<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
---------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 1998
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 33-81786
-----------------------------
FIRST USA BANK, NATIONAL ASSOCIATION
(Exact name of registrant as specified in its charter)
(As Servicer on behalf of CC Master Credit Card Trust (formerly Chevy Chase
Master Credit Card Trust))
Laws of the United States 76-0039224
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 North Walnut Street 19801
Wilmington, Delaware (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (302) 594-4000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
$ 322,000,000 Class A Floating Rate Asset Backed Certificates, Series 1994-5
$ 28,000,000 Class B Floating Rate Asset Backed Certificates, Series 1994-5
$ 319,375,000 Class A Floating Rate Asset Backed Certificates, Series 1995-1
$ 30,625,000 Class B Floating Rate Asset Backed Certificates, Series 1995-1
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Not Applicable.
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
Not Applicable.
Indicate the number shares outstanding of each of the Registrant's class of
common stock, as of the latest practicable date.
Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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Introductory Note
-----------------
On September 30, 1998, First USA Bank, National Association, (the "Bank"), a
wholly owned subsidiary of First USA Financial, Inc., which was a wholly owned
subsidiary of BANC ONE CORPORATION, purchased the credit card operations of
Chevy Chase Bank, F.S.B., a federally chartered stock savings bank ("Chevy
Chase"). In connection with the purchase, the Bank assumed all of the rights and
obligations of Chevy Chase as Seller and Servicer of CC Master Credit Card Trust
(formerly Chevy Chase Master Credit Card Trust) (the "Trust") under the Amended
and Restated Pooling and Servicing Agreement dated as of August 1, 1994, between
Chevy Chase, as Seller and Servicer, and Bankers Trust Company, as Trustee (the
"Trustee"), as supplemented and amended (the "Amended and Restated Pooling and
Servicing Agreement"), pursuant to the Assignment and Assumption Agreement dated
as of September 30, 1998 by and among the Bank, Chevy Chase and the Trustee.
Effective October 1, 1998, the Bank, as Seller and Servicer of the Trust,
changed the bankruptcy and deceased charge-off policies of the Trust to conform
to those of the Bank. Beginning on October 1, 1998, bankruptcies and deceased
charge-off accounts are charged off at 90 days. Prior to October 1, 1998, all
bankruptcies and deceased charge-off accounts were charged off at 30 days.
Effective October 2, 1998, BANK ONE CORPORATION ("BANK ONE"), the parent
corporation of the Bank, merged with and into First Chicago NBD Corporation, a
Delaware corporation. Immediately prior to such merger, BANC ONE also merged
with and into BANK ONE, which had been a subsidiary of BANC ONE prior to such
merger. BANK ONE is a bank holding company headquartered in Chicago, Illinois
and registered under the Bank Holding Company Act of 1956 as amended.
The Certificates listed on page 1 hereof will be referred to collectively herein
as the "Certificates". The Certificates do not represent obligations of or
interests in the Bank.
The Bank will respond only to certain items of Form 10-K. In doing so, the Bank
will be relying on a letter dated July 31, 1989 from the Security and Exchange
Commission, Division of Corporation Finance, Office of Chief Counsel to Chevy
Chase, the then Servicer of the Trust, granting the Servicer of the Trust relief
from the requirement to respond to various items of Form 10-K. The items to
which the Bank is not required to respond are designated herein as "Not
Applicable".
The final payments with respect to Floating Rate Asset Backed Certificates,
Series 1994-1, and Floating Rate Asset Backed Certificates, Series 1994-2,
issued by the CC Master Credit Card Trust (formerly Chevy Chase Master Credit
Card Trust) were made on February 17, 1998 and April 15, 1998 respectively. The
final payment with respect to Floating Rate Asset Backed Certificates, Series
1994-3 and Floating Rate Asset Backed Certificates, Series 1994-4 was made on
June 15, 1998. Information with respect to the above Certificates is only
included in Item 14(a)(i) which contains the Summary of Annual Distributions on
the Certificates to Certificateholders for the year ended December 31, 1998.
2
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PART I
ITEM 1. BUSINESS
Not Applicable
ITEM 2. PROPERTIES
Not Applicable
ITEM 3. LEGAL PROCEEDINGS
The Bank has been named as a defendant in four class action lawsuits filed in
late 1997 by cardmembers of the Bank. These actions were filed in the Superior
Court of the State of Delaware, New Castle County, the Circuit Court of
Multnomah County, Oregon, the United States District Court for the Western
District of Washington and in the 14th District Court of Dallas County, Texas.
