the Principal Funding
Investment Proceeds -- up to a maximum amount equal to the Class A
Covered Amount; see "-- Principal Funding Account"; and
* any amounts withdrawn from the Reserve Account; see "-- Reserve Account."
The amount of Acquired Interchange allocated to series 04-1 for any monthly
period will be the product of the Acquired Interchange and the Floating
Investor Percentage. This allocated Acquired Interchange will be credited to
the Finance Charge Collections Ledger.
On each transfer date, the receivables trustee will withdraw the Class A
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
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(1) the Class A Trustee Payment Amount plus any unpaid Class A Trustee
Payment Amounts from prior transfer dates will be used by the by the
receivables trustee to satisfy the Trustee Payment Amounts;
(2) the MTN Issuer Costs Amounts will be credited to the Class A Distribution
Ledger;
(3) the sum of the Class A Monthly Finance Amount, the Class A Deficiency
Amount, the Class A Additional Finance Amount and the Monthly Loan
Expense Amount will be credited to the Class A Distribution Ledger;
(4) the class A servicing fee and class A cash management fee and any due and
unpaid class A servicing fees or class A cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable;
(5) an amount equal to the Class A Investor Default Amount will be allocated
to Class A and treated as a portion of Investor Principal Collections
referable to Class A and credited to the Principal Collections Ledger;
(6) the balance -- called "Class A Excess Spread" -- will be part of Excess
Spread and will be allocated as described in "-- Excess Spread."
On each distribution date, all amounts credited to the Class A Distribution
Ledger for the amounts in (2) and (3) above will be deposited in the Series 04-
1 Distribution Account. The amount in (2) and (3) above is called the "Class A
Monthly Distribution Amount".
The "Series 04-1 Distribution Account" is a bank account in the name of the MTN
Issuer that will be used to deposit amounts distributed to the MTN Issuer for
the series 04-1 investor certificates from the receivables trust.
The "class A servicing fee" is that portion of the servicing fee attributable
to Class A (on a pro rata basis). The "class A cash management fee" is that
portion of the trust cash management fee attributable to class A (on a pro rata
basis).
The "Class A Distribution Ledger" is a ledger for Class A in the Trustee
Collection Account. See "-- Distribution Ledgers".
CLASS B INVESTOR INTEREST
To understand calculations and information delivered by the receivables trustee
regarding the amount of finance charge collections distributable to the MTN
Issuer that for the purposes of calculation is treated as referable to notional
Class B on any transfer date, you need to understand the following definitions
and cash flows.
The "Class B Monthly Required Expense Amount" for any transfer date will be the
sum of the following items:
* the Class B Trustee Payment Amount plus any unpaid Class B Trustee
Payment Amounts from previous transfer dates; See "-- Trustee Payment
Amount";
* the Class B Monthly Finance Amount;
* the Class B Deficiency Amount; and
* the Class B Additional Finance Amount.
"Class B Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
-------------------------- x The Class B Finance Rate x The Class B Debt Amount
365 (366 for a leap year)
The "Class B Finance Rate" for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the first
Calculation Period, the linear interpolation of two-month and three-month
deposits, and (b) for any other interest period, for three-month deposits, in
each case for pounds sterling in the London interbank market, plus 0.2520 per
cent.
"Class B Deficiency Amount" is the excess, if any, of the Class B Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class B Trustee Payment Amount -- over the funds referable to Class
B actually credited to the Class B Distribution Ledger for payment of the Class
B Monthly Required Expense Amount on that transfer date.
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"Class B Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period Any unpaid Class B
-------------------------- x The Class B Finance Rate x Deficiency Amount on
365 (366 for a leap year) plus 2 per cent. the prior transfer date
"Class B Debt Amount" means the Class B Initial Investor Interest minus the
total principal payments made to the MTN Issuer referable to the Class B
Investor Interest from the property of the receivables trust. On the series 04-
1 termination date, the Class B Debt Amount will be zero.
"Class B Available Funds" for any monthly period equals the sum of the
following amounts credited to the Finance Charge Collections Ledger for that
monthly period:
* the Class B Floating Allocation of finance charge collections allocated
to series 04-1; and
* the Class B Floating Allocation of Acquired Interchange allocated to
series 04-1.
On each transfer date, the receivables trustee will withdraw the Class B
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
(1) the Class B Trustee Payment Amount plus any unpaid Class B Trustee
Payment Amounts from prior transfer dates will be used by the receivables
trustee to satisfy the Trustee Payment Amounts;
(2) the sum of the Class B Monthly Finance Amount, the Class B Deficiency
Amount and the Class B Additional Finance Amount will be credited to the
Class B Distribution Ledger;
(3) the class B servicing fee and class B cash management fee and any due and
unpaid class B servicing fees and class B cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable; and
(4) the balance -- called "Class B Excess Spread" -- will be part of Excess
Spread and will be allocated as described in "-- Excess Spread".
On each distribution date, all amounts credited to the Class B Distribution
Ledger for the amounts in (2) above -- called the "Class B Monthly Distribution
Amount" -- will be deposited into the Series 04-1 Distribution Account.
The "class B servicing fee" is that portion of the servicing fee attributable
to Class B (on a pro rata basis). The "class B cash management fee" is that
portion of the trust cash management fee attributable to Class B (on a pro rata
basis).
The "Class B Distribution Ledger" is a ledger for Class B in the Trustee
Collection Account. See
"-- Distribution Ledgers".
CLASS C INVESTOR INTEREST
To understand the calculations and information delivered by the receivables
trustee regarding the amount of finance charge collections distributable to the
MTN Issuer that for the purposes of calculation is treated as referable to
Class C on any transfer date, you need to understand the following definitions
and cash flows.
The "Class C Monthly Required Expense Amount" will be the sum of the following
items:
* the Class C Trustee Payment Amount plus any unpaid Class C Trustee
Payment Amounts from previous transfer dates; see " -- Trustee Payment
Amount";
* the Class C Monthly Finance Amount;
* the Class C Deficiency Amount; and
* the Class C Additional Finance Amount.
"Class C Monthly Finance Amount" means the amount calculated as follows:
Days in Calculation Period
-------------------------- x The Class C Finance Rate x The Class C Debt Amount
365 (366 for a leap year)
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"Class C Deficiency Amount" is the excess, if any, of the Class C Monthly
Required Expense Amount for the prior transfer date -- disregarding for this
purpose the Class C Trustee Payment Amount -- over the funds allocable to Class
C actually credited to the Class C Distribution Ledger for payment of the Class
C Monthly Required Expense Amount on that transfer date.
"Class C Additional Finance Amount" means the amount calculated as follows:
Days in Calculation Period The Class C Finance Rate
- -------------------------- x plus 2 per cent. x Any unpaid Class C Deficiency
365 (366 in a leap year) Amounts on the prior transfer date
The "Class C Finance Rate " for any Calculation Period will be the screen rate,
or the arithmetic mean calculated to replace the screen rate, (a) for the first
Calculation Period, the linear interpolation of two-month and three-month
deposits, and (b) for any other interest period, for three-month deposits, in
each case for pounds sterling in the London interbank market, plus 0.5395 per
cent.
"Class C Debt Amount" means the Class C Initial Investor Interest minus the
total principal payments made to the MTN Issuer referable to the Class C
Investor Interest from the property of the receivables trust. On the series 04-
1 termination date, the Class C Debt Amount will be zero.
"Class C Available Funds" for any monthly period equals the sum of the
following amounts credited to the Finance Charge Collections Ledger for that
monthly period:
* the Class C Floating Allocation of finance charge collections allocated
to series 04-1; and
* the Class C Floating Allocation of Acquired Interchange allocated to
series 04-1.
On each transfer date, the receivables trustee will withdraw the Class C
Available Funds from the Finance Charge Collections Ledger, and they will be
distributed in the following order:
(1) the Class C Trustee Payment Amount plus any unpaid Class C Trustee
Payment Amounts from prior transfer dates will be used by the receivables
trustee to satisfy the Trustee Payment Amounts;
(2) the class C servicing fee and class C cash management fee and any due and
unpaid class C servicing fees or class C cash management fees from prior
transfer dates will be distributed to the servicer or trust cash manager,
as applicable; and
(3) the balance -- called "Class C Excess Spread" -- will be part of Excess
Spread and will be allocated as described in " -- Excess Spread".
On each distribution date, all amounts credited to the Class C Distribution
Ledger for the Class C Monthly Distribution Amount, as described in "-- Excess
Spread", will be deposited into the Series 04-1 Distribution Account.
The "class C servicing fee" is that portion of the servicing fee attributable
to Class C (on a pro rata basis). The "class C cash management fee" is that
portion of the trust cash management fee attributable to Class C (on a pro rata
basis).
The "Class C Distribution Ledger" is a ledger for Class C in the Trustee
Collection Account. See
"-- Distribution Ledgers".
REVOLVING PERIOD
The "Revolving Period" for series 04-1 is the period from the closing date to
the start of the Controlled Accumulation Period or, if earlier, the start of
the Rapid Amortisation Period or the Regulated Amortisation Period.
During the Revolving Period, principal collections calculated as referable
daily to the Class A Investor Interest will be used by the receivables trustee
as Shared Principal Collections and, to the extent not used as Shared Principal
Collections, to make payments to the transferor:
* to accept new offers of receivables made by the transferor to the
receivables trustee, and
* to make payments to the transferor for future receivables assigned by the
transferor to the receivables trustee by offers that have already been
made and accepted.
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Principal collections calculated as referable to the Class B Investor Interest
and the Class C Investor Interest will be used by the receivables trustee as
described in the previous paragraph on the next following transfer date to the
extent not required to fund shortfalls for the Class A Investor Interest and --
for principal collections calculated as referable to the Class C Investor
Interest -- the Class B Investor Interest.
CONTROLLED ACCUMULATION PERIOD
The "Controlled Accumulation Period" for series 04-1 is the period scheduled to
begin on the close of business on 31 January 2006 and ending when the Investor
Interest is paid in full, unless a Pay Out Event occurs and the Regulated
Amortisation Period or the Rapid Amortisation Period begins. If the Regulated
Amortisation Period or Rapid Amortisation Period begins before the start of the
Controlled Accumulation Period, there will not be a Controlled Accumulation
Period for series 04-1. The start of the Controlled Accumulation Period may be
delayed until no later than the close of business on 31 December 2006. See "--
Postponement of Controlled Accumulation Period".
During the Controlled Accumulation Period the principal collections allocated
to the Investor Interest for series 04-1, up to the Controlled Deposit Amount,
will be accumulated by the receivables trustee in a trust account called the
"Principal Funding Account" for distribution to the MTN Issuer as the investor
beneficiary for series 04-1 on the 15 February 2007 distribution date -- called
the "series 04-1 scheduled redemption date". Any principal collections
allocated to the Investor Interest for series 04-1 over the amount that will be
deposited in the Principal Funding Account will be used by the receivables
trustee first as Shared Principal Collections and then to make payments to the
transferor as described above under "-- Revolving Period".
The "Controlled Deposit Amount" for any transfer date for the Controlled
Accumulation Period or the Regulated Amortisation Period will be the sterling
equivalent of $62,500,000, using the fixed exchange rate in the swap agreements,
which equals the Initial Investor Interest divided by 12, or for a Regulated
Amortisation Period, if greater, may be an amount not exceeding 1/12 of the
total sum of all investor interests of all series in group one -- except
Companion Series -- that are scheduled to be in their revolving periods. If the
start of the Controlled Accumulation Period is delayed as described in "--
Postponement of Controlled Accumulation Period", the Controlled Deposit Amount
will be greater than the sterling equivalent of $62,500,000. This higher amount
will be determined by the servicer based on the principal payment rates on the
designated accounts and on the investor interests of series in group one --
except Companion Series -- that are scheduled to be in their revolving periods.
In any case, during the Controlled Accumulation Period, the Controlled Deposit
Amount will be the amount that, if deposited in the Principal Funding Account on
each transfer date for the Controlled Accumulation Period, will cause the
balance of the Principal Funding Account to equal the Investor Interest on the
series 04-1 scheduled redemption date. The Controlled Deposit Amount for any
transfer date will include the amount of any shortfall in payment of the
Controlled Deposit Amount for the previous transfer date.
REGULATED AMORTISATION PERIOD
A "Regulated Amortisation Period" will start on the day, if there is one, that
any of the following Series 04-1 Pay Out Events occur, each of which we refer
to as a "Regulated Amortisation Trigger Event":
* the average Portfolio Yield for any three consecutive monthly periods is
less than the average Expense Rate for those periods or, on any
determination date before the end of the third monthly period from the
closing date, the Portfolio Yield is less than average Expense Rate for
that period; or
* either:
(1) over any period of thirty consecutive days, the Transferor Interest
averaged over that period is less than the Minimum Transferor
Interest for that period and the Transferor Interest does not
increase on or before the tenth business day following that thirty
day period to an amount so that the average of the Transferor
Interest as a percentage of the Average Principal Receivables for
such thirty day period, computed by assuming that the amount of the
increase of the Transferor Interest by the last day of that ten
business day period, as compared to the Transferor Interest on the
last day of the thirty day period, would have existed in the
receivables trust during each day of the thirty day period, is at
least equal to the Minimum Transferor Interest; or
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(2) on the last day of any monthly period the total balance of eligible
principal receivables is less than the Minimum Aggregate Principal
Receivables, adjusted for any series having a Companion Series as
described in the supplement for that series and the Companion
Series, and the total balance of eligible principal receivables
fails to increase to an amount equal to or greater than the Minimum
Aggregate Principal Receivables on or before the tenth business day
following that last day.
The Regulated Amortisation Period will continue until the earlier of:
* the start of the Rapid Amortisation Period; and
* the series 04-1 termination date.
During the Regulated Amortisation Period the amount of principal collections
allocated to the Investor Interest for series 04-1, up to the Controlled
Deposit Amount, will be paid each month to the MTN Issuer first for the Class A
Investor Interest, second for the Class B Investor Interest and third for the
Class C Investor Interest until the series 04-1 termination date. Any principal
collections allocated to the Investor Interest for series 04-1 over the
Controlled Deposit Amount paid to the MTN Issuer will be used by the
receivables trustee first as Shared Principal Collections and then to make
payments to the transferor as described above under "-- Revolving Period".
RAPID AMORTISATION PERIOD
A "Rapid Amortisation Period" will start on the first day of the monthly period
next following the day on which any Pay Out Event other than a Regulated
Amortisation Trigger Event occurs.
The Rapid Amortisation Period will continue until the earlier of:
* the series 04-1 termination date; or
* the dissolution of the receivables trust following the occurrence of an
Insolvency Event; see "The Receivables Trust: Trust Pay Out Events".
During the Rapid Amortisation Period, principal collections allocable to the
Investor Interest of series 04-1 will be paid each month to the MTN Issuer
first for the Class A Investor Interest, second for the Class B Investor
Interest and third for the Class C Investor Interest until the series 04-1
termination date.
The "series 04-1 termination date" is the earlier of the distribution date on
which the Investor Interest has been reduced to zero and the 17 February 2009
distribution date.
ALLOCATION, CALCULATION AND DISTRIBUTION OF PRINCIPAL COLLECTIONS TO THE MTN
ISSUER
During the Revolving Period, principal collections will be allocated to the
Investor Interest on the basis of the Floating Investor Percentage. During the
Controlled Accumulation Period, the Regulated Amortisation Period and the Rapid
Amortisation Period, principal collections will be allocated to the Investor
Interest on the basis of the Fixed Investor Percentage. The amount of principal
collections allocated to the Investor Interest at any time will be credited to
the Principal Collections Ledger for series 04-1. The principal collections
credited to the Principal Collections Ledger from time to time that will be
allocated to the MTN Issuer will be:
* during the Revolving Period, equal to the total of the floating
allocations for each class;
* during the Controlled Accumulation Period, the Regulated Amortisation
Period and the Rapid Amortisation Period, equal to the total of the fixed
allocations for each class.
"Fixed Investor Percentage" means, for any monthly period, the following
calculation expressed as a percentage:
A
---------------------
the greater of B or C
Where:
A = the Investor Interest calculated at close of business on the last day of
the Revolving Period;
B = the total balance of eligible principal receivables in the receivables
trust plus the Unavailable Principal Collections standing to the credit
of the Principal Collections Ledger; and
C = the sum of the numerators used to calculate the fixed investor
percentages for all outstanding series.
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Items B and C above will be calculated for any monthly period as of the last
day of the prior monthly period. For the first monthly period, they will be
calculated as of the closing date. The Fixed Investor Percentage will never
exceed 100 per cent.
Notwithstanding the above, for a monthly period in which an addition date
occurs, B in the fraction used to calculate the Fixed Allocation Percentage
above will be:
* for the period from the first day of the monthly period to the addition
date, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger at the close of business
on the last day of the prior monthly period; and
* for the period from the addition date to the last day of the monthly
period, the total balance of eligible principal receivables in the
receivables trust plus the Unavailable Principal Collections standing to
the credit of the Principal Collections Ledger on the addition date,
taking into account the eligible principal receivables added to the
receivables trust.
If in any monthly period the Investor Interest would be zero if the payments to
be made on the distribution date during that monthly period were made on the
last day of the prior monthly period, the Fixed Investor Percentage will be
zero.
The "Class A Fixed Allocation", the "Class B Fixed Allocation" and the "Class C
Fixed Allocation" will each be calculated the same way and will be equal to,
for each notional class and for any monthly period after the end of the
Revolving Period, the following fraction expressed as a percentage:
Investor Interest for the relevant notional class
-------------------------------------------------
Investor Interest
This percentage, never to exceed 100 per cent., will be calculated using these
amounts on the close of business on the last day of the Revolving Period.
On each business day during the Revolving Period which is not a transfer date,
the Reinvested Investor Principal Collections for that day will be distributed
in the following priority:
* the Reinvested Investor Principal Collections will be applied as Shared
Principal Collections and allocated to other outstanding series in group
one; see "-- Shared Principal Collections"; and
* the balance remaining will be applied as Investor Cash Available for
Acquisition in the manner described in "The Receivables Trust: Acquiring
Additional Entitlements to Trust Property and Payments for Receivables".
"Reinvested Investor Principal Collections" means, for any business day:
* principal collections credited to the Principal Collections Ledger
identified for series 04-1, after adjustments for Unavailable Principal
Collections during the Controlled Accumulation Period, the Regulated
Amortisation Period and the Rapid Amortisation Period -- for any day
called the "Daily Investor Principal Collections"; minus
* an amount equal to the product of the Class B Floating Allocation and the
Daily Investor Principal Collections; minus
* an amount equal to the product of the Class C Floating Allocation and the
Daily Investor Principal Collections.
"Available Investor Principal Collections" means, for any monthly period:
* the Investor Principal Collections; minus
* the Investor Cash Available for Acquisition that has been calculated as
being available to be used during that monthly period; minus
* the Reallocated Class C Principal Collections that are required to fund
the Class A Required Amount or the Class B Required Amount; minus
* the Reallocated Class B Principal Collections for that monthly period
that are required to fund the Class A Required Amount; plus
* the Shared Principal Collections from other series in group one that are
allocated to series 04-1; plus
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* for a monthly period in which the Rapid Amortisation Period starts, any
previously identified Investor Cash Available for Acquisition that was
not used to acquire receivables.
"Investor Principal Collections" means, for any monthly period, the sum of:
* principal collections credited to the Principal Collections Ledger
identified for series 04-1, after adjustments for Unavailable Principal
Collections during the Controlled Accumulation Period, the Regulated
Amortisation Period and the Rapid Amortisation Period; plus
* amounts treated as Investor Principal Collections up to the Class A
Investor Default Amount and distributed out of Class A Available Funds,
Excess Spread, Reallocated Class C Principal Collections and Reallocated
Class B Principal Collections; plus
* amounts treated as Investor Principal Collections up to the Class B
Investor Default Amount and distributed out of Excess Spread and
Reallocated Class C Principal Collections; plus
* amounts treated as Investor Principal Collections up to the Class C
Investor Default Amount and distributed out of Excess Spread; plus
* Excess Spread treated as Investor Principal Collections used to reimburse
Class A Investor Charge-Offs, any reductions in the Class B Investor
Interest and any reductions in the Class C Investor Interest; plus
* Unavailable Principal Collections credited to the Principal Collections
Ledger and to be treated as Investor Principal Collections; see "--
Unavailable Principal Collections".
On each transfer date for the Controlled Accumulation Period, the Regulated
Amortisation Period or the Rapid Amortisation Period, the receivables trustee
will withdraw the Class A Monthly Principal Amount from the Principal
Collections Ledger and:
* for a transfer date for the Controlled Accumulation Period, deposit it
into the Principal Funding Account; or
* for a transfer date during the Rapid Amortisation Period or Regulated
Amortisation Period, credit it to the Class A Distribution Ledger.
The "Class A Monthly Principal Amount" is the least of:
* the Available Investor Principal Collections standing to the credit of
the Principal Collections Ledger on that transfer date;
* for each transfer date for the Controlled Accumulation Period or the
Regulated Amortisation Period before the series 04-1 scheduled redemption
date, the Controlled Deposit Amount for that transfer date; and
* the Class A Adjusted Investor Interest -- adjusted to account for any
unreimbursed Class A Investor Charge-Offs.
The first distribution date (1) for the Controlled Accumulation Period, on
which an amount equal to the Class A Investor Interest has been deposited in
the Principal Funding Account, or (2) during the Rapid Amortisation Period or
the Regulated Amortisation Period, on which the Class A Investor Interest is
paid in full, is called the "Class B Principal Commencement Date."
Starting with the Class B Principal Commencement Date, to the extent there are
funds remaining after distributing the Class A Monthly Principal Amount, the
receivables trustee will withdraw the Class B Monthly Principal Amount from the
Principal Collections Ledger and:
* for a transfer date for the Controlled Accumulation Period, deposit it
into the Principal Funding Account; or
* for a transfer date during the Rapid Amortisation Period or the Regulated
Amortisation Period, credit it to the Class B Distribution Ledger.
The "Class B Monthly Principal Amount" is the least of:
* the Available Investor Principal Collections standing to the credit of
the Principal Collections Ledger on that transfer date minus, if
applicable, the Class A Monthly Principal Amount;
* for each transfer date for the Controlled Accumulaton Period or the
Regulated Amortisation Period before the series 04-1 scheduled redemption
date, an amount equal to the Controlled Deposit Amount minus, if
applicable, the Class A Monthly Principal Amount; and
* the Class B Adjusted Investor Interest -- adjusted to account for any
unreimbursed reductions in the Class B Investor Interest for reasons
other than principal payments.
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The first distribution date (1) for the Controlled Accumulation Period, on
which an amount equal to the sum of the Class A Investor Interest and the Class
B Investor Interest has been deposited in the Principal Funding Account, or (2)
during the Rapid Amortisation Period or the Regulated Amortisation Period, on
which the Class B Investor Interest is paid in full, is called the "Class C
Principal Commencement Date".
Starting with the Class C Principal Commencement Date, to the extent there are
funds remaining after distributing the Class A Monthly Principal Amount and the
Class B Monthly Principal Amount, as applicable, the receivables trustee will
withdraw the Class C Monthly Principal Amount from the Principal Collections
Ledger and:
* for a transfer date for the Controlled Accumulation Period, deposit it
into the Principal Funding Account; or
* for a transfer date during the Rapid Amortisation Period or the Regulated
Amortisation Period, credit it to the Class C Distribution Ledger.
The "Class C Monthly Principal Amount" is the lesser of:
* the Available Investor Principal Collections standing to the credit of
the Principal Collections Ledger on that transfer date minus, if
applicable, the Class A Monthly Principal Amount and the Class B Monthly
Principal Amount; and
* the Class C Adjusted Investor Interest -- adjusted to account for any
unreimbursed reductions in the Class C Investor Interest for reasons
other than principal payments.
On the earlier of (1) the first distribution date during the Rapid Amortisation
Period or the Regulated Amortisation Period and (2) the series 04-1 scheduled
redemption date, and on each distribution date after that, the receivables
trustee will distribute the following amounts in the following priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
* the amount on deposit in the Principal Funding Account; and
* the Class A Investor Interest;
will be deposited in the Series 04-1 Distribution Account for Class A and will
be owned by the MTN Issuer. The MTN Issuer will use this amount to repay
principal outstanding on the series 04-1 medium term note certificate;
(2) from the Class A Distribution Ledger an amount equal to the lesser of :
* the amount credited to the Class A Distribution Ledger; and
* the Class A Investor Interest, after taking into account the
amounts described in clause (1) above;
will be deposited to the Series 04-1 Distribution Account for Class A and
will be owned by the MTN Issuer. The MTN Issuer will use this amount to
repay principal outstanding on the series 04-1 medium term note
certificate;
Starting on the earlier of (1) if the amount on deposit in the Principal
Funding Account exceeds the Class A Investor Interest, the series 04-1
scheduled redemption date and (2) during the Rapid Amortisation Period or the
Regulated Amortisation Period, the Class B Principal Commencement Date, and on
each distribution date after that, the receivables trustee will distribute the
following amounts in the following priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
* the amount on deposit in the Principal Funding Account in excess of
the Class A Investor Interest; and
* the Class B Investor Interest;
will be deposited to the Series 04-1 Distribution Account for Class B and
will be owned by the MTN Issuer. The MTN Issuer will use this amount to
repay principal outstanding on the series 04-1 medium term note
certificate;
(2) from the Class B Distribution Ledger an amount equal to the lesser of:
* the amount credited to the Class B Distribution Ledger; and
* the Class B Investor Interest, after taking into account the amount
described in clause (1) above;
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this amount will be deposited in the Series 04-1 Distribution Account for
Class B and will be owned by the MTN Issuer. The MTN Issuer will use this
amount to repay principal outstanding on the series 04-1 medium term note
certificate.
Starting on the earlier of (1) if the amount on deposit in the Principal
Funding Account exceeds the sum of the Class A Investor Interest and the Class
B Investor Interest, the series 04-1 scheduled redemption date, and (2) during
the Rapid Amortisation Period or the Regulated Amortisation Period, the Class C
Principal Commencement Date, and on each distribution date after that, the
receivables trustee will distribute the following amounts in the following
priority:
(1) from the Principal Funding Account, an amount equal to the lesser of:
* the amount on deposit in the Principal Funding Account in excess of
the sum of the Class A Investor Interest and the Class B Investor
Interest; and
* the Class C Investor Interest;
will be deposited in the Series 04-1 Distribution Account for Class C and
will be owned by the MTN Issuer. The MTN Issuer will use this amount to
repay principal outstanding on the series 04-1 medium term note
certificate.
(2) from the Class C Distribution Ledger, an amount equal to the lesser of;
* the amount credited to the Class C Distribution Ledger; and
* the Class C Investor Interest after taking into account the amount
described in clause (1) above;
will be deposited to the Series 04-1 Distribution Account for Class C and
will be owned by the MTN Issuer. The MTN Issuer will use this amount to
repay principal outstanding on the Series 04-1 medium term note
certificate.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The Controlled Accumulation Period is scheduled to begin on the close of
business on 31 January 2006. If the Controlled Accumulation Period Length,
which is explained in the next paragraph, is less than 12 months, the Revolving
Period may be extended and the start of the Controlled Accumulation Period will
be postponed. The Controlled Accumulation Period will, in any event, begin no
later than the close of business on 31 December 2006.
On the determination date right before the distribution date in February 2006,
and on each determination date after that, until the Controlled Accumulation
Period begins, the servicer will determine the "Controlled Accumulation Period
Length". This is the number of months that the servicer expects will be needed
to fully fund the Principal Funding Account no later than the series 04-1
scheduled redemption date. This calculation is based on:
* the expected monthly principal collections that the servicer calculates
will be available to the investor interests of all series other than
excluded series, assuming a principal payment rate no greater than the
lowest monthly principal payment rate on the receivables for the twelve
months before; and
* the amount of principal expected to be distributable to the investor
interests of all series in group one -- other than Companion Series --
that are not expected to be in their revolving periods during the
Controlled Accumulation Period.
If the Controlled Accumulation Period Length is less than twelve months, the
servicer may, at its option, postpone the start of the Controlled Accumulation
Period such that the number of calendar months in the Controlled Accumulation
Period will be at least equal to the Controlled Accumulation Period Length.
The effect of this is to permit the reduction of the length of the Controlled
Accumulation Period based on the investor interest of future series that are
scheduled to be in their revolving periods during the Controlled Accumulation
Period and on increases in the principal payment rate occurring after the
closing date. The length of the Controlled Accumulation Period will not be less
than one month.
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UNAVAILABLE PRINCIPAL COLLECTIONS
If:
* during the Controlled Accumulation Period or the Regulated Amortisation
Period, the amount credited to the Principal Collections Ledger
identified for series 04-1 during any monthly period minus the amount of
Investor Cash Available for Acquisition calculated for series 04-1 for
that monthly period, exceeds the sum of:
(1) the Adjusted Investor Interest as of the last day of the prior
monthly period, after taking into account any deposits to be made
to the Principal Funding Account on the transfer date for that
monthly period, any unreimbursed Investor Charge-Offs for any class
and any other adjustments to the Investor Interest for that monthly
period; and
(2) any Reallocated Class B Principal Collections or Reallocated Class
C Principal Collections on the transfer date for that monthly
period; or
* during the Rapid Amortisation Period, the amount credited to the
Principal Collections Ledger identified for series 04-1 during any
monthly period exceeds the sum of:
(1) the Investor Interest as of the last day of the prior monthly
period, after taking into account any deposits to be made to the
Series 04-1 Distribution Account on the transfer date for that
monthly period, any unreimbursed Investor Charge-Offs for any class
and any other adjustments to the Investor Interest for that monthly
period; and
(2) any Reallocated Class B Principal Collections or Reallocated Class
C Principal Collections on the transfer date for that monthly
period
the amount of any excess will be allocated and transferred to the transferor
beneficiary only to the extent that the Transferor Interest on that date is
greater than zero. If the Transferor Interest on that date is not greater than
zero, the amount will be identified as unavailable transferor principal
collections credited to the Principal Collections Ledger. This sum, together
with any unavailable investor principal collections that have been credited to
the Principal Collections Ledger, will be identified as "Unavailable Principal
Collections". Unavailable investor principal collections are principal
collections identified for the transferor beneficiary but not transferred to
the transferor beneficiary because the Transferor Interest at the relevant date
is not greater than zero.
Unavailable Principal Collections will to the extent they arise during the
Revolving Period, be allocated to the transferor beneficiary but will be
transferred to the transferor beneficiary only if and to the extent that the
Transferor Interest at that time is greater than zero. On each transfer date
for the Controlled Accumulation Period, Regulated Amortisation Period or the
Rapid Amortisation Period, any Unavailable Principal Collections which arise
after the end of the Revolving Period which are credited to the Principal
Collections Ledger will be allocated to the investor beneficiary and included
as Investor Principal Collections to be distributed as Available Investor
Principal Collections.
SHARED PRINCIPAL COLLECTIONS
Principal collections for any monthly period allocated to the Investor Interest
of series 04-1 will first be used to cover:
* until the series 04-1 scheduled redemption date, for any monthly period
during the Controlled Accumulation Period, deposits of the Controlled
Deposit Amount to the Principal Funding Account;
* during the Regulated Amortisation Period, deposits of the Controlled
Deposit Amount to the Series 04-1 Distribution Account for series 04-1;
and
* during the Controlled Accumulation Period, on the series 04-1 scheduled
redemption date and during the Rapid Amortisation Period, payments to the
MTN Issuer for series 04-1.
The receivables trustee will determine the amount of principal collections for
any monthly period allocated to the Investor Interest remaining after covering
required distributions to the MTN Issuer for each class of series 04-1 and any
similar amount remaining for any other outstanding series in group one. These
remaining principal collections are called "Shared Principal Collections". The
receivables trustee will allocate the Shared Principal Collections to cover any
scheduled or permitted principal distributions to beneficiaries, and deposits
to principal funding accounts, if any, for any
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series in group one that have not been covered out of the principal collections
allocable to that series. These uncovered principal distributions and deposits
are called "Principal Shortfalls". Shared Principal Collections will not be
used to cover investor charge-offs for any class of any series.
If Principal Shortfalls exceed Shared Principal Collections for any monthly
period, Shared Principal Collections will be allocated in proportion among the
outstanding series in group one based on the amounts of Principal Shortfalls
for each series. To the extent that Shared Principal Collections exceed
Principal Shortfalls, the balance will in the normal course be paid to the
transferor beneficiary.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each transfer date, the receivables trustee will calculate the Investor
Default Amount for the previous monthly period. The "Investor Default Amount"
will be the total of, for each defaulted account, the product of the Floating
Investor Percentage and the default amount.
The "default amount" for any defaulted account will be the amount of eligible
principal receivables in the defaulted account on the day the account became a
defaulted account.
The Investor Default Amount will be calculated for each notional class of
series 04-1 based on its floating allocation during the monthly period. These
allocations will be called the "Class A Investor Default Amount", the "Class B
Investor Default Amount" and the "Class C Investor Default Amount".
On each transfer date, if the Class A Investor Default Amount for the prior
monthly period exceeds the sum of:
* Class A Available Funds;
* Excess Spread;
* Reallocated Class C Principal Collections; and
* Reallocated Class B Principal Collections;
in each case, to the extent available to cover the Class A Investor Default
Amount, then the Class C Investor Interest will be reduced by the amount of the
excess, but not by more than the remaining Class A Investor Default Amount.
This reduction to the Class C Investor Interest will be made only after giving
effect to reductions to the Class C Investor Interest for any Class C Investor
Charge-Offs, any Reallocated Class B Principal Collections and Reallocated
Class C Principal Collections.
If this reduction would cause the Class C Investor Interest to be a negative
number, it will be reduced to zero. In this case, the Class B Investor Interest
will be reduced by the amount by which the Class C Investor Interest would have
been reduced below zero, but not by more than the Class A Investor Default
Amount not covered by a reduction in the Class C Investor Interest. This
reduction in the Class B Investor Interest will be made only after giving
effect to reductions for any Class B Investor Charge-Offs and Reallocated Class
B Principal Collections not covered by a reduction in the Class C Investor
Interest.
If this reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero. In this case,
the Class A Investor Interest will be reduced by the amount by which the Class
B Investor Interest would have been reduced below zero, but not by more than
the remaining Class A Investor Default Amount not covered by a reduction in the
Class C Investor Interest or the Class B Investor Interest. This is called a
"Class A Investor Charge-Off" and may have the effect of slowing or reducing
the return of principal to the MTN Issuer calculated in respect of Class A.
If the Class A Investor Interest has been reduced by any Class A Investor
Charge-Offs, it will be reimbursed on any transfer date by the amount of Excess
Spread allocated and available for that purpose, but not by more than the total
amount by which the Class A Investor Interest has been reduced. See "-- Excess
Spread".
On each transfer date, if the Class B Investor Default Amount for the prior
monthly period exceeds the sum of:
* Excess Spread; and
* Reallocated Class C Principal Collections,
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in each case to the extent available to cover the Class B Investor Default
Amount, then the Class C Investor Interest will be reduced by the amount of the
excess, but not by more than the remaining Class B Investor Default Amount.
This reduction to the Class C Investor Interest will be made only after giving
effect to any reductions to the Class C Investor Interest for any Class C
Investor Charge-Offs, any Reallocated Class B Principal Collections, any
Reallocated Class C Principal Collections and any reductions in the Class C
Investor Interest to cover the Class A Investor Default Amount.
If this reduction would cause the Class C Investor Interest to be a negative
number, it will be reduced to zero. In this case, the Class B Investor Interest
will be reduced by the amount by which the Class C Investor Interest would have
been reduced below zero, but not by more than the remaining Class B Investor
Default Amount not covered by a reduction to the Class C Investor Interest.
This is called a "Class B Investor Charge-Off" and may have the effect of
slowing or reducing the return of principal to the MTN Issuer calculated in
respect of Class B.
If the Class B Investor Interest has been reduced for any reasons other than
the payment of principal, it will be reimbursed on any transfer date by the
amount of Excess Spread allocated and available for that purpose, but not by
more than the total amount by which the Class B Investor Interest has been
reduced. See "-- Excess Spread".
