Aeroplan Investor

Air Canada has agreed to let Onex Corporation acquire a 35% equity interest in its”Aeroplan” loyalty program for $245 million. “Aeroplan,” launched in 1984, hasmore than six million members. In January 2002, “Aeroplan” became a wholly-owned subsidiary of Air Canada. Last year, “Aeroplan” generated cash revenue in excess of $600 million, of which less than forty percent represented billings to Air Canada. Approximately 1.4 million round-trips were redeemed for travel on Air Canada and its worldwide “Star Alliance” partner airlines in the past year. Aeroplan has more than 90 partnerships with airline, hotel, car rental, financial, telecommunication, retail, services and entertainment partners. It has a long-standing business relationship with CIBC for the “CIBC Aerogold VISA” card, which allows cardholders to earn one “Aeroplan Mile” for every one dollar spent. “Aeroplan” also has a long-term partnership with Diners Club Canada, the only travel and entertainment card to offer “Aeroplan Miles.”

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Euronet ATM Deals

Euronet has recently signed two significant ATM outsourcing agreements and software agreements. The first outsourcing agreement is with a Western European independent ATM deployer, which plans to start rolling out ATMs in second quarter. The IAD plans to implement 1,700 ATMs by the end of 2006. Traditional ATM transactions will be combined with value-added transactions that allow consumers to purchase prepaid mobile air time and other items, such as cinema tickets, directly from the ATM. The second agreement is with a South African-based company that plans to build a shared network in Uganda, offering ATM operating and card issuing services. Euronet will provide processing services out of its Budapest center together with the professional services for training and development, while the contracted company will handle all local services. This project will also integrate ATM processing services with the area’s mobile operators, making available electronic payments for prepaid mobile air time.

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AmEx 4Q/02

American Express’ introduction of the new “Green” and “Gold” rewards cards in late September has paid off in spades during the fourth quarter. AmEx reported yesterday it added 900,000 new cards-in-force in the last three months of 2002. However, some of the new cards represented reward cards issued to existing “Green” and “Gold” cardholders whereby the previous cards were kept in-force. Nevertheless, AmEx’s U.S. gross dollar volume soared in 4Q/02 by nearly 13%, and credit card loans increased by more than 7%. For 4Q/02, the Travel Related Services division produced fourth quarter net income of $550 million, triple last year’s fourth quarter earnings, but down slightly from 3Q/02. One year ago, AmEx took a $279 million charge to restructure operations and reduce its workforce after the collapse of air travel following the 9/11 attacks. While AmEx benefited from a 33% decline in charge card interest expense for the fourth quarter, the company increased its marketing and promotion expense for the TRS division by 18%. Credit quality improved during the fourth quarter as delinquency (30+ days) declined more than 6% and charge-offs dropped nearly 7%. AmEx net interest yield increased 10 basis points over 3Q/02 and 20 basis points over 4Q/01. In September 2002, AmEx launched the “Rewards Green,” “Rewards Gold,” “Preferred Rewards Green,” and “Preferred Rewards Gold” cards which have the “Membership Rewards” program as a core feature. The cards carry annual fees ranging from $65 to $130. For complete details on AmEx’s fourth quarter performance as well as prior quarters visit CardData (www.carddata.com). (CF Library 9/23/02)

American Express U.S. Card Portfolio Snapshot
4Q/02 3Q/02 2Q/02 1Q/02 4Q/01 Ann Chng
Volume $62.9b 58.2b 58.7b 54.3b 55.8b +12.7%
Loans $34.3b 32.2b 31.6b 31.3b 32.0b +7.2%
Cards 35.1m 34.8m 34.8m 34.8m 34.6m +1.4%
Delinq* 3.1% 3.2% 3.1% 3.4% 3.3% -6.1%
Losses 5.5% 5.6% 6.2% 6.5% 5.9% -6.8%
Yield** 9.8% 9.7% 9.8% 9.6% 9.6% +2.1%
* 30+ days past due; ** net interest yield
Source: CardData (www.carddata.com)

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CONSUMER DEBT UP

Household credit rose by 7.6% during the year ending October 2002, the
fastest pace of growth in 11 years. Also, for the first time since mid-2001
consumer credit is rising faster than mortgage credit. Mortgage debt rose
by 7.6% during the year ending October 2002, a significant acceleration
from the 6% growth observed earlier in 2002. During the same period,
consumer debt expanded by more than 8%. Growth in credit card debt is also
rising by over 13% year over year. Even with the very strong growth in
borrowing, personal bankruptcies are trending downward, falling by 1.5% in
the first eleven months of 2002 compared to the same period last year. The
main improvement is in Quebec, with Ontario still seeing rising
bankruptcies – reflecting the sensitivity of the province to developments
south of the border.

