The composition of the competition is 12 clubs, the three Nationwide clubs, the best placed club from Colwyn Bay, Merthyr Tydfil and Newport County from the preceding season along with Welsh Cup Winners and the clubs that finish in the top seven places in the preceding League of Wales season.
Should the Welsh Cup winner qualify as a result of finishing in the top seven places in the League of Wales, the final club shall be the one that finishes 8th in the preceding League of Wales season. Barry Town, Cardiff City, Swansea City and Wrexham automatically qualify for the quarter final stage of the competition but will be drawn away in the 2002/2003 and 2003/2004 seasons.
All the competing clubs have to comply with the entry requirements of the competition/league in which they normally compete.
The eight qualified clubs are drawn into two groups of four with each club playing each other home and away.
Should clubs finish level on points, then placings will be decided on goal difference in group matches. If still level the club with the highest number of goals scored in group matches will be placed higher.
8 teams qualify for the Quarter Finals with the clubs finishing in the top two places in each group being guaranteed a home draw. The quarter finals are decided "on the night" with extra time and penalties if necessary.

For the semi finals, the club who are drawn first will be at home in a single tie. Should the clubs be level after 90 mins, extra time will be played and if, still level then penalties will decide the tie. The Final is one match played at a ground of one of the finalists drawn by lots.

Prize money
The Prize Money is allocated as follows:
£6,500 to each of the 8 clubs playing in the group stages.
£15,000 to each club losing in the quarter finals.
£25,000 to each Club losing in the semi-finals.
£50,000 to the Club losing in the final.
£100,000 to the winning Club
£5,000 facility fee for each match televised live on BBC Wales to be paid to the Home Club.
For the Final the sum of £8,000 shall be retained by the Company and added to the gross gate receipts for the match.