On each transfer date, if the Class C Investor Default Amount for the prior
monthly period exceeds the amount of Excess Spread available to cover the Class
C Investor Default Amount, the Class C Investor Interest will be reduced by the
amount of the excess, but not by more than the Class C Investor Default Amount.
This is called a "Class C Investor Charge-Off", which may have the effect of
slowing or reducing the return of principal to the MTN Issuer calculated in
respect of Class C.
If the Class C Investor Interest has been reduced for any reasons other than
the payment of principal, it will be reimbursed on any transfer date by the
amount of Excess Spread allocated and available for that purpose, but not by
more than the total amount by which the Class C Investor Interest has been so
reduced. See "-- Excess Spread".
"Reallocated Class B Principal Collections" means, for any transfer date, the
principal collections allocable to the Class B Investor Interest for the
related monthly period in an amount not to exceed the Class A Required Amount,
after applying Excess Spread and Reallocated Class C Principal Collections to
cover the Class A Required Amount. Reallocated Class B Principal Collections
cannot exceed the Class B Investor Interest after giving effect to any
unreimbursed Class B Investor Charge-Offs. Reallocated Class B Principal
Collections will reduce the Class B Investor Interest.
"Reallocated Class C Principal Collections" means, for any transfer date, the
principal collections allocable to the Class C Investor Interest for the
related monthly period in an amount not to exceed the Class A Required Amount
and the Class B Required Amount after applying Excess Spread to cover the Class
A Required Amount and the Class B Required Amount. Reallocated Class C
Principal Collections cannot exceed the Class C Investor Interest after giving
effect to any unreimbursed Class C Investor Charge-Offs. Reallocated Class C
Principal Collections will reduce the Class C Investor Interest.
The "Class A Required Amount" for any transfer date will be the amount, if any,
by which the sum of:
* the Class A Monthly Required Expense Amount;
* the total amount of the class A servicing fee and the class A cash
management fee for the prior monthly period and any due and unpaid class
A servicing fees and class A cash management fees; and
* the Class A Investor Default Amount,
exceeds the Class A Available Funds.
The "Class B Required Amount" for any transfer date will be the sum of (1) the
amount, if any, by which the sum of:
* the Class B Monthly Required Expense Amount; and
* the total amount of the class B servicing fee and the class B cash
management fee for the prior monthly period and any due and unpaid Class
B servicing fees or class B cash management fees,
exceeds the Class B Available Funds, and (2) the Class B Investor Default
Amount.
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EXCESS SPREAD
"Excess Spread" for any transfer date will be the sum of Class A Excess Spread,
Class B Excess Spread and Class C Excess Spread.
On each transfer date, the receivables trustee will apply Excess Spread to make
the following distributions in the following priority:
(1) an amount equal to the Class A Required Amount, if any, will be used to
fund, the Class A Required Amount; if the Class A Required Amount is more
than the amount of Excess Spread, Excess Spread will be applied in the
order of priority in which Class A Available Funds are to be distributed;
(2) an amount equal to the total amount of Class A Investor Charge-Offs that
have not been previously reimbursed will be used to reinstate the Class A
Investor Interest, treated as a portion of Investor Principal Collections
allocated to Class A and credited to the Principal Collections Ledger;
(3) an amount equal to the Class B Required Amount will be used to fund the
Class B Required Amount; if the Class B Required Amount is more than the
amount of Excess Spread available, Excess Spread will be applied first in
the order of priority with which Class B Available Funds are to be
distributed on any transfer date and then to fund the Class B Investor
Default Amount; any amount available to pay the Class B Investor Default
Amount will be allocated to Class B and treated as a portion of Investor
Principal Collections allocated to Class B and credited to the Principal
Collections Ledger;
(4) an amount equal to the total amount by which the Class B Investor
Interest has been reduced below the Class B Initial Investor Interest for
reasons other than the payment of principal -- but not in excess of the
aggregate amount of such reductions which have not been previously
reimbursed -- will be used to reinstate the Class B Investor Interest,
treated as a portion of Investor Principal Collections and credited to
the Principal Collections Ledger;
(5) an amount equal to the sum of the Class C Monthly Finance Amount, the
Class C Deficiency Amount and the Class C Additional Finance Amount --
called the "Class C Monthly Distribution Amount" -- will be credited to
the Class C Distribution Ledger;
(6) an amount equal to the Class C Investor Default Amount will be allocated
to Class C and treated as a portion of Investor Principal Collections
allocated to Class C and credited to the Principal Collections Ledger;
(7) an amount equal to the total amount by which the Class C Investor
Interest has been reduced below the Class C Investor Interest for reasons
other than the payment of principal -- but not in excess of the total
amount of the reductions that have not been previously reimbursed -- will
be used to reinstate the Class C Investor Interest, treated as a portion
of Investor Principal Collections and credited to the Principal
Collections Ledger;
(8) on each transfer date from and after the Reserve Account Funding Date,
but before the date on which the Reserve Account terminates, an amount up
to the excess, if any, of the Required Reserve Account Amount over the
amount on deposit in the Reserve Account will be deposited into the
Reserve Account;
(9) on each distribution date prior to the Class C Release Date, if the
available amount on deposit in the Spread Account is less than the
Required Spread Account Amount, an amount up to any excess will be
deposited into the Spread Account;
(10) an amount equal to any Aggregate Investor Indemnity Amount for series 04-
1 will be paid to the transferor and will then cease to be property of
the receivables trust;
(11) the Series 04-1 Extra Amount will be paid into the Series 04-1
Distribution Account and will be owned by the MTN Issuer;
(12) on the series 04-1 termination date, an amount equal to the principal
calculated as payable in accordance with the expenses loan agreement will
be paid into the Series 04-1 Distribution Account; and
(13) the balance, if any, after giving effect to the payments made under
paragraphs (1) through (12) above will be paid to the MTN Issuer as
assignee of the excess interest beneficiary and will then cease to be
property of the receivables trust.
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EXTRA AMOUNT
The "Series 04-1 Extra Amount" is calculated as follows:
For the first [GBP]250,000,000:
Days in Calculation period
-------------------------- x 0.02 per cent. x The Investor Interest
365 (366 in a leap year)
and for any amounts exceeding [GBP]250,000,000:
Days in Calculation period
-------------------------- x 0.002 per cent. x The Investor Interest
365 (366 in a leap year)
AGGREGATE INVESTOR INDEMNITY AMOUNT
By each transfer date, the receivables trustee will calculate the Aggregate
Investor Indemnity Amount for each outstanding series. The "Aggregate Investor
Indemnity Amount" is the sum of all Investor Indemnity Amounts for the related
monthly period.
An "Investor Indemnity Amount" means for any series, the amount of any
Transferor Section 75 Liability claimed from the receivables trustee by the
transferor under the trust section 75 indemnity allocated to that series,
calculated as follows:
Transferor Section 75 Liability x Floating Investor Percentage for that
series
The "Transferor Section 75 Liability" is the liability that the transferor has
for any designated account because of Section 75 of the Consumer Credit Act.
The Transferor Section 75 Liability cannot exceed the original outstanding face
amount of the principal receivable relating to the transaction giving rise to
the liability. See "Risk Factors: Application of the Consumer Credit Act 1974
May Impede Collection Efforts and Could Cause Early Redemption of the Notes or
a Loss on your Notes".
Aggregate Investor Indemnity Amounts for series 04-1 will be payable only if
amounts are available from Excess Spread to pay them. See "-- Excess Spread".
If Excess Spread available on any transfer date is not enough to pay the
Aggregate Investor Indemnity Amount for series 04-1 otherwise payable on that
date, the excess will be carried forward and paid on subsequent transfer dates
to the extent amounts of Excess Spread are available to pay them.
PRINCIPAL FUNDING ACCOUNT
The receivables trustee will establish and maintain the Principal Funding
Account at a Qualified Institution -- currently Barclays Bank PLC at its branch
located at 1234 Pavilion Drive Northampton NN4 7SG -- as a segregated Trust
Account held for the benefit of the MTN Issuer as the investor beneficiary for
series 04-1 and the transferor beneficiary. During the Controlled Accumulation
Period, the receivables trustee will transfer the amounts described under "--
Allocation, Calculation and Distribution of Principal Collections to the MTN
Issuer" to the Principal Funding Account.
Funds on deposit in the Principal Funding Account will be invested to the
following transfer date by the receivables trustee in permitted investments.
Investment earnings, net of investment losses and expenses, on funds on deposit
in the Principal Funding Account are called "Principal Funding Investment
Proceeds".
Principal Funding Investment Proceeds will be used to pay the Class A Covered
Amount.
The "Class A Covered Amount" is calculated as follows:
Days in the Calculation Period The amount equal to the amount
- ------------------------------ x The Class A Finance Rate x on deposit in the Principal
365 (366 in a leap year) Funding Account
where the amount on deposit in the Principal Funding Account is calculated as
of the last day of the monthly period before the monthly period in which the
relevant transfer date occurs.
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Where the amount on deposit in the Principal Funding Account is calculated as
of the last day of the monthly period before the monthly period in which the
relevant transfer date occurs.
Principal Funding Investment Proceeds up to the Class A Covered Amount will be
transferred to the Trustee Collection Account by each transfer date and
credited to the Finance Charge Collections Ledger for application as Class A
Available Funds.
If on any transfer date during the Controlled Accumulation Period, the
Principal Funding Investment Proceeds exceed the Class A Covered Amount, that
excess will be paid to the transferor beneficiary. If the Principal Funding
Investment Proceeds are less than the Class A Covered Amount, a withdrawal will
be made from the Reserve Account -- to the extent funds are available -- and
will be deposited in the Finance Charge Collections Ledger, for application as
Class A Available Funds. The amount of this withdrawal will be reduced to the
extent Excess Spread would be available for deposit in the Reserve Account. See
"-- Reserve Account" and "-- Excess Spread".
RESERVE ACCOUNT
The receivables trustee will establish and maintain a reserve account at a
Qualified Institution -- currently, Barclays Bank PLC at its branch located at
54 Lombard Street, London EC3P 3AH -- as a Trust Account segregated for the
benefit of series 04-1. This account is called the "Reserve Account". The
Reserve Account will be established to assist with the payment distribution of
the Class A Monthly Finance Amount to the MTN Issuer during the Controlled
Accumulation Period.
On each transfer date from and after the Reserve Account Funding Date, but
before the termination of the Reserve Account, the receivables trustee will
apply Excess Spread in the order of priority described in "-- Excess Spread" to
increase the amount on deposit in the Reserve Account, up to the Required
Reserve Amount.
The "Reserve Account Funding Date" will be the transfer date that starts no
later than three months before the start of the Controlled Accumulation Period.
This date will be an earlier date if the Portfolio Yield decreases below levels
described in the Series 04-1 Supplement. In any case, this date will be no
earlier than 12 months before the start of the Controlled Accumulation Period.
The "Required Reserve Amount" for any transfer date on or after the Reserve
Account Funding Date will be:
* 0.50 per cent. of the Class A Investor Interest; or
* subject to the conditions described in the next paragraph, any other
amount designated by the transferor beneficiary;
If, on or before the Reserve Account Funding Date, the transferor beneficiary
designates a lesser amount, it must provide the servicer and the receivables
trustee with evidence that each rating agency has notified the transferor, the
servicer and the receivables trustee that that lesser amount will not result in
the rating agency reducing or withdrawing its then existing rating of any
outstanding related beneficiary debt. Also, the transferor beneficiary must
deliver to the receivables trustee an officer's certificate to the effect that,
based on the facts known to that officer at that time, in the reasonable belief
of the transferor beneficiary, the designation will not cause a Pay Out Event
to occur or an event that, after the giving of notice or the lapse of time,
would cause a Pay Out Event to occur. Further, this designation will not be
effective without the prior written agreement of all the other beneficiaries.
On each transfer date, after giving effect to any deposit to be made to, and
any withdrawal to be made from, the Reserve Account on that transfer date, the
receivables trustee will withdraw from the Reserve Account an amount equal to
the excess, if any, of the amount on deposit in the Reserve Account over the
Required Reserve Amount. The receivables trustee will distribute this amount to
the transferor beneficiary and it will cease to be the property of the
receivables trust.
All amounts on deposit in the Reserve Account on any transfer date will be
invested by the receivables trustee in permitted investments to the following
transfer date. This will be done after giving effect to any deposits to, or
withdrawals from, the Reserve Account to be made on that transfer date. The
interest and other income -- net of investment expenses and losses -- earned on
the investments will be retained in the Reserve Account if the amount on
deposit in the Reserve Account is less than the Required Reserve Amount. If the
amount on deposit is equal to or more than the Required Reserve Amount, it will
be credited to the Finance Charge Collections Ledger to be included in the
Class A Available Funds.
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On each transfer date for the Controlled Accumulation Period before the series
04-1 scheduled redemption date and on the first transfer date during the
Regulated Amortisation Period or the Rapid Amortisation Period, the receivables
trustee will withdraw an amount from the Reserve Account and deposit it in the
Trustee Collection Account for credit to the Finance Charge Collections Ledger
to be included, in Class A Available Funds. This amount will be equal to the
lesser of:
* the available amount on deposit in the Reserve Account; and
* the amount, if any, by which the Class A Covered Amount is greater than
the Principal Funding Investment Proceeds.
The amount of this withdrawal will be reduced to the extent Excess Spread would
be available for deposit in the Reserve Account.
The Reserve Account will be terminated following the earliest to occur of:
* the termination of the receivables trust;
* the earlier of the first transfer date after the start of the Regulated
Amortisation Period or the Rapid Amortisation Period; and
* the series 04-1 termination date.
When the Reserve Account terminates, all amounts still on deposit in the
Reserve Account will be treated as part of the excess interest attributable to
series 04-1 and will be paid to the MTN Issuer and will no longer be the
property of the receivables trust.
SPREAD ACCOUNT
The receivables trustee will establish and maintain a spread account at a
Qualified Institution -- currently Barclays Bank PLC at its branch located at
1234 Pavilion Drive, Northampton NN4 7SG -- as a segregated Trust Account held
for the benefit of the MTN Issuer as the investor beneficiary and the
transferor beneficiary. This account is called the "Spread Account". The Spread
Account will be used:
* to fund shortfalls in Excess Spread available to pay the Class C Monthly
Distribution Amount;
* on the day called the "Class C Release Date", which is the earlier of:
(1) the day the Class A Investor Interest and the Class B Investor
Interest are reduced to zero, and
(2) the series 04-1 termination date,
to fund the amount, if any, by which the Class C Debt Amount is greater
than the Class C Investor Interest; and
* beginning on the Class C Release Date, to fund shortfalls in Excess
Spread available to fund the Class C Investor Default Amount.
No amounts will be deposited into the Spread Account on the closing date, but
if the amount on deposit in the Spread Account is less than the Required Spread
Account Amount, then the Spread Account will be funded by Excess Spread as
described above in item (9) under "--Excess Spread".
The "Required Spread Account Amount" will be determined monthly and will be
equal to the Spread Account Percentage times:
* during the Revolving period or the Controlled Accumulation Period, the
current Adjusted Investor Interest, or
* during the Regulated Amortisation Period or the Rapid Amortisation
Period, the Adjusted Investor Interest as of the last day of the
Revolving Period or, if the Controlled Accumulation Period has started,
as of the last day of the Controlled Accumulation Period.
The Required Spread Account Amount, however, will never exceed the Class C Debt
Amount.
The "Spread Account Percentage" will be determined each determination date by
the level of the quarterly excess spread percentage as follows:
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Spread Account
Quarterly Excess Spread Percentage Percentage
above 4.5% 0.0%
above 4.0% but equal to or below 4.5% 1.0%
above 3.5% but equal to or below 4.0% 1.5%
above 3.0% but equal to or below 3.5% 2.0%
equal to or below 3.0% 2.5%
The quarterly excess spread percentage will be calculated on each determination
date and will be a percentage equal to the average of the Portfolio Yields for
the three prior months less the average of the Expense Rates for the same three
months.
The quarterly excess spread percentage for the first determination date will be
calculated using the Portfolio Yield for the prior month divided by the Expense
Rate for the same month. The quarterly excess spread percentage for the second
determination date will be calculated using the average of the Portfolio Yields
for the prior two months divided by the average of the Expense Rates for the
same two months.
All amounts on deposit in the Spread Account on any transfer date will be
invested by the receivables trustee in permitted investments to the next
transfer date. For purposes of the Spread Account, permitted investments will
include investments rated A-2 by Standard & Poor's, and P-2 by Moody's. This
will be done after giving effect to any deposits to, or withdrawals from, the
Spread Account made on that transfer date. The interest and other investment
income -- net of investment expenses and losses -- earned on the investments
will be retained in the Spread Account if the amount on deposit in the Spread
Account is less than the Required Spread Account Amount. If the amount on
deposit in the Spread Account is at least equal to the Required Spread Account
Amount, then it will be paid to the transferor beneficiary.
If the Class C Monthly Distribution Amount is not fully paid from Excess Spread
on any transfer date, the receivables trustee will withdraw from available
funds on deposit in the Spread Account an amount equal to the shortfall and
credit it to the Class C Distribution Ledger.
On the Class C Release Date, the lesser of:
* the available amount on deposit in the Spread Account, and
* the amount, if any, by which the Class C Debt Amount exceeds the Class C
Investor Interest
will be withdrawn by the receivables trustee and paid to the MTN Issuer as the
investor beneficiary and treated as principal paid that is referable to the
Class C Investor Interest. This withdrawal will be made only after giving
effect to any withdrawal made for the purposes described in the preceding
paragraph.
Beginning on the Class C Release Date, if the Class C Investor Default Amount
is not fully funded from Excess Spread on any transfer date, the receivables
trustee will withdraw from available funds on deposit in the Spread Account an
amount equal to the shortfall and these funds will be calculated by reference
to Class C and treated as a portion of Investor Principal Collections that is
referable to the Class C Investor Interest and credited to the Principal
Collections Ledger. This withdrawal will be made only after giving effect to
any withdrawal made for the purposes described in the two preceding paragraphs.
Any amount on deposit in the Spread Account that exceeds the Required Spread
Account Amount will be withdrawn by the receivables trustee and will be treated
as part of the excess interest attributable to series 04-1 and will be paid to
the MTN Issuer. Also, on the earlier of:
* the termination of the receivables trust; and
* the series 04-1 termination date,
any amounts still on deposit in the Spread Account, after making any deposit or
withdrawal described above, will be withdrawn by the receivables trustee and
treated as part of the excess interest attributable to series 04-1 and will be
paid to the MTN Issuer.
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DISTRIBUTION LEDGERS
The receivables trustee will establish distribution ledgers for each class of
series 04-1 in the Trustee Collection Account. On each transfer date it will
credit and debit amounts to these ledgers as described throughout this section
of this prospectus. All amounts credited to the Class A Distribution Ledger,
the Class B Distribution Ledger and the Class C Distribution Ledger will be
regarded as being segregated for the benefit of the MTN Issuer.
TRUSTEE PAYMENT AMOUNT
The share of the Trustee Payment Amount payable on any transfer date that is
allocable to series 04-1 -- called the "Investor Trustee Payment Amount" --
will be calculated as follows:
Investor Interest for series 04-1 Trustee
- --------------------------------------------------- x Payment Amount
Total of Investor Interests of series for which the
Trustee Payment Amount was incurred
The share of the Investor Trustee Payment Amount allocable to the Investor
Interest for each class is equal to the product of:
* the floating allocation for the relevant class; and
* the Investor Trustee Payment.
This will be called the "Class A Trustee Payment Amount", the "Class B Trustee
Payment Amount" and the "Class C Trustee Payment Amount", respectively.
The Investor Trustee Payment Amount for any class will be payable from amounts
available for distribution for that purpose out of available funds for each
class and Excess Spread. See "--Allocation, Calculation and Distribution of
Finance Charge Collections to the MTN Issuer" and "-- Excess Spread".
The portion of the Trustee Payment Amount not allocated to series 04-1 will be
paid from cashflows under the receivables trust allocated to other outstanding
series, and in no event will series 04-1 be liable for these payments.
QUALIFIED INSTITUTIONS
If the bank or banks at which any of the accounts listed below are held cease
to be a Qualified Institution, then the receivables trustee will, within 10
business days, establish a new account to replace the affected account or
accounts, and will transfer any cash and interest to that new account or
accounts. The accounts referred to above are:
* Trustee Collection Account;
* Trustee Acquisition Account;
* Reserve Account;
* Spread Account;
* Principal Funding Account; and
* Series 04-1 Distribution Account.
The receivables trustee may in its discretion elect to move any or all of these
accounts and the amounts credited to them from the Qualified Institution at
which they are kept as at the date of this document to another or other
Qualified Institutions.
"Qualified Institution" means (1) an institution which at all times has a
short-term unsecured debt rating of at least A-1+ by Standard & Poor's and P-1
by Moody's or (2) an institution acceptable to each rating agency.
SERIES 04-1 PAY OUT EVENTS
The events described below are called "Series 04-1 Pay-Out Events":
(1) failure on the part of the transferor:
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* to make any payment or deposit required by the terms of the
receivables securitisation agreement within five business days
after the date that the payment or deposit is required to be made;
or
* duly to observe or perform any covenants or agreements of the
transferor in the receivables securitisation agreement or the
Series 04-1 Supplement that has a material adverse effect on the
interests of the MTN Issuer in respect of series 04-1 and which
continues unremedied for a period of 60 days after the date on
which written notice of the failure, requiring it to be remedied,
is given to the transferor by the receivables trustee, or is given
to the transferor and the receivables trustee by the investor
beneficiary for series 04-1 acting on the instructions of holders
of the series 04-1 medium term note certificate representing
together 50 per cent. or more of the total balance of the series
04-1 medium term note certificate outstanding at that time, and
which unremedied continues during that 60 day period to have a
material adverse effect on the interests of the MTN Issuer in
respect of series 04-1 for that period;
(2) any representation or warranty made by the transferor in the receivables
securitisation agreement or the Series 04-1 Supplement, or any
information contained in a computer file or microfiche list required to
be delivered by the transferor under the receivables securitisation
agreement:
* proves to have been incorrect in any material respect when made or
when delivered and continues to be incorrect in any material
respect for a period of 60 days after the date on which written
notice of the error, requiring it to be remedied, is given to the
transferor by the receivables trustee, or is given to the
transferor and the receivables trustee by the investor beneficiary
for series 04-1 acting on the instructions of holders of the series
04-1 medium term note certificate representing together 50 per
cent. or more of the total balance of the series 04-1 medium term
note certificate outstanding; and
* as a result of which there is a material adverse effect on the
interests of the MTN Issuer in respect of series 04-1 and which
unremedied continues during that 60 day period to have a material
adverse effect for that period;
Notwithstanding the above, no series 04-1 Pay-Out Event in relation to
(2) shall be deemed to have occurred if the transferor has complied with
its obligations for a breach of warranty as set out in the receivables
securitisation agreement.
(3) the average Portfolio Yield for any three consecutive monthly periods is
less than the average Expense Rate for those periods, or on any
determination date before the end of the third monthly period from the
closing date the Portfolio Yield is less than the average Expense Rate
for that period;
(4) either:
* over any period of thirty consecutive days, the Transferor Interest
averaged over that period is less than the Minimum Transferor
Interest for that period and the Transferor Interest does not
increase on or before the tenth business day following that thirty
day period to an amount so that the average of the Transferor
Interest as a percentage of the Average Principal Receivables for
such thirty day period, computed by assuming that the amount of the
increase of the Transferor Interest by the last day of the ten
business day period, as compared to the Transferor Interest on the
last day of the thirty day period, would have existed in the
receivables trust during each day of the thirty day period, is at
least equal to the Minimum Transferor Interest; or
* on the last day of any monthly period the total balance of eligible
receivables is less than the Minimum Aggregate Principal
Receivables, adjusted for any series having a Companion Series as
described in the supplement for that series, and the total balance
of eligible receivables fails to increase to an amount equal to or
greater than the Minimum Aggregate Principal Receivables on or
before the tenth business day following that last day;
(5) any servicer default or trust cash manager default occurs that would have
a material adverse effect on the MTN Issuer in respect of series 04-1;
(6) the Investor Interest is not reduced to zero on the series 04-1 scheduled
redemption date;
104
(7) the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements";
(8) the MTN Issuer is required to withhold or deduct any amounts for or on
account of tax on the payment of any principal or interest in respect of
the series 04-1 medium term note certificate.
If any event described in paragraphs (1), (2) or (5) occurs then, after the
applicable grace period, either (1) the receivables trustee or (2) the investor
beneficiary may declare that a Series 04-1 Pay Out Event has occurred if the
correct notice has been given. If the investor beneficiary declares that a
Series 04-1 Pay Out Event has occurred, it must have acted on the instructions
of holders of the series 04-1 medium term note certificate representing,
together, 50 per cent. or more of the series 04-1 medium term note certificate
outstanding at that time. The investor beneficiary must give a written notice
to the transferor, the servicer and the receivables trustee that a Series 04-1
Pay Out Event has occurred. If the receivables trustee declares that a Series
04-1 Pay Out Event has occurred, it must give a written notice to this effect
to the transferor, the servicer and the trust cash manager. A Series 04-1 Pay
Out Event will be effective as of the date of the relevant notice. If any event
in paragraphs (3), (4), (6), (7) or (8) occurs, a Series 04-1 Pay Out Event
will occur without any notice or other action on the part of the receivables
trustee or the investor beneficiary.
"Portfolio Yield" means, for any monthly period:
(A + B + C + D) -- E
-------------------- x 12
F
where:
A = the finance charge collections allocable to series 04-1;
B = the Acquired Interchange allocable to series 04-1;
C = the Principal Funding Investment Proceeds up to the Class A Covered
Amount;
D = the amount, if any, to be withdrawn from the Reserve Account that is
included in Class A Available Funds;
E = the Investor Default Amount; and
F = the Investor Interest.
"Expense Rate" means, for any transfer date:
A + B + C
--------- x 12
D
where:
A = the sum of the Class A Monthly Required Expense Amount, the Class B
Monthly Required Expense Amount and the Class C Monthly Required Expense
Amount;
B = the investor servicing fee;
C = the investor trust cash management fee; and
D = the Investor Interest.
"Minimum Transferor Interest" means 5 per cent. of the Average Principal
Receivables. The transferor may reduce the Minimum Transferor Interest in the
following circumstances:
* upon 30 days prior notice to the receivables trustee, each rating agency
and any enhancement provider entitled to receive notice under its
supplement;
* upon written confirmation from each rating agency that the reduction will
not result in the reduction or withdrawal of the ratings of the rating
agency for any outstanding related beneficiary debt, including, for
series 04-1, the notes; and
* delivery to the receivables trustee and each enhancement provider of an
officer's certificate stating that the transferor reasonably believes
that the reduction will not, based on the facts known to the officer at
the time of the certification, cause, at that time or in the future, a
Pay Out Event to occur for any investor beneficiary.
105
The Minimum Transferor Interest will never be less than 2 per cent. of the
Average Principal Receivables.
"Minimum Aggregate Principal Receivables" means, an amount equal to the sum of
the numerators used in the calculation of the investor percentages for
principal collections for all outstanding series on that date. For any series
in its rapid accumulation period, as defined in its supplement, with an
investor interest as of that date of determination equal to the balance on
deposit in the principal funding account for that series, the numerator used in
the calculation of the investor percentage for principal collections for that
eligible series will, only for the purpose of the definition of Minimum
Aggregate Principal Receivables, be zero.
"Average Principal Receivables" means, for any period, an amount equal to:
* the sum of the total balance of eligible principal receivables at the end
of each day during that period divided by;
* the number of days in that period.
"Companion Series" means:
* each series that has been paired with another series so that the
reduction of the investor interest of the paired series results in the
increase of the investor interest of the other series, as described in
the related supplements; and
* the other series.
ENTITLEMENT OF MTN ISSUER TO SERIES 04-1 EXCESS INTEREST
Barclays Bank PLC will enter into an "agreement between beneficiaries" with the
MTN Issuer under which Barclays Bank PLC will transfer its excess interest
entitlement attributable to series 04-1 to the MTN Issuer. The portion of the
excess interest so transferred will form part of the Investor Interest. The MTN
Issuer will pay amounts of excess interest attributable to series 04-1 which it
receives pursuant to the agreement between the beneficiaries to the issuer as
"MTN Issuer additional interest payments".
In return for the transfer of the entitlement to the portion of the excess
interest relating to series 04-1 the MTN Issuer will agree to pay deferred
consideration to Barclays Bank PLC. We will refer to this deferred
consideration as "excess entitlement consideration". The amount of the excess
entitlement consideration in respect of Series 04-1 will be equal to the amount
of deferred subscription price which the MTN Issuer receives from the issuer in
respect of the series 04-1 medium term note certificate from time to time.
The issuer will apply any MTN Issuer additional interest payments received by
it in meeting its due and payable obligations. Any sums remaining following
satisfaction of all amounts due and payable by the issuer, which we will refer
to as "unutilised excess spread", will be paid to the MTN Issuer as deferred
subscription price for the series 04-1 medium term note certificate for as long
as the series 04-1 medium term note certificate is in issue.
YOUR PAYMENT FLOWS
On each distribution date, the receivables trustee will transfer from available
funds in the Trustee Collection Account the sum of:
* the Class A Monthly Distribution Amount;
* the Class B Monthly Distribution Amount;
* the Class C Monthly Distribution Amount;
* on the series 04-1 termination date, an amount equal to the principal
calculated as payable in accordance with the expenses loan agreement; and
* the excess interest attributable to series 04-1;
and deposit that sum into the Series 04-1 Distribution Account held by the MTN
Issuer.
The MTN Issuer will credit the amount received in respect of the monthly
distribution amounts for each class and the portion of the excess interest
attributable to series 04-1 to the MTN Issuer coupon ledger and will record for
calculational purposes the amounts treated as referrable to each class.
106
The MTN Issuer will then transfer from the Series 04-1 Distribution Account to
the extent there are sufficient funds on deposit:
* first, the costs and expenses of the MTN Issuer for the relevant monthly
period;
* second, the lesser of (1) the amounts credited to the MTN Issuer coupon
ledger, after paying or reserving for the MTN Issuer's costs and expenses
described in the first bullet point above and (2) the interest due and
payable on the series 04-1 medium term note certificate, excluding the
MTN Issuer additional interest payments, will be deposited in the Series
04-1 Issuer Account;
* third, an amount equal to the Monthly Loan Expenses Amount plus, on the
series 04-1 termination date, an amount equal to the principal calculated
as payable in accordance with the expenses loan agreement will be
deposited in the Series 04-1 Issuer Account;
* fourth, an amount equal to 1/2 of the Series 04-1 Extra Amount will be
paid to the MTN Issuer;
* fifth, an amount equal to 1/2 of the Series 04-1 Extra Amount will be
deposited in the Series 04-1 Issuer Account;
* sixth, an amount equal to the MTN Issuer additional interest payments
will be deposited in the Series 04-1 Issuer Account.
The "Series 04-1 Issuer Account" is a bank account in the name of the issuer
that will be used to deposit amounts distributed to the issuer on the series
04-1 medium term note certificate from the MTN Issuer.
Note coupon ledgers will be established for each class of notes in the Series
04-1 Issuer Account. On each interest payment date the issuer will credit:
* to the class A notes coupon ledger an amount equal to the lesser of (1)
the amount deposited in the Series 04-1 Issuer Account and (2) the sum of
the Class A Monthly Finance Amount, the Class A Deficiency Amount and the
Class A Additional Finance Amount;
* to the class B notes coupon ledger an amount equal to the lesser of (1)
the amount deposited in the Series 04-1 Issuer Account minus the amount
credited to the class A notes coupon ledger and (2) the Class B Monthly
Distribution Amount; and
* to the class C notes coupon ledger an amount equal to the lesser of (1)
the amount deposited in the Series 04-1 Issuer Account minus the amount
credited to the class A notes coupon ledger and the class B notes coupon
ledger and the Monthly Loan Expenses Amount and (2) the Class C Monthly
Distribution Amount.
In addition, the MTN Issuer will pay any amounts received from the issuer as
deferred subscription price to Barclays Bank PLC pursuant to an agreement
between beneficiaries, to the extent not required by the MTN Issuer to make
other payments on that date.
Before the termination of the swap agreements, on each interest payment date,
the issuer will pay:
* first, from MTN Issuer additional interest, the costs and expenses of the
issuer for the relevant monthly period will be paid or reserved for
within the issuer;
* second, the costs and expenses of the issuer for the relevant monthly
period remaining after the first item will be paid or reserved for within
the issuer proportionately to the class A notes', the class B notes' and
the class C notes' share for such payment to be used to pay, or reserve
for, the costs and expenses of the issuer;
* third, from the class A notes coupon ledger, the lesser of (1) the amount
credited to the class A notes coupon ledger after paying or reserving for
the class A notes' proportionate share of the issuer's costs and (2)
other than amounts payable under the twelfth item below, expenses and the
amounts due and payable to the swap counterparty under the class A swap
agreement for the relevant Calculation Period, to the swap counterparty
and upon payment to the issuer by the swap counterparty in exchange
therefor, to the holder of the class A note (or, to the extent that the
class A swap agreement has been terminated and not replaced, the lesser
of (i) the spot United States dollar equivalent of (1) above and (ii) the
amount due under the class A note to the holder of the class A note);
107
* fourth, from the class B notes coupon ledger, the lesser of (1) the
amount credited to the class B notes coupon ledger after paying or
reserving for the class B notes' proportionate share of the issuer's
costs and (2) other than amounts payable under the thirteenth item below,
the amounts due and payable to the swap counterparty under the class B
swap agreement for the relevant Calculation Period, to the swap
counterparty and upon payment to the Issuer by the swap counterparty in
exchange therefor, to the holder of the class B note (or, to the extent
the class B swap agreement has been terminated and not replaced, the
lesser of (i) the spot United States dollar equivalent of (1) above and
(ii) the amount due under the Class B note to the holder of the class B
note;
* fifth, the lesser of the remaining amount on deposit in the Series 04-1
Issuer Account and an amount equal to the Monthly Loan Expenses Amount
will be paid to the lender under the expenses loan agreement;
* sixth, from the class C notes coupon ledger, the lesser of (1) the amount
credited to the class C notes coupon ledger after paying or reserving for
the class C notes' proportionate share of the issuer's costs and (2)
other than amounts payable under the fourteenth item below, the amounts
due and payable to the swap counterparty under the class C swap agreement
in respect of the relevant Calculation Period, to the swap counterparty
and upon payment to the Issuer by the swap counterparty in exchange
therefor to the holder of the class C note (or, to the extent the class C
swap agreement has been terminated and not replaced, the lesser of (i)
the spot United States dollar equivalent of (1) above and (ii) the amount
due under the Class C note to the holder of the class C note;
* seventh, the lesser of the remaining amount on deposit in the Series 04-1
Issuer Account and an amount equal to the principal calculated as payable
in accordance with the expenses loan agreement will be paid to the lender
under the expenses loan agreement;
* eighth, the lesser of the remaining amount on deposit in the Series 04-1
Issuer Account and an amount equal to 1/2 of the Series 04-1 Extra
Amount, will be paid to the issuer;
* ninth, any amounts due from or required to be provided for by the issuer
to meet its liabilities to any taxation authority;
* tenth, any amounts due to third parties under obligations incurred in the
course of the issuer's business;
* eleventh, an amount equal to the lesser of the amount on deposit in the
Series 04-1 Issuer Account and the amount needed to cover any shortfall
with respect to the notes caused by the imposition of withholding taxes
on payments made under the series 04-1 medium term note certificate or
the swap agreements;
* twelfth, the amount equal to any termination payment due and payable to
the swap counterparty pursuant to the class A swap agreement where the
class A swap agreement has been terminated as a result of a default by
the swap counterparty;
* thirteenth, the amount equal to any termination payment due and payable
to the swap counterparty pursuant to the class B swap agreement where the
class B swap agreement has been terminated as a result of a default by
the swap counterparty;
* fourteenth, the amount equal to any termination payment due and payable
to the swap counterparty pursuant to the class C swap agreement where the
class C swap agreement has been terminated as a result of a default by
the swap counterparty; and
* fifteenth, any amounts remaining will constitute deferred subscription
price and will be paid to the MTN Issuer.
Under the terms of each swap agreement, the swap counterparty will pay to the
principal paying agent on each interest payment date an amount equal to the
interest on the applicable class of notes, converted into dollars, subject to
the deferral of interest as described in "Terms and Conditions of the Notes"
and "The Swap Agreements".