The plaintiffs in all four cases contend that they and others similarly situated
are entitled to equitable relief for alleged violations of the Delaware Consumer
Fraud Act, breach of contract, breach of the covenant of good faith and fair
dealing and fraud. The court granted summary judgment in favor of the Bank in
the Delaware case in April 1998 and the court in Oregon entered partial summary
judgment in favor of the Bank in May 1998. These cases are in various stages of
motion and discovery practice. The Bank believes that these claims are without
merit and intends to vigorously defend against all claims. While it is
impossible to predict the outcome of these matters, the Bank believes that any
liability arising from these matters will not have a material adverse effect on
the Transferor's business or on the Receivables of the Trust.
The Bank has been named as a defendant in a class action lawsuit filed in the
United States District Court for the District of Delaware against the Bank
alleging that the Bank charged convenience check fees in a manner contrary to
representations made in the Bank's solicitations. Although this matter is at a
preliminary stage, the Bank believes that it is without merit and the Bank
intends to vigorously defend against all claims. While it is impossible to
predict the outcome of this matter, the Bank believes that any liability arising
from this matter will not have a material effect on the Transferor's business or
on the Receivables of the Trust.
The Bank has been named as a defendant in a class action lawsuit filed in
December 1998 in the United States District Court for the Northern District of
Illinois alleging that the Bank, in one of its direct mail solicitations,
violated Federal and State prohibitions against the mailing of unsolicited
credit cards. Although this matter is at a preliminary stage, the Bank believes
that it is without merit and the Bank intends to vigorously defend against all
claims. While it is impossible to predict the outcome of this matter, the Bank
believes that any liability arising from this matter will not have a material
adverse effect on the Transferor's business or on the Receivables of the Trust.
The Bank and Chevy Chase have been named as defendants in a class action lawsuit
filed in January 1999 in the Circuit Court for Baltimore City, Maryland. The
plaintiffs, who are holders of credit cards issued by Chevy Chase prior to
January 16, 1996, allege breach of contract by Chevy Chase and the Bank, as its
successor, and unfair and deceptive trade practices by Chevy Chase. Since the
claims relate to a period prior to the sale by Chevy Chase of its credit card
portfolios to the Bank and Chevy Chase has agreed to indemnify the Bank against
any losses arising out of Chevy Chase's credit card programs prior to such sale,
the Bank expects to be fully indemnified by Chevy Chase for any losses sustained
by the Bank in connection with the lawsuit. The Bank believes that any liability
arising from this matter will not have a material effect on the Transferor's
business or on the Receivables of the Trust.
3
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Each of the Certificates, representing investors' interests in the Trust, are
represented by a single certificate registered in the name of Cede & Co., the
nominee for The Depository Trust Company ("DTC").
To the best knowledge of the Registrant, there is no established public trading
market for the Certificates.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BANK ONE continues to execute project plans established by its predecessor
companies to assure Year 2000 readiness. Project costs are estimated to reach
$350 million over the life of the project. Year 2000 costs incurred through
year-end 1998 were approximately $235 million.
The inventory and assessment phase has been completed for all information and
non-information technology. At December 31, 1998, 87% of BANK ONE's affected
information technology applications were tested and returned to production. BANK
ONE expects that all information technology applications, systems and equipment
will be Year 2000 compliant by mid-1999. Ongoing facilities and equipment
improvements are expected to result in Year 2000 readiness for non-information
systems technology by mid-1999.
Year 2000 readiness is highly dependent on external entities and is not limited
to operating risk. BANK ONE is working extensively with external entities to
ensure that their systems will be Year 2000 compliant; however, BANK ONE bears
risk and could be adversely affected if outside parties, such as customers,
vendors, utilities and government agencies, do not appropriately address Year
2000 readiness issues. In addition, BANK ONE may have increased credit risk
related to customers whose ability to repay debt is impaired due to Year 2000
readiness costs or risk or whose collateral becomes impaired due to lack of Year
2000 readiness.