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Shell MasterCard

Citibank announced this morning the official re-launch of the “Shell MasterCard” featuring a double rebate to kickstart the program. The “Shell MasterCard” was originally launched by Chemical Bank, now Chase, in October 1993, and has grown to become the largest gasoline co-branded card in the USA. Chase lost the Shell co-brand contract last year. The new “Shell MasterCard from Citi” is doubling the card’s regular 5% rebate on Shell gas purchases as part of an introductory program for those that apply for the new card by March 31st. New cardholders will receive a 10% rebate on each Shell gasoline purchase made within the first 60 days of the card’s activation. Thereafter the rebate reverts back to a 5% rebate on Shell gasoline purchases and 1% on all other retail purchases wherever the card is used. All rebates are applied as credits toward future Shell gasoline purchases. The card has no annual fee for the first year. And the $20.00 annual fee is waived after that, provided the cardholder makes 9 Shell gasoline purchases per year. Citi is charging a prime +9.99% interest rate on purchases. Balance transfers are 0% for the first six months followed by the prime +9.99% APR. Citi says the launch of the new Shell card will be supported by an integrated-marketing campaign, including direct mail, point-of-purchase, advertising, Internet marketing and public relations. (CardTrak11/93)

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ESC & Witness eQuality

Atlanta-based Enhancement Services Corporation has implemented the “eQuality” software from Witness Systems to become the first in the card reward industry to record all calls. eQuality Balance is used by ESC to record conversations on 100% of all client calls including those from BMW Financial Services, Citibank and JPMorgan Chase. A customer service representative’s (CSR) corresponding computer desktop activities can be recorded as well. This dual recording solution allows managers to more efficiently evaluate CSR performance and process effectiveness, thereby increasing the amount of feedback and coaching available to the CSR.

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BofA ATMs

Bank of America and Valero Energy Corporation announced Friday they have expanded their ATM contract. By the end of the first quarter, BofA will have installed its enhanced ATM software on more than 1,100 of Valero Energy-owned ATMs, which are located in the company’s retail stores. Valero’s retail brands include Diamond Shamrock Corner Stores, Stop N Go, Ultramar, Valero, Beacon and Total. This new agreement expands upon BofA’s previous contract with Valero for approximately 300 ATMs in Stop N Go convenience stores. The agreement increases the number of ATMs that Bank of America operates in Arizona, Arkansas, California, Colorado, Louisiana, New Mexico, Oklahoma and Texas. More than half of the ATMs will be located in Texas, expanding BofA’s current ATM network by more than 700 locations, giving it a total of 1,900 statewide. At the end of December, Bank of America had installed its software on approximately 900 ATMs in Valero’s network of 1,300 company-operated convenience stores. The deal between BofA and Valero has created the single largest ATM contracts in U.S. banking history.

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CARDS EUROPE

Banks, retailers, telcos will be assembling next week in London to discuss
smart moves with EMV, secure payments and commerce, point of sale, Europe’s
hot markets, mobile payments, and, loyalty and multi-application cards.
“Cards Europe” has signed the following major sponsors and exhibitors for
the event including MasterCard International, Thales e-Security, Thales
e-Transactions, Gemplus, Schlumberger SEMA, Pegasystems, ACI Worldwide, and
First Data Europe. The event is scheduled for February 3-5 at the Royal
Garden Hotel.

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Certegy 4Q/02

Certegy reported Friday net income of $29 million on revenues of $263 million for the fourth quarter. During the fourth quarter, domestic card issuing transaction volumes increased by 6.8%, driven primarily by growth in debit card transactions. Certegy added approximately 500,000 cards, increasing its international card base to 24.2 million and its global card base to 46.7 million. For the full year 2002, the number of cards processed globally increased by approximately 5.0 million, or 11.9% over 2001. Card Services produced revenue of $163.6 million in the fourth quarter, an increase of $1.0 million, or 0.6% over the prior-year quarter, driven by a 7.2% increase in North American card revenue and strong international card revenue growth outside of Latin America. However, merchant processing revenue declined by 4.7%, due to the previously announced deconversion of a large customer and the company’s focus on improving the overall quality and profitability of the portfolio. For complete details on Certegy’s 4Q/02 performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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Canadian Debt

Household credit in Canada rose by 7.6% during the year ending October 2002, the fastest pace of growth in 11 years. Also, for the first time since mid-2001 consumer credit is rising faster than mortgage credit, according to CIBC’s latest “Household Credit Analysis.” Mortgage debt rose by 7.6% during the year ending October 2002, a significant acceleration from the 6% growth observed earlier in 2002. During the same period, consumer debt expanded by more than 8%. Growth in credit card debt is also rising by over 13% year over year. Even with the very strong growth in borrowing, personal bankruptcies are trending downward, falling by 1.5% in the first eleven months of 2002 compared to the same period last year. The main improvement is in Quebec, with Ontario still seeing rising bankruptcies – reflecting the sensitivity of the province to developments south of the border.

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