After the termination of the swap agreements, the note trustee will withdraw
the amounts on deposit in the class A notes coupon ledger, the class B notes
coupon ledger and the class C notes coupon ledger and convert those amounts
into dollars at the then prevailing spot exchange rate in London, England for
sterling purchases of dollars and distribute these dollar amounts to the paying
agent to make payments of interest on the class A notes, the class B notes and
the class C notes, respectively.
108
On the earlier of (1) the series 04-1 scheduled redemption date and (2) the
first distribution date for the Regulated Amortisation Period or the Rapid
Amortisation Period, and on each distribution date after that, the receivables
trustee will transfer the following amounts and deposit them into the Series
04-1 Distribution Account:
* from the Principal Funding Account, the lesser of (1) the amount in the
Principal Funding Account on that date and (2) the Class A Investor
Interest; and
* from the Class A Distribution Ledger, the lesser of (1) during the Rapid
Amortisation Period, the amount in the Class A Distribution Ledger or,
during the Regulated Amortisation Period, the Controlled Deposit Amount,
and (2) the Class A Investor Interest -- after taking into account the
amount distributed from the Principal Funding Account as described above.
On the later to occur of the Class B Principal Commencement Date and the series
04-1 scheduled redemption date and each distribution date after, the
receivables trustee will transfer the following amounts and deposit them into
the Series 04-1 Distribution Account:
* from the Principal Funding Account, the lesser of (1) the amount on
deposit in the Principal Funding Account in excess of the Class A
Investor Interest and (2) the Class B Investor Interest; and
* from the Class B Distribution Ledger, the lesser of the amount on deposit
in the Class B Distribution Ledger and the Class B Investor Interest --
after taking into account the amount distributed from the Principal
Funding Account as described above.
On the later to occur of the Class C Principal Commencement Date and the series
04-1 scheduled redemption date and each distribution date after, the
receivables trustee will transfer the following amounts and deposit them into
the Series 04-1 Distribution Account:
* from the Principal Funding Account, the lesser of (1) the amount on
deposit in the Principal Funding Account in excess of the sum of the
Class A Investor Interest and the Class B Investor Interest and (2) the
Class C Investor Interest; and
* from the Class C Distribution Ledger, the lesser of the amount on deposit
in the Class C Distribution Ledger and the Class C Investor Interest --
after taking into account the amount distributed from the Principal
Funding Account as described above.
The MTN Issuer will credit the amount received for each class of Investor
Interest to the MTN Issuer Principal Ledger.
On the earlier of (1) the series 04-1 scheduled redemption date and (2) the
first distribution date for the Regulated Amortisation Period or the Rapid
Amortisation Period, and each distribution date after, the MTN Issuer will
transfer for same day value from the Series 04-1 Distribution Account the
amount in the MTN Issuer Principal Ledger and deposit it into the Series 04-1
Issuer Account.
The issuer will credit each amount received from the MTN Issuer Principal
Ledger to the appropriate notes principal ledger.
Before the termination of the swap agreements, on the earlier of (1) the Series
04-1 scheduled redemption date and (2) the first interest payment date for the
Regulated Amortisation Period or the Rapid Amortisation Period, and each
interest payment date after, the issuer will pay:
* from the class A notes principal ledger, an amount equal to the lesser of
(1) the amount in the class A notes principal ledger; and (2) the
sterling equivalent of the principal due on the class A notes, to the
swap counterparty;
* from the class B notes principal ledger, an amount equal to the lesser of
(1) the amount in the class B notes principal ledger and (2) the sterling
equivalent of the principal due on the class B notes, to the swap
counterparty; and
* from the class C notes principal ledger, an amount equal to the lesser of
(1) the amount in the class C notes principal ledger and (2) the sterling
equivalent of the principal due on the class C notes, to the swap
counterparty.
The swap counterparty will pay to the principal paying agent, in dollars,
principal for distribution to the noteholders converted into dollars, at the
fixed exchange rate.
After the termination of the swap agreements, the note trustee will withdraw
the amounts on deposit in the class A notes principal ledger, the class B notes
principal ledger and the class C notes principal ledger and, to the extent
necessary, the amounts on deposit in the Series 04-1 Issuer Account
representing MTN Issuer additional interest payments and convert those amounts
into
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dollars at the then prevailing spot exchange rate in London, England for
sterling purchases of dollars and distribute those dollar amounts to the paying
agent to make payments of principal first on the class A notes, then the class
B notes and finally the class C notes.
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THE TRUST DEED
The principal agreement governing the notes will be the trust deed. The trust
deed has five primary functions:
* it constitutes the notes;
* it sets out the covenants of the issuer in relation to the notes;
* it sets out the enforcement and post-enforcement procedures relating to
the notes;
* it contains provisions necessary to comply with the U.S. Trust Indenture
Act of 1939 -- which we will call the Trust Indenture Act; and
* it sets out the appointment, powers and responsibilities of the note
trustee.
Each function is summarised below.
The trust deed sets out the form of the notes. It also sets out the terms and
conditions of the notes, and the conditions for the issue of individual note
certificates and/or the cancellation of any notes. It stipulates that the
paying agents, the registrar, the transfer agents and the agent bank will be
appointed. The detailed provisions regulating these appointments are contained
in the paying agency and agent bank agreement.
The trust deed also contains covenants made by the issuer in favour of the note
trustee and the noteholders. The main covenants are that the issuer will pay
interest and repay principal on each of the notes when due. Covenants are
included to ensure that the issuer remains insolvency remote, and to give the
note trustee access to all information and reports that it may need in order to
discharge its responsibilities in relation to the noteholders. Some of the
covenants also appear in the terms and conditions of the notes, see "Terms and
Conditions of the Notes". The issuer also covenants that it will do all things
necessary to maintain the listing of the notes on the Official List of the UK
Listing Authority and admission to trading on the London Stock Exchange and to
keep in place a registrar, a transfer agent, a paying agent and an agent bank.
The trust deed sets out the general procedures by which the note trustee may
take steps to enforce the security created by the issuer in the deed of charge
so that the note trustee can protect the interests of the noteholders in
accordance with the terms and conditions. The trust deed gives the note trustee
a general discretion to enforce the security, but also provides for meetings of
the noteholders at which the noteholders can determine the action taken by the
note trustee in relation to the enforcement of the notes. The trust deed
provides that the class A noteholders' interests take precedence for so long as
the class A notes are outstanding, and after that, the interests of the class B
noteholders take precedence over the interests of class C noteholders, until no
more class B notes remain outstanding. Certain basic terms of each class of
notes may not be amended without the consent of the majority of the holders of
that class of note. This is described further in the "Terms and Conditions of
the Notes".
The trust deed also sets out the priority in which the note trustee will pay
out any monies that it receives under the notes after the security has been
enforced. This is also set out in the deed of charge and the priority of
payments is summarised in the terms and conditions of the notes.
The trust deed also sets out the terms on which the note trustee is appointed,
the indemnification of the note trustee, the payment it receives and the extent
of the note trustee's authority to act beyond its statutory powers under
English Law. The note trustee is also given the ability to appoint a delegate
or agent in the execution of any of its duties under the trust deed. The trust
deed also sets out the circumstances in which the note trustee may resign or
retire.
Finally, the trust deed includes certain provisions mandated by the Trust
Indenture Act. Generally, these provisions outline the duties, rights and
responsibilities of the note trustee and the issuer and the rights of the
noteholders. Specifically these include, but are not limited to:
* the maintenance of a noteholder list by the note trustee;
* the provision of financial statements and other information by the issuer
to the note trustee;
* the duty of the note trustee to use the same degree of care in exercising
its responsibilities as would be exercised by a prudent person conducting
its own affairs;
* the duty of the note trustee to notify all noteholders of any events of
default of which it has actual knowledge; and
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* the right of the note trustee to resign at any time by notifying the
issuer in writing, and the ability of the issuer to remove the note
trustee under certain circumstances.
The trust deed contains a provision that, if any other provision of the trust
deed limits, qualifies or conflicts with another provision that is required to
be included in the trust deed by, and is not subject to contractual waiver
under, the Trust Indenture Act, the Trust Indenture Act provision will prevail.
The terms of the trust deed supercede the provisions of the Trustee Act 2000 of
England and Wales.
The trust deed is governed by English Law.
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THE NOTES
The issue of the notes will be authorised by a resolution of the board of
directors of the issuer passed prior to the closing date. The notes will be
constituted by a trust deed to be dated the closing date between the issuer and
the note trustee as trustee for, among others, the holders for the time being
of the notes. The trust deed includes provisions which enable it to be modified
or supplemented and any reference to the trust deed is a reference also to the
document as modified or supplemented in accordance with its terms.
The material terms of the notes are described in this prospectus. However, the
statements set out in this section with regard to the notes and the global note
certificates representing the notes are subject to the detailed provisions of
the trust deed. The trust deed will include the forms of the global note
certificates and the forms of the individual note certificates. A paying agent
and agent bank agreement between the issuer, the note trustee, The Bank of New
York in London as "principal paying agent", the other paying agents -- together
with the principal paying agent, called the "paying agents" -- the transfer
agent, the registrar and the agent bank, regulates how payments will be made on
the notes and how determinations and notifications will be made. It will be
dated as of the closing date and the parties will include, on an ongoing basis,
any successor party appointed in accordance with its terms.
Each class of notes will be represented initially by a global note certificate
in registered form. The notes will initially be offered and sold pursuant to a
registration statement, of which this prospectus forms a part, filed with the
United States Securities and Exchange Commission. The global note certificates
representing the notes offered by this prospectus -- called the "global note
certificates" -- will be deposited with The Bank of New York in New York, as
the depository for, and registered in the name of, Cede & Co. as nominee of,
The Depository Trust Company, referred to in this prospectus as, "DTC". On
confirmation from the depository that it holds the global note certificates,
DTC will record book-entry interests in the beneficial owner's account or the
participant account through which the beneficial owner holds its interests in
the notes. These book-entry interests will represent the beneficial owner's or
participant's beneficial interest in the relevant global note certificates.
The amount of notes represented by each global note certificate is evidenced by
the register maintained for that purpose by the registrar. Together, the notes
represented by the global note certificates and any outstanding individual note
certificates will equal the aggregate principal amount of the notes outstanding
at any time. However, except as described under "-- Individual Note
Certificates", individual note certificates will not be issued.
Beneficial owners may hold their interests in the global note certificates only
through DTC, Clearstream, Luxembourg or Euroclear, as applicable, or indirectly
through organisations that are participants in any of those systems. Ownership
of these beneficial interests in a global note certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC, Clearstream, Luxembourg or Euroclear (with respect to
interests of their participants) and the records of their participants (with
respect to interests of persons other than their participants). By contrast,
ownership of direct interests in a global note certificate will be shown on,
and the transfer of that ownership will be effected through, the register
maintained by the registrar. Because of this holding structure of the notes,
beneficial owners of notes may look only to DTC, Clearstream, Luxembourg or
Euroclear, as applicable, or their respective participants for their beneficial
entitlement to those notes. The issuer expects that DTC, Clearstream,
Luxembourg or Euroclear will take any action permitted to be taken by a
beneficial owner of notes only at the direction of one or more participants to
whose account the interests in a global note certificate is credited and only
in respect of that portion of the aggregate principal amount of notes as to
which that participant or those participants has or have given that direction.
Beneficial owners will be entitled to the benefit of, will be bound by and will
be deemed to have notice of, all the provisions of the trust deed and the
paying agent and agent bank agreement. Beneficial owners can see copies of
these agreements at the principal office for the time being of the note
trustee, which is, as of the date of this document, The Bank of New York in
London and at the specified office for the time being of each of the paying
agents. Pursuant to its obligations under the Listing Rules made by the UK
Listing Authority, the issuer will maintain a paying agent in the United
Kingdom until the date on which the notes are finally redeemed.
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PAYMENT
Principal and interest payments on the notes will be made via the paying agents
to DTC or its nominee, as the registered holder of the offered global note
certificates. DTC's practice is to credit its participants' accounts on the
applicable payment date according to their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that payment date.
Payments by DTC, Clearstream, Luxembourg and Euroclear participants to the
beneficial owners of notes will be governed by standing instructions, customary
practice, and any statutory or regulatory requirements as may be in effect from
time to time, as is now the case with securities held by the accounts of
customers registered in street name. These payments will be the responsibility
of the DTC, Clearstream, Luxembourg or Euroclear participant and not of DTC,
Clearstream, Luxembourg, Euroclear, any paying agent, the note trustee or the
issuer. None of the issuer, the note trustee, any underwriter nor any paying
agent will have the responsibility or liability for any aspect of the records
of DTC, Clearstream, Luxembourg or Euroclear relating to or payments made by
DTC, Clearstream, Luxembourg or Euroclear on account of beneficial interests in
the global note certificates or for maintaining, supervising or reviewing any
records of DTC, Clearstream, Luxembourg or Euroclear relating to those
beneficial interests.
CLEARANCE AND SETTLEMENT
The Clearing Systems
DTC. DTC has advised us and the underwriters that it intends to follow the
following procedures:
DTC will act as securities depository for the global note certificates. The
notes represented by the global note certificates will be issued as securities
registered in the name of Cede & Co., DTC's nominee.
DTC has advised us that it is a:
* limited-purpose trust company organized under New York Banking Law;
* banking organisation within the meaning of New York Banking Law;
* member of the Federal Revenue System;
* clearing corporation within the meaning of the New York Uniform
Commercial Code; and
* clearing agency registered under the provisions of Section 17A of the
Exchange Act.
DTC holds securities for its participants and facilitates the clearance and
settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities certificates. DTC participants include securities
brokers and dealers, banks, trust companies, clearing corporations and other
organisations. Indirect access to DTC system is also available to others
including securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the SEC.
Transfers between participants on the DTC system will occur under DTC rules.
Transfers between participants on the Clearstream, Luxembourg system and
participants in the Euroclear system will occur under their rules and operating
procedures.
Purchases of notes under the DTC system must be made by or through DTC
participants, which will receive a credit for the note on DTC's records. The
ownership interest of each actual beneficial owner is in turn to be recorded on
the DTC participants' and indirect participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchase. However,
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the DTC participant or indirect participant through which the beneficial
owner entered into the transaction. Transfer of ownership interests in the
offered notes are to be accomplished by entries made on the books of DTC
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interest in notes unless use
of the book-entry system for the notes described in this section is
discontinued.
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To facilitate subsequent transfers, all global note certificates deposited with
DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of
these global note certificates with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the ultimate beneficial owners of the notes. DTC's records reflect only the
identity of the DTC participants to whose accounts the beneficial interests are
credited, which may or may not be the actual beneficial owners of the notes.
The DTC participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants, by
DTC participants to indirect participants, and by DTC participants and indirect
participants to beneficial owners will be governed by arrangements among them
and by any statutory or regulatory requirements in effect from time to time.
Redemption notices for the notes represented by the global note certificates
will be sent to DTC. If less than all of those notes are being redeemed by
investors, DTC's practice is to determine by lot the amount of the interest of
each participant in those notes to be redeemed.
Neither DTC nor Cede & Co. will consent or vote on behalf of the notes. Under
its usual procedures, DTC will mail an omnibus proxy to the issuer as soon as
possible after the record date, which assigns the consenting or voting rights
of Cede & Co. to those DTC participants to whose accounts the book entry
interests are credited on the record date, identified in a list attached to the
proxy.
The issuer understands that under existing industry practices, when the issuer
requests any action of noteholders or when a beneficial owner desires to give
or take any action which a noteholder is entitled to give or take under the
trust deed, DTC generally will give or take that action, or authorize the
relevant participants to give or take that action, and those participants would
authorize beneficial owners owning through those participants to give or take
that action or would otherwise act upon the instructions of beneficial owners
through them.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the issuer believes to be reliable, but the
issuer takes no responsibility for the accuracy thereof.
Clearstream, Luxembourg and Euroclear. Clearstream, Luxembourg and Euroclear
each hold securities for their participating organisations and facilitate the
clearance and settlement of securities transactions between their respective
participants through electronic book-entry changes in accounts of those
participants, thereby eliminating the need for physical movement of securities.
Clearstream, Luxembourg and Euroclear provide various services including
sakekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg and
Euroclear also deal with domestic securities markets in several countries
through established depository and custodial relationships. Clearstream,
Luxembourg and Euroclear have established an electronic bridge between their
two systems across which their respective participants may settle trades with
each other. Transactions may be settled in Clearstream, Luxembourg and
Euroclear in any of numerous currencies, including United States dollars.
Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a
professional depository. Clearstream, Luxembourg participants are financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
Clearstream, Luxembourg is also available to others, including banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg participant, either directly or
indirectly.
The Euroclear system was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment. The Euroclear system is operated by Euroclear Bank S.A./N.V., called
the "Euroclear operator". All operations are conducted by the Euroclear
operator. All Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator.
Euroclear participants include banks -- including central banks -- securities
brokers and dealers and other professional financial intermediaries. Indirect
access to the Euroclear system is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
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Securities clearance accounts and cash accounts with the Euroclear operator are
governed by the Terms and Conditions Governing use of Euroclear and the related
Operating Procedures of the Euroclear system. These terms and conditions govern
transfers of securities and cash within the Euroclear system, withdrawal of
securities and cash from the Euroclear system, and receipts of payments for
securities in the Euroclear system. All securities in the Euroclear system are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear operator acts under these
terms and conditions only on behalf of Euroclear participants and has no record
of or relationship with persons holding through Euroclear participants.
As the holders of book-entry interests, beneficial owners will not have the
right under the trust deed to act on solicitations by the issuer for action by
noteholders. Beneficial owners will only be able to act to the extent they
receive the appropriate proxies to do so from DTC, Clearstream, Luxembourg or
Euroclear or, if applicable, their respective participants. No assurances are
made about these procedures or their adequacy for ensuring timely exercise of
remedies under the trust deed.
No beneficial owner of an interest in a note represented by a global note
certificate will be able to transfer that interest except in accordance with
applicable procedures, in addition to those provided for under the trust deed,
of DTC, Clearstream, Luxembourg and Euroclear, as applicable. The laws of some
jurisdictions require that some purchasers of securities take physical delivery
of those securities in definitive form. These laws and limitations may impair
the ability to transfer beneficial interests in a note represented by a global
note certificate.
CLEARANCE AND SETTLEMENT
Initial Settlement
The global note certificates will be delivered on the closing date to The Bank
of New York in New York, as depository for DTC. Customary settlement procedures
will be followed for participants of each system on the closing date. Notes
will be credited to investors' securities accounts on the closing date against
payment in same-day funds.
Secondary Trading
Secondary market sales of book-entry interests in notes between DTC
participants will occur in the ordinary way in accordance with DTC rules and
will be settled using the procedures applicable to conventional United States
corporate debt obligations.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to these
procedures to facilitate transfers of interests in securities among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are not
obliged to perform these procedures. Additionally, these procedures may be
discontinued at any time. None of the issuer, any agent, the underwriters or
any affiliate of any of the foregoing, or any person by whom any of the
foregoing is controlled for the purposes of the Securities Act, will have any
responsibility for the performance by DTC, Clearstream, Luxembourg, Euroclear
or their respective direct or indirect participants or accountholders of their
respective obligations under the rules and procedures governing their
operations or for the sufficiency for any purpose of the arrangements described
in this prospectus.
INDIVIDUAL NOTE CERTIFICATES
Beneficial owners of notes will only be entitled to receive individual note
certificates if the notes become immediately due and repayable by reason of an
event of default or DTC notifies the issuer that it is unwilling or unable to
hold the global note certificates or is unwilling or unable to continue as, or
has ceased to be, a clearing agency registered under the Exchange Act and, in
each case, the issuer cannot appoint a successor within 90 days of such
notification.
In no event will individual note certificates in bearer form be issued. Any
individual note certificate will be issued in registered form in minimum
denominations of $1,000. Any individual note certificates will be registered in
that name or those names as the registrar shall be instructed by DTC,
Clearstream, Luxembourg and Euroclear, as applicable. It is expected that these
instructions will be based upon directions received by DTC, Clearstream,
Luxembourg and Euroclear from their participants reflecting the ownership of
book-entry interests. To the extent permitted by law, the issuer, the note
trustee and any paying agent shall be entitled to treat the person in whose
names
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any individual note certificate is registered as the absolute owner thereof.
The paying agent and agent bank agreement contains provisions relating to the
maintenance by a registrar of a register reflecting ownership of the notes and
other provisions customary for a registered debt security.
Any person receiving individual note certificates will not be obligated to pay
or otherwise bear the cost of any transfer tax or governmental charge or any
cost or expense relating to insurance, postage, transportation or any similar
charge in connection with the delivery of such individual note certificates,
which will be solely the responsibility of the issuer. No service charge will
be made for any registration of transfer or exchange of any individual note
certificates.
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TERMS AND CONDITIONS OF THE NOTES
The material terms of the notes are described in the body of the prospectus.
The following is a summary of the material terms and conditions of the notes,
and is numbered 1 to 16. This summary does not need to be read with the terms
and conditions of the notes in order to learn all the material terms and
conditions of the notes.
The notes are the subject of the following documents:
* a trust deed dated the closing date between the issuer and the note
trustee;
* a paying agency and agent bank agreement dated the closing date among the
issuer, the registrar, the principal paying agent and the agent bank, the
other paying agents, the transfer agent and the note trustee;
* a deed of charge dated the closing date among the lender under the
expenses loan agreement, the issuer, the swap counterparty and the note
trustee; and
* the class A swap agreement, the class B swap agreement and the class C
swap agreement, each between the issuer and the swap counterparty.
When we refer to the parties to the documents listed above, the reference
includes any successor to that party validly appointed.
Initially the parties will be as follows:
* Gracechurch Card Funding (No. 6) PLC as issuer;
* The Bank of New York as principal paying agent and agent bank, transfer
agent and note trustee; and
* Barclays Bank PLC as lender under the expenses loan agreement and swap
counterparty.
You are bound by and deemed to have notice of all of the provisions of the
trust deed, the paying agency and agent bank agreement, the deed of charge, the
expenses loan agreement and the swap agreements, which are applicable to you.
You can view drafts of those documents at the principal place of business of
the note trustee or the specified office of any of the paying agents.
1. FORM, DENOMINATION, TITLE AND TRANSFER
(1) The notes are in global registered form. Transfers and exchanges of
beneficial interests in notes represented by global note certificates are
made in accordance with the rules and procedures of DTC, Euroclear or
Clearstream, Luxembourg, as applicable. The notes are being offered in
minimum denominations of $1,000.
(2) Global note certificates will be exchanged for individual note
certificates in definitive registered form only under certain limited
circumstances. If individual note certificates are issued, they will be
serially numbered and issued in an aggregate principal amount equal to
the principal amount outstanding of the relevant global note certificates
and in registered form only.
(3) The registrar will maintain a register in respect of the notes in
accordance with the provisions of the paying agent and agent bank
agreement. References in this section to a "holder" of a note means the
person in whose name such note is for the time being registered in the
register -- or, in the case of a joint holding, the first named -- and
"noteholder" will be construed accordingly. A "note certificate" will be
issued to each noteholder for its registered holding. Each note
certificate will be numbered serially with an identifying number which
will be recorded in the register.
(4) The registered owner of each note will -- except as otherwise required by
law -- be treated as the absolute owner of such note for all purposes.
This will be true whether or not it is overdue and regardless of any
notice of ownership, trust or any other interest therein, any writing on
the note certificate -- other than the endorsed form of transfer -- or
any notice of any previous loss or theft of the note certificate -- and
no other person will be liable for so treating the registered owner.
(5) Subject to the provisions below, a note may be transferred upon surrender
of the relevant note certificate, with the endorsed form of transfer duly
completed, at the offices of the registrar or any transfer agent
specified in the paying agent and agent bank agreement, together with
such evidence as the registrar or transfer agent may reasonably require
to prove the title of the transferor and the authority of the individuals
who have executed the form of
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transfer. A note may not be transferred, however, unless the principal
amount of notes transferred and -- where not all of the notes held by a
holder are being transferred -- the principal amount of the balance of
notes not transferred are authorised holdings. "Authorised holdings"
means holdings of at least $1,000. Where not all the notes represented by
the surrendered note certificate are the subject of the transfer, a new
note certificate in respect of the balance of the notes will be issued to
the transferor.
(6) Within five business days of surrender of a note certificate, the
registrar will register the transfer in question and deliver a new note
certificate of a like principal amount to the notes transferred to each
relevant holder at its office or the office of any transfer agent
specified in the paying agent and agent bank agreement or, at the request
and risk of any such relevant holder, by uninsured first class mail --
and by airmail if the holder is overseas -- to the address specified for
the purpose by which commercial banks are open for business, including
dealings in foreign currencies, in the city where the registrar or the
relevant transfer agent has its specified office.
(7) The transfer of a note will be effected without charge by or on behalf of
the issuer, the registrar or any transfer agent but against such
indemnity as the registrar or transfer agent may require for any tax or
other duty of any nature that may be levied or imposed in connection with
the transfer.
(8) All payments on the notes are subject to any applicable fiscal or other
laws and regulations. Noteholders will not be charged commissions or
expenses on these payments.
(9) If the due date for payment of any amount on the notes is not a business
day in the place it is presented, noteholders will not be entitled to
payment of the amount due in that place until the next business day in
that place and noteholders will not be entitled to any further interest
or other payment as a result of that delay.
(10) If a noteholder holds individual note certificates, payments of principal
and interest -- except in the case of a final payment that pays off the
entire principal on the note -- will be made by U.S. dollar check and
mailed to the noteholder at the address shown in the register. In the
case of final redemption, payment will be made only when the note
certificate is surrendered. If the noteholder makes an application to the
registrar, payments can instead be made by transfer to a bank account.
(11) If payment of principal on a note is improperly withheld or refused, the
interest that continues to accrue will still be payable as usual.
(12) The issuer can, at any time, vary or terminate the appointment of any
paying agent and can appoint successor or additional paying agents,
registrars or transfer agents. If the issuer does this it must ensure
that it maintains a paying agent in London, a paying agent in New York
and a registrar. The issuer will ensure that at least 30 days' notice of
any change in the paying agents, the registrar or the transfer agent or
their specified offices is given to noteholders in accordance with
condition number 14.
(13) Subject as described earlier about the deferral of interest, if payment
of interest on a note is not paid for any other reason when due and
payable, the unpaid interest will itself bear interest at the applicable
rate until both the unpaid interest and the interest on that interest are
paid.
2. STATUS
Payments on the notes will be made equally amongst all notes of the same class.
3. SECURITY AND SWAP AGREEMENT
The security for the payment of amounts due under your notes, together with the
expenses which validly arise during the transaction, is created by the deed of
charge and the pledge agreement. The security is created in favour of the note
trustee who will hold it on your behalf and on the behalf of other secured
creditors of the issuer. The security consists of the following:
(1) an assignment by way of first fixed security of the issuer's right, title
and interest in and to the series 04-1 medium term note certificate to
the extent not pledged in (6) below;
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(2) a charge by way of first fixed sub-charge of all of the issuer's right,
title and interest in the security interest created by the MTN Issuer in
favour of the security trustee in respect of the series 04-1 medium term
note certificate;
(3) an assignment by way of first fixed security of the issuer's right,
title, interest and benefit in and to the issuer related documents except
the trust deed and the deed of charge;
(4) an assignment by way of first fixed security of the issuer's right,
title, interest and benefit in and to all monies credited to the Series
04-1 Issuer Account or to any bank or other account in which the issuer
may at any time have any right, title, interest or benefit;
(5) a first floating charge over the issuer's business and assets not charged
under (1), (2), (3) or (4) above or pledged under the pledge referred to
in (6) below; and
(6) a pledge over the series 04-1 medium term note certificate pursuant to a
pledge agreement between the issuer and the note trustee.
The security is described in detail in the deed of charge and the pledge
agreement.
The deed of charge sets out how money is distributed between the secured
parties if the security is enforced. The order of priority it sets out is as
follows:
* in no order of priority between them but in proportion to the respective
amounts due, to pay fees which are due to any receiver appointed under
the deed of charge and all amounts due for legal fees and other costs,
charges, liabilities, expenses, losses, damages, proceedings, claims and
demands which have been incurred by the note trustee under the issuer
related documents and/or in enforcing or perfecting title to the security
together with interest due on these amounts;
* towards payment of amounts due and unpaid on the class A notes, to
interest then to principal after, subject to the eleventh item below,
having paid any amounts due to the swap counterparty under the terms of
the class A swap agreement;
* towards payment of amounts due and unpaid on the class B notes, to
interest then to principal after, subject to the twelfth item below,
having paid any amounts due to the swap counterparty under the terms of
class B swap agreement;
* towards payment of amounts of interest due and unpaid under the terms of
the expenses loan agreement;
* towards payment of amounts due and unpaid on the class C notes, to
interest then to principal after, subject to the thirteenth item below,
having paid any amounts due to the swap counterparty under the terms of
the class C swap agreement;
* after the notes have been paid in full, towards payment of amounts of
principal due and unpaid under the terms of the expenses loan agreement;
* towards payment of any sums that the issuer must pay to any tax
authority;
* towards payment of any sums due to third parties under obligations
incurred in the course of the issuer's business;
* towards payment of the deferred subscription price in respect of the
series 04-1 medium term note certificate;
* towards payment of any dividends due and unpaid to shareholders of the
issuer;
* towards payment of the amount equal to any termination payment due and
payable to the swap counterparty pursuant to the class A swap agreement,
where the class A swap agreement has been terminated as a result of a
default by the swap counterparty;
* towards payment of the amount equal to any termination payment due and
payable to the swap counterparty pursuant to the class B swap agreement
where the class B swap agreement has been terminated as a result of a
default by the swap counterparty;
* towards payment of the amount equal to any termination payment due and
payable to the swap counterparty pursuant to the class C swap agreement
where the class C swap agreement has been terminated as a result of a
default by the swap counterparty; and
* in payment of the balance, if any, to the liquidator of the issuer.
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The security becomes enforceable when an event of default occurs. These events
are described in condition number 9 below. If an event of default occurs, the
redemption of notes will not necessarily be accelerated as described in
condition number 6 below.
The issuer will enter into three swap agreements, the material terms of which
are described under the heading "The Swap Agreements" in this prospectus.
4. NEGATIVE COVENANTS OF THE ISSUER
If any note is outstanding, the issuer will not, unless it is permitted by the
terms of the issuer related documents or by the written consent of the note
trustee:
* create or permit to subsist any mortgage, charge, pledge, lien or other
security interest, including anything which amounts to any of these
things under the laws of any jurisdiction, on the whole or any part of
its present or future business, assets or revenues, including uncalled
capital;
* carry on any business other than relating to the issue of the notes, as
described in this prospectus; in carrying on that business, the issuer
will not engage in any activity or do anything at all except:
(1) preserve, exercise or enforce any of its rights and perform and
observe its obligations under the notes, the deed of charge, the
paying agency and agent bank agreement, the trust deed, the
expenses loan agreement, each swap agreement, the series 04-1
medium term note certificate and the related purpose trust, the
corporate services agreement, the underwriting agreement, the bank
agreement and any bank mandate regarding the Series 04-1 Issuer
Account -- collectively called the "issuer related documents".
(2) use, invest or dispose of any of its property or assets in the
manner provided in or contemplated by the issuer related documents;
or
(3) perform any act incidental to or necessary in connection with (1)
or (2) above.
* have any subsidiaries, subsidiary business, business of any other kind,
employees, premises or interests in bank accounts other than the Series
04-1 Issuer Account unless the account is charged to the note trustee on
acceptable terms;
* have any indebtedness, other than indebtedness permitted under the terms
of its articles of association or any of the issuer related documents;
* give any guarantee or indemnity for any obligation of any person;
* repurchase any shares of its capital stock or declare or pay any dividend
or other distributions to its shareholders;
* consolidate with or merge with or into any person or liquidate or
dissolve on a voluntary basis;
* be a member of any group of companies for the purposes of value added
tax;
* waive or consent to the modification or waiver of any of the provisions
of the issuer related documents without the prior written consent of the
note trustee; or
* offer to surrender to any company any amounts which are available for
surrender by way of group relief.
5. INTEREST
Each note will bear interest on its principal amount outstanding from, and
including, the closing date. Interest on the notes is payable in arrear in U.S.
dollars on each interest payment date.
If there is a shortfall between the amounts received by the issuer from the
swap counterparty or otherwise and the amount of interest due on any class of
notes on that interest payment date, that shortfall will be borne by each note
in that class in a proportion equal to the proportion that the interest
outstanding on the relevant note bears to the total amount of interest
outstanding on all the notes of that class. This will be determined on the
interest payment date on which the shortfall arises. Payment of the shortfall
will be deferred and will be due on the next interest payment date on which
funds are available to the issuer, or, if earlier, the 17 February 2009
interest payment date, from payments made to it from the swap counterparty or
otherwise on that interest payment date, to make the payment. The shortfall
will accrue interest at the rate described for each class of
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note below plus a margin of 2.0 per cent. per annum, and payment of that
interest will also be deferred and will be due on the next interest payment
date on which funds are available to the issuer to make the payment or, if
earlier, on the 17 February 2009 interest payment date.
Each period beginning on, and including, the closing date or any interest
payment date and ending on, but excluding, the next interest payment date is
called an interest period. The first interest payment for the notes will be
made on 17 May 2004 for the interest period from and including the closing date
to but excluding 17 May 2004.
Interest will stop accruing on any part of the principal amount outstanding of
a note from the date it is due to redeem unless payment of principal is
improperly withheld or refused. If this happens it will continue to bear
interest in accordance with this condition, both before and after any judgement
is given, until whichever is the earlier of the following:
* the day on which all sums due in respect of that note, up to that day,
are received by or on behalf of the relevant noteholder; and
* the day which is seven days after the principal paying agent or the note
trustee has notified the relevant class of noteholders, in accordance
with condition number 14, that it has received all sums due in respect of
the relevant class of notes up to that day, except to the extent that
there is any subsequent default in payment.
The rate of interest applicable to the notes for each interest period will be
determined by the agent bank on the following basis:
(1) On the quotation date for each class of note, the agent bank will
determine the offered quotation to leading banks in the London interbank
market for one-month U.S. dollar deposits or, in the case of the first
interest period, the linear interpolation of two-month and three-month
U.S. dollar deposits.
This will be determined by reference to the British Bankers Association
LIBOR Rates display as quoted on the Moneyline Telerate Service display
page designated 3750. If the display page designated 3750 stops providing
these quotations, the replacement service for the purposes of displaying
this information will be used. If the replacement service stops
displaying the information, any page showing this information will be
used. If there is more than one service displaying the information, the
one previously approved in writing by the note trustee will be used;
In each case above, the determination will be made as at or about 11.00
a.m., London time, on that date. These are called the screen rates for
the respective classes.
A "quotation date" means the second business day before the first day of
an interest period.
(2) if, on any quotation date, the screen rate is unavailable, the agent bank
will:
* request the principal London office of each of four major banks --
called "reference banks" -- in the London interbank market selected
by the agent bank to provide the agent bank with its offered
quotation to leading banks of the equivalent of the screen rate on
that quotation date in an amount that represents a single
transaction in that market at that time; and
* calculate the arithmetic mean, rounded upwards to four decimal
places, of those quotations;
(3) if on any quotation date the screen rate is unavailable and only two or
three of the reference banks provide offered quotations, the rate of
interest for that interest period will be the arithmetic mean of the
quotations as last calculated in (2) above; and
(4) if fewer than two reference banks provide quotations, the agent bank will
determine the arithmetic mean, rounded upwards to four decimal places of
the rates quoted by major banks in London, selected by the agent bank at
approximately 11.00 a.m. London time on the relevant quotation date, to
leading banks for a period equal to the relevant interest period and in
an amount that is representative for a single transaction in that market
at that time, for loans in U.S. dollars.
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The rate of interest for each interest period for the class A notes will be the
sum of:
* 0.03 per cent. per annum; and
* the screen rate or the arithmetic mean calculated to replace the screen
rate.
The rate of interest for each interest period for the class B notes will be the
sum of:
* 0.19 per cent. per annum; and
* the screen rate or the arithmetic mean calculated to replace the screen
rate.
