00 Ahold ANNUAL REPORT 2002 145
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
The Company's wholly owned subsidiaries, USF and Alliant, participate in separate Receivable Sale and Related
Agreements (the "Agreements"). Under the Agreements, these subsidiaries sell, on a revolving basis, their eligible trade
receivables to two companies, which are wholly owned, special purpose, bankruptcy-remote subsidiaries of the Company
(the "Receivable Companies"). Simultaneously, the Receivables Companies transfer, assign and convey all of their present
and future rights, title and interest in the receivables to two non-consolidated qualifying special purpose entities (the
"Master Trusts"). In return for the receivables transferred, the Receivable Companies receive cash and certificates
representing fractional, undivided interests in the Master Trusts, subordinate to the interest of third-party investors.
Additional certificates, also representing fractional, undivided interests in the Master Trusts, are sold at a discount to third-
party investors in exchange for cash. The interests purchased by third-party investors include both variable investment
certificates, which may be increased up to a maximum purchase limit of USD 695, and USD 300 in term investment
certificates, aggregating to a maximum purchase limit of USD 995 (EUR 953). The variable certificate holders are
generally either commercial paper conduits, which may at their sole option choose to increase the amount invested in a
certificate, or banks or other financial institutions that commit, subject to certain conditions, to fund increases in respect
of the certificates for a committed period of time. The transferable term certificates were sold in reliance on Rule 144A to
qualified institutional buyers in July 2000 and are scheduled to expire in June 2005.
As of fiscal year-end 2002 and 2001, the Company had sold USD 857 (EUR 826) and USD 870 (EUR 985), respectively,
in interests were sold under the Agreements to the third-party certificate holders. The costs associated with the sale of
interests in the Master Trusts are based on existing markets for A-1+/P-1 asset-backed commercial paper rates and LIBOR
plus fees and expenses and ranged between 1.30% and 1.88% annually during 2002. Because the variable certificate
holders have no commitment to maintain the funding of their purchases of interests of the Master Trusts based on the
A-1+/P-1 asset-backed commercial paper market, in the event these purchasers refuse or are unable to fund the purchase
of the Master Trusts interest with asset-backed commercial paper, the costs associated with the sale of such interests is
based upon the sum of LIBOR and an additional amount based on Ahold's then current credit rating. The Company's
retained interest in the assets of the Master Trusts as of fiscal year-end 2002 and fiscal year-end 2001, was approximately
USD 251 (EUR 240) and USD 198 (EUR 224), respectively. This retained interest, which Ahold includes in the accounts
receivable balance reflected in the consolidated balance sheets, is recorded at estimated fair value and approximates the
carrying amount because of the immediate or short-term maturity of the assets underlying the certificates. Further, the fair
value of the retained interest is not significantly affected by changes in the discount rate assumption used in the fair value
assessment because of the short-term nature, approximately 30 days, of the underlying receivables. The fair value of the
retained interest in the assets of the Master Trusts is reviewed on an ongoing basis for outstanding and newly securitized
receivables.
The Company received proceeds from the collections under the Agreements of USD 16.2 billion (EUR 15.5 billion) and
USD 10.7 billion (EUR 12.1 billion) in fiscal 2002 and 2001, respectively. Losses, primarily representing interest, in the
form of discounts on the sale price received on each receivable sold, totalled EUR 18 and EUR 20 in fiscal 2002 and
2001, respectively, and are included in the consolidated statements of operations under the caption "Other financial
income and expense". The Company retains responsibility for the servicing of these receivables in return for a servicing fee
pursuant to the Agreements. No servicing asset or liability has been recorded because the fees Ahold receives for servicing
the receivables approximate the related cost.
The sole purpose of the Master Trusts is to facilitate the purchases of the trade receivables of USF and Alliant by various
third-party investors. The only assets of the Master Trusts are the receivables purchased that are still outstanding at year-
end, cash collected from the assets that they hold, and highly liquid investments purchased with that cash pending
distribution to holders of beneficial interests that are appropriate for that purpose. The obligations of the Master Trusts
equal the invested amount of certificate holders, the accrued return for the year, and the fair value of the residual interests
sold, including those sold to the Company.
Due to the nature of the restatements that were announced on February 24, 2003, and the consequent related potential
impact on compliance with certain provisions in the portions of the Agreements related to variable certificate investments,
the Agreements were amended in March 2003 to, among other things, include a financial covenant that requires Ahold's
average four quarter rolling interest coverage ratio to not be lower than 2.25. The Company further amended the portions of
the Agreements related to variable certificate investments to lower the aggregate maximum purchase limit of third-party
variable certificate investments in the Master Trusts to USD 490, primarily in response to a contraction in the aggregate pool
of receivables available for sale to the Master Trusts under the Agreements and to extend the termination date of those
portions of the Agreements until December 5, 2003. The Company intends to extend further the termination date of those
portions of the Agreements for at least an additional two months, where some of the variable certificate investors have
committed to extend their investments until February 2004. In addition to the changes described above, in June 2003,