The rate of interest for each interest period for the class C notes will be the
sum of:
* 0.45 per cent. per annum; and
* the screen rate or the arithmetic mean calculated to replace the screen
rate.
If the agent bank is unable to determine the screen rate or an arithmetic mean
to replace it, as described in (2), (3) and (4) the rates of interest for any
interest period will be as follows:
* for the class A notes the rate will be the sum of 0.03 per cent. per
annum and the screen rate or arithmetic mean last determined for the
class A notes;
* for the class B notes the rate will be the sum of 0.19 per cent. per
annum and the screen rate or arithmetic mean last determined for the
class B notes; and
* for the class C notes the rate will be the sum of 0.45 per cent. per
annum and the screen rate or arithmetic mean last determined for the
class C notes.
The agent bank will, as soon as it can after the quotation date for each
interest period, calculate the amount of interest payable on each note for that
interest period. The amount of interest will be calculated by applying the rate
of interest for that interest period to the principal amount outstanding of
that note during that interest period, multiplying the product by the actual
number of days in that interest period divided by 360 and rounding to the
nearest U.S. dollars 0.01, half a cent being rounded upwards.
On each interest payment date, the agent bank will determine the actual amount
of interest which will be paid on the notes on that interest payment date and
the amount of any shortfall on the notes for that interest period and the
amount of interest on any shortfall which will be paid on that interest payment
date. The amount of any interest on the shortfall will be calculated by
applying the relevant rate of interest for those notes plus a margin of 2.0 per
cent. per annum, to the sum of the shortfall and accrued interest on shortfall
from prior interest periods which remains unpaid, multiplying by the actual
number of days in the relevant interest period and dividing by 360 and rounding
the nearest U.S. dollars 0.01, half a cent being rounded upwards.
If, on any interest payment date, the amount available to the issuer, from the
swap counterparty is insufficient (through shortfall in the amounts available
from the series 04-1 medium term note certificate or otherwise) to pay in full
the amount of interest due on a class of notes, any outstanding shortfall and
accrued interest on shortfall, due on that interest payment date, that amount
will be applied first to the payment of the interest due on that class of
notes, secondly to the payment of any outstanding shortfall and thereafter to
the payment of any accrued interest on shortfall for that class of notes.
The rates and amounts determined by the agent bank will be notified to the
issuer, trustee and paying agent and published in accordance with condition
number 14 as soon as possible after these parties have been notified.
The issuer, the paying agents, the note trustee, the reference banks, the agent
bank and the noteholders will be bound by the determinations properly made as
described above and none of the reference banks, the agent bank or the note
trustee will be liable in connection with the exercise or non-exercise by them
of their powers, duties and discretions for those purposes.
If the agent bank fails to make a determination or calculation required as
described above, the note trustee, or its appointed agent, without accepting
any liability for it, will make the determination or calculation as described
above. If this happens, the determination or calculation will be deemed to have
been made by the agent bank.
The issuer will ensure that there will be four reference banks while there are
notes outstanding.
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6. REDEMPTION AND PURCHASE
The issuer is only entitled to redeem the notes as provided in paragraphs (1),
(2) and (3) below.
(1) Scheduled Redemption
Class A notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or Rapid Amortisation Period has already started, all class A notes will
be redeemed on the series 04-1 scheduled redemption date, unless there is a
shortfall between the amount in the Series 04-1 Issuer Account and the total
amount payable to the swap counterparty under the class A swap agreement. If
there is such a shortfall, the class A notes will be redeemed proportionately
with the amount in the Series 04-1 Issuer Account after being exchanged under
the terms of the class A swap agreement. The Rapid Amortisation Period will
then begin. The payments will be made in no order of preference and
proportionately between all class A notes.
Class B notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or the Rapid Amortisation Period has already started, the class B notes
will be redeemed on the series 04-1 scheduled redemption date unless there is a
shortfall between the amount in the Series 04-1 Issuer Account, after payment
of all interest and principal due and payable on the class A notes, and the
amount due and payable to the swap counterparty under the class B swap
agreement. If there is such a shortfall, the class B notes will be redeemed
proportionately with the amount in the Series 04-1 Issuer Account after being
exchanged under the terms of the class B swap agreement. The Rapid Amortisation
Period will then begin. The payments will be made, in no order of preference
and proportionately between all class B notes.
Class C notes:
Unless previously purchased and cancelled or unless the Regulated Amortisation
Period or the Rapid Amortisation Period has already started, the class C notes
will be redeemed on the series 04-1 scheduled redemption date unless there is a
shortfall between the amount in the Series 04-1 Issuer Account, after payment
of all interest and principal due and payable on the class A notes and the
class B notes, and the amount due and payable to the swap counterparty under
the class C swap agreement. If there is such a shortfall, the class C notes
will be redeemed proportionately with the amount in the Series 04-1 Issuer
Account after being exchanged under the terms of the class C swap agreement.
The Rapid Amortisation Period will then begin. The payments will be made, in no
order of preference and proportionately between all class C notes.
If the Rapid Amortisation Period begins as a result of there being insufficient
funds to repay principal and pay interest on the class A, the class B notes or
the class C notes, as described above, then on each interest payment date after
that, first the class A notes, second the class B notes and third the class C
notes, will be redeemed, to the extent of amounts available to the issuer,
after being exchanged under the swap agreements, for each note of a class in
the proportion that the principal amount outstanding of that note bears to the
total principal amount outstanding of the notes of that class. This will happen
until the earlier of the time when each class of notes has been paid in full
and the February 2009 interest payment date.
On each interest payment date, the agent bank will determine for each class of
notes the following:
* the amount of principal repayable on each note of that class; and
* the principal amount outstanding of each note of that class on the first
day of the next interest period, after deducting any principal payment
due to be made on each note of that class on that interest payment date.
The amounts and dates determined by the agent bank will be notified to the
issuer, the paying agents and the note trustee and published in accordance with
condition number 14 as soon as possible after these parties have been notified.
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The issuer, the paying agents, the note trustee and the noteholders will be
bound by the determinations properly made as described above and neither the
agent bank nor the note trustee will be liable for the exercise or non-exercise
by it of its powers, duties and discretions for those purposes.
If the agent bank fails to make a determination as described above, the note
trustee will calculate the principal payment or principal amount outstanding as
described above, and each of these determinations or calculations will be
deemed to have been made by the agent bank. If this happens, the determination
will be deemed to have been made by the agent bank.
(2) Mandatory Early Redemption
If the Regulated Amortisation Period or the Rapid Amortisation Period begins
before the series 04-1 scheduled redemption date, then on each interest payment
date after that each note of first class A, second class B, and third class C
will be redeemed, in the proportion that its principal amount outstanding bears
to the total principal amount outstanding of the notes of that class, to the
extent of the amount which is deposited into the Series 04-1 Issuer Account
towards redemption of the series 04-1 medium term note certificate -- after the
amount has been exchanged for dollars under the relevant swap agreement or by
the note trustee in the spot exchange market if the relevant swap agreement has
been terminated. This will happen until the earliest of:
* the date on which the relevant class of notes has been redeemed in full;
or
* the February 2009 interest payment date.
(3) Optional Redemption
The issuer may by not less than thirty and not more than sixty days prior
notice to the trustee and without the need to obtain the prior consent of the
note trustee or the noteholders redeem all of the remaining notes on the next
following interest payment date together with all accrued interest, deferred
interest and additional interest if any if the principal balance of the
remaining notes is less than 10 per cent. of their original principal balance
and the note trustee is satisfied that the issuer will have funds available to
it to make the required payment on that interest payment date.
(4) Final Redemption
If the notes have not previously been purchased and cancelled or redeemed in
full as described in condition number 6, the notes will be finally redeemed at
their then principal amount outstanding on the February 2009 interest payment
date, together with, in each case, all accrued and unpaid interest, shortfall
and interest on shortfall, if any.
The issuer or its parent may buy notes at any price. Any notes that are
redeemed or purchased pursuant to these provisions will be cancelled at that
time and may not be reissued or resold.
You are required, at its request, to sell all of your notes to Gracechurch Card
(Holdings) Limited, pursuant to the option granted to it by the note trustee,
on your behalf. The option is granted to acquire all, but not some only, of the
notes, plus accrued interest on them, for one penny per note, on the date upon
which the note trustee gives written notice to Gracechurch Card (Holdings)
Limited that it has determined, in its sole opinion, that all amounts
outstanding under the notes have become due and payable and there is no
reasonable likelihood of there being any further realisations, whether arising
from an enforcement of the note trustee's security or otherwise, which would be
available to pay all such amounts outstanding under the notes.
This is called the "post maturity call option".
You acknowledge that the note trustee has the authority and the power to bind
you in accordance with the terms and conditions set out in the post maturity
call option and, by subscribing or acquiring, as the case may be, for your
note(s), you agree to be bound in this way.
7. PAYMENTS
Payments of principal and interest in respect of the notes will be made to the
persons in whose names the global note certificates are registered on the
register at the opening of business in the place of the registrar's specified
office on the fifteenth day before the due date for such payment. Such date is
called the "record date". Payments will be made by wire transfer of immediately
available funds, if the registered holder has provided wiring instructions no
less than five business days prior to the record date, or otherwise by check
mailed to the address of the registered holder
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as it appears in the register at the opening of business on the record date. In
the case of the final redemption, and provided that payment is made in full,
payment will only be made against surrender of those global note certificates
to the registrar.
The note trustee will not be responsible for any deficiency which may arise
because it is liable to tax in respect of the proceeds of any security.
Similar provisions in respect of the indemnification of the security trustee
are set out in the transaction documents.
8. TAXATION
Payments of interest and principal will be made without making any deductions
for any tax imposed by any jurisdiction having power to tax unless a deduction
is required by the law of the relevant jurisdiction which has power to tax. If
a deduction for tax is made, the paying agent will account to the relevant
authority for the amount deducted. Neither the issuer nor any paying agent is
required to make any additional payments to noteholders for any deductions made
for tax.
9. EVENTS OF DEFAULT
If any of the following events occurs and is continuing it is called an "event
of default":
* the issuer fails to pay any amount of principal on the notes within 7
days of the date payment is due or fails to pay any amount of interest on
the notes within 15 days of the date payment is due; or
* the issuer fails to perform or observe any of its other obligations under
the notes, the trust deed, the deed of charge or the paying agency and
agent bank agreement other than any obligation to pay any principal or
interest on the notes, and, except where that failure is incapable of
remedy, it remains unremedied for 30 days after the note trustee has
given written notice of it to the issuer, certifying that the default is,
in its opinion, materially prejudicial to the interests of the
noteholders; or
* the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements"; or
* a judgement or order for the payment of any amount is given against the
issuer and continues unsatisfied and unstayed for a period of 30 days
after it is given or, if a later date is specified for payment, from that
date; or
* a secured party or encumbrancer takes possession or a receiver,
administrative receiver, administrator, examiner, manager or other
similar officer is appointed, of the whole or any part of the business,
assets and revenues of the issuer or an enforcement action is begun for
unpaid rent or execution is levied against any of the assets of the
issuer; or
* the issuer becomes insolvent or is unable to pay its debts as they fall
due; or
* an administrator or liquidator of the issuer or the whole or any part of
the business, assets and revenues of the issuer is appointed, or an
application for an appointment is made; or
* the issuer takes any action for a readjustment or deferment of any of its
obligations or makes a general assignment or an arrangement or
composition with or for the benefit of its creditors or declares a
moratorium in respect of any of its indebtedness or any guarantee of
indebtedness given by it; or
* the issuer stops or threatens to stop carrying on all or any substantial
part of its business; or
* an order is made or an effective resolution is passed for the winding up,
liquidation or dissolution of the issuer; or
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* any action, condition or thing at any time required to be taken,
fulfilled or done in order :
(1) to enable the issuer lawfully to enter into, exercise its rights
and perform and comply with its obligations under and in respect of
the notes and the issuer related documents; or
(2) to ensure that those obligations are legal, valid, binding and
enforceable, except as that enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganisation or
other similar laws affecting the enforcement of the rights of
creditors generally and that that enforceability may be limited by
the effect of general principles of equity,
is not taken, fulfilled or done; or
* it is or will become unlawful for the issuer to perform or comply with
any of its obligations under or in respect of the notes or the related
documents; or
* all or any substantial part of the business, assets and revenues of the
issuer is condemned, seized or otherwise appropriated by any person
acting under the authority of any national, regional or local government;
or
* the issuer is prevented by any person acting under the authority of any
national, regional or local government from exercising normal control
over all or any substantial part of its business, assets and revenues.
If an event of default occurs then the note trustee may give an enforcement
notice or appoint a receiver if it chooses and if it is indemnified to its
satisfaction.
If an event of default occurs then the note trustee shall be bound to give an
enforcement notice if it is indemnified to its satisfaction and it is:
* required to by the swap counterparty;
* required to by holders of at least one-quarter of the aggregate principal
amount outstanding of the class A notes, if any remain outstanding, and
if none remain outstanding, the class B notes, and if none of these
remain outstanding, the class C notes; or
* directed by an extraordinary resolution, as defined in the trust deed, of
holders of outstanding class A notes, and if there are none, of holders
of outstanding class B notes, and if there are none, of holders of
outstanding class C notes.
An "enforcement notice" is a written notice to the issuer declaring the notes
to be immediately due and payable. When it is given, the notes will become
immediately due and payable at their principal amount outstanding together with
accrued interest without further action or formality. Notice of the receipt of
an enforcement notice shall be given to the noteholders as soon as possible. A
declaration that the notes have become immediately due and payable will not, of
itself, accelerate the timing or amount of redemption of the notes as described
in condition number 6.
10. PRESCRIPTION
Your notes will become void if they are not presented within the time limit for
payment. That time limit is ten years from their due date. If there is a delay
in the principal paying agent receiving the funds, the due date, for the
purposes of this time limit, is the date on which it notifies you, in
accordance with condition number 14, that it has received the relevant payment.
11. REPLACEMENT OF NOTE CERTIFICATES
If any note certificates are lost, stolen, mutilated, defaced or destroyed, you
can replace them at the specified office of the registrar. You will be required
to both pay the expenses of producing a replacement and comply with the
issuer's reasonable requests for evidence, security and indemnity. You must
surrender any defaced or mutilated note certificates before replacements will
be issued.
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12. NOTE TRUSTEE AND AGENTS
The note trustee is entitled to be indemnified and relieved from responsibility
in certain circumstances and to be paid its costs and expenses in priority to
your claims.
In the exercise of its powers and discretions under the conditions and the
trust deed, the note trustee will consider the interests of the noteholders as
a class and will not be responsible for any consequence to you individually as
a result of you being connected in any way with a particular territory or
taxing jurisdiction.
In acting under the paying agency and agent bank agreement, and in connection
with your notes, the paying agents and the agent bank act only as agents of the
issuer and the note trustee and do not assume any obligations towards or
relationship of agency or trust for or with you.
The note trustee and its related companies are entitled to enter into business
transactions with the issuer, Barclays Bank PLC or related companies of either
of them without accounting for any profit resulting from those transactions.
The issuer can, at any time, vary or terminate the appointment of any paying
agent or the agent bank and can appoint successor or additional paying agents
or a successor agent bank. If the issuer does this it must ensure that it
maintains the following:
* a principal paying agent;
* a paying agent in New York and, if and for so long as any of the notes
are listed on the Official List of the UK Listing Authority and admitted
to trading on the London Stock Exchange, in London;
* an agent bank; and
* a registrar.
Notice of any change in the paying agents, agent bank, registrar or their
specified offices shall be promptly given to you in accordance with condition
number 14.
13. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER, SUBSTITUTION AND ADDITION
Meetings of Noteholders
The trust deed contains provisions for convening single and separate meetings
of each class of noteholders to consider matters relating to the notes,
including the modification of any provision of the conditions or the trust
deed. Any modification may be made if sanctioned by an extraordinary
resolution.
The quorum for any meeting convened to consider an extraordinary resolution
will be two or more persons holding or representing a clear majority of the
aggregate principal amount outstanding of the relevant class of notes -- and in
the case of a separate meeting, the class A notes, the class B notes or the
class C notes, as the case may be -- for the time being outstanding.
Certain terms including the date of maturity of the notes, any day for payment
of interest on the notes, reducing or cancelling the amount of principal or the
rate of interest payable in respect of the notes or altering the currency of
payment of the notes, require a quorum for passing an extraordinary resolution
of two or more persons holding or representing in total not less than 75 per
cent. of the total principal amount outstanding of the relevant class of notes.
These modifications are called "Basic Terms Modifications".
Except where the extraordinary resolution effects a Basic Terms Modification,
the interests of the most senior class of notes outstanding at the time take
precedence over the interests of the subordinated classes. The note trustee may
only give effect to an extraordinary resolution passed by the class C
noteholders if it considers that the interests of the class A noteholders or
the class B noteholders will not be materially prejudiced. An extraordinary
resolution of the class B noteholders will only be effective if the note
trustee considers that it will not be materially prejudicial to the class A
noteholders.
Subject to the foregoing, any extraordinary resolution duly passed shall be
binding on all noteholders, whether or not they are present at the meeting at
which such resolution was passed. The majority required for an extraordinary
resolution shall be 75 per cent. of the votes cast on that extraordinary
resolution.
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Modification and Waiver
The note trustee may agree, without the consent of the noteholders, (1) to any
modification -- except a Basic Terms Modification -- of, or to the waiver or
authorisation of any breach or proposed breach of, the notes or any other
related agreement, which is not, in the opinion of the note trustee, materially
prejudicial to the interests of the noteholders or (2) to any modification of
any of the provisions of the terms and conditions or any of the related
agreements which, in the opinion of the note trustee, is of a formal, minor or
technical nature or is to correct a manifest error. Any of those modifications,
authorisations or waivers will be binding on the noteholders and, unless the
note trustee agrees otherwise, shall be promptly notified by the issuer to the
noteholders in accordance with condition number 14.
Substitution and Addition
The note trustee may also agree to the substitution of any other body corporate
in place of the issuer as principal debtor under the trust deed and the notes
and in the case of such a substitution or addition the note trustee may agree,
without the consent of the noteholders, to a change of the law governing the
notes and/or the trust deed provided that such change would not in the opinion
of the trustee be materially prejudicial to the interests of the noteholders.
Any such substitution or addition will be promptly notified to the noteholders
in accordance with condition number 14.
Enforcement
At any time after the notes become due and repayable and without prejudice to
its rights of enforcement in relation to the security, the note trustee may, at
its discretion and without notice, institute such proceedings as it thinks fit
to enforce payment of the notes, including the right to repayment of the notes
together with accrued interest thereon, and shall be bound to do so only if it
has been so directed by an extraordinary resolution of the noteholders of the
relevant class. No extraordinary resolution of the class B noteholders or class
C noteholders or any request of the class B noteholders or class C noteholders
will be effective unless there is an extraordinary resolution of the class A
noteholders or a direction of the class A noteholders to the same effect or
none of the class A notes remain outstanding.
No extraordinary resolution of the class C noteholders or any request of the
class C noteholders will be effective unless there is an extraordinary
resolution of the class B noteholders or a direction of the class B noteholders
to the same effect or none of the class B notes remain outstanding.
No noteholder may institute any proceedings against the issuer to enforce its
rights under or in respect of the notes or the trust deed unless (1) the note
trustee has become bound to institute proceedings and has failed to do so
within a reasonable time and (2) the failure is continuing. Notwithstanding the
previous sentence and notwithstanding any other provision of the trust deed,
the right of any noteholder to receive payment of principal of and interest on
its notes on or after the due date for the principal or interest, or to
institute suit for the enforcement of payment of that interest or principal,
may not be impaired or affected without the consent of that noteholder.
14. NOTICES
Any notice to you will be deemed to have been validly given if published in a
leading English language daily newspaper in London -- which is expected to be
the Financial Times -- and will be deemed to have been given on the day it is
first published.
Any notice specifying a rate of interest, an interest amount, an amount of
shortfall or interest on it, principal payment or a principal amount
outstanding will be treated as having been duly given if the information
contained in that notice appears on the relevant page of the Reuters Screen or
other similar service approved by the note trustee and notified to you. The
notice will be deemed given when it first appears on the screen. If it cannot
be displayed in this way, it will be published as described in the previous
paragraph.
Copies of all notices given in accordance with these provisions will be sent to
the London Stock Exchange Company Announcements Office, Clearstream,
Luxembourg, Euroclear and DTC.
15. CURRENCY INDEMNITY
You can be indemnified against losses you suffer from the use of an exchange
rate to convert sums recovered by you in litigation against the issuer, which
is different to the rate you ordinarily use. You must request this indemnity in
writing from the issuer.
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This indemnity constitutes a separate and independent obligation of the issuer
and shall give rise to a separate and independent cause of action.
16. GOVERNING LAW AND JURISDICTION
The notes, swap agreements and trust deed are governed by English Law and the
English courts have non-exclusive jurisdiction in connection with the notes.
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THE SWAP AGREEMENTS
GENERAL
The issuer will enter into the class A swap agreement, the class B swap
agreement and the class C swap agreement -- called collectively the "swap
agreements". There is no separate interest rate cap agreement for any of the
notes. In connection with the swap agreements, the swap counterparty and the
Issuer will enter into a collateral support annex in respect of certain
obligations under the swap agreements.
Under the class A swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
* an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class A notes; and
* on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN Issuer on the series 04-1 medium term note
certificate, including any MTN Issuer additional interest payments and
after deducting the costs and expenses of the issuer, and (2) the amounts
due and payable to the swap counterparty under the class A swap
agreement.
The swap counterparty will pay to the issuer:
* an initial payment in sterling, on the closing date, in an amount equal
to the dollar amount of the initial balance of the class A notes
converted into sterling at the fixed exchange rate; and
* on each interest payment date after the closing date, sums in dollars
equal to the interest payable and, if any, principal repayable to holders
of the class A notes on that interest payment date, as set out in the
terms and conditions of the class A notes.
Under the class B swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
* an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class B notes; and
* on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN Issuer on the series 04-1 medium term note
certificate, including any MTN Issuer additional interest payments and
after deducting the costs and expenses of the issuer, remaining after
giving effect to the payment made under the class A swap agreement
described above, and (2) the amounts due and payable to the swap
counterparty under the class B swap agreement.
The swap counterparty will pay to the issuer:
* an initial payment in sterling, on the closing date, in an amount equal
to the dollar amount of the initial balance of the class B notes
converted into sterling at the fixed exchange rate; and
* on each interest payment date after the closing date, sums in dollars
equal to the interest payable and principal repayable, if any, to holders
of the class B notes on that interest payment date, as set out in the
terms and conditions of the class B notes.
Under the class C swap agreement between the issuer and the swap counterparty,
the issuer will pay to the swap counterparty:
* an initial payment of dollars, on the closing date, in an amount equal to
the initial balance of the class C notes; and
* on each transfer date after the closing date, the lesser of (1) the
sterling amount equal to the interest and principal, if any, received by
the issuer from the MTN Issuer on the series 04-1 medium term note
certificate, including any MTN Issuer additional interest payments and
after deducting the costs and expenses of the issuer, remaining after
giving effect to the payments made under the class A swap agreement and
the class B swap agreement, and (2) the amounts due and payable to the
swap counterparty under the class C swap agreement.
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The swap counterparty will pay to the issuer:
* an initial payment in sterling, on the closing date, in an amount equal
to the dollar amount of the initial balance of the class C notes
converted into sterling at the fixed exchange rate; and
* on each interest payment date after the closing date, sums in dollars
equal to the interest payable and principal repayable, if any, to holders
of the class C notes on that interest payment date, as set out in the
terms and conditions of the class C notes.
Each swap agreement provides that payments made under it are to be reduced in
the event that any amount due and payable to the issuer under the series 04-1
medium term note certificate is deferred by the MTN Issuer under the terms of
the series 04-1 medium term note certificate such that the issuer does not have
sufficient funds to make the scheduled payments under the swap agreement. This
is to prevent that amount in dollars being payable by the swap counterparty
before it receives the corresponding sterling amount from the issuer under the
relevant swap agreement. There will be a corresponding increase in the amounts
payable under the relevant swap agreement to make up this shortfall if the
deferred amount is subsequently received by the issuer. The MTN Issuer will be
liable to pay deferred interest on any such deferred amount, and the issuer
will be liable to pay that deferred interest on to the noteholders in the order
of priorities set out in the terms and conditions of the notes, after
converting it into U.S. dollars under the relevant swap agreement. You should
be aware that if withholding tax is levied on the series 04-1 medium term note
certificate, payments to the issuer will be reduced accordingly. Such reduced
payments would not be treated as deferred amounts -- and, accordingly, would
not bear deferred interest -- and neither the issuer nor the swap counterparty
is obliged to make up the shortfall.
The fixed sterling to dollar exchange rate, which we refer to as the "fixed
exchange rate", in the swap agreements will be approximately $1.855 per one
pound sterling.
COMMON PROVISIONS OF THE SWAP AGREEMENTS
The swap agreements provide that if the short-term unsecured debt rating of the
swap counterparty is withdrawn or reduced below "A-1+" by Standard & Poor's or
"P-1" by Moody's or if the long-term unsecured debt rating of the swap
counterparty is withdrawn or reduced below "A1" by Moody's, then within 30 days
following that event, the swap counterparty will be required to take one of the
following steps:
* if such downgrade or withdrawal is by Moody's:
* transfer its rights and obligations under the swap agreements to a
suitably rated replacement counterparty; or
* obtain a suitably rated co-obligor in respect of the obligations of
the counterparty under the swap agreements; or
* take such other action as may be agreed with Moody's; or
* within 30 days of such downgrade, lodge collateral in an amount
determined pursuant to the credit support annex in support of its
obligations under the swap agreements;
provided further that if such Moody's downgrade results in a rating of
the swap counterparty below A3 or P2, the swap counterparty will use its
best efforts to attempt to: (a) transfer its rights and obligations to a
suitably rated counterparty, (b) find a suitably rated co-obligor, or (c)
take such other action as may be agreed with Moody's; pending compliance
with (a), (b) or (c), the swap counterparty will post collateral in an
amount determined pursuant to the credit support annex;
* if such downgrade or withdrawal is by Standard & Poor's:
* within 30 days of such downgrade or withdrawal, transfer its rights
and obligations under the swap agreements to a suitably rated
replacement counterparty; or
* within 30 days of such downgrade or withdrawal, obtain a suitably
rated guarantee of the obligations of the swap counterparty under
the swap agreements; or
* within 30 days of such downgrade, lodge collateral in an amount
determined pursuant to the credit support annex in support of its
obligations under the swap agreements; or
* find any other solution acceptable to Standard & Poor's to maintain
the then current rating of the notes.
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Termination of the Swap Agreements
The swap agreements will, or may, in the case of the third bullet point below,
terminate on the earliest of:
* the distribution date on which there is no further obligation to make a
payment under the series 04-1 medium term note certificate;
* the February 2009 interest payment date; and
* the occurrence of an early swap termination event as described below.
The swap agreements may be terminated early in the following circumstances --
each called an "early swap termination event":
* at the option of one party, if there is a failure by the other party to
pay any amounts due under the swap agreement;
* if an event of default under the notes occurs, or if there is no further
obligation to make a payment under the series 04-1 medium term note
certificate before the series 04-1 scheduled redemption date, or if the
series 04-1 investor interest has been reduced to zero;
* upon the occurrence of an insolvency of either party, merger without an
assumption of the obligations under the swap agreements, or changes in
law resulting in illegality;
* if as a result of a change in applicable law, withholding taxes would be
imposed by any jurisdiction on payments to the issuer under the series
04-1 medium term note certificate or on any payments made or required to
be made by the swap counterparty to the issuer or by the issuer to the
swap counterparty under the swap agreement and there are no reasonable
measures that the swap counterparty or the issuer can take to avoid their
imposition; and
* the issuer determines that it or the paying agent has or will become
obligated to deduct or withhold amounts from payments on the related
class of notes to be made to any of the related noteholders on the next
interest payment date, for tax imposed by any political subdivision or
taxing authority of the United Kingdom on the payments as a result of any
change in its laws or regulations or rulings, or any change in official
position regarding the application or interpretation of its laws,
regulations or rulings, which change or amendment becomes effective on or
after the date the notes are issued, and there are no reasonable measures
the issuer can take to avoid the tax or assessment.
The swap agreements may be terminated following the events described in either
of the last two bullet points above only if the issuer is directed to terminate
the swap agreements by a vote of the holders of the class A notes representing
662/3per cent. of the outstanding principal balance of the class A notes or, if
there are no class A notes outstanding, a vote of the holders of the class B
notes representing 662/3per cent. of the outstanding principal balance of the
class B notes or, if there are no class B notes outstanding, a vote of the
holders of the class C notes representing 662/3per cent. of the outstanding
principal balance of the class C notes.
If notice is given to terminate, following the occurrence of any of the events
referred to in the last two bullet points above, the issuer or the swap
counterparty may be liable to make a termination payment to the other. This
termination payment will be calculated and made in sterling. The amount of any
termination payment will be based on the market value of the terminated swap
agreement based on market quotations of the cost of entering into a swap
transaction with the same terms and conditions that would have the effect of
preserving the respective full payment obligations of the parties. Any such
termination payment could, if the sterling/dollar exchange rates have changed
significantly, be substantial.
If an early swap termination event occurs, on each interest payment date
thereafter, payments of interest and principal payable on the series 04-1
medium term note certificate, including MTN Issuer additional interest,
available to make payments on the notes will be converted into dollars by the
note trustee at the then-prevailing spot exchange rate in the City of London
for sterling purchases of dollars. The issuer will apply the U.S. dollar
proceeds of that exchange to pay principal and interest on the notes in the
order of priority described under "Terms and Conditions of the Notes". Any
dollar amounts so distributed may not be equal to the dollar amounts then due
and owing on the notes. Any dollar amounts so converted in excess of principal
and interest due and payable on that class of notes will be held in the series
04-1 Issuer Account to be applied, if needed to cover any future shortfall in
sterling amounts needed for such conversion.
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TAXATION
Neither the issuer nor the swap counterparty is obliged under the swap
agreements to gross up if withholding taxes are imposed on payments made under
the swap agreements.
If any withholding tax is imposed on payments due from the issuer under the
swap agreements, the swap counterparty will be entitled to deduct amounts in
the same proportion from subsequent payments due from it. If that happens MTN
Issuer additional interest payments, to the extent available, will be used to
cover the shortfall in the payments due from the swap counterparty. If MTN
Issuer additional interest payments are not sufficient to cover the shortfall,
amounts available to the issuer to make payments on the notes will be reduced
by the amount so deducted that is not covered by MTN Issuer additional interest
payments. Any reduction will be applied first to the class C notes, second to
the class B notes and third to the class A notes.
If any withholding tax is imposed on payments due from the swap counterparty
under the swap agreements, the issuer will not be entitled to deduct amounts
from subsequent payments due from it and amounts available to the issuer to
make payments on the notes will be reduced by the amount so withheld by the
swap counterparty. To the extent any such withholding exceeds available MTN
Issuer additional interest payments, any reduction will be applied first to the
class C notes, second to the class B notes and third to the class A notes.
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THE MEDIUM TERM NOTE CERTIFICATE
On the closing date the MTN Issuer will issue one interest bearing medium term
note certificate to the issuer -- which we call the "series 04-1 medium term
note certificate". The series 04-1 medium term note certificate will mature for
redemption on the series 04-1 scheduled redemption date. The Bank of New York
in London will act as trustee, depositary, issue agent and principal paying
agent in relation to the series 04-1 medium term note certificate.
The series 04-1 medium term note certificate is issued in bearer form under a
security trust deed and MTN Issuer cash management agreement. Under the terms
of the security trust deed and MTN Issuer cash management agreement, Barclays,
acting through its corporate lending division at 54 Lombard Street, London,
EC3P 3AH, was appointed as cash manager for the medium term notes and
certificates -- called the "MTN Issuer cash manager".
The medium term notes or certificates will be issued on a non-syndicated
continuous basis in series. Previously the MTN Issuer issued the series 99-1
medium term notes (which were repaid in November 2002), the series 02-1, the
series 03-1, the series 03-2 and the Series 03-3 medium term notes. Medium term
notes or certificates issued in respect of any series may differ as to
principal, interest and recourse to security. Each series must be constituted
by a supplemental deed to the security trust deed and MTN Issuer cash
management agreement.
Each new series may differ from any other series in its principal terms and the
manner, timing and amounts of distributions made to the holders of that series
of medium term notes or certificates. The MTN Issuer will not issue any further
medium term notes or certificates in respect of an existing series without the
prior consent of the holders of the existing medium term notes in that series,
unless the further medium term notes or certificates are fungible with the
existing ones.
The series 04-1 medium term note certificate will be issued at par with a right
of the MTN Issuer to receive further payments of subscription price as deferred
consideration, which we call "deferred subscription price". The MTN Issuer will
pay the initial consideration received for the series 04-1 medium term note
certificate to the receivables trustee for the purpose of the receivables trust
which will permit the MTN Issuer to acquire an undivided beneficial interest in
the receivables trust. See "The Receivables Trust" and "Use of Proceeds". The
initial principal amount of each undivided beneficial interest acquired is the
initial Investor Interest for each class of investor certificates. These will
be issued to the MTN Issuer by the receivables trustee. See "Series 04-1:
General".
The ability of the MTN Issuer to meet its obligations to pay principal of and
interest on the series 04-1 medium term note certificate will be entirely
dependent on the receipt by it of funds from the series 04-1 investor
certificates and excess interest attributable to series 04-1.
The MTN Issuer and the security trustee will have no recourse to Barclays other
than:
* against Barclaycard as transferor under the receivables securitisation
agreement for any breach of representations and obligations in respect of
the receivables; and
* against Barclaycard as MTN Issuer cash manager under the security trust
deed and MTN Issuer cash management agreement for any breach of
obligations of the MTN Issuer cash manager.
On the closing date, the MTN Issuer will declare an English law express purpose
trust in respect of any funds received by it from the investor certificate and
excess interest attributable to series 04-1. This trust will create a right in
equity in favour of the holder of the series 04-1 medium term note certificate
to require these funds to be applied in making payments on the series 04-1
medium term note certificate.
The obligations of the MTN Issuer and certain other rights of the MTN Issuer
under each series of medium term notes or certificates and under the documents
relating to them, will be secured under the security trust deed and MTN Issuer
cash management agreement, by security interests over the investor
certificates. The security for each series will be granted by the MTN Issuer in
favour of the security trustee. If the net proceeds of the enforcement of
security for a series following a mandatory redemption -- after meeting the
expenses of the trustee, the paying agents, the depository and any receiver --
are insufficient to make all payments due on the medium term notes or
certificates of that series, the assets of the MTN Issuer securing other series
of medium term notes or certificates will not be available for payment of that
shortfall.
If the security trust deed and MTN Issuer cash management agreement is
enforced, the monies paid to the MTN Issuer by the receivables trustee on each
transfer date will be applied:
135
* first to meet payments due to any receiver appointed under it or to the
security trustee and all amounts due for legal fees and other costs,
charges, liabilities, expenses, losses, damages, proceedings, claims and
demands which have been incurred under the relevant documents and in
enforcing the security, together with interest due on these amounts; then
* to the extent not met above, to meet the costs, charges, liabilities,
expenses, losses, damages, proceedings, claims and demands of the
security trustee; then
* to meet payments of premium (if any), interest and principal on the
relevant series of medium term notes or certificates; then
* to meet payments due by the MTN Issuer to any taxation authority; then
* to meet payment of sums due to third parties under obligations incurred
in the course of the MTN Issuer's business; then
* to meet payment of any dividends due and unpaid to shareholders of the
MTN Issuer; then
* to pay all amounts of MTN Issuer additional interest payments (if any);
* to pay all amounts of excess entitlement consideration; then
* to pay any balance to the liquidator of the MTN Issuer.
The interest rate on the series 04-1 medium term note certificate will be
determined by the agent bank in accordance with the series 04-1 medium term note
certificate conditions. This is done by reference to the screen rate or other
rate set by the agent bank (a) for the first interest period, for the linear
interpolation of two-month and three-month deposits, and (b) for any other
interest period, for three-month deposits, in each case for pounds sterling in
the London interbank market plus a margin. The margin will be 0.1076 per cent.
per annum for the series 04-1 medium term note certificate. The interest rate
for the first interest period will be determined on the closing date. Interest
in respect of the series 04-1 medium term note certificate will be payable in
arrear in sterling on each interest payment date. Interest on the series 04-1
medium term note certificate will be paid monthly on each distribution date
falling during or upon the expiry of each quarterly interest period.
Excess interest received by the MTN Issuer under the agreement between
beneficiaries will be paid as MTN Issuer additional interest payments on the
series 04-1 medium term note certificate concurrently with the interest
payments on the series 04-1 medium term note certificate.
If any withholding or deduction for any taxes, duties, assessments or
government charges is imposed, levied, collected, withheld or assessed on
payments of principal or interest, including MTN Issuer additional interest, on
the series 04-1 medium term note certificate by any jurisdiction or any
political subdivision or authority in or of any jurisdiction having power to
tax, neither the MTN Issuer nor the principal paying agent will be required to
make any additional payments to holders of the series 04-1 medium term note
certificate for that withholding or deduction.
The occurrence and continuation of the following events is called an MTN Issuer
event of default:
* the MTN Issuer fails to pay any amount of principal of the series 04-1
medium term note certificate within 7 days of the due date for its
payment or fails to pay any amount of interest on the series 04-1 medium
term note certificate within 15 days of its due date; or
* the MTN Issuer fails to perform or observe any of its other obligations
under the series 04-1 medium term note certificate, the series 04-1 MTN
Issuer supplement, or the security trust deed and MTN Issuer cash
management agreement and, except where the failure is incapable of
remedy, it remains unremedied for 30 days, in either case, after the
security trustee has given written notice to the MTN Issuer, certifying
that the failure is, in the opinion of the security trustee, materially
prejudicial to the interests of the series 04-1 medium term note
certificate holders; or
* the early termination, without replacement, of any of the swap agreements
as described in this prospectus under "The Swap Agreements: Common
Provisions of the Swap Agreements"; or
* a judgment or order for the payment of any amount is given against the
MTN Issuer and continues unsatisfied and unstayed for a period of 30 days
after the date it is given or the date specified for payment, if later;
or
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* a secured party takes possession or a receiver, administrative receiver,
administrator, examiner, manager or other similar officer is appointed,
of the whole or any part of the undertaking, assets and revenues of the
MTN Issuer or an enforcement action is begun for unpaid rent or
executions levied against any of the assets of the MTN Issuer; or
* the MTN Issuer becomes insolvent or is unable to pay its debts as they
fall due or an administrator or liquidator of the MTN Issuer or the whole
or any part of its business, assets and revenues is appointed, or
application for any appointment is made, or the MTN Issuer takes any
action for a readjustment or deferment of any of its obligations or makes
a general assignment or an arrangement or composition with or for the
benefit of its creditors or declares a moratorium in respect of any of
its indebtedness or any guarantee of indebtedness given by it or ceases
or threatens to cease to carry on all or any substantial part of its
business; or
* an order is made or an effective resolution is passed for the winding up,
liquidation or dissolution of the MTN Issuer; or
* any action, condition or thing at any time required to be taken,
fulfilled or carried out in order to (i) enable the MTN Issuer lawfully
to enter into, exercise its rights and perform and comply with its
obligations under and in respect of the medium term notes or certificates
and the documents relating to them or (ii) to ensure that those
obligations are legal, valid, binding and enforceable, except as the
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganisation or other similar laws affecting the
enforcement of the rights of creditors generally and as that
enforceability may be limited by the effect of general principles of
equity, is not taken. fulfilled or, as the case may be, carried out; or
* it is or will become unlawful for the MTN Issuer to perform or comply
with any of its obligations under or in respect of the medium term notes
or certificates or the documents relating to them; or
* all or any substantial part of the business, assets and revenues of the
MTN Issuer is condemned, seized or otherwise appropriated by any person
acting under the authority of any national, regional or local government
or the MTN Issuer is prevented by any of these people from exercising
normal control over all or any substantial part of its business assets
and revenues,
If an MTN Issuer event of default occurs then the security trustee will be
bound to give an enforcement notice if it is indemnified to its satisfaction
and it is:
* required to by holders of at least one-quarter of the aggregate principal
amount outstanding of the series 04-1 medium term note certificate; or
* directed by an extraordinary resolution, as defined in the security trust
deed and MTN Issuer cash management agreement, of holders of the series
04-1 medium term note certificate.
An MTN Issuer enforcement notice is a written notice to the MTN Issuer
declaring the series 04-1 medium term note certificate to be immediately due
and payable. When it is given, the series 04-1 medium term note certificate
will become immediately due and payable at its principal amount outstanding
together with accrued interest without further action or formality. Notice of
the receipt of an MTN Issuer enforcement notice shall be given to the holders
of the series 04-1 medium term note certificate as soon as possible. A
declaration that the series 04-1 medium term note certificate has become
immediately due and payable will not, of itself, accelerate the timing or
amount of redemption of the series 04-1 medium term note certificate.
When reference is made to the MTN Issuer cash manager it includes any successor
to Barclays as MTN Issuer cash manager. The security trust deed and MTN Issuer
cash management agreement provides that, as MTN Issuer cash manager, Barclays
will service and administer the Series 04-1 Distribution Account.
Barclays, and any successor MTN Issuer cash manager to the MTN Issuer, will be
entitled to receive the fee inclusive of VAT, if any, for acting as MTN Issuer
cash manager, payable by the MTN Issuer from amounts received as MTN Issuer
Costs Amounts from the Series 04-1 Distribution Account.
The MTN Issuer cash manager may not resign, apart from in certain
circumstances. The resignation of the MTN Issuer cash manager shall only become
effective once a replacement has assumed all of the responsibilities of the MTN
Issuer cash manager set out in the security trust deed and MTN Issuer cash
management agreement.
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MATERIAL LEGAL ISSUES
INSOLVENCY ACT 2000
The UK Insolvency Act 2000 received Royal Assent on 30 November 2000. The Act
amends Part I of the UK Insolvency Act 1986 so that the directors of a company
which meets certain eligibility criteria can take steps to obtain a moratorium
preventing any creditor from enforcing security or taking proceedings to
recover its debt for the period in which the moratorium is in force.
The relevant provisions of the Act came into force on 1 January 2003. However,
prior to bringing the provisions into force, the Secretary of State of the
United Kingdom amended the eligibility criteria by way of statutory instrument
in such a way that special purpose vehicles such as the Issuer and the MTN
Issuer can no longer be considered to be eligible companies.
THE ENTERPRISE ACT
The UK Enterprise Act received Royal Assent on 7 November 2002 and came into
force on 15 September 2003. Pursuant to the UK Enterprise Act, unless a
floating charge was created prior to 15 September 2003, or falls within one of
the exemptions contained in the UK Enterprise Act, the holder of a qualifying
floating charge will be prohibited from appointing an administrative receiver
to a company and consequently, the ability to prevent the appointment of an
administrator to such company will be lost.
A floating charge that the issuer and the MTN Issuer will grant pursuant to the
terms of the Deed of Charge and the Security Trust Deed respectively is a
qualifying floating charge for the purposes of the UK Enterprise Act and will
be entered into after 15 September 2003 and as such, unless excepted, the
trustee will be prevented from appointing an administrative receiver in respect
of the issuer and/or the MTN Issuer. However, this qualifying floating charge
will fall within the "capital market arrangement" exception to the prohibition
of the appointment of an administrative receiver and accordingly the trustee
will still be able to appoint an administrative receiver pursuant to the
Security Trust Deed in respect of the MTN Issuer and pursuant to the Deed of
Charge in respect of the issuer.
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MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
CONSUMER CREDIT ACT 1974
A significant number of the credit transactions that occur on a designated
account will be for items of credit extended to a cardholder for an amount up
to [GBP]25,000. The Consumer Credit Act applies to these transactions and, in
whole or in part, the credit or charge card agreement establishing each
designated account. This has certain consequences for the designated accounts,
including the following:
Enforcement of improperly executed or modified card agreements
If a credit or charge card agreement has not been executed or modified in
accordance with the Consumer Credit Act, it may be unenforceable against a
cardholder without a court order -- and in some instances may be completely
unenforceable. As is common with many other UK credit and charge card issuers,
some of Barclaycard's credit and charge card agreements do not comply in all
respects with the Consumer Credit Act or other related legislation. As a
result, these agreements may be unenforceable by Barclaycard against the
cardholders without a court order. The transferor gives no guarantee that a
court order could be obtained if required. With respect to those credit or
charge card agreements which may not be compliant, such that a court order
could not be obtained, Barclaycard estimates that this would apply to less than
1 per cent. of the aggregate principal receivables in the designated accounts
on 31 December 2002. Barclaycard does not anticipate any material increase in
this percentage of receivables in the securitised portfolio. The accounts that
do not comply with the Consumer Credit Act are still legal, valid and binding
obligations of the relevant cardholder and it will still be possible to collect
payments from cardholders willing to pay their debt and demand arrears from
cardholders who are falling behind with their payments. The transferor will
have no obligation to repay or account to a cardholder for any payments
received by a cardholder because of this non-compliance with the Consumer
Credit Act. However, if losses arise on these accounts, they will be written
off and borne by the investor beneficiary and transferor beneficiary based on
their respective interests in the receivables trust.
Liability for supplier's misrepresentation or breach of contract
Transactions involving the use of a credit or charge card in the United Kingdom
may constitute transactions under debtor-creditor-supplier agreements. A
debtor-creditor-supplier agreement includes an agreement where the creditor,
with knowledge of its purpose, advances funds to finance a purchase by the
debtor of goods or services from a supplier.
Section 75 of the Consumer Credit Act provides that, if the supplier is in
breach of the contract -- whether such contract is express or implied by law --
between the supplier and a cardholder in certain debtor-creditor-supplier
agreements or if the supplier has made a misrepresentation about that contract,
the creditor may also be liable to the cardholder for the breach or
misrepresentation. The liability of the transferor for a designated account is
called a "Transferor Section 75 Liability". In these circumstances, the
cardholder may have the right to reduce the amount owed to the transferor under
his or her credit or charge card account. This right would survive the sale of
the receivables to the receivables trustee. As a result, the receivables
trustee may not receive payments from cardholders that it might otherwise
expect to receive. As a result, the receivables trustee may not receive the
full amount otherwise owed by a cardholder. However, the creditor will not be
liable where the cash price of the item or service supplied concerning the
claim is [GBP]100 or less, or greater than [GBP]30,000.
The receivables trustee has agreed to indemnify the transferor for any loss
suffered by the transferor arising from any claim under section 75 of the
Consumer Credit Act. This indemnity cannot exceed the original outstanding
principal balance of the affected charges on the designated account.
The receivables trustee's indemnity will be payable from excess spread on the
receivables. Any amounts that Barclaycard recovers from the supplier will
reduce Barclaycard's loss for purposes of the receivables trustee's indemnity.
Barclaycard will have rights of indemnity against suppliers under section 75 of
the Consumer Credit Act. Barclaycard may also be able to charge-back the
transaction in dispute to the supplier under the operating regulations of VISA
or Mastercard.
If Barclaycard's loss for purposes of the receivables trustee's indemnity
exceeds the excess spread available to satisfy the loss, the amount of the
excess will reduce the Transferor Interest accordingly.
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TRANSFER OF BENEFIT OF RECEIVABLES
The transfer by the transferor to the receivables trustee of the benefit of the
receivables is governed by English law and takes effect in equity only.
Notice to the cardholders of the assignment to the receivables trustee would
perfect the legal title of the receivables trustee to the receivables. The
receivables trustee has agreed that notice will not be given to cardholders,
unless the transferor's long-term senior unsecured indebtedness as rated by
Moody's or Standard & Poor's were to fall below Baa2, BBB or BBB respectively.
The lack of notice has several legal consequences.
Until notice is given to the cardholders, each cardholder will discharge his or
her obligations under the designated account by making payment to the
transferor. Notice to cardholders would mean that cardholders should no longer
make payment to the transferor as creditor under the card agreement but should
instead make payment to the receivables trustee as assignee of the receivables.
If notice is given, and a cardholder ignores it and makes payment to the
transferor for its own account, that cardholder would nevertheless still be
bound to make payment to the receivables trustee. The transferor, having
transferred the benefit of the receivables to the receivables trustee, is the
bare trustee of the receivables trustee for the purposes of the collection of
the receivables that are the property of the receivables trust and is
accountable to the receivables trustee accordingly.
Before the insolvency of the transferor, until notice is given to a cardholder
who is a depositor or other creditor of the transferor, equitable set-offs may
accrue in favour of that cardholder against his or her obligation to make
payments under the card agreement to the transferor. These rights of set-off
may result in the receivables trustee receiving less monies than anticipated
from the receivables.
The transfer of the benefit of receivables to the receivables trustee has been
and will continue to be subject both to any prior equities that have arisen in
favour of the cardholder and to any equities that may arise in the cardholder's
favour after the assignment. Where notice of the assignment is given to a
cardholder, certain rights of set-off may not arise after the date of the
notice.
Under the terms of the receivables securitisation agreement, the transferor
represents that each receivable assigned to the receivables trust is an
eligible receivable -- unless the receivable is specified as being an
ineligible receivable. The eligibility criteria include that each receivable
constitutes the legal, valid and binding obligations of the cardholder
enforceable -- unless they are not in compliance with the Consumer Credit Act
in which case they may only be enforceable with a court order and, in a small
number of cases, may be unenforceable -- against the cardholder in accordance
with its terms. They also include that each receivable is not, save as
specifically contemplated by any rule of English law, currently subject to any
defence, dispute, set-off or counterclaim or enforcement orders apart from in
the limited cases described in the previous sentence.
Notice to the cardholder would perfect the transfer so that the receivables
trustee would take priority over any interest of a later encumbrancer or
transferee of the transferor's rights who has no notice of the transfer to the
receivables trustee.
Notice to the cardholder would prevent the card agreement from being amended by
the transferor or the cardholder without the consent of the receivables
trustee.
Lack of notice to the cardholder means that, for procedural purposes, the
receivables trustee will have to join the transferor as a party to any legal
action that the receivables trustee may want to take against any cardholder.
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UNITED KINGDOM TAXATION TREATMENT OF THE NOTES
OVERVIEW
United Kingdom legal advisers, Clifford Chance Limited Liability Partnership,
have filed an opinion that, subject to finalisation of documents including
those which are exhibits to the registration statement of which this prospectus
forms a part in a form which is satisfactory to them and not inconsistent with
the descriptions in the body of this prospectus and based on certain
assumptions which cannot be verified before closing, the following summary is
true in all material respects in relation to the matters expressly addressed.
The summary set out below describes the material United Kingdom withholding
tax, income tax, corporation tax, inheritance tax, capital gains tax, stamp
duty and stamp duty reserve tax consequences of acquiring, holding and
disposing of the notes.
The comments below are based on United Kingdom law and practice at the date of
this prospectus. They relate only to the position of persons who are the
absolute beneficial owners of their notes and may not apply to certain classes
of persons, including dealers and persons who own the notes as trustee, nominee
or otherwise on behalf of another person, but otherwise will, subject to the
following paragraph, apply to United States holders who beneficially own the
notes.
The comments below do not necessarily apply where the interest or any other
income on the notes is deemed for United Kingdom tax purposes to be the income
of a person other than the absolute beneficial owner of the notes in question,
for example where a person ordinarily resident in the United Kingdom transfers
assets to a non-resident company for the purpose of avoiding United Kingdom
tax.
It is suggested that any noteholders who are in doubt as to their position
consult their professional advisers.
TAXATION OF U.S. RESIDENTS
Subject to the comments below, under the terms of the Convention of 24 July
2001 between the United Kingdom and the United States of America, called the
"New Convention", a person who is a US resident for the purposes of the
Convention, called a "US noteholder", will not be subject to United Kingdom tax
on any coupon beneficially owned by him, unless he carries on business in the
United Kingdom through a permanent establishment situated in the United
Kingdom, or performs in the United Kingdom independent personal services from a
fixed base situated therein, and the notes are effectively connected with such
permanent establishment or fixed base, or in certain other circumstances
specified in the Convention where relief is not available. However, this
general position is subject to the application of extensive anti-avoidance
provisions which may affect the ability of US noteholders to claim relief under
the New Convention. Under the terms of the Convention of 31 December 1975
between the United Kingdom and the United States of America, called the "Old
Convention", a similar relief is available; however, some of the anti-avoidance
provisions contained in the New Convention are not contained in the Old
Convention. The New Convention takes effect in relation to amounts paid or
credited on or after 1 May 2003, but a US noteholder may elect to rely on the
provisions of the Old Convention in relation to amounts paid or credited up to
1 May 2004.
TAXATION OF INTEREST PAID
The notes will constitute "quoted Eurobonds" provided that they are and
continue to be listed on a recognised stock exchange. On the basis of the
United Kingdom Inland Revenue's published interpretation of the relevant
legislation, securities which are to be listed on a stock exchange in a country
which is a member state of the European Union or which is part of the European
Economic Area will satisfy this requirement if they are listed by a competent
authority in that country and are admitted to trading on a recognised stock
exchange in that country; securities which are to be listed on a stock exchange
in any other country will satisfy this requirement if they are admitted to
trading on a recognised stock exchange in that country. The London Stock
Exchange is a recognised stock exchange for these purposes. Whilst the notes
are and continue to be quoted Eurobonds, payments of interest on the notes may
be made without deduction or withholding for or on account of United Kingdom
income tax irrespective of whether the notes are in global or definitive form.
141
In all cases falling outside the exemption described above, interest on the
notes may fall to be paid under deduction of United Kingdom income tax at the
lower rate, currently 20 per cent., subject to such relief as may be available
for example, under the provisions of any applicable double taxation treaty.
Alternatively, there is in certain circumstances an exemption for certain
payments between certain companies and partnerships. The latter exemption can
apply where (inter alia) the person beneficially entitled to the interest is
(i) a company resident in the United Kingdom, (ii) a company not resident in
the United Kingdom which carries on a trade in the United Kingdom through a
permanent establishment and which is required to bring the interest into
account in computing its profits chargeable to United Kingdom corporation tax
or (iii) a partnership each member of which is a company falling within (i) or
(ii) above.
PROVISION OF INFORMATION
Holders should note that where any interest on notes is paid to them, or to any
person acting on their behalf, by the issuer or any person in the United
Kingdom acting on behalf of the issuer, called a "paying agent", or is received
by any person in the United Kingdom acting on behalf of the relevant holder,
other than solely by clearing or arranging the clearing of a cheque, called a
"collecting agent", then the issuer, the paying agent or the collecting agent
as the case may be, may in certain circumstances be required to supply to the
United Kingdom Inland Revenue details of the payment and certain details
relating to the holder, including the holder's name and address. These
provisions will apply whether or not the interest has been paid subject to
withholding or deduction for or on account of United Kingdom income tax and
whether or not the holder is resident in the United Kingdom for United Kingdom
taxation purposes. Where the holder is not so resident, the details provided to
the United Kingdom Inland Revenue, in certain cases, may be passed by United
Kingdom Inland Revenue to the tax authorities of the jurisdiction in which the
holder is resident for taxation purposes.
PROPOSED EUROPEAN UNION SAVINGS DIRECTIVE
On 3 June 2003 the EU Council of Economic and Finance Ministers adopted a new
directive regarding the taxation of savings income. The directive is scheduled
to be applied by Member States from 1 January 2005, provided that certain non-
EU countries adopt similar measures from the same date. Under the directive
each Member State will be required to provide to the tax authorities of another
Member State details of payments of interest or other similar income paid by a
person within its jurisdiction to an individual resident in that other Member
State; however, Austria, Belgium and Luxembourg may instead apply a withholding
system for a transitional period in relation to such payments, deducting tax at
rates rising over time to 35%. The transitional period is to commence on the
date from which the directive is to be applied by Member States and to
terminate at the end of the first fiscal year following agreement by certain
non-EU countries to the exchange of information relating to such payments.
OTHER RULES RELATING TO UNITED KINGDOM WITHHOLDING TAX
1. Where interest has been paid under deduction of United Kingdom income
tax, holders who are not resident in the United Kingdom may be able to
recover all or part of the tax deducted if there is an appropriate
provision in any applicable double taxation treaty.
2. The references to "interest" above mean "interest" as understood in
United Kingdom tax law. The statements above do not take any account of
any different definitions of "interest" or "principal" which may prevail
under any other law or which may be created by the terms and conditions
of the notes or any related documentation.
3. The above description of the United Kingdom withholding tax position
assumes that there will be no substitution of the issuer and does not
consider the tax consequences of any such substitution.
4. The notes may be issued at an issue price of less than 100 per cent. of
their principal amount. Any discount element on any of these notes will
not be subject to any United Kingdom withholding tax pursuant to the
provisions mentioned above, but may be subject to reporting requirements
as outlined above.
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OWNERSHIP AND DISPOSAL, INCLUDING REDEMPTION, OF THE NOTES BY UNITED KINGDOM
TAX PAYERS
1. CORPORATE NOTEHOLDERS
Noteholders which are companies within the charge to United Kingdom corporation
tax -- other than authorised unit trusts and open ended investment companies,
as to which see below -- will normally be taxed on their returns from the
notes, including interest and returns attributable to movements in value, and
foreign exchange gains and losses, whether income or capital in nature, as
income, which is calculated in accordance with an authorised accruals or mark-
to-market basis of accounting. Relief may be available for related expenses on
a similar basis.
Noteholders that are authorised unit trusts or open ended investment companies
will be subject to the same taxation treatment in respect of the notes as other
noteholders that are within the charge to United Kingdom corporation tax, other
than, in each case, with respect to profits and losses of a capital nature in
respect of these notes.
2. OTHER NOTEHOLDERS
A noteholder who is not within the charge to United Kingdom corporation tax but
who is resident or ordinarily resident in the United Kingdom or who carries on
a trade in the United Kingdom through a branch or agency to which the notes are
attributable may be treated as realising a chargeable gain or an allowable loss
for capital gains tax purposes on a disposal -- including redemption -- of the
notes. In calculating any gain or loss on disposal of a note, sterling values
are compared at acquisition and disposal. Accordingly, a taxable profit can
arise even where a non-sterling amount received on a disposal is less than or
the same as an amount in the same currency which is paid from or in respect of
the note. In addition, on disposal of the notes by a noteholder, an amount
which is treated as reflecting interest determined on a just and reasonable
basis to which the noteholder is treated as having become entitled since the
last interest payment date may be chargeable to tax as income under the rules
known as the Accrued Income Scheme contained in Chapter II of Part XVII of the
Income and Corporation Taxes Act 1988, if that noteholder is not a dealer in
securities and is not within the charge to United Kingdom corporation tax but
is resident or ordinarily resident in the United Kingdom or carries on a trade
in the United Kingdom through a branch or agency to which the notes are
attributable. There is no corresponding relief available to the person
acquiring the relevant notes. There are provisions to prevent any particular
gain or loss from being charged or relieved at the same time under the
provisions of the Taxation of Chargeable Gains Act 1992 and also under the
provisions of the "accrued income scheme" described in this paragraph. For
further information in this regard, noteholders should seek their own
professional advice.
UNITED KINGDOM INHERITANCE TAX
Where a note is held by an individual there may be a charge to United Kingdom
inheritance tax on the individual's death or on certain transfers of the note,
including gifts to some settlements and gifts made within seven years of the
death of the individual.
These provisions are subject to any relief provided by any applicable double
tax convention relating to estate and gift taxes.
STAMP DUTY AND STAMP DUTY RESERVE TAX
No United Kingdom stamp duty or stamp duty reserve tax is payable on the issue
or transfer of a note provided that the note does not at any time carry (1) a
right to interest, the amount of which exceeds a reasonable commercial return
on the nominal amount of the capital of the note or (2) a right on repayment to
an amount which exceeds the nominal amount of the capital of the note and is
not reasonably comparable with what is generally repayable, in respect of a
similar nominal amount of capital, under the terms of issue of loan capital
listed on the Official List of the UK Listing Authority and admitted to trading
on the London Stock Exchange.
TAXATION OF THE MTN ISSUER AND THE ISSUER
The MTN Issuer and the issuer will be subject to UK corporation tax, at a
maximum rate currently of 30 per cent., on the profit reflected in their
respective profit and loss accounts as increased by the amounts of any non-
deductible expenses or losses. The profit in the profit and loss account
143
should not exceed 1 basis point of the principal amount outstanding on the
medium term notes or certificates in the case of the MTN Issuer, or on the
notes in the case of the issuer. Examples of non-deductible expenses and losses
may include, for the MTN Issuer:
* amounts paid by the MTN Issuer to the receivables trustee to cover the
receivables trustee's fee and expenses; and
* any losses of principal which cannot be met out of excess spread; and
for the issuer, certain expenses relating to cash management.
TAXATION OF RECEIVABLES TRUSTEE
The receivables trustee will have no United Kingdom tax liabilities, and
accordingly, the receivables trustee will have no liability to United Kingdom
tax in relation to amounts which it receives on behalf of the MTN Issuer or
amounts which it is obliged to pay the MTN Issuer.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OVERVIEW
The following summary describes the material U.S. federal income tax
consequences of acquiring, holding and disposing of the notes. This summary has
been prepared and reviewed by Clifford Chance U.S. LLP -- called "U.S. tax
counsel".
This summary does not discuss all aspects of U.S. federal tax law. In
particular, except as specifically indicated in this summary, it addresses only
purchasers in the original offering who hold notes as "capital assets" within
the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, called
the "Code". It does not address special U.S. federal income tax considerations
that may be important to particular investors in light of their individual
investment circumstances or to certain types of investors subject to special
tax rules -- e.g. financial institutions, insurance companies, tax-exempt
institutions, dealers in securities or currencies or investors holding the
notes as part of a conversion transaction, hedge, integrated transaction,
constructive sale transaction or as a position in a straddle for tax purposes,
or persons whose functional currency, as defined in Code Section 985, is not
the U.S. dollar.
Further, this discussion does not address alternative minimum tax consequences
or any tax consequences to holders of interests in a noteholder. In addition,
this summary does not discuss any foreign, state, local or other tax
considerations. This summary is based on the Code, and administrative and
judicial authorities, all as in effect on the date of this prospectus and all
of which are subject to change, possibly on a retroactive basis.
U.S. tax counsel has prepared and reviewed this summary of material U.S.
federal income tax consequences, and is of the opinion that it is correct in
all material respects. U.S. tax counsel also opines that, as described below,
each of the receivables trust, the MTN Issuer and the issuer will not be
treated as engaged in a trade or business within the United States for U.S.
federal income tax purposes and will not be subject to U.S. federal income tax.
U.S. tax counsel further opines that, as described below, although there is no
directly governing authority addressing the classification of securities
similar to the notes, under current law, the notes will be treated as debt for
U.S. federal income tax purposes. Except as set forth in the preceding
sentences, U.S. tax counsel will render no other opinions about the
acquisition, holding and disposition of the notes. Further, an opinion of U.S.
tax counsel is not binding on the IRS or the courts, and no ruling on any of
the consequences or issues discussed below will be sought from the IRS.
Moreover, there are no authorities on similar transactions involving securities
issued by an entity with terms similar to those of the notes. Accordingly, the
issuer suggests that persons considering the purchase of notes consult their
own tax advisors about the U.S. federal income tax consequences of an
investment in the notes and the application of United States federal tax laws,
as well as the laws of any state, local or foreign taxing jurisdictions, to
their particular situations.
For the purposes of this summary, a "United States holder" means a beneficial
owner of notes who is a "United States person" as described in Section
7701(a)(30) of the Code, generally including;
* an individual who is a citizen or resident of the United States;
* a corporation or partnership created in or under the laws of the United
States, any state or any political subdivision of any state -- including
the District of Columbia; and
* an estate or trust whose income is includible in gross income for US
federal income tax purposes without regard to source.
A "non-United States holder" means a beneficial owner of notes that is not a
United States holder.
TAX STATUS OF THE RECEIVABLES TRUST, THE MTN ISSUER AND THE ISSUER
It is presently contemplated that each of the receivables trust, the MTN Issuer
and the issuer will conduct their respective activities, including activities
undertaken on their behalf, such as servicing activities entirely outside of
the United States. In that regard, assuming that the activities of each of the
receivables trust, the MTN Issuer and the issuer are, as contemplated,
conducted entirely outside of the United States, and assuming each of these
entities makes no investments that are subject to withholding of U.S. federal
income tax, U.S. tax counsel is of the opinion that, although no transaction
closely comparable to that contemplated herein has been the subject of a
Treasury regulation, revenue ruling or judicial decision and hence the matter
cannot be free from doubt,
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each of the receivables trust, the MTN Issuer and the issuer will not be
treated as engaged in a trade or business within the United States for
U.S. federal income tax purposes and that each of these entities will not be
subject to U.S. federal income tax.
Prospective investors should understand that such determination of whether a
person is engaged in a U.S. trade or business is based on a highly factual
analysis, there is no direct guidance as to which activities constitute being
engaged in a trade or business within the United States, and it is unclear how
a court would construe the existing indirect authorities. A foreign corporation
deemed to be so engaged would be subject to U.S. federal income tax, as well as
the branch profits tax, on its income which is treated as effectively connected
with the conduct of that trade or business. Such income tax, if imposed, would
be based on effectively connected income computed in a manner generally
analogous to that applied to the income of a domestic corporation, except that
a foreign corporation would be entitled to deductions and credits for a taxable
year only if it files, on a timely basis, an income tax return for that year
which none of the receivables trust, MTN Issuer and issuer intend to do, even
as a protective measure. The maximum U.S. federal income tax rates are
currently 35 per cent. for a corporation's effectively connected income and 30
per cent. for the branch profits tax, resulting in an effective maximum U.S.
federal income tax rate of 54.5 per cent. The branch profits tax is imposed
each year on a corporation's effectively connected earnings and profits, with
certain adjustments, deemed repatriated out of the United States.
UNITED STATES HOLDERS
TAX TREATMENT OF THE NOTES AS INDEBTEDNESS. The issuer will treat the notes as
debt for U.S. federal income tax purposes. Each holder of notes, by acceptance
of such notes, will also agree to treat the notes as indebtedness for U.S.
federal income tax purposes. U.S. tax counsel has advised that in its opinion,
although there is no directly governing authority addressing the classification
of securities similar to the notes, under current law, the notes will be
treated as indebtedness for U.S. federal income tax purposes. Such agreement
and opinion are not binding on the IRS and, as stated above, no assurance can
be given that the characterisation of the notes as indebtedness would prevail
if the issue were challenged by the IRS. The IRS might attempt to treat the
notes for U.S. federal income tax purposes as equity interests in a
corporation. As discussed below, treatment of the notes as equity interests
could have adverse tax consequences for United States holders.
Except as indicated, the discussion below assumes the notes are treated as
indebtedness for U.S. federal income tax purposes.
INTEREST PAYMENTS AND DISTRIBUTIONS. The notes may be treated as having been
issued with original issue discount -- "OID" -- for U.S. federal income tax
purposes, in which case the OID will be taxed as described below. However, in
the absence of any OID on the notes, interest on the notes will be taxable to a
United States holder as ordinary income at the time it is received or accrued,
in accordance with the holder's regular method of accounting for U.S. federal
income tax purposes.
The total amount of OID on a note is the excess of its stated redemption price
at maturity over its issue price. The issue price for the notes is the price --
including any accrued interest -- at which a substantial portion of the
relevant notes are first sold to the public. In general, the stated redemption
price at maturity of a note is the sum of all payments made on the note other
than payments of interest that (1) are payable at least annually over the
entire life of the note and (2) are based on a single fixed rate or variable
rate -- or certain combinations of fixed and variable rates.
If any of the notes are issued at a discount of an amount equal to or greater
than 0.25 per cent. of that note's stated redemption price at maturity
multiplied by the note's weighted average maturity, called its "WAM", then that
note will be deemed to bear OID. The WAM of a note is computed based on the
number of full years each distribution of principal -- or other amount included
in the stated redemption price at maturity -- is scheduled to be outstanding.
Further, the IRS could take the position based on U.S. Treasury regulations
that none of the interest payable on a note is unconditionally payable and so
that all of that interest should be included in the note's stated redemption
price at maturity. In addition, if on the closing date there is a differential
of more than 25 basis points between the initial fixed interest rate and the
current value of the variable interest rate that follows, the IRS may take the
position that the note bears OID and the holder of the note would be required
to accrue OID into income as described below.
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A United States holder -- including a cash basis holder -- of a note deemed to
bear OID generally would be required to accrue OID on the relevant note for
U.S. federal income tax purposes on a constant yield basis. This would require
the inclusion of OID in income in advance of the receipt of cash attributable
to that income. Under Section 1272(a)(6) of the Code, special provisions apply
to debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those
provisions would apply to the notes is unclear.
Sourcing: Interest payments or distributions on a note generally will
constitute foreign source income for U.S. federal income tax purposes. Subject
to certain limitations, UK withholding tax, if any, imposed on these payments
will generally be treated as foreign tax eligible for credit against a United
States holder's U.S. federal income tax. For foreign tax credit purposes, it is
expected that interest will generally be treated as passive income or, in the
case of some United States holders, financial services income.
DISPOSITION OR RETIREMENT OF INVESTMENT. Subject to the discussion of the PFIC
rules below, upon the sale, exchange or retirement of a note -- including
pursuant to a redemption by the issuer prior to its maturity date -- a United
States holder will recognise gain or loss equal to the difference between the
amount realised and the United States holder's "adjusted tax basis" in the
relevant note. In general, a United States holder's adjusted tax basis in an
OID debt instrument is equal to the United States holder's cost for such debt
instrument, plus any OID accrued and less the amount of any payments received
by the holder that are not "qualified stated interest" payments under
applicable U.S. Treasury regulations.
A United States holder's adjusted tax basis in a debt instrument with no OID is
generally equal to the holder's cost less the amount of any principal payments
made before the date of disposition. A United States holder's adjusted tax
basis in stock is generally equal to the United States holder's cost for the
stock. In general, any gain or loss realised by the holder will be capital gain
or loss. Under certain circumstances, capital gains derived by individuals are
taxed at preferential rates. The deductibility of capital losses is subject to
limitations. If a United States holder's basis in a note includes accrued but
unpaid OID, the holder may be required specifically to disclose any loss under
recent regulations on corporate tax shelter transactions.
Sourcing: Gain realised by a United States holder on the sale, exchange or
retirement of a note generally will be treated as a United States source gain.
Under recently issued U.S. Treasury regulations governing losses recognised on
the sale of personal property, loss from the sale, exchange or retirement of a
note generally will also be treated as a United States source loss. Exceptions
to the application of these regulations' sourcing provisions include exceptions
for certain losses attributable to foreign exchange fluctuations, accrued but
unpaid interest, and foreign offices of U.S. residents, among others. Some
other exceptions to the regulations' general rule apply to notes treated as
equity in the issuer. The issuer suggests that United States holders consult
their own tax advisors about the proper treatment of losses for foreign tax
credit purposes.
ALTERNATIVE TAX TREATMENT OF NOTES AS EQUITY. U.S. tax counsel opines, and the
issuer intends to take the position, that the notes are debt for U.S. federal
income tax purposes. Consequently, the U.S. federal income tax consequences of
purchasing, owning and disposing of the notes should be as set forth above.
However, if the notes were not to be treated as debt, they would likely be
treated as equity interests in the issuer.
INVESTMENT IN A PASSIVE FOREIGN INVESTMENT COMPANY. Because of the nature of
the income of the issuer, the issuer could constitute a passive foreign
investment company -- or "PFIC". Accordingly, United States holders of any
class of notes treated as equity -- in particular, the class C notes -- might
be shareholders in a PFIC.
In general, United States holders treated as shareholders of a PFIC constituted
by the issuer would be subject to special tax rules on excess distributions
made to them by the issuer, including a rateable inclusion of "excess
distributions" in the United States holder's gross income as ordinary income
(and not as dividend taxed at the long-term capital gain rates in the hands of
non-corporate United States holders) and requirement for the payment of an
interest charge on tax that is deemed to have been deferred on these excess
distributions. Excess distributions would generally include (1) some
distributions on a United States shareholder's equity interest in the issuer
for a taxable year, if the total of those amounts exceeds 125 per cent. of the
average amount of distributions from the issuer made during a specified base
period, and (2) gain from the disposition, or deemed disposition, of the equity
interest in the issuer. United States holders generally might
147
avoid these unfavourable consequences if they made either of two specific
elections available under the Code with respect to shares in a PFIC, but it is
not clear either election would be available for the notes.
The first such mitigating election is a "qualified electing fund", or "QEF",
election pursuant to Code Section 1295. If a United States holder made a QEF
election with respect to a note treated as equity, that United States holder
generally would be required to include its pro rata share of the issuer's
ordinary income and net capital gains in income for each taxable year and pay
tax on it, even if such income and gain were not distributed to the United
States holder. Further, any losses of the issuer would not be deductible by the
United States holder. If the issuer later distributed the income or gain on
which a United States holder had already paid tax, amounts so distributed will
not be further taxable to the United States holder. A United States holder's
tax basis in such a note would be increased by the amount so included and
decreased by the amount of nontaxable distributions thereon. In general, a
United States holder making a QEF election would recognize, on a disposition of
its notes, capital gain or loss equal to the difference, if any, between the
amount realized upon such disposition and the tax basis in such notes. In
general, a QEF election would be required to be made on or before the due date
for filing a United States holders' federal income tax return for the first
taxable year for which it holds a note. The QEF election would be effective
only if certain required information were made available by the issuer to an
investor. The issuer, however, does not intend to provide holders with this
information and, accordingly, no assurance can be given to investors that any
QEF election made with respect to notes would be effective.
A United States holder that held marketable stock in a PFIC might, in lieu of
making a QEF election, also avoid certain unfavourable consequences of the PFIC
rules by electing to mark the PFIC stock to market as of the close of each
taxable year. A United States holder that made the mark-to-market election
would be required to include in income each year as ordinary income an amount
equal to the excess, if any, of the fair market value of the stock at the close
of the year over the United States holder's adjusted tax basis in the stock.
For this purpose, a United States holder's adjusted basis would generally be
the holder's cost for the stock, increased by the amount previously included in
the holder's income pursuant to this mark-to market election and decreased by
any amount previously allowed to the United States holder as a deduction
pursuant to this election. If, at the close of the year, the United States
holder's adjusted tax basis exceeded the fair market value of the stock, then
the United States holder could deduct any of this excess ordinary income, but
only to the extent of net mark-to market gains previously included in income.
Any gain from the actual sale of the PFIC stock would be treated as ordinary
income, and any loss would be treated as ordinary loss to the extent of net
mark-to market gains previously included in income. Stock would be considered
marketable if it were regularly traded on an exchange that the IRS determined
to be qualified for these purposes. Although the issuer believes that each
class of notes will be listed on a qualified exchange, pursuant to U.S.
Treasury regulations, a class of stock is regularly traded for any calendar
year during which it is traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter. Accordingly, because there is
uncertainty as to whether any class of notes will be regularly traded and
hence, there can be no assurance -- and no representation is made -- that the
notes would be eligible for mark-to-market election.
Because the issuer does not expect the QEF election to be available to an
investor to mitigate the effect of the PFIC provisions, and it is unclear with
whether mark-to-market would be available either, United States holders should
be aware of the potentially adverse tax consequences arising under the PFIC
provisions discussed above should any notes be treated as equity. First, all or
a portion of both distributions and gains on notes generally would be taxable
to holders as ordinary income, and would be taxable at the highest marginal
rates applicable to current and prior years during the holding period. Further,
all or a portion of the distributions and gains could be subject to the
additional "interest charge" tax. Such interest charge tax -- computed in the
manner described above on "excess distributions" and gains -- generally is
intended to eliminate the value of any tax deferral arising from an investment
in notes. Although the issuer does not expect there would be any significant
deferral of tax arising from an investment in notes treated as equity and
consequently does not expect that the interest charge tax computation should
produce a substantial additional tax liability, in some circumstances, it could
do so. For example, the interest charge computation could produce an interest
charge tax with respect to a floating rate note if the floating rate on the
note increased substantially over an investor's holding period. Alternatively,
the
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computation could produce such a tax with respect to a fixed rate note if that
note was sold by a United States holder at a substantial gain due to
fluctuations in the general level of interest rates. No assurance is possible
that such circumstances, or others, will not occur.
Certain additional adverse consequences could flow to indirect investors in a
PFIC. More specifically, the ownership of the notes by a non-United States
holder might be attributed to a United States holder notwithstanding that such
United States holder held no note and received no cash in respect of a note.
Code Section 1298(a) generally treats notes held directly or indirectly by a
foreign partnership, corporation, trust or estate as owned by such entity's
partners, shareholders or beneficiaries, as applicable; it also may treat any
of various option arrangements as conferring ownership of notes on United
States holders. Hence, a United States holder treated as owning notes held by a
non-United States holder generally would be subject to tax on indirect gains
and distributions attributable to the notes in the manner described above.
Finally, an investor who pledged shares in a PFIC as security for a loan should
be aware that such a pledge would be treated as a disposition of the related
shares, and any gain would be subject to the rules applicable to distributions
and gains with respect to shares in a PFIC described above.
Sourcing: For sourcing of payments for a note treated as stock in the issuer
and gain or loss on sale of an interest in this stock, see "-- Interest
Payments and Distributions -- Sourcing" and "-- Disposition or Retirement of
Investment -- Sourcing" above.
CONTROLLED FOREIGN CORPORATION STATUS. Should the notes, and particularly the
class C notes, be treated as equity, it is possible that the issuer might be
treated as a controlled foreign corporation for U.S. federal income tax
purposes. In this event, United States holders of equity interests that were
treated as owning 10 per cent. or more of the combined voting power of the
issuer would be required to include in income their pro rata share of the
earnings and profits of the issuer, and generally would not be subject to the
rules described above about PFICs. Additionaly, an IRS Form 5471 may be
required to be filed.
REPORTING REQUIREMENTS. If any United States holder were treated as owning an
equity interest in the issuer for U.S. federal income tax purposes, it would be
required file IRS Form 8621 for each tax year in which it held such an
interest. In addition, if a United States holder were treated as owning 5 per
cent. or more of an equity interest of the issuer, certain additional reporting
requirements would be required to be satisfied.
Under Section 6038B of the Code -- relating to reporting requirements incident
to the transfer of property, including cash, to a foreign corporation by U.S.
persons or entities -- in general, a United States holder, including a tax-
exempt entity, that purchased any notes treated as equity for U.S. federal
income tax purposes would be required to file an IRS Form 926 or similar form
with the IRS if such United States holder were treated as owning, directly or
by attribution, immediately after the transfer at least 10 per cent. by vote or
value of the issuer, or the purchase, when aggregated with all purchases made
by such United States holder -- or any related person thereto -- within the
preceding 12 month period, exceeded $100,000. If a United States holder fails
to file any such required form, the United States holder could be required to
pay a penalty equal to 10 per cent. of the gross amount paid for the notes,
subject to a maximum penalty of $100,000, except in cases involving intentional
disregard.
NON-UNITED STATES HOLDERS
Subject to the discussion of backup withholding below, an investment in the
notes by non-United States holders generally will not give rise to any U.S.
federal income tax to these holders, unless the income received on, or any gain
recognised on the sale or other disposition of their notes is:
* treated as effectively connected with the conduct of a trade or business
in the United States; or
* in the case of gain recognised by an individual, the individual is
present in the United States for 183 days or more and has a tax home --
as defined in the Code -- in the United States during the taxable year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of principal and interest, as well as payments of proceeds from the
sale, retirement or disposition of a note, may be subject to "backup
withholding" tax under Section 3406 of the Code if a recipient of such payments
fails to furnish to the payor certain identifying information. Any
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amounts deducted and withheld would be allowed as a credit against such
recipient's U.S. federal income tax, provided appropriate proof is provided
under rules established by the IRS. Furthermore, certain penalties may be
imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner. Backup withholding
will not apply with respect to payments made to certain exempt recipients, such
as corporations and financial institutions. Information may also be required to
be provided to the IRS concerning payments, unless an exemption applies.
Holders of the notes should consult their tax advisors regarding their
qualification for exemption from backup withholding and information reporting
and the procedure for obtaining such an exemption.
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CERTAIN ERISA AND OTHER CONSIDERATIONS
The U.S. Employee Retirement Income Security Act of 1974, as amended -- called
"ERISA"-- and Section 4975 of the Code impose requirements on employee benefit
plans and some other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective investment funds,
insurance company general or separate accounts or other entities in which these
plans, accounts or arrangements are invested, that are subject to the fiduciary
responsibility provisions of ERISA or Section 4975 of the Code. We call these
entities "Plans." ERISA also imposes requirements on persons who are
fiduciaries of Plans for the investment of "plan assets" of any Plan -- called
"Plan Assets". ERISA generally imposes on Plan fiduciaries certain general
fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons -- called "Parties in Interest" -- who have
specified relationships to a Plan or its Plan Assets, unless an exemption is
available. Parties in Interest that participate in a prohibited transaction may
be subject to a penalty imposed under ERISA or an excise tax imposed under
Section 4975 of the Code, unless an exemption is available. The details of
these prohibited transaction rules are contained in Section 406 of ERISA and
Section 4975 of the Code.
Subject to the considerations described below, you may purchase the notes with
Plan Assets of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the notes
with Plan Assets of any Plan should determine whether that purchase is
consistent with its fiduciary duties and whether that purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section
4975 of the Code because any of Barclays Bank PLC, the issuer, the receivables
trustee, the MTN Issuer, the servicer, the note trustee, the security trustee
or any other party may be Parties in Interest with respect to the investing
Plan and may be deemed to be benefiting from the issuance of the notes. If
Barclays Bank PLC, the issuer, the receivables trustee, the MTN Issuer, the
servicer, the note trustee or the security trustee is a Party in Interest with
respect to the prospective Plan investor, the issuer suggests that any
fiduciary or other Plan investor considering whether to purchase or hold the
notes consult with its counsel regarding the availability of exemptive relief
under U.S. Department of Labor -- "DOL" -- Prohibited Transaction Class
Exemptions, or any other prohibited transactions exemption issued by the DOL. A
purchaser of the notes should be aware, however, that even if the conditions
specified in one or more of the above-referenced exemptions are met, the scope
of the exemptive relief provided by the exemption might not cover all acts that
might be construed as prohibited transactions.
You will be deemed to have represented and agreed by your purchase and holding
of the notes that (1) (a) no part of the funds being used to pay the purchase
price for those notes constitutes Plan Assets of any Plan or will constitute
Plan Assets while you hold those notes, and that you are not, and for so long
as you hold the notes will not be, a Plan, or (b) the purchase and holding of
those notes do not and will not constitute, result in or otherwise involve a
non-exempt prohibited transaction under ERISA or Section 4975 of the Code; and
(2) if, at any time while those notes are purchased or held by you, you are or
will be another employee benefit plan subject to any U.S. Federal State or
local or non-U.S. law substantially similar to Section 406 of ERISA or Section
4975 of the Code, the purchase and holding of those notes do not and will not
violate any such substantially similar law.
In addition, under DOL Regulation Section 2510.3-101 -- called the "Plan Asset
Regulation" -- the purchase with Plan Assets of equity interests in the issuer
could, in certain circumstances, cause the series 04-1 medium term note
certificate and other assets of the issuer to be deemed Plan Assets of the
investing Plan which, in turn, would subject the issuer and its assets to the
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code. Thus, if the underlying
assets of the issuer are deemed to be Plan Assets, the obligations and other
responsibilities of Plan sponsors, Plan fiduciaries and Plan administrators,
and of Parties in Interest, under Parts 1 and 4 of Subtitle B of Title I of
ERISA and Section 4975 of the Code, as applicable, may be expanded, and there
may be an increase in their liability under these and other provisions of ERISA
and the Code (except to the extent (if any) that a favourable statutory or
administrative exemption or exception applies). In addition, various providers
of fiduciary or other services to the issuer, and any other parties with
authority or control with respect
151
to the entity, could be deemed to be Plan fiduciaries or otherwise Parties in
Interest by virtue of their provision of such services (and there could be an
improper delegation of authority to such providers). Nevertheless, consistent
with the expectation indicated above that the issuer expects that the notes
will be treated as indebtedness for U.S. federal income tax purposes, and the
opinion of U.S. tax counsel to that effect -- see "Material United States
Federal Income Tax Consequences -- United States Holders -- Tax Treatment of
the Notes as Indebtedness", the issuer will proceed based on the position that
the notes should not be treated as equity investments for purposes of the Plan
Asset Regulation and, therefore, the notes may be purchased by Plans. The
issuer's position is also based, in part, upon the traditional debt features of
the notes, including the reasonable expectation of purchasers of the notes that
the notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features.
The notes may not be purchased or held by any Plan, or any person investing
Plan Assets of any Plan, if any of Barclays Bank PLC, the issuer, the
receivables trustee, the MTN Issuer, the servicer, the note trustee, security
trustee or any of their respective affiliates (a) has investment or
administrative discretion with respect to the Plan Assets used to effect the
purchase; (b) has authority or responsibility to give, or regularly gives,
investment advice with respect to the Plan Assets, for a fee and pursuant to an
agreement or understanding that the advice (1) will serve as a primary basis
for investment decisions for the Plan Assets and (2) will be based on the
particular investment needs of that Plan; or (c) unless Prohibited Transaction
Class Exemption 95-60, 91-38 or 90-1 is applicable, is an employer maintaining
or contributing to that Plan. Each purchaser or holder of the notes or any
interest in the notes will be deemed to have represented by its purchase and
holding of them that it is not subject to the foregoing limitation.
ACCORDINGLY, THE ISSUER SUGGESTS THAT PROSPECTIVE EMPLOYEE BENEFIT PLAN
INVESTORS, WHETHER OR NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE, CONSULT
WITH THEIR OWN LEGAL AND OTHER ADVISORS CONCERNING THE IMPACT OF ERISA AND THE
CODE AND, PARTICULARLY IN THE CASE OF EMPLOYEE BENEFIT PLANS NOT SUBJECT TO
ERISA, ANY ADDITIONAL U.S. STATE AND LOCAL LAW OR NON-U.S. LAW CONSIDERATIONS,
AS APPLICABLE.
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ENFORCEMENT OF FOREIGN JUDGEMENTS IN ENGLAND AND WALES
The issuer is incorporated with limited liability in England and Wales under
the Companies Act 1985. Any final and conclusive judgement of either a New York
state or United States Federal court that has jurisdiction recognised by
England and Wales regarding obligations of the issuer for the notes, which is
for a debt or a fixed sum of money and which has not been stayed or fully
satisfied, can be enforced by action against the issuer in the courts of
England and Wales without re-examining the merits of the issues determined by
the proceedings unless:
* the proceedings in New York state or the United States Federal court
involved a denial of the principles of natural justice;
* the judgement goes against the public policy of England and Wales;
* the judgement was obtained by fraud, duress or was based on a clear
mistake of fact;
* the judgement is a penal or revenue judgement; or
* there has been an earlier judgment in another court between the same
parties on the same issues as are dealt within the judgement to be
enforced.
A judgement by a court may be sometimes given in pounds sterling. The issuer
expressly submits to the jurisdiction of New York state and the United States
Federal courts sitting in the Borough of Manhattan in the City of New York for
the purpose of any suit, action or proceedings arising out of this offering.
The following parties have been appointed to receive legal documents for the
issuer and the transferor, servicer and trust cash manager.
* for the issuer:
CT Corporation Systems
111 Eighth Avenue
New York, NY 10011
+1 212 590 9009
* for the transferor, servicer and trust cash manager:
Office of the General Counsel
Barclays Capital Inc.
200 Park Avenue
New York, New York 10166
+1 212 412 1392
Most of the directors and executive officers of the issuer and some of the
experts named in this document live outside the United States. Most of their
assets are located outside the United States. Because of this, the holders of
the notes may not be able to serve notice of legal action on them or to enforce
judgements against them. The issuer has been advised by its English counsel,
Clifford Chance Limited Liability Partnership, that because of this, they may
not be able to enforce in England and Wales, in original actions or in actions
for enforcement of judgements of United States courts, civil liabilities based
on the Federal securities laws of the United States.
153
UNDERWRITING
The issuer has agreed to sell and the underwriters for the notes listed below
have agreed to purchase the principal amount of the notes listed in the table
below. The terms of these purchases are governed by an underwriting agreement
between the issuer and Barclays Capital Inc. for itself and as representative
for all of the underwriters.
Principal Amount
of the Class A
Underwriters of the Class A Notes Notes
Barclays Capital Inc. $600,000,000
J.P. Morgan Securities Inc. $37,500,000
Lehman Brothers Inc. $37,500,000
--------------
Total $675,000,000
==============
Principal Amount of
Underwriter of the Class B Notes the Class B Notes
Barclays Capital Inc. $37,500,000
Principal Amount of
Underwriter of the Class C Notes the Class C Notes
Barclays Capital Inc. $37,500,000
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class A notes will be 100 per cent.
and 0.175 per cent., respectively.
Barclays Capital Inc., as representative of the underwriters of the class A
notes, has advised the issuer that the underwriters propose initially to offer
the class A notes to the public at the public offering price stated on the
cover page of this prospectus, and to some dealers at that price, less a
concession up to 0.105 per cent. for the class A note. The underwriters may
allow, and those dealers may reallow, concessions up to 0.0525 per cent. of the
principal balance of the class A notes, to some brokers and dealers.
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class B notes will be 100 per cent.
and 0.2 per cent., respectively.
Barclays Capital Inc. has advised the issuer that it proposes initially to
offer the class B notes to the public at the public offering price stated on
the cover page of this prospectus, and to some dealers at that price, less a
concession up to 0.12 per cent. for each class B note. Barclays Capital Inc. may
allow, and those dealers may reallow, concessions up to 0.06 per cent. of the
principal balance of the class B notes to some brokers and dealers.
The price to the public and underwriting discounts and commissions as a
percentage of the principal balance of the class C notes will be 100 per cent.
and 0.3 per cent., respectively.
Barclays Capital Inc. has advised the issuer that it proposes initially to
offer the class C notes to the public at the public offering price stated on
the cover page of this prospectus, and to some dealers at that price, less a
concession up to 0.18 per cent. for each class C note. Barclays Capital Inc. may
allow, and those dealers may reallow, concessions up to 0.09 per cent. of the
class C notes to some brokers and dealers.
Additional offering expenses are estimated to be $1,815,000.
The underwriters have agreed to purchase all of the notes if any of them are
purchased.
The issuer and Barclays Bank PLC will indemnify the underwriters against
liabilities -- including liabilities under the Securities Act -- caused by (1)
any untrue statement or alleged untrue statement of a material fact contained
in this prospectus or the related registration statement or (2) any omission or
alleged omission to state a material fact required to be stated in this
prospectus or the related registration statement or necessary to make the
statements in this prospectus or the related registration statement not
misleading. The issuer and Barclays Bank PLC
154
will not, however, indemnify the underwriters against liabilities caused by any
untrue statement or omission, real or alleged, made in reliance upon and in
conformity with information relating to and provided by any underwriter for use
in this prospectus and the related registration statement.
The underwriters may engage in over-allotment transactions, stabilising
transactions, syndicate covering transactions and penalty bids for the notes
under Regulation M under the Securities and Exchange Act of 1934.
* Over-allotment transactions involve syndicate sales in excess of the
offering size, which creates a syndicate short position.
* Stabilising transactions permit bids to purchase the notes so long as the
stabilising bids do not exceed a specified maximum.
* Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover
syndicate short positions.
* Penalty bids permit the underwriters to reclaim a selling concession from
a syndicate member when the notes originally sold by that syndicate
member are purchased in a syndicate covering transaction.
These transactions may cause the prices of the notes to be higher than they
would otherwise be in the absence of those transactions. Neither the issuer nor
any of the underwriters represent that the underwriters will engage in any of
those transactions or that those transactions, once begun, will not be
discontinued without notice at any time.
The underwriters are entitled to terminate the underwriting agreement in
certain limited circumstances prior to the issue of the notes.
The notes will be registered under the Securities Act.
UNITED KINGDOM
Each underwriter has represented and agreed with the issuer that:
(i) it has not offered or sold and will not offer or sell any notes to any
person in the United Kingdom prior to the admission of the notes to
listing on the Official List in accordance with Part VI of the Financial
Services and Markets Act 2000, called the "FSMA", and admission of the
notes to trading on the London Stock Exchange except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments, as principal or agent, for the purpose of their
business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or the FSMA;
(ii) it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the notes in,
from or otherwise involving the United Kingdom; and
(iii) it has only communicated or caused to be communicated, and will only
communicate or cause to be communicated, any invitation or inducement to
engage in investment activity -- within the meaning of Section 21 of the
FSMA -- received by it in connection with the issue or sale of the notes,
in circumstances in which Section 21(1) of the FSMA does not apply to the
issuer.
GENERAL
The underwriters have represented and agreed that they have complied and will
comply with all applicable laws and regulations in force in any jurisdiction in
which they purchase, offer, sell or deliver notes or possess them or distribute
the prospectus and will obtain any consent, approval or permission required by
them for the purchase, offer, sale or delivery by them of notes under the laws
and regulations in force in any jurisdiction to which they are subject or in
which they make such purchases, offers, sales or deliveries and the issuer
shall have no responsibility for them. Furthermore, they will not directly or
indirectly offer, sell or deliver any notes or distribute or publish any
prospectus, form of application, offering circular, advertisement or other
offering material except under circumstances that will, to the best of their
knowledge and belief, result in compliance with any applicable laws and
regulations, and all offers, sales and deliveries of notes by them will be made
on the same terms.
155
The underwriters have agreed that no invitation may be made to the public in
Jersey to subscribe for the notes.
Neither the issuer nor the underwriters represent that notes may at any time
lawfully be sold in compliance with any application registration or other
requirements in any jurisdiction, or pursuant to any exemption available
thereunder, or assume any responsibility for facilitating such sale.
With regard to each issue of notes, the underwriters will be required to comply
with such other additional or modified restrictions, if any, as the issuer and
the underwriters shall agree.
The underwriters will, unless prohibited by applicable law, furnish to each
person to whom they offer or sell notes a copy of the prospectus as then
amended or supplemented or, unless delivery of the prospectus is required by
applicable law, inform each such person that a copy will be made available upon
request. The underwriters are not authorised to give any information or to make
any representation not contained in the prospectus in connection with the offer
and sale of notes to which the prospectus relates.
This prospectus may be used by Barclays Bank PLC -- the transferor, servicer
and trust cash manager -- for offers and sales related to market-making
transactions in the notes. Barclays Bank PLC may act as principal or agent in
these transactions. These sales will be made at prices relating to prevailing
market prices at the time of sale. Barclays Bank PLC has no obligation to make
a market in the notes, and any market-making may be discontinued at any time
without notice.
Barclays Bank PLC will be the initial transferor, the servicer, the cash
manager for the receivables trust and the series 04-1 medium term note
certificate, the transferor beneficiary and excess interest beneficiary, the
swap counterparty and the lender under the expenses loan agreement.
156
RATINGS OF THE NOTES
It is a condition to issuing the class A notes that they be rated in the
highest rating category by two internationally recognised rating agencies.
It is a condition to issuing the class B notes that they be rated at least "A"
or its equivalent by two internationally recognised rating agencies.
It is a condition to issuing the class C notes that they be rated at least
"BBB" or its equivalent by two internationally recognised rating agencies.
Any rating of your notes by a rating agency will indicate:
* its view on the likelihood that you will receive timely interest payments
and principal payments by the series 04-1 termination date; and
* its evaluation of the receivables and the availability of the credit
enhancement for your notes.
What a rating will not indicate is:
* the likelihood that principal payments will be paid on a scheduled
redemption date before the series 04-1 termination date;
* the likelihood that a Pay Out Event will occur;
* the likelihood that a withholding tax will be imposed on noteholders;
* the marketability of your notes;
* the market price of your notes; or
* whether your notes are an appropriate investment for you.
A rating will not be a recommendation to buy, sell or hold the notes. A rating
may be lowered or withdrawn at any time.
The issuer will request a rating of the notes from two internationally
recognized rating agencies. Rating agencies other than those requested could
assign a rating to the notes, and its rating could be lower than any rating
assigned by a rating agency chosen by the issuer.
EXPERTS
The financial statements of Barclaycard Funding PLC and subsidiary at 14
December 2002 and 14 December 2001 and for each of the three years in the
period ended 14 December 2002 included in this prospectus have been so included
in reliance on the independent accountants reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
auditing and accounting.
The balance sheet of Gracechurch Card Funding (No. 6) PLC as at 27 February
2004 included in this prospectus, has been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent public accountants, given on
the authority of that firm as experts in auditing and accounting.
PricewaterhouseCoopers LLP is a member of the Institute of Chartered
Accountants in England and Wales.
PricewaterhouseCoopers LLP has given, and not withdrawn, its consent to the
inclusion in this document of its reports on the balance sheet of Gracechurch
Card Funding (No. 6) PLC as at 27 February 2004 and financial statements of
Barclaycard Funding PLC and subsidiary at 14 December 2002 and 14 December 2001
and for each of the three years in the period ended 14 December 2002 and the
references to its name in the form and context in which they are included and
has authorised the contents of those parts of the prospectus which comprise
their reports for the purposes of Regulation 6(1)(e) of the United Kingdom
Financial Services and Markets Act 2000 (Official Listing of Securities)
Regulations 2001 (as amended).
Clifford Chance Limited Liability Partnership has given and not withdrawn its
written consent to the inclusion in this document of their opinions in the form
and context in which they are included, as set out in the prospectus, and have
authorised the contents of those parts of the listing particulars, for the
purposes of Regulation 6(1)(e) of the United Kingdom Financial Services and
Markets Act 2000 (Official Listing of Securities) Regulations 2001.
INDEPENDENT ACCOUNTANTS
With respect to the unaudited financial information of Barclaycard Funding PLC
for the six-month periods ended June 30, 2003 and June 14, 2002, included in
this Prospectus, PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated August 29, 2003
appearing herein, states that they did not audit and they do not express an
opinion on that unaudited financial information. Accordingly, the degree of
reliance on their report
157
on such information should be restricted in light of the limited nature of the
review procedures applied. PricewaterhouseCoopers LLP is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited financial information because that report is not a
"report" or a "part" of the registration statement prepared or certified by
PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.
LEGAL MATTERS
Matters of English law relating to the validity of the issuance of the notes
and matters of U.S. law will be passed upon for the issuer by Clifford Chance
Limited Liability Partnership, London, England. Weil, Gotshal & Manges has
acted as counsel to the underwriters with respect to the offering of the notes
pursuant to this prospectus.
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the notes. The financial information contained in that part
of the listing particulars will not be prepared in accordance with generally
accepted accounting principles. Unless and until individual note certificates
are issued, the reports will be sent to the depository as holder of the notes.
No reports will be sent to you.
WHERE YOU CAN FIND MORE INFORMATION
Any reference in this document to listing particulars means this document
excluding all information incorporated by reference. We have confirmed that any
information incorporated by reference, including any such information to which
readers of this document are expressly referred, has not been and does not need
to be included in the listing particulars to satisfy the requirements of the
FSMA under part VI of the FSMA or the listing rules. We believe that none of
the information incorporated therein by reference conflicts in any material
respect with the information included in the listing particulars.
We filed a registration statement for the notes with the SEC. This prospectus
is part of the registration statement, but the registration statement includes
additional information.
The servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the notes.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at +1 (800) SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings also are available to
the public on the SEC internet site (http://www.sec.gov).
LISTING AND GENERAL INFORMATION
These listing particulars (which include all appendices hereto) with regards to
the issuer and the notes in accordance with the listing rules made under Part VI
of the FSMA, have been delivered to the Registrar of Companies in England and
Wales for registration in accordance with Section 83 of the FSMA.
The listing of the notes on the Official List of the UK Listing Authority and
admission to trading of the notes on the London Stock Exchange is expected to
be granted before the closing date subject only to the issue of the notes. The
listing of the notes will not become effective if any of the notes are not
issued. Before official listing, however, dealings in the notes will be
permitted by the London Stock Exchange in accordance with its rules.
PricewaterhouseCoopers LLP, chartered accountants, have audited, without
qualification, the balance sheet of the issuer at 27 February 2004 in
accordance with generally accepted auditing standards in the United States.
PricewaterhouseCoopers LLP, chartered accountants, have audited, without
qualification, the consolidated financial statements of the MTN Issuer as at
and for each of three years ended on 14 December 2002 in accordance with
generally accepted auditing standards in the United States.
158
CUSIPS AND ISINS
CUSIP ISIN
Class A Notes 38405U AA 2 US38405UAA25
Class B Notes 38405U AB 0 US38405UAB08
Class C Notes 38405U AC 8 US38405UAC80
Loan Note Certificate XS0183667624
LITIGATION AND CHANGE IN CIRCUMSTANCES
Other than as described in the section "The Issuer" there have been no material
adverse changes in the financial position of the issuer nor has the issuer been
involved in, or expects, any litigation which has had or may have a significant
effect on its financial position, for the twelve months preceding the date of
this prospectus.
Other than as described in the section "The MTN Issuer" there have been no
material adverse changes in the financial position of the MTN Issuer nor has
the MTN Issuer been involved in, or expects, any litigation which has had or
may have a significant effect on its financial position, for the twelve months
preceding the date of this prospectus.
SIGNIFICANT OR MATERIAL CHANGE
Save as disclosed in this prospectus there has been no significant change in the
balance sheet or the financial or trading position of the issuer, nor any
material adverse change in the financial position or prospects of the issuer,
since 1 September 2003.
Save as disclosed in this prospectus, there has been no significant change in
the financial or trading position of the MTN Issuer, nor any material adverse
change in the financial position or prospects of the MTN Issuer, since 14
December 2002.
Save as disclosed in this prospectus there has been no significant change in
the financial or trading position of the receivables trustee, nor any material
adverse change in the financial position or prospects of the receivables
trustee, since 29 September 1999.
DOCUMENTS AVAILABLE FOR INSPECTION
You may inspect drafts of the following documents at the offices of Clifford
Chance Limited Liability Partnership, 10 Upper Bank Street, London E14 5JJ,
England during usual business hours on any weekday, apart from Saturdays,
Sundays and public holidays, during the period of 21 days from the date of this
prospectus:
* master definitions schedule;
* receivables securitisation agreement;
* declaration of trust and trust cash management agreement;
* series 04-1 supplement to declaration of trust and trust cash management;
* beneficiaries servicing agreement;
* agreement between beneficiaries
* trust section 75 indemnity;
* security trust deed and MTN Issuer cash management agreement;
* series 04-1 MTN Issuer supplement to security trust deed and MTN Issuer
cash management agreement;
* expenses loan agreement;
* class A swap agreement;
* class B swap agreement;
* class C swap agreement;
* corporate officers agreement;
* underwriting agreement;
* paying agency and agent bank agreement;
159
* trust deed;
* deed of charge;
* pledge agreement
* post maturity call option;
* form of class A global note certificate;
* form of class B global note certificate;
* form of class C global note certificate;
* form of class A individual note certificate;
* form of class B individual note certificate;
* form of class C individual note certificate;
* memorandum and articles of association of the issuer;
* audited balance sheet of the issuer as at 27 February 2004;
* memorandum and articles of association of the MTN Issuer;
* consolidated audited accounts of the MTN Issuer as at 14 December 2002
and for the three years ended 14 December 2002;
* memorandum and articles of association of the receivables trustee;
* consolidated audited accounts of the MTN Issuer for each of the three
years preceding the publication of this prospectus; and
* US tax opinion of Clifford Chance U.S. LLP.
160
ISSUER
GRACECHURCH CARD FUNDING (NO. 6) PLC
54 Lombard Street
London EC3P 3AH
INITIAL TRANSFEROR SERVICER AND TRUST
CASH MANAGER RECEIVABLES TRUSTEE
BARCLAYS BANK PLC GRACECHURCH RECEIVABLES TRUSTEE LTD
1234 Pavillion Drive 26 New Street
Northampton NN4 7SG St. Helier, Jersey JE2 3RA
NOTE TRUSTEE AND SECURITY TRUSTEE
THE BANK OF NEW YORK, LONDON BRANCH
One Canada Square
London E14 5AL
PRINCIPAL PAYING AGENT OTHER PAYING AGENTS
THE BANK OF NEW YORK, LONDON BRANCH THE BANK OF NEW YORK
One Canada Square One Wall Street
London E14 5AL New York, New York 10286
REGISTRAR
THE BANK OF NEW YORK, LONDON BRANCH
One Canada Square
London E14 5AL
LEGAL ADVISERS
To the Issuer, the MTN Issuer, To the Receivables Trustee as to
the Receivables Trustee and Barclays Jersey law
as to English law and United States law BEDELL CRISTIN
CLIFFORD CHANCE LIMITED LIABILITY PARTNERSHIP 26 New Street
10 Upper Bank Street St. Helier, Jersey JE2 3RA
London E14 5JJ
To the underwriters as to English law and To the Note Trustee and the Security Trustee
United States law as to English law and United States law
WEIL, GOTSHAL & MANGES LOVELLS
One South Place Atlantic House
London EC2M 2WG 50 Holborn Viaduct
London EC1A 2FG
AUDITORS
To the Issuer and the MTN Issuer To the Receivables Trustee
PRICEWATERHOUSECOOPERS LLP PRICEWATERHOUSECOOPERS
Southwark Towers Twenty Two Colomberie
32 London Bridge Street St Helier,
London SE1 9SY Jersey JE1 4XA
AUTHORISED ADVISOR
BARCLAYS BANK PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
161
INDEX OF TERMS FOR PROSPECTUS
Acquired Interchange 52
addition date 51
additional accounts 51
Adjusted Investor Interest 76
adjusted tax basis 147
Aggregate Investor Indemnity Amount 98
aggregate investor interest 10
agreement between beneficiaries 106
Available Investor Principal Collections 91
Average Principal Receivables 106
Barclaycard Operating Account 68
Barclaycard Proceeds Account 70
Barclays 7
Basic Terms Modifications 128
business day 53
Calculation Period 85
cancelled account 53
Class A 81
Class A Additional Finance Amount 85
Class A Adjusted Investor Interest 81
Class A Available Funds 85
class A cash management fee 86
Class A Covered Amount 99
Class A Debt Amount 85
Class A Deficiency Amount 85
Class A Distribution Ledger 86
Class A Excess Spread 86
Class A Finance Rate 85
Class A Fixed Allocation 91
Class A Floating Allocation 81
Class A Initial Investor Interest 81
Class A Investor Charge-Off 82, 96
Class A Investor Default Amount 82
Class A Investor Interest 82
Class A Monthly Distribution Amount 86
Class A Monthly Finance Amount 85
Class A Monthly Principal Amount 92
Class A Monthly Required Expense Amount 84
Class A Required Amount 97
class A Servicing Fee 86
Class A Trustee Payment Amount 103
Class B 81
Class B Additional Finance Amount 87
Class B Adjusted Investor Interest 82
Class B Available Funds 87
class B cash management fee 87
Class B Debt Amount 87
Class B Deficiency Amount 86
Class B Distribution Ledger 87
Class B Excess Spread 87
Class B Fixed Allocation 91
Class B Floating Allocation 81
Class B Initial Investor Interest 82
Class B Investor Charge-Off 82, 97
Class B Investor Default Amount 96
Class B Investor Interest 82
Class B Monthly Distribution Amount 87
Class B Monthly Finance Amount 86
162
Class B Monthly Principal Amount 92
Class B Monthly Required Expense Amount 86
Class B Principal Commencement Date 92
Class B Required Amount 97
class B servicing fee 87
Class B Trustee Payment Amount 103
Class C 81
Class C Additional Finance Amount 87
Class C Adjusted Investor Interest 83
Class C Available Funds 88
class C cash management fee 88
Class C Debt Amount 88
Class C Deficiency Amount 88
Class C Distribution Ledger 89
Class C Excess Spread 88
Class C Finance Rate 88
Class C Fixed Allocation 88
Class C Floating Allocation 81
Class C Initial Investor Interest 82
Class C Investor Charge-Off 83, 97
Class C Investor Default Amount 96
Class C Investor Interest 82
Class C Monthly Distribution Amount 98
Class C Monthly Finance Amount 87
Class C Monthly Principal Amount 93
Class C Monthly Required Expense Amount 87
Class C Principal Commencement Date 93
Class C Release Date 101
class C servicing fee 88
Class C Trustee Payment Amount 103
closing date 11
Code 145
collecting agent 142
Companion Series 106
Controlled Accumulation Period 89
Controlled Accumulation Period Length 94
Controlled Deposit Amount 89
Convention 141
Daily Investor Principal Collections 91
default amount 96
defaulted account 53
defaulted receivable 57
designated account 51
Discount Option Receivables 54
Discount Percentage 54
distribution date 85
DOL 151
early swap termination event 133
eligible account 56
eligible receivable 57
Eligible Receivables Pool 67
eligible servicer 78
eligible trust cash manager 80
enforcement notice 127
ERISA 151
event of default 126
excess distributions 106
excess entitlement consideration 106
Excess Interest 67
Excess Spread 98
163
Expense Rate 105
expenses loan agreement 33
Finance Charge Collections Ledger 69
finance charge receivables 53
fixed exchange rate 133
Fixed Investor Percentage 90
Floating Investor Percentage 84
FSMA 154
Future Receivables Transfer 51
Group 35
ineligible receivables 57
initial closing date 51
Initial Investor Interest 81
Insolvency Events 71
interest 143
interchange 55
interest charge 148
interest payment date 85
Investor Cash Available for Acquisition 69
investor certificate 40
Investor Default Amount 96
Investor Indemnity Amount 99
Investor Interest 66, 82
Investor Percentage 68
Investor Principal Collections 92
investor servicing fee 76
investor trust cash management fee 76
Investor Trustee Payment Amount 103
issuer related documents 121
Maximum Addition Amount 52
Minimum Aggregate Principal Receivables 106
Minimum Transferor Interest 105
Monthly Loan Expense Amount 85
MTN Issuer 7
MTN Issuer additional interest payments 106
MTN Issuer cash manager 136
MTN Issuer Costs Amount 85
notice of assignment 57
OID 146
Parties in Interest 151
paying agent 113
Pay Out Event 71
permitted additional jurisdiction 57
permitted investments 67
PFIC 147
Plan Asset Regulation 151
Plan Assets 151
Plans 151
pool selection date 51
Portfolio Yield 105
post maturity call option 125
pounds 30
pounds sterling 30
Principal Collections Ledger 69
Principal Funding Account 89
Principal Funding Investment Proceeds 99
principal receivables 52
Principal Shortfalls 96
qualified institution 103
QEF 148
164
quotation date 122
quoted Eurobonds 141
Rapid Amortisation Period 91
Reallocated Class B Principal Collections 97
Reallocated Class C Principal Collections 97
receivables securitisation agreement 51
redesignated account 53
reference banks 122
Regulated Amortisation Period 89
Regulated Amortisation Trigger Event 89
Reinvested Investor Principal Collections 89
related beneficiary debt 65
relevant documents 43
Required Reserve Amount 100
Required Spread Account Amount 101
Reserve Account 100
Reserve Account Funding Date 100
restricted additional jurisdiction 57
restricted eligible receivable 57
Revolving Period 88
Series 04-1 Distribution Account 86
Series 04-1 Extra Amount 99
Series 04-1 Issuer Account 107
Series 04-1 Pay-Out Events 103
series 04-1 scheduled redemption date 89
Series 04-1 Supplement 82
series 04-1 termination date 90
servicer default 76
servicing fee 76
Shared Principal Collections 95
Spread Account 101
Spread Account Percentage 101
successor trust cash manager 78
successor servicer 78
swap agreements 131
transferor acquisition 64
Transferor Cash Available for Acquisition 69
transferor certificate 64
Transferor Ineligible Interest 68
Transferor Interest 66
Transferor Percentage 67
Transferor Section 75 Liability 99, 139
transferor servicing fee 76
transferor trust cash management fee 76
Trust Accounts 68
trust cash management fee 76
trust cash manager default 76
Trust Pay Out Events 70
Trustee Acquisition Account 67
Trustee Collection Account 67
Trustee Payment Amount 73
Unavailable Principal Collections 95
United States holder 145
United States person 145
U.S. noteholder 141
U.S. tax counsel 14, 146
unutilised excess spread 106
WAM 146
zero balance account 53
165
INDEX OF APPENDICES
The appendices are an integral part of this prospectus.
Page
A Report of Independent Accountants for Gracechurch Card Funding (No. 6) PLC A-1
B Balance Sheet of Gracechurch Card Funding (No. 6) PLC B-1
C Notes to Financial Statement C-1
D Report of Independent Accountants for Barclaycard Funding PLC and subsidiary D-1
E Unaudited Financial Statements of Barclaycard Funding PLC and subsidiary for the six E-1
months ended 30 June 2003
F Notes to Financial Statements for the six months ended 30 June 2003 F-1
G Report of Independent Accountants for Barclaycard Funding and subsidiary G-1
H Financial Statements of Barclaycard Funding PLC and subsidiary for the years ended
14 December 2002, 2001 and 2000 H-1
I Notes to Financial Statements for the years ended 14 December 2002, 2001 and 2000 I-1
J Other Series Issued and Outstanding J-1
166
THIS PAGE IS INTENTIONALLY LEFT BLANK
GRACECHURCH CARD FUNDING (NO. 6) PLC
BALANCE SHEET
AS AT 27 FEBRUARY 2004
TOGETHER WITH INDEPENDENT ACCOUNTANTS REPORT
APPENDIX A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of:
Gracechurch Card Funding (No. 6) PLC
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Gracechurch Card Funding (No. 6) PLC ("the
Company") at 27 February 2004 in conformity with accounting principles
generally accepted in the United States of America. This financial statement is
the responsibility of the Company's management; our responsibility is to
express an opinion on this financial statement based on our audit. We conducted
our audit of this statement in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall balance sheet presentation. We believe
that our audit of the balance sheet provides a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
London, England
27 February 2004
A-1
APPENDIX B
GRACECHURCH CARD FUNDING (NO. 6) PLC
BALANCE SHEET AS OF 27 FEBRUARY 2004
Notes [GBP]
CURRENT ASSETS
Cash 12,502
LIABILITIES AND SHAREHOLDERS' EQUITY
Common stock (50,000 shares authorised, [GBP]1.00 par value. Issued and
outstanding, 50,000 shares comprising 2 fully paid and 49,998 quarter called and paid) (3) 12,502
------
Total liabilities and shareholders equity 12,502
======
The notes on the following page form an integral part of this statement
B-1
APPENDIX C
GRACECHURCH CARD FUNDING (NO. 6) PLC
NOTES TO FINANCIAL STATEMENT
27 FEBRUARY 2004
1. ACCOUNTING POLICIES
The financial information of Gracechurch Card Funding (No. 6) PLC (the
"Company") has been prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP") and in Pounds Sterling
("[GBP]") which is the Company's operating currency. The financial statements
are reported in accordance with US GAAP due to the Company's reporting
requirements under the United States Securities Exchange Act of 1933. These are
not the Company's statutory accounts for the period from 1 September 2003
(incorporation date) to 27 February 2004. The statutory accounts and an
unqualified statement under s235 of the United Kingdom's Companies Act for the
period from 1 September 2003 to 27 February 2004 have not been delivered to the
registrar of companies.
2. TRADING ACTIVITY
The Company did not trade during the period from incorporation on 1 September
2003 to 27 February 2004 nor did it receive any income nor did it incur any
expenses or pay any dividends. Consequently, no statement of income, statement
of changes of shareholders' equity or statement of cashflows has been prepared.
The Company's business is the issuing of the notes and transactions incidental
thereto.
3. SHARE CAPITAL
The Company was incorporated on 1 September 2003 with an authorised share
capital of [GBP]50,000, comprising 50,000 ordinary shares of [GBP]1 each. 2
ordinary shares were allotted for cash, and fully paid, on incorporation. The
name of the Company was changed from Cardgrange PLC to Gracechurch Card Funding
(No. 6) PLC on 17 December 2003. On 14 November 2003, 49,998 ordinary shares
were allotted quarter paid. 49,999 shares are held by Gracechurch Card
(Holdings) Limited and one share is held by SFM Corporate Services Limited as
share trustee under the terms of a share declaration of trust. The shares in
Gracechurch Card (Holdings) Limited are in turn held by SFM Corporate Services
Limited as share trustee under the terms of a trust for charitable purposes.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Guarantees of Indebtedness of Others ("FIN 45").
This interpretation elaborates on the disclosures to be made by the guarantor
about its obligations under certain guarantees that it has issued effective for
financial statements for periods ending after 15 December 2002. This
interpretation also clarifies that a guarantor is required to recognize, at the
inception of the guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee effective as of 1 January 2003. The company
has recently commenced its operations and will assess the impact of this
interpretation on their operations. However, management does not expect the
adoption of this interpretation to have a material effect on the Company's
financial position or results of operations. In January 2003, the FASB
Interpretation No. 46 Consolidation of Variable Interest Entities -- An
Interpretation of ARB No. 51 ("FIN 46"). This pronouncement modifies the
framework for determining consolidation of certain entities that meet the
definition of a "variable interest entity" ("VIE"). Under the variable interest
model promulgated by FIN 46, all ownership, contractual and other pecuniary
interests in the entity are evaluated to determine which of the holders, if
any, hold a variable interest which will absorb the majority of the expected
losses, expected residual returns, or both. The holder is the "primary
beneficiary" of the variable interest entity and would be required to
consolidate the VIE. The company has recently commenced its operations and will
assess the impact of this interpretation on their operations. However,
management does not expect the adoption of this interpretation to have a
material effect on the Company's financial position or results of operations.
C-1
BARCLAYCARD FUNDING PLC
AND
SUBSIDIARY
UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
AND
REPORT AND FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 14, 2002,
DECEMBER 14, 2001
AND
DECEMBER 14, 2000
APPENDIX D
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of:
Barclaycard Funding PLC and Subsidiary
We have reviewed the accompanying consolidated balance sheet of Barclaycard
Funding PLC ("the Company") and its subsidiary as of June 30, 2003, and the
related consolidated statements of income, of shareholders' equity and of cash
flows for the six-month periods ended June 30, 2003 and June 14, 2002. These
interim financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
PricewaterhouseCoopers LLP
London, England
August 29, 2003
D-1
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AT JUNE 30, 2003 AND DECEMBER 14, 2002
Unaudited Audited
Notes 6/30/2003 12/14/2002
ASSETS [GBP] [GBP]
Cash 9,11 131,701 160,280
Accrued finance charges receivable 11 5,263 9,346
Other assets 7,11 997 ---
--------- ----------
TOTAL ASSETS 137,961 169,626
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Other liabilities 7,11 58,784 112,215
--------- ----------
TOTAL LIABILITIES 58,784 112,215
MINORITY INTEREST 10,468 23,283
SHAREHOLDERS' EQUITY
Common stock, [GBP]1 par value; 50,000 shares authorized,
issued and quarter called and paid 8 12,500 12,500
Retained earnings 56,209 21,628
--------- ----------
TOTAL SHAREHOLDERS' EQUITY 68,709 34,128
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 137,961 169,626
========= ==========
Richard Francis Sommers
Director
August 29, 2003
The accompanying notes are an integral part of these consolidated financial
statements
E-1
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME FOR THE 6 MONTHS ENDED JUNE 30, 2003 AND
JUNE 14, 2002
Unaudited Unaudited
Notes 2003 2002
REVENUES [GBP] [GBP]
Finance charges 9 3,408,053 14,763,749
Unrealised gain on derivatives 9 --- ---
Realised foreign exchange gain --- 35,400,000
Other Income --- 5,485
--------- ----------
TOTAL REVENUE 3,408,053 50,169,234
--------- ----------
EXPENSES
Interest expense 9 14,772 12,835,699
Foreign currency translation loss --- ---
Unrealised loss on derivatives 9 --- 35,833,705
Servicing fees 9 3,320,962 1,615,477
Administration expenses 46,164 299,213
--------- ----------
TOTAL EXPENSES 3,381,898 50,584,094
--------- ----------
INCOME/(LOSS) BEFORE PROVISION FOR INCOME TAXES 26,155 (414,860)
Less: Provision for income taxes 2 7,845 4,406
--------- ----------
NET INCOME/(LOSS) BEFORE MINORITY INTEREST 18,310 (419,266)
Minority interest net of income taxes 12,815 418,850
--------- ----------
NET INCOME/(LOSS) 31,125 (416)
========= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
E-2
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE 6 MONTHS
ENDED JUNE 30, 2003 AND JUNE 14, 2002
Unaudited Unaudited
Notes 2003 2002
[GBP] [GBP]
Net income/(loss) for the period 31,125 (416)
Retained earnings brought forward 3 25,084 17,411
--------- ---------
Retained earnings carried forward 56,209 16,995
--------- ---------
Common stock brought forward 3,8 12,500 12,500
--------- ---------
Common stock carried forward 12,500 12,500
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 68,709 29,495
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
E-3
APPENDIX E
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND
JUNE 14, 2002
Unaudited Unaudited
Notes 2003 2002
[GBP] [GBP]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) 31,125 (416)
Adjustments to reconcile net income to net cash
(used in)/provided by operating activities
Unrealised loss on derivatives 3,10 --- 35,833,705
Foreign currency translation gain --- (35,400,000)
Minority interest (12,815) (418,888)
Increase in accrued finance charges receivable 3,11 (326) ---
(Increase)/Decrease in other assets 3,7,11 (997) 223,685
Increase in accrued interest payable 3,11 --- 185,655
Decrease in other liabilities 3,7,11 (54,912) (22,801)
-------------- -----------
TOTAL ADJUSTMENTS (69,050) 401,356
-------------- -----------
NET CASH (USED IN)/PROVIDED BY OPERATING
ACTIVITIES (37,925) 400,940
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investor interest 4 (1,196,512,914) ---
Sale of investor interest 4 1,196,512,914 ---
-------------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES --- ---
-------------- -----------
NET (DECREASE)/INCREASE IN CASH (37,925) 400,940
-------------- -----------
Cash at beginning of period 3 169,626 3,353,064
-------------- -----------
Cash at end of period 131,701 3,754,004
============== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid for:
Interest 14,772 12,834,453
Taxes --- ---
The accompanying notes are an integral part of these consolidated financial
statements.
E-4
APPENDIX F
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Barclaycard Funding PLC (the "Company") was incorporated on August 13, 1990.
The Company commenced business on November 22, 1999. Barclaycard Funding PLC
and its Subsidiary, Gracechurch Card Funding (No. 1) PLC ("Subsidiary"),
collectively comprise the "Group".
The principal purpose of the Group is to raise financing via the purchase of a
beneficial interest in a pool of credit card receivables, which is sold to a
debt issuer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
(a) Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP") and in Pounds Sterling ("[GBP]"), the currency of the United Kingdom,
which is the Group's operating currency. The financial statements are reported
in accordance with US GAAP due to the Group's reporting requirements under the
United States Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"). These financial statements are not statutory financial
statements and a statement in accordance with section 235 of the United
Kingdom's Companies Act ("UKCA") for the consolidated group is not given. The
individual UK statutory financial statements for Barclaycard Funding PLC and
Gracechurch Card Funding (No. 1) PLC for each of the years in the three year
period ended December 14, 2002 and December 31, 2002 respectively, have been
filed with the registrar of companies in the United Kingdom.
In the opinion of the management, the interim financial statements include all
adjustments, which consist only of normal recurring adjustments necessary for a
fair presentation of the consolidated statement of income, balance sheet and
cash flows for each interim period presented. The interim consolidated results
are not necessarily indicative of results for the full year. These interim
financial statements should be read in conjunction with the Group's audited
consolidated financial statements as of, and for the year ended December 14,
2002.
(b) Consolidation
The consolidated financial statements include the financial statements of
Barclaycard Funding PLC and, Gracechurch Card Funding (No. 1) PLC. Gracechurch
Card Funding (No. 1) PLC is a special-purpose vehicle established by Barclays
Bank PLC solely to issue asset backed notes denominated in United States
Dollars (see footnote 4), the proceeds of which were remitted to Barclaycard
Funding PLC in exchange for a corresponding medium term note. Because the only
purpose of Gracechurch Card Funding (No. 1) PLC is to raise financing for the
Group, its financial statements are consolidated with those of Barclaycard
Funding PLC.
The total share capital issued by Gracechurch Card Funding (No. 1) PLC is owned
by Gracechurch Card (Holdings) Limited, and its earnings and losses allocable
thereto are reported as minority interest in the accompanying consolidated
balance sheet.
Any distributable profits which Gracechurch Card Funding (No. 1) PLC generates
is payable to Gracechurch Card (Holdings) Limited, that was a wholly owned
subsidiary of Royal Exchange Trust Company Limited during the year, (the
"Trust"). Losses which Gracechurch Card Funding (No. 1) PLC incurs are
allocated firstly to the Trust's equity at risk, which is comprised of the
Trust's initial capital investment (via Gracechurch Card (Holdings) Limited )
plus any distributable profits receivable, reflected as minority interest.
Losses in excess of the Trust's equity at risk are allocated to the note
holders. On March 17, 2003, the shares in Gracechurch Card (Holdings) Limited
were transferred to SFM Corporate Services Limited under the terms of a trust
for charitable purposes.
Intercompany transactions and balances have been eliminated on consolidation.
There was a 16 day difference between the financial results for the 6 months
periods to June 14 2002. Eliminations were performed at the Company's fiscal
year end and aside from the differences in the unrealised gains
F-1
on derivatives and effects of currency fluctuations on the asset backed notes
as noted in Footnote 11 that impacted the prior year; the non-coterminous year
end did not have a material effect on the financial statements.
(c) Asset Derecognition
Where Barclaycard Funding PLC is a transferor of financial assets to a Special
Purpose Entity ("SPE"), the assets sold are derecognized and the SPE is not
consolidated on its balance sheet when the assets are: (1) legally isolated
from the Group's creditors, (2) the accounting criteria for a sale are met, and
(3) the SPE is a qualifying special-purpose entity (QSPE) under Statement of
Financial Accounting Standards ("SFAS") 140. When an SPE does not meet the
formal definition of a QSPE, the decision whether or not to consolidate depends
on the applicable accounting principles for non-QSPEs, including a
determination regarding the nature and amount of investment made by third
parties in the SPE.
(d) Foreign Currency Translation
All foreign currency assets and liabilities are translated into Pounds Sterling
at the exchange rates prevailing at the end of the period. Interest income and
expense denominated in foreign currencies are translated into Pound Sterling at
the exchange rates in force when the transaction occurred. Foreign currency
translation effects are reflected on the face of the income statement. Foreign
currency transactions are economically hedged into Pounds Sterling to offset
exposure to fluctuating currency exchange rates. Although these instruments
offset exposures they do not qualify for hedge accounting under SFAS No. 133
"Accounting for Derivative Instruments and hedging activities".
(e) Derivatives
The derivative instrument was a cross currency swap, and was used by the Group
to minimize currency risk associated with its financing activities denominated
in United States Dollars (USD). Although this instrument was a hedge from an
economic perspective, it did not qualify for hedge accounting under SFAS No.
133 due to the lack of documentation requirements under SFAS No. 133. The
derivative was recorded on the balance sheet at fair value with changes
reflected in the income statement. The derivative was transacted simultaneously
with the purchase or issuance of the underlying funding instrument. The swap
was not held for trading purposes.
(f) Finance Charges
Finance charges receivable are recognized in the consolidated financial
statements on an accrual basis. Finance charges are primarily related to
interest and other charges on the intercompany notes (footnote 5) and relevant
charges on the Investor Certficates (footnote 4).
(g) Interest Expenses
Interest expenses are recognized in the consolidated financial statements on an
accrual basis. Interest expenses primarily relate to asset backed notes
(footnote 6).
(h) Servicing Fee Expense
The Company pays Barclays Bank PLC for services associated with the management
of receivables and administration of associated cash flows.
(i) Income Taxes
Income taxes for the Group are paid to the tax authorities in the United
Kingdom. There are no deferred taxes for the periods presented in the financial
statements. The tax charge is based on an effective UK corporation tax rate of
30%.
(j) Distribution Policy
Distributions to shareholders are accounted for when approved by the Board of
Directors.
(k) Issue Costs
The portion of the direct costs associated with the issue of the notes by the
Subsidiary that are attributable to the Group are capitalized and are amortized
over the expected life of the notes.
(l) Funding Instruments
Asset backed notes are stated at amortised cost restated at the exchange rate
prevailing at the balance sheet date.
F-2
(m) Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the balance sheet date and the reported amount
of revenues and expenses in the reporting period. Actual results may differ
from the estimates used in the financial statements.
(n) Recent Accounting Developments
(i) Guarantor Accounting and Disclosures
In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation ("FIN") No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. This interpretation
elaborates on the disclosures to be made by the guarantor about its
obligations under certain guarantees that it has issued effective
for financial statements for periods ending after December 15,
2002. This interpretation also clarifies that a guarantor is
required to recognize, at the inception of the guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee effective as of January 1, 2003. The impact
of adopting this standard did not have a material effect on the
companies financial position or results of operation.
The Group has received a guarantee in respect of bank borrowings
from its parent company, which amounted to [GBP]16,920 at June 30,
2003 (December 14, 2002: [GBP]16,920).
The Group is a participant in a banking arrangement with Barclays
Bank PLC under which all surplus cash balances are held as
collateral for bank facilities advanced to Barclays Bank PLC group
members. As at June 30, 2003 this surplus cash balance amounted to
[GBP]131,701 (December 14, 2002 : [GBP]160,280). In addition, the
Group has issued an unlimited guarantee to the bank to support
these Barclays Bank PLC group facilities that does not have a
termination date.
(ii) Consolidation of Variable Interest Entities
In January 2003, the FASB issued FIN No. 46 "Consolidation of
Variable Interest Entities -- An interpretation of ARB No. 51"
("FIN 46"). This pronouncement modifies the framework for
determining consolidation of certain entities that meet the
definition of a variable interest entity ("VIE"). This is met where
the entity either does not have sufficient equity of the
appropriate nature to support its expected losses, or its equity
investors lack certain characteristics which would be expected to
be present within a controlling financial interest. Entities which
do not meet this definition would continue to apply the voting
interest model.
The provisions of FIN 46 are immediately effective for VIEs created
after January 31, 2003. The standard must be applied to all
entities beginning in the first fiscal year after June 15, 2003.
Management does not expect the adoption of this interpretation to
have a material effect on the Group's financial position or results
of operations.
FIN 46 requires transitional disclosure, which includes the maximum
risk of loss an entity can incur in relation to VIEs that it has a
significant interest in. The maximum exposure to loss represents a
"worst case" scenario in the event that all such vehicles
simultaneously fail. It does not provide an indication of ongoing
exposure, which is managed within the Group's risk management
framework.
Barclaycard Funding PLC is involved with variable interest entities
Gracechurch Card Funding (No. 1) PLC, Gracechurch Card Funding (No.
2) PLC, Gracechurch Card Funding (No. 3) PLC, and Gracechurch Card
Funding (No. 4) PLC.
The proceeds of the series 99-1 notes were used by Gracechurch Card
Funding (No. 1) PLC to purchase, respectively, corresponding series
of medium term notes issued by Barclaycard Funding PLC. The
purchase was deemed a financing transaction between the two parties
and consequently the financial statements of Gracechurch Card
Funding (No. 1) PLC were consolidated into those of Barclaycard
Funding PLC.
F-3
The proceeds of the series 02-1 , 03-1 and 03-2 notes were used by
Gracechurch Card Funding (No. 2) PLC, Gracechurch Card Funding (No.
3) PLC and Gracechurch Card Funding (No. 4) PLC respectively to
each purchase from Barclaycard Funding PLC one limited recourse
medium term note certificate, being an equitable right in the
investor interest. The structure of these transaction achieved the
QSPE status under US GAAP and hence Gracechurch Card Funding (No.
2) PLC , Gracechurch Card Funding (No. 3) PLC and Gracechurch Card
Funding (No. 4) PLC are not consolidated.
The variable interest entities that the Company is involved with
are used to raise financing via the purchase of a beneficial
interest in a pool of credit card receivables.
The total assets of these vehicles as at June 30, 2003 are
[GBP]1,889,933,354 (December 14, 2002 : [GBP] 647,872,001) of
which [GBP]10,468 ( December 14, 2002 : [GBP] 23,283) are already
consolidated by the Group under US GAAP. As at June 30, 2003
maximum exposure to loss is [GBP] 1,882,908,875 (December 14, 2002
: [GBP]647,549,639).
(iii) Derivative Instruments and Hedging Activity
In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities."
SFAS No. 149 amends and clarifies the accounting and reporting for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. In
addition, the statement clarifies when a contract is a derivative
and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. SFAS No. 149 is
effective prospectively for contracts entered into or modified, and
hedging relationships designated, after June 30, 2003. Management
does not expect a material impact from the adoption of this
standard.
(iv) Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity, and imposes certain
additional disclosure requirements. The provisions of SFAS No. 150
are generally effective for financial instruments entered into or
modified after May 31, 2003. The impact of adopting this standard
did not have a material effect on the Group's financial position or
results of operations.
3. CHANGE IN FISCAL YEAR END
During the period, the Company's Board of Directors approved a change in the
fiscal year end of the Company from December 14 to December 31 to align the
fiscal year end with that of Barclays Bank PLC. Subsequent reports will be
prepared on the basis of the new fiscal year. The period from December 15, 2002
to December 31, 2002 is less than one month and will be covered in the annual
report for December 31, 2003.
In compiling the consolidated statement of changes in shareholders' equity and
the consolidated statement of cashflows for the six months to June 30, 2003 the
opening balances are as at January 1, 2003.
Pursuant to Section 13a-10 of the Securities Exchange Act the interim prior
period results have been included in these consolidated financial statements
for the six months ended June 14, 2002. It is not practicable or cost-
justifiable to include the financial statements for the corresponding prior
period ended June 30, 2002.
The comparability of the 2003 information with prior periods, as presented, has
been impacted by the factors noted below that are not attributable to the 16-
day transition period arising on change in the fiscal year end.
On November 15, 2002 the $1bn series 99-1 asset backed notes that were
consolidated in the financial statements of Barclaycard Funding PLC were
redeemed in full.
F-4
When compared to the corresponding prior periods, the interim financial
information for 2003 therefore excludes interest and other fees in respect of
series 99-1 together with foreign exchange differences on the series 99-1 asset
backed notes in issue (footnote 6) and the gains and losses on derivative
instruments that matured on the redemption of the series 99-1 notes (footnote
10).
The series 02-1, series 03-1 and series 03-2 issued after June 30, 2002 and
that are still in issue as at June 30, 2003 are not consolidated in the
financial statements of the Group (footnotes 2 and 4). The interim financial
information for 2003 includes the relevant balances and transactions arising
from the unconsolidated series 02-1, series 03-1 and series 03-2 when compared
with the corresponding prior periods.
4. DERECOGNITION OF ASSETS AND LIABILITIES
Gracechurch Card Funding (No. 2) PLC
On October 24, 2002, Gracechurch Card Funding (No. 2) PLC purchased for
[GBP]643,624,895 the beneficial interests in a pool of credit card receivables
via the purchase of a limited recourse medium term note certificate from the
Group. On the same day, the Group paid [GBP]643,624,895 to the Receivables
Trustee (the "Trustee"), an offshore trustee, in the form of an Investor
Certificate, in order to fund the purchase of credit card receivables (the
"Receivables") by the Trustee from Barclaycard, a division of Barclays Bank
PLC. This payment to the Trustee secured a fractional beneficial interest in
the assets of the Receivables Trust. The assets of the Trust comprise the
Receivables acquired from Barclaycard.
The Group passes amounts received from the Trustee in connection with the
investor interest to Gracechurch Card Funding (No. 2) PLC the rate of return on
which is at a variable rate of interest, as outlined below. At the redemption
of the investor certificate, the Group will pass amounts received on repayment
of its share of the investor interest from the Trustee to Gracechurch Card
Funding (No. 2) PLC. The Group has no obligation to pass on payments that it
has not received.
The investor certificate is repayable on October 15, 2007. The receivables and
the limited recourse medium term note certificate have been derecognised in the
balance sheet as at June 30, 2003.
The [GBP]643,624,895 medium term note certificate has the following interest
rates:
* First interest period October 24 to December 15, 2002, interest rate
applicable was the average of one and two month Libor plus 0.19345%
* Second interest period, month to January 15, 2003, interest rate
applicable was one month Libor plus 0.19345%
* Third and subsequent monthly interest periods, interest rate applicable
is three month Libor plus 0.19345%
On April 8, 2003, Gracechurch Card Funding (No. 3) PLC purchased for
[GBP]637,064,407 the beneficial interests in a pool of credit card receivables
via the purchase of a limited recourse medium term note certificate from the
Group. On the same day, the Group paid [GBP]637,064,407 to the Receivables
Trustee (the "Trustee"), an offshore trustee, in the form of an Investor
Certificate, in order to fund the purchase of credit card receivables (the
"Receivables") by the Trustee from Barclaycard, a division of Barclays Bank
PLC. This payment to the Trustee secured a fractional beneficial interest in
the assets of the Receivables Trust. The assets of the Trust comprise the
Receivables acquired from Barclaycard.
The Group passes amounts received from the Trustee in connection with the
investor interest to Gracechurch Card Funding (No. 3) PLC the rate of return on
which is at a variable rate of interest, as outlined below. At the redemption
of the investor certificate, the Group will pass amounts received on repayment
of its share of the investor interest from the Trustee to Gracechurch Card
Funding (No. 3) PLC. The Group has no obligation to pass on payments that it
has not received.
The investor certificate is repayable on March 15, 2008. The receivables and
the limited recourse medium term note certificate have been derecognised in the
balance sheet as at June 30, 2003.
The [GBP]637,064,407 medium term note certificate has the following interest
rates:
* First interest period April 8 to June 15 2003, interest rate applicable
was the average of two and three month Libor plus 0.20214%
* Third and subsequent monthly interest periods, interest rate applicable
is three month Libor plus 0.20214%
F-5
Gracechurch Card Funding (No. 4) PLC
On June 19, 2003, Gracechurch Card Funding (No. 4) PLC purchased for
[GBP]599,448,507 the beneficial interests in a pool of credit card receivables
via the purchase of a limited recourse medium term note certificate from the
Group. On the same day, the Group paid [GBP]599,448,507 to the Receivables
Trustee (the "Trustee"), an offshore trustee, in the form of an Investor
Certificate, in order to fund the purchase of credit card receivables (the
"Receivables") by the Trustee from Barclaycard, a division of Barclays Bank
PLC. This payment to the Trustee secured a fractional beneficial interest in
the assets of the Receivables Trust. The assets of the Trust comprise the
Receivables acquired from Barclaycard.
The Group passes amounts received from the Trustee in connection with the
investor interest to Gracechurch Card Funding (No. 4) PLC the rate of return on
which is at a variable rate of interest, as outlined below. At the redemption
of the investor certificate, the Group will pass amounts received on repayment
of its share of the investor interest from the Trustee to Gracechurch Card
Funding (No. 4) PLC. The Group has no obligation to pass on payments that it
has not received.
The investor certificate is repayable on June 15, 2006. The receivables and the
limited recourse medium term note certificate have been derecognised in the
balance sheet as at June 30, 2003.
The [GBP]599,448,507 medium term note certificate has the following interest
rates:
* First interest period June 19 to August 15, 2003, interest rate
applicable was the average of one and two month Libor plus 0.14069%
* Second interest period to September 15, 2003, interest rate applicable is
one month Libor plus 0.14069%
* Third and subsequent monthly interest periods, interest rate applicable
is three month Libor plus 0.14069%
The Investor Certificates are secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the
Trust. The Trust uses a portion of the interest and principal payments that it
receives on the credit card receivables held by it in trust to repay principal
and interest amounts on the investor certificates.
The payment of interest and repayment of principal on the advance to the Trust
is dependent upon payment of interest and repayment of principal due under the
credit card receivables held by the Trust, and is therefore subject to the risk
of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays
Bank PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card
receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety
of social, legal, political and economic factors in the United Kingdom. There
can be no assurance that changes in social, legal, political and economic
factors will not have a material effect on the Group's future performance.
5. INTERCOMPANY NOTES
On November 23, 1999, the Company paid [GBP]607,050,000 to the Receivables
Trustee. This payment to the Trustee secured a fractional beneficial interest
in the assets of the Receivables Trust.
The Receivables continue to be accounted for as an asset on the Barclays Bank
PLC's balance sheet and therefore in substance the Company has recorded its
payment to the Trustee as intercompany notes.
Interest on the notes was payable up to the redemption date as follows:
546,345,000 -- 3 month LIBOR plus 0.2375%
30,352,000 -- 3 month LIBOR plus 0.53%
30,352,000 -- 3 month LIBOR plus 1.00%
On November 15, 2002 notes amounting to [GBP]607,050,000 were redeemed in full.
F-6
The intercompany notes were secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the
Trust. The Trust used a portion of the interest and principal payments that it
received on the credit card receivables held by it in trust to repay principal
and interest amounts on the investor certificate.
The payment of interest and repayment of principal on the advance to the Trust
was dependent upon payment of interest and repayment of principal due under the
credit card receivables held by the Trust, and was therefore subject to the
risk of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays
Bank PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card
receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety
of social, legal, political and economic factors in the United Kingdom. There
can be no assurance that changes in social, legal, political and economic
factors will not have a material effect on the Group's future performance.
6. ASSET BACKED NOTES
A summary of asset backed notes at June 30, 2003, December 14, 2002 and
December 14, 2001 were as follows:
Unaudited Audited Audited Audited
06/30/2003 12/14/2002 12/14/2001 12/14/2001
[GBP] [GBP] [GBP] $
Class A --- --- 618,750,000 900,000,000
Class B --- --- 34,375,000 50,000,000
Class C --- --- 34,375,000 50,000,000
---------- ---------- ----------- -------------
--- --- 687,500,000 1,000,000,000
========== ========== =========== =============
The Class A, B and C floating rate notes were issued on November 23, 1999 and
were repaid in full on November 15, 2002. The floating rates notes represented
asset backed obligations and had a nominal value of [GBP]607,050,000. Interest
on the notes was payable up to the redemption date as follows:
Class A Notes -- 3 month LIBOR plus 0.18%
Class B Notes -- 3 month LIBOR plus 0.43%
Class C Notes -- 3 month LIBOR plus 0.90%
The Class C notes were subordinated in right of payment of principal and
interest to the Class B notes which, in turn were subordinated in right of
payment of principal and interest to the Class C notes.
F-7
7. OTHER ASSETS/OTHER LIABILITIES
The other assets and other liabilities balances at June 30, 2003 and December
14, 2002 includes the following:
Unaudited Audited
06/30/2003 12/14/2002
[GBP] [GBP]
OTHER ASSETS
Due from Gracechurch Holdings Limited 997 ---
OTHER LIABILITIES
Taxation creditor 16,795 6,469
Bank loans interest free 16,920 16,920
Due to Barclays Bank PLC 13,116 ---
Due to Gracechurch Holdings Limited --- 12,500
Other accruals 11,953 76,326
---------- ----------
58,784 112,215
========== ==========
8. COMMON STOCK
The common stock at June 30, 2003 and December 14, 2002 was as follows:
Unaudited Audited
6/30/2003 12/14/2002
[GBP] [GBP]
BARCLAYCARD FUNDING PLC
Authorised:
Ordinary shares of [GBP]1 each 50,000 50,000
Ordinary A Allotted and quarter paid 9,375 9,375
Ordinary B Allotted and quarter paid 3,125 3,125
--------- ----------
Ordinary shares of [GBP]1 each 12,500 12,500
========= ==========
Barclays Bank PLC holds 75% of the issued share capital of Barclaycard Funding
PLC representing 51% issued voting share capital and 49% entitlement to
distributable profits.
Royal Exchange Trust Company owns 49% of the issued voting share capital and
are entitled to 51% of the distributable profit.
9. RELATED PARTY TRANSACTIONS
The Group considers related parties to be entities which the Group can
significantly influence or has an ownership interest in that allows it
influence to an extent that the other party might be prevented from fully
pursuing its own separate interests. Examples of related parties include
affiliates of the company; entities for which investments are accounted for by
the equity method by the company; trusts for the benefit of employees,
principal owners of the enterprise; its management; and members of the
immediate families of principal owners of the enterprise and its management.
Parties are considered to be related if one party, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with an enterprise.
Barcosec Limited and Barometers Limited are Barclays Bank PLC group companies
whose business is the provision of corporate directorship services for Barclays
Bank subsidiaries.
The Group enters into various transactions with affiliates. At June 30, 2003,
and December 14, 2002, in addition to the intercompany notes disclosed in
footnote 5, the following are the balances related to transactions with
affiliates:
F-8
Unaudited Audited
6/30/2003 12/14/2002
[GBP] [GBP]
ASSETS
Cash -- (Barclays Bank PLC) 131,701 160,280
Liabilities
Other liabilities -- (Barclays Bank PLC) 16,920 16,920
For the 6 month period to June 30, 2003 and June 14, 2002 the following
balances relate to transactions with affiliates:
Unaudited Unaudited
2003 2002
[GBP] [GBP]
INCOME/EXPENSE
Finance charges -- (Barclays Bank PLC) 3,408,053 14,763,749
Interest expense -- (Barclays Bank PLC) 14,772 57,321
Servicing expense -- (Barclays Bank PLC) 3,320,962 1,615,477
Unrealised (loss)/gain on derivatives -- (Barclays Bank PLC) --- (35,833,705)
During the period, the Company sold a [GBP]637,064,407 investor interest in the
Receivables Trust to Gracechurch Card Funding (No. 3) PLC and a
[GBP]599,448,507 investor interest in the Receivables Trust to Gracechurch Card
Funding (No. 4) PLC acting as a conduit for resultant revenue streams, accrued
[GBP]5,654,982 interest to Gracechurch Card Funding (No. 3) PLC and
[GBP]743,260 interest to Gracechurch Card Funding (No. 4) PLC.
10. DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group enters into cross currency swaps. The purpose of these transactions
is to manage the currency risk arising from the Group's operations and its
sources of finance.
The net loss/gain reflected is attributable to the recognition of gains/losses
on derivatives entered into for hedging purposes. Because the hedge
documentation requirements under SFAS No. 133 were not met, the Group is
required to record the changes in the fair value of the derivatives in the
income statement.
Currency risk -- all of the Group's assets and associated income are
denominated in Pounds Sterling, although some of the asset backed notes issued
by the Subsidiary and associated interest expense are denominated in US
dollars. The Group's policy is to match this currency income and expense by the
use of cross currency swaps. There are no outstanding transactions as at June
30, 2003.
DEBT MATURITY ANALYSIS
Unaudited Audited
6/30/2003 12/14/2002
[GBP] [GBP]
Less than one year 16,920 16,920
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
Disclosures in the table below are in accordance with SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments".
Fair values have been estimated using quoted marked prices where available.
Where no ready markets exist and hence quoted market prices are not available,
appropriate techniques are used to estimate fair values which take account of
the characteristics of the instruments, including the expected future cash
flows, market interest rates and prices available for similar instruments.
There were no instruments listed below that quoted market prices were used to
estimate fair value, the instruments are valued on a discounted cashflow basis.
F-9
The estimated fair value and recorded carrying values of the financial
instruments as of June 30, 2003 and December 14, 2002 are as follows:
Unaudited Unaudited Audited Audited
6/30/2003 6/30/2003 12/14/2002 12/14/2002
Carrying Fair Carrying Fair
Amount Value Amount Value
[GBP] [GBP] [GBP] [GBP]
NON-TRADING ASSETS
Cash 131,701 131,701 160,280 160,280
Accrued finance charges receivable 5,263 5,263 9,346 9,346
Other assets 997 997 --- ---
NON-TRADING LIABILITIES
Other liabilities 58,784 58,784 112,215 112,215
The Group had no trading assets or liabilities at June 30, 2003 and December
14, 2002.
12. NON-COTERMINOUS YEAR ENDS
During the period, the Company's Board of Directors approved a change in the
fiscal year end of the Company from December 14 to December 31 to align the
fiscal year end of Barclays Bank PLC. This change brings the reporting date for
Barclaycard Funding PLC into line with Gracechurch Card Funding (No. 1) PLC.
Eliminations between the Company and the Subsidiary were performed at June 14,
2002, and aside from the differences in the unrealised gain/(loss) on
derivatives and effects of currency fluctuations noted below there were no
significant effects.
Eliminations between the Company and the Subsidiary were performed at June 30,
2003, and December 14, 2002 and there were no significant effects.
Unaudited Unaudited
6/30/2002 6/14/2002
Profit & Loss [GBP] [GBP]
Unrealised loss on derivatives (35,833,705) (10,091,531)
Foreign currency translation gain 35,400,000 10,500,000
F-10
APPENDIX G
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of:
Barclaycard Funding PLC and Subsidiary
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
Barclaycard Funding PLC and Subsidiary at December 14, 2002 and December 14,
2001, and the results of their operations and their cash flows for each of the
three years in the period ended December 14, 2002 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
London, England
March 25, 2003
G-1
APPENDIX H
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AT DECEMBER 14, 2002 AND 2001
Notes 2002 2001
ASSETS [GBP] [GBP]
Cash 8,11 160,280 3,353,064
Intercompany notes 3,4,11 --- 607,050,000
Derivatives 8,10,11 --- 80,444,623
Accrued interest receivable 11 9,346 ---
Other assets 6,11 --- 396,535
------- -----------
TOTAL ASSETS 169,626 691,244,222
======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Asset backed notes 3,5,11 --- 687,500,000
Accrued interest payable 11 --- 2,231,913
Other liabilities 6,11 112,215 1,467,570
------- -----------
TOTAL LIABILITIES 112,215 691,199,483
MINORITY INTEREST 23,283 14,828
SHAREHOLDERS' EQUITY
Common stock, [GBP]1 par value; 50,000 shares authorised,
issued and outstanding 7 50,000 50,000
Less: Receivable from shareholders (37,500) (37,500)
Retained earnings 21,628 17,411
------- -----------
TOTAL SHAREHOLDERS' EQUITY 34,128 29,911
------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 169,626 691,244,222
======= ===========
The accompanying notes are an integral part of these consolidated financial
statements
H-1
APPENDIX H
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS END DECEMBER 14, 2002, 2001 AND
2000
Notes 2002 2001 2000
REVENUES [GBP] [GBP] [GBP]
Interest income 8 24,634,224 34,396,764 39,439,510
Servicing fees 8 4,575,734 4,552,875 4,465,117
Unrealised gain on derivatives 8 --- 17,436,450 51,695,832
Realised foreign exchange gain 54,588,608 --- ---
Other Income 11,667 11,000 10,447
---------- ---------- ----------
TOTAL REVENUE 83,810,233 56,397,089 95,610,906
---------- ---------- ----------
EXPENSES
Interest expense 8,12 24,077,409 33,783,357 38,838,159
Foreign currency translation loss --- 17,700,000 51,800,000
Realised loss on derivatives 8 54,583,230 --- ---
Servicing fees 8 4,575,734 4,552,875 4,465,117
Administration expenses 541,838 614,858 579,035
---------- ---------- ----------
TOTAL EXPENSES 83,778,211 56,651,090 95,682,311
---------- ---------- ----------
INCOME/(LOSS) BEFORE PROVISION FOR
INCOME TAXES 32,022 (254,001) (71,405)
Less: Provision for income taxes 2 (6,850) 3,322 4,971
---------- ---------- ----------
NET INCOME/(LOSS) BEFORE MINORITY
INTEREST 25,172 (257,323) (76,376)
Minority interest net of income taxes (8,455) 265,036 83,088
---------- ---------- ----------
NET INCOME 16,717 7,713 6,712
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
H-2
APPENDIX H
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 14, 2002, 2001 AND 2000
Notes 2002 2001 2000
[GBP] [GBP] [GBP]
Net income for the period 16,717 7,713 6,712
Retained earnings brought forward 17,411 9,698 2,986
Dividend (12,500) --- ---
------- ------ ------
Retained earnings carried forward 21,628 17,411 9,698
------- ------ ------
Common stock brought forward 7 12,500 12,500 12,500
Shares issued in the period --- --- ---
Less: Receivables from shareholders --- --- ---
------- ------ ------
Common stock carried forward 12,500 12,500 12,500
------- ------ ------
TOTAL SHAREHOLDERS' EQUITY 34,128 29,911 22,198
======= ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
H-3
APPENDIX H
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR YEARS ENDED
DECEMBER 14, 2002, 2001 AND 2000
Notes 2002 2001 2000
[GBP] [GBP] [GBP]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 16,717 7,713 6,712
Adjustments to reconcile net incometo
net cash (used in)/provided by
operating activities
Unrealised gain on derivatives 8 --- (17,436,450) (51,695,832)
Foreign currency translation loss --- 17,700,000 51,800,000
Minority interest 8,455 (265,036) (133,092)
(Increase)/Decrease in accrued
interest receivable 11 (9,346) --- 3,972,250
Decrease in other assets 6,11 396,535 444,979 470,345
Decrease in accrued interest payable 11 (2,231,913) (921,429) (752,733)
(Decrease)/Increase in other
liabilities 6,11 (1,355,355) 68,701 45,018
------------ ----------- -----------
TOTAL ADJUSTMENTS (3,191,624) (409,235) 3,705,956
------------ ----------- -----------
NET CASH (USED IN)/PROVIDED BY
OPERATING ACTIVITIES (3,174,907) (401,522) 3,712,668
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Investor Interest 4,11 (643,624,895)
Sale of Investor Interest 5,11 643,624,895 ---
Intercompany deposit redeemed from
Barclays Bank PLC 4,11 607,050,000
------------ ----------- -----------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 607,050,000 ---
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of asset backed notes 5,11 (607,055,377)
Dividend paid (12,500) ---
------------ ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (607,067,877) --- ---
------------ ----------- -----------
NET (DECREASE)/INCREASE IN CASH (3,192,784) (401,522) 3,712,668
Cash at beginning of year 3,353,064 3,754,586 41,918
------------ ----------- -----------
Cash at end of year 160,280 3,353,064 3,754,586
============ =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION
Cash paid for:
Interest 28,002,153 33,690,979 40,975,759
Taxes 3,312 1,562 5,070
The accompanying notes are an integral part of these consolidated financial
statements.
H-4
APPENDIX I
BARCLAYCARD FUNDING PLC AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Barclaycard Funding PLC (the "Company") was incorporated on August 13, 1990.
The Company commenced business on November 22, 1999. Barclaycard Funding PLC
and its Subsidiary, Gracechurch Card Funding (No. 1) PLC ("Subsidiary"),
collectively comprise the "Group".
The principal purpose of the Group is to raise financing via the purchase of a
beneficial interest in a pool of credit card receivables, which is sold to a
debt issuer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
(a) Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP") and in Pounds Sterling ("[GBP]"), the currency of the United Kingdom,
which is the Group's operating currency. The financial statements are reported
in accordance with US GAAP due to the Group's reporting requirements under the
United States Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"). These financial statements are not statutory financial
statements and a statement in accordance with section 235 of the United
Kingdom's Companies Act ("UKCA") for the consolidated group is not given. The
individual UK statutory financial statements for Barclaycard Funding PLC and
Gracechurch Card Funding (No. 1) PLC for each of the years in the three year
period ended December 14, 2002 and December 31, 2002 respectively, have been
filed with the registrar of companies in the United Kingdom.
(b) Consolidation
The consolidated financial statements include the accounts of Barclaycard
Funding PLC and, Gracechurch Card Funding (No. 1) PLC. Gracechurch Card Funding
(No. 1) PLC is a special-purpose vehicle established by Barclays Bank PLC
solely to issue asset backed notes denominated in United States Dollars (see
footnote 5), the proceeds of which were remitted to Barclaycard Funding PLC in
exchange for a corresponding medium term note. Because the only purpose of
Gracechurch Card Funding (No. 1) PLC is to raise financing for the Group, its
accounts are consolidated with those of Barclaycard Funding PLC.
The total share capital issued by Gracechurch Card Funding (No. 1) PLC is owned
by Gracechurch Card (Holdings) Limited, and its earnings and losses allocable
thereto are reported as minority interest in the accompanying consolidated
balance sheet.
Any distributable profits which Gracechurch Card Funding (No. 1) PLC generates
is payable to Gracechurch Card (Holdings) Limited, that was a wholly owned
subsidiary of Royal Exchange Trust Company Limited during the year, (the
"Trust"). Losses which Gracechurch Card Funding (No. 1) PLC incurs are
allocated firstly to the Trust's equity at risk, which is comprised of the
Trust's initial capital investment (via Gracechurch Card (Holdings) Limited
plus any distributable profits receivable, reflected as minority interest.
Losses in excess of the Trust's equity at risk are allocated to the note
holders. On March 17, 2003, the shares in Gracechurch Card (Holdings) Limited
were transferred to SFM Corporate Services Limited under the terms of a trust
for charitable purposes.
Intercompany transactions and balances have been eliminated on consolidation.
There was a 16 day difference between the fiscal year end of the Company and
Subsidiary. Eliminations were performed at the Company's fiscal year end and
aside from the differences in the unrealised gains on derivatives and effects
of currency fluctuations on the asset backed notes as noted in Footnote 12 that
impacted the prior year; the non coterminous year end did not have a material
effect on the financial statements.
I-1
(c) Asset Derecognition
Where Barclaycard Funding PLC is a transferor of financial assets to a Special
Purpose Entity ("SPE"), the assets sold are derecognized and the SPE is not
consolidated on its balance sheet when the assets are: (1) legally isolated
from the Group's creditors, (2) the accounting criteria for a sale are met, and
(3) the SPE is a qualifying special-purpose entity (QSPE) under Statement of
Financial Accounting Standards ("SFAS") 140. When an SPE does not meet the
formal definition of a QSPE, the decision whether or not to consolidate depends
on the applicable accounting principles for non- QSPEs, including a
determination regarding the nature and amount of investment made by third
parties in the SPE.
(d) Foreign Currency Translation
All foreign currency assets and liabilities are translated into Pounds Sterling
at the exchange rates prevailing at the end of the period. Interest income and
expense denominated in foreign currencies are translated into Pound Sterling at
the exchange rates in force when the transaction occurred. Foreign currency
translation effects are reflected on the face of the income statement. Foreign
currency transactions are economically hedged into pounds sterling to offset
exposure to fluctuating currency exchange rates. Although these instruments
offset exposures they do not qualify for hedge accounting under SFAS No. 133
"Accounting for Derivative Instruments and hedging activities".
(e) Derivatives
The derivative instrument was a cross currency swap, and was used by the Group
to minimize currency risk associated with its financing activities denominated
in United States Dollars (USD). Although this instrument was a hedge from an
economic perspective, it did not qualify for hedge accounting under SFAS No.
133 due to the lack of documentation requirements under SFAS No. 133. The
derivative was recorded on the balance sheet at fair value with changes
reflected in the income statement. The derivative was transacted simultaneously
with the purchase or issuance of the underlying funding instrument. The swap
was not held for trading purposes.
(f) Interest Income and Expense
Interest income and expense are recognized in the consolidated financial
statements on an accrual basis. Interest income and interest expense are
primarily related to intercompany notes and asset backed notes, respectively.
(g) Servicing Fee Income/Expense
The Company earns fee income from the servicing of the credit card receivables
and at the same time remits those monies earned to Barclays PLC for the same
amount which is included as expenses in the Consolidated Income Statement. Fees
are recorded when earned, net of associated expenses.
(h) Income Taxes
Income taxes for the Group are paid to the tax authorities in the United
Kingdom. There are no deferred taxes for the periods presented in the financial
statements. The tax charge is based on an effective UK corporation tax rate of
30%.
(i) Distribution Policy
Distributions to shareholders are accounted for when approved by the Board of
Directors.
(j) Issue Costs
The portion of the direct costs associated with the issue of the notes by the
Subsidiary that are attributable to the Group are capitalized and are amortized
over the expected life of the notes.
(k) Funding Instruments
Asset-backed notes are stated at amortised cost restated at the exchange rate
prevailing at the balance sheet date.
(l) Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the balance sheet date and the reported amount
of revenues and expenses in the reporting period. Actual results may differ
from the estimates used in the financial statements.
I-2
(m) Recent Accounting Developments
1. GUARANTOR ACCOUNTING AND DISCLOSURES
In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation ("FIN") No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. This interpretation
elaborates on the disclosures to be made by the guarantor about its
obligations under certain guarantees that it has issued effective
for financial statements for periods ending after December 15,
2002. This interpretation also clarifies that a guarantor is
required to recognize, at the inception of the guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee effective as of January 1, 2003. Management
does not expect the adoption of this interpretation to have a
material effect on the Company's financial position or results of
operations.
The company has received a guarantee in respect of bank borrowings
from the parent company which amounted to [GBP]16,920 at December
14, 2002 (December 14, 2001: [GBP]16,920).
The Group is a participant in a banking arrangement with Barclays
Bank PLC under which all surplus cash balances are held as
collateral for bank facilities advanced to Barclays Bank PLC group
members. As at December 14, 2002 this surplus cash balance amounted
to [GBP]160,280 (December 14, 2001: [GBP]3,353,064). In addition,
the Group has issued an unlimited guarantee to the bank to support
these Barclays Bank PLC group facilities.
2. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In January 2003, the FASB issued FIN No.46 "Consolidation of
Variable Interest Entities -- An interpretation of ARB No. 51"
("FIN 46"). This pronouncement modifies the framework for
determining consolidation of certain entities that meet the
definition of a variable interest entity ("VIE"). This is met where
the entity either does not have sufficient equity of the
appropriate nature to support its expected losses, or its equity
investors lack certain characteristics which would be expected to
be present within a controlling financial interest. Entities which
do not meet this definition would continue to apply the voting
interest model.
The provisions of FIN 46 are immediately effective for VIEs created
after January 31, 2003. The standard must be applied to all
entities beginning in the first fiscal year after June 15, 2003.
Management does not expect the adoption of this interpretation to
have a material effect on the Company's financial position or
results of operations.
FIN 46 requires transitional disclosure which includes the maximum
risk of loss an entity can incur in relation to VIEs that it has a
significant interest in. The maximum exposure to loss represents a
"worst case" scenario in the event that all such vehicles
simultaneously fail. It does not provide an indication of ongoing
exposure which is managed within the company's risk management
framework.
Barclaycard Funding PLC is involved with variable interest entities
Gracechurch Card Funding (No. 1) PLC, Gracechurch Card Funding (No.
2) PLC and Gracechurch Card Funding (No. 3) PLC.
The proceeds of the series 99-1 notes were used by Gracechurch Card
Funding (No. 1) PLC to purchase, respectively, corresponding series
of medium term notes issued by Barclaycard Funding PLC. The
purchase was deemed a financing transaction between the two parties
and consequently the accounts of Gracechurch Card Funding (No. 1)
PLC were consolidated into those of Barclaycard Funding PLC.
The proceeds of the series 02-1 notes and the series 03-1 were used
by Gracechurch Card Funding (No. 2) PLC and Gracechurch Card
Funding (No. 3) PLC respectively, to purchase from Barclaycard
Funding PLC limited recourse medium term note certificates, being
equitable rights in the investor interests. The structure of these
transactions achieved the QSPE status under US GAAP and hence
Gracechurch Card Funding (No. 2) PLC and Gracechurch Card Funding
(No. 3) PLC are not consolidated.
The variable interest entities that the company is involved with,
are used to raise financing via the purchase of a beneficial
interest in a pool of credit card receivables.
I-3
The total assets of these vehicles are [GBP]647,872,001, of which [GBP]23,283
are already consolidated by the Group under US GAAP as at December 14, 2002,
and maximum exposure of loss is [GBP]647,549,639.
3. DERECOGNITION OF ASSETS AND LIABILITIES
On October 24, 2002, Gracechurch Card Funding (No 2) PLC purchased for
[GBP]643,624,895 the beneficial interests in a pool of credit card receivables
via the purchase of a limited recourse medium term note certificate from the
Group. On the same day, the Group paid [GBP]643,624,895 to the Receivables
Trustee (the "Trustee"), an offshore trustee, in the form of an Investor
Certificate, in order to fund the purchase of credit card receivables (the
"Receivables") by the Trustee from Barclaycard, a division of Barclays Bank
PLC. This payment to the Trustee secured a fractional beneficial interest in
the assets of the Receivables Trust . The assets of the Trust comprise the
Receivables acquired from Barclaycard.
The Group passes amounts received from the Trustee in connection with the
investor interest to Gracechurch Card Funding (No 2) PLC the rate of return on
which is at a variable rate of interest, as outlined below. At the redemption
of the investor certificate, the Group will pass amounts received on repayment
of its share of the investor interest from the Trustee to Gracechurch Card
Funding (No 2) PLC. The Group has no obligation to pass on payments that it has
not received.
The investor certificate is repayable on October 15, 2007. The receivables and
the limited recourse medium term note certificate have been derecognised in the
balance sheet as at December 14, 2002.
The [GBP]643,624,895 medium term note certificate has the following interest
rates:
* First interest period October 24 to December 15 2002, interest rate
applicable was the average of one and two month Libor plus 0.19345%
* Second interest period, month to January 15 2003, interest rate
applicable was one month Libor plus 0.19345%
* Third and subsequent monthly interest periods, interest rate applicable
is three month Libor plus 0.19345%
The Investor Certificate is secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the
Trust. The Trust uses a portion of the interest and principal payments that it
receives on the credit card receivables held by it in trust to repay principal
and interest amounts on the investor certificate.
The payment of interest and repayment of principal on the advance to the Trust
is dependent upon payment of interest and repayment of principal due under the
credit card receivables held by the Trust, and is therefore subject to the risk
of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays
Bank PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card
receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety
of social, legal, political and economic factors in the United Kingdom. There
can be no assurance that changes in social, legal, political and economic
factors will not have a material effect on the Group's future performance.
4. INTERCOMPANY NOTES
On November 23, 1999, the Company paid [GBP]607,050,000 to the Receivables
Trustee. This payment to the Trustee secured a fractional beneficial interest
in the assets of the Receivables Trust.
I-4
The Receivables continue to be accounted for as an asset on the Barclays Bank
PLC's balance sheet and therefore in substance the Company has recorded its
payment to the Trustee as intercompany notes.
Interest on the notes was payable up to the redemption date as follows:
546,345,000 -- 3 month LIBOR plus 0.2375%
30,352,000 -- 3 month LIBOR plus 0.53%
30,352,000 -- 3 month LIBOR plus 1.00%
On November 15, 2002 notes amounting to [GBP] 607,050,000 were redeemed in
full.
The intercompany notes are secured by a pool of United Kingdom credit card
receivables that have been equitably assigned by Barclays Bank PLC to the
Trust. The Trust uses a portion of the interest and principal payments that it
receives on the credit card receivables held by it in trust to repay principal
and interest amounts on the investor certificate.
The payment of interest and repayment of principal on the advance to the Trust
is dependent upon payment of interest and repayment of principal due under the
credit card receivables held by the Trust, and is therefore subject to the risk
of non-payment of the credit card receivables.
All of the credit card receivables in the Trust were originated by Barclays
Bank PLC and the following factors help mitigate the risks associated with the
failure of customers to settle financial obligations:
1) The use of sophisticated credit scoring systems to underwrite account
holder selection.
2) The extremely well seasoned nature of the pool of credit card
receivables.
3) The high amount of yield generated by the pool.
4) The geographic spread inherent in the pool.
Credit card use, payment patterns, amounts of yield on the pool of credit card
receivables and the rate of defaults by cardholders may result from a variety
of social, legal, political and economic factors in the United Kingdom. There
can be no assurance that changes in social, legal, political and economic
factors will not have a material effect on the Group's future performance.
5. ASSET BACKED NOTES
A summary of asset backed notes at December 14, 2002 and 2001 were as follows:
2002 2001 2001
[GBP] [GBP] $
Class A --- 618,750,000 900,000,000
Class B --- 34,375,000 50,000,000
Class C --- 34,375,000 50,000,000
--------- ----------- -------------
--- 687,500,000 1,000,000,000
========= =========== =============
The Class A, B and C floating rate notes were issued on November 23, 1999 and
were repaid in full on November 15, 2002. The floating rate notes represented
asset backed obligations and had a nominal value of [GBP]607,050,000. Interest
on the notes was payable up to the redemption date as follows:
Class A Notes -- 3 month LIBOR plus 0.18%
Class B Notes -- 3 month LIBOR plus 0.43%
Class C Notes -- 3 month LIBOR plus 0.90%
The Class C notes were subordinated in right of payment of principal and
interest to the Class B notes which, in turn were subordinated in right of
payment of principal and interest to the Class C notes.
I-5
6. OTHER ASSETS / OTHER LIABILITIES
The other assets and other liabilities balances at December 14, 2002 and 2001
includes the following:
2002 2001
[GBP] [GBP]
OTHER ASSETS
Prepayments administrative expenses --- 13,424
Prepayments underwriting fee --- 383,111
------- ---------
--- 396,535
OTHER LIABILITIES
Bank loans interest bearing --- 1,310,769
Bank loans interest free 16,920 16,920
Other accruals 95,295 139,881
------- ---------
112,215 1,467,570
------- ---------
7. COMMON STOCK
The common stock at December 14, 2002 and 2001 was as follows:
2002 2001
[GBP] [GBP]
BARCLAYCARD FUNDING PLC
Authorised:
Ordinary shares of [GBP]1 each 50,000 50,000
Ordinary A Allotted and nil paid 37,500 37,500
Ordinary B Allotted and fully paid 12,500 12,500
------ ------
Ordinary shares of [GBP]1 each 50,000 50,000
====== ======
Barclays Bank PLC holds 75% of the issued share capital of Barclaycard Funding
PLC representing 51% issued voting share capital and 49% entitlement to
distributable profits.
Royal Exchange Trust Company owns 49% of the issued voting share capital and
are entitled to 51% of the distributable profit.
8. RELATED PARTY TRANSACTIONS
The Group considers related parties to be entities which the Group can
significantly influence or has an ownership interest in that allows it
influence to an extent that the other party might be prevented from fully
pursuing its own separate interests. Examples of related parties include
affiliates of the company; entities for which investments are accounted for by
the equity method by the company; trusts for the benefit of employees,
principal owners of the enterprise; its management; and members of the
immediate families of principal owners of the enterprise and its management.
Parties are considered to be related if one party, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with an enterprise.
Barcosec Limited and Barometers Limited are Barclays Bank PLC group companies
whose business is the provision of corporate directorship services for Barclays
Bank subsidiaries.
The Group enters into various transactions with affiliates. At December 14,
2002, 2001 and 2000, in addition to the intercompany notes disclosed in
footnote 4, the following are the balances related to transactions with
affiliates:
I-6
2002 2001
[GBP] [GBP]
ASSETS
Cash -- (Barclays Bank PLC) 160,280 3,353,064
Derivatives -- (Barclays Bank PLC) --- 80,444,623
Intercompany notes (Barclays Bank PLC) --- 607,050,000
LIABILITIES
Other liabilities -- (Barclays Bank PLC) 16,920 1,327,689
2002 2001 2000
[GBP] [GBP] [GBP]
INCOME / EXPENSE
Interest income -- (Barclays Bank PLC) 24,634,224 34,396,764 39,439,510
Interest expense -- (Barclays Bank PLC) 62,596 87,110 99,703
Servicing income -- (Barclays Bank PLC) 4,575,734 4,552,875 4,465,117
Servicing expense -- (Barclays Bank PLC) 4,575,734 4,552,875 4,465,117
Realised loss on derivatives -- (Barclays Bank
PLC) 54,583,230 --- ---
Unrealised gain on derivatives -- (Barclays Bank
PLC) --- 17,436,450 51,695,832
During the year, the Company sold a [GBP]643,624,895 investor interest in the
Receivables Trust to Gracechurch Card Funding (No.2) PLC and acting as a
conduit for resultant revenue streams, accrued [GBP]3,924,744 interest to
Gracechurch Card Funding (No.2) PLC.
9. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
See disclosures outlining "Guarantor Accounting and Disclosures" in the "Recent
Accounting Developments" contained in footnote 2
10. DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group enters into cross currency swaps. The purpose of these transactions
is to manage the currency risk arising from the Group's operations and its
sources of finance.
The net loss/gain reflected is attributable to the recognition of gains/losses
on derivatives entered into for hedging purposes. Because the hedge
documentation requirements under SFAS No. 133 were not met, the Group is
required to record the changes in the fair value of the derivatives in the
income statement.
Currency risk -- all of the Group's assets and associated income are
denominated in Pounds Sterling, although some of the asset-backed notes issued
by the Subsidiary and associated interest expense are denominated US dollars.
The Group's policy is to match this currency income and expense by the use of
cross currency swaps
On the redemption of the series Gracechurch Card Funding (No 1) PLC notes the
realised loss on the maturity of the cross currency swap was [GBP]54,583,230
offset by the foreign exchange gains on the Gracechurch Card Funding (No 1) PLC
Notes.
DEBT MATURITY ANALYSIS
2002 2001
[GBP] [GBP]
Less than one year 16,920 688,827,689
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
Disclosures in the table below are in accordance with SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments".
I-7
Fair values have been estimated using quoted marked prices where available.
Where no ready markets exist and hence quoted market prices are not available,
appropriate techniques are used to estimate fair values which take account of
the characteristics of the instruments, including the expected future cash
flows, market interest rates and prices available for similar instruments.
There were no instruments listed below that quoted market prices were used to
estimate fair value, the instruments are valued on a discounted cash flow
basis.
The estimated fair value and recorded carrying values of the financial
instruments as of December 14, 2002 and 2001 are as follows:
2002 2002 2001 2001
Carrying Fair Carrying Fair
amount value Amount value
[GBP] [GBP] [GBP] [GBP]
NON-TRADING ASSETS
Cash 160,280 160,280 3,353,064 3,353,064
Intercompany notes --- --- 607,050,000 607,050,000
Derivatives --- --- 80,444,623 80,444,623
Accrued Interest receivable 9,346 9,346 --- ---
Other assets --- --- 396,535 396,535
NON-TRADING LIABILITIES
Asset backed notes --- --- 687,500,000 687,500,000
Accrued interest payable --- --- 2,231,913 2,231,913
Other liabilities 112,215 112,215 1,467,570 1,467,570
The Group had no trading assets or liabilities at December 14, 2002 and 2001.
12. NON-COTERMINOUS YEAR ENDS
Eliminations between the Company and the Subsidiary were performed at the prior
fiscal year end, and aside from the differences in the unrealised gain on
derivatives and effects of currency fluctuations noted below there were no
significant effects.
Eliminations between the Company and the Subsidiary were performed at the
current fiscal year end and there were no significant effects noted.
12/31/2002 12/14/2002 12/31/2001 12/14/2001
Balance Sheet [GBP] [GBP] [GBP] [GBP]
Unrealised gain on
derivative --- --- 80,444,623 80,295,914
Asset backed notes --- --- 687,500,000 687,600,000
12/31/2002 12/14/2002 12/31/2001 12/14/2001 12/31/2000 12/14/2000
Profit & Loss [GBP] [GBP] [GBP] [GBP] [GBP] [GBP]
Unrealised gain on
derivatives --- --- 17,436,450 7,606,147 51,695,832 59,075,069
Foreign Currency
translation (loss)/
gain --- --- (17,700,000) (8,800,000) (51,800,000) (58,200,000)
I-8
APPENDIX J
OTHER SERIES ISSUED AND OUTSTANDING
The table below sets forth the principal characteristics of the other series
previously issued by other issuers, in connection with the receivables trust
and the receivables assigned by the transferor. For more information with
respect to any series, any prospective investor should contact Barclays
Capital, 5 The North Colonnade, Canary Wharf, London E14 4BB, United Kingdom,
Attention Securitisation Group. Barclaycard will provide, without charge, to
any prospective purchaser of the notes, a copy of the disclosure document for
any such other publicly-issued series.
SERIES 99-1
Sterling Interest Rate
Class Principal Balance Equivalent 1
Class A $900,000,000 [GBP]546,345,000 One month USD LIBOR + 0.18%
Class B $50,000,000 [GBP]30,352,500 One month USD LIBOR + 0.43%
Class C $50,000,000 [GBP]30,352,500 One month USD LIBOR + 0.90%
----------------- ----------------
Total $1,000,000,000 [GBP]607,050,000
================= ================
Closing Date: 23 November, 1999
Scheduled Redemption Date: 15 November 2002 2
Legal Final Redemption Date: 15 November 2004
SERIES 02-1
Principal Sterling Interest Rate
Class Balance Equivalent 3
Class A $900,000,000 [GBP]579,262,406 One month USD LIBOR + 0.12%
Class B $50,000,000 [GBP]32,181,245 One month USD LIBOR + 0.45%
Class C $50,000,000 [GBP]32,181,245 One month USD LIBOR + 1.15%
-------------- ----------------
Total $1,000,000,000 [GBP]643,624,896
============== ================
Closing Date: 24 October, 2002
Scheduled Redemption Date: 15 October 2007
Legal Final Redemption Date: 15 October 2009
SERIES 03-1
Principal Sterling Interest Rate
Class Balance Equivalent 4
Class A $900,000,000 [GBP]573,357,966.49 One month USD LIBOR + 0.11%
Class B $50,000,000 [GBP]31,853,220.36 One month USD LIBOR + 0.37%
Class C $50,000,000 [GBP]31,853,220.36 One month USD LIBOR + 1.27%
-------------- -------------------
Total $1,000,000,000 [GBP]637,064,407.21
============== ===================
Closing Date: 8 April 2003
Scheduled Redemption Date: 15 March 2008
Legal Final Redemption Date: 15 March 2010
J-1
SERIES 03-2
Principal Sterling Interest Rate
Class Balance Equivalent 4
Class A $900,000,000 [GBP]539,503,656 One month USD LIBOR + 0.05%
Class B $50,000,000 [GBP]29,972,425 One month USD LIBOR + 0.30%
Class C $50,000,000 [GBP]29,972,425 One month USD LIBOR + 1.10%
-------------- ----------------
Total $1,000,000,000 [GBP]599,448,507
============== ================
Closing Date: 13 June 2003
Scheduled Redemption Date: 15 June 2006
Legal Final Redemption Date: 15 June 2008
SERIES 03-3
Principal Sterling Interest Rate
Class Balance Equivalent 5
Class A1 $600,000,000 [GBP]376,884,422.11 One month USD LIBOR + 0.05%
Class A2 $300,000,000 [GBP]188,442,211.06 2.70%
Class B $50,000,000 [GBP]31,407,035.18 One month USD LIBOR + 0.23%
Class C $50,000,000 [GBP]31,407,035.18 One month USD LIBOR + 0.93%
-------------- -------------------
Total $1,000,000,000 [GBP]628,140,703.53
============== ===================
Closing Date: 18 September 2003
Scheduled Redemption Date: 15 August 2006
Legal Final Redemption Date: 15 August 2008
1 sterling equivalent obtained by converting dollars to sterling at the exchange
rate of [GBP]0.60705 to $1.
2 series 99-1 was repaid in full on 15 November 2002
3 sterling equivalent obtained by converting dollars to sterling at the exchange
rate of [GBP]0.643625 to $1.
4 sterling equivalent obtained by converting dollars to sterling at the exchange
rate of $1.5697 to [GBP]1.
5 sterling equivalent obtained by converting dollars to sterling at the exchange
rate of $1,592 to [GBP]1.
J-2
GRACECHURCH CARD FUNDING (NO. 6) PLC
Issuer
BARCLAYS BANK PLC
Transferor, Servicer and Trust Cash Manager
$675,000,000 Class A Floating Rate Asset-Backed Notes
$37,500,000 Class B Floating Rate Asset-Backed Notes
$37,500,000 Class C Floating Rate Asset-Backed Notes
-----------------------------
PROSPECTUS
-----------------------------
Underwriters of the Class A Notes
BARCLAYS CAPITAL
JPMORGAN LEHMAN BROTHERS
Underwriter of the Class B Notes and Class C Notes
BARCLAYS CAPITAL
You should rely only on the information contained in this prospectus. We have
not authorised anyone to provide you with different information.
We are not offering the notes where the offer is not permitted.
Dealers will deliver a prospectus when acting as underwriters of the notes and
with respect to their unsold allotments or subscriptions. In addition, all
dealers selling the notes may be required to deliver a prospectus until 27 May
2004.
imprima de bussy --- C88683