Detailed contingency plans exist for critical business system applications to
mitigate potential problems or delays associated with systems replacements or
vendor delivery dates. Critical business processes have been identified, and the
most reasonable recovery strategies have been selected. Contingency plans have
been documented and validated for effectiveness. BANK ONE will continue to
review and validate the scope and content of its contingency plans throughout
1999.
4
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Not Applicable
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not Applicable
ITEM 11. EXECUTIVE COMPENSATION
Not Applicable
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Each of the Certificates, representing investor's interests in the Trust, are
represented by a single certificate registered in the name of Cede & Co., the
nominee of DTC, and an investor holding an interest in the Trust is not entitled
to receive a Certificate representing such interest except in certain limited
circumstances. Accordingly, Cede & Co. is the sole holder of record of the
Certificates, which it held on behalf of approximately 33 brokers, dealers,
banks and other direct participants in the DTC system at December 31, 1998. Such
direct participants may hold Certificates for their own accounts or for the
accounts of their customers. The following table sets forth, with respect to
each of the Certificates, the identity of each direct DTC participant that holds
a position in such Certificate in excess of 5% of the outstanding principal
amount thereof at December 31, 1998.
<TABLE>
<CAPTION>
(3) Amount and Nature
(2) Name and Address of of Beneficial (4) Percent
(1) Title Of Class Beneficial Owners Ownership $(000's) of Class
------------------ ----------------- ------------------ ---------
<S> <C> <C> <C>
Class A Floating Rate Bank of New York (The) $64,000 19.88%
Asset Backed Certificates, 925 Patterson Plank Road
Series 1994-5 Secaucus, NJ 07094
Bankers Trust Company $27,000 8.39%
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Chase Manhattan Bank $60,000 18.63%
4 New York Plaza, 13th Floor
New York, NY 10004
Provident Bank (The) $45,950 14.27%
One East Fourth Street
Mail Stop 666D
Cincinnati, OH 45202
Prudential Securities Custody $46,600 14.47%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Republic National Bank of New York $21,900 6.80%
Investment Account
One Hanson Place
Lower Level
Brooklyn, NY 11243
State Street Bank and Trust Company $40,550 12.59%
Global Corp. Action Dept. JAB5W
P.P. Box 1631
Boston, MA 02105-1631
Class B Floating Rate Boston Safe Deposit and Trust Company $11,000 39.29%
Asset Backed Certificates, c/o Mellon Bank, N.A.
Series 1994-5 Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Chase Manhattan Bank $17,000 60.71%
4 New York Plaza, 13th Floor
New York, NY 10004
Class A Floating Rate Bankers Trust Company $62,625 19.61%
Asset Backed Certificates, c/o BT Services Tennessee Inc.
Series 1995-1 648 Grassmere Park Drive
Nashville, TN 37211
Chase Manhattan Bank $103,250 32.33%
4 New York Plaza, 13th Floor
New York, NY 10004
Citibank, N.A. $32,000 10.02%
P.O. Box 30576
Tampa, FL 33630-3576
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fuji Bank and Trust Company (The) $20,000 6.26%
2 World Trade Center, 81st Floor
New York, NY 10048
Prudential Securities Custody $23,000 7.20%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Republic National Bank of New York $45,000 14.09%
Investment Account
One Hanson Place
Lower Level
Brooklyn, NY 11243
Class B Floating Rate Boston Safe Deposit and Trust Company $10,000 32.65%
Asset Backed Certificates, c/o Mellon Bank, N.A.
Series 1995-1 Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Chase Manhattan Bank $10,625 34.70%
4 New York Plaza, 13th Floor
New York, NY 10004
Fuji Bank and Trust Company (The) $10,000 32.65%
2 World Trade Center, 81st Floor
New York, NY 10048
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
7
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(i) Summary of annual distributions on the Certificates to
Certificate-holders for the year ended December 31, 1998
(ii) Annual Accountant's Report dated November 18, 1998 and related
Report of Management dated November 18, 1998 relating to
sufficiency of accounting controls
No proxy soliciting material has been distributed by the
Trust.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST USA BANK, NATIONAL ASSOCIATION
as Servicer of the CC Master Credit
Card Trust (formerly Chevy Chase
Master Credit Card Trust)
By: /s/ Tracie H. Klein
------------------------------
Name: Tracie H. Klein
Title: Vice President
Date: March 25, 1999
--------------
9
<PAGE>
CC Master Credit Card Card Trust
Series 1994-1
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1994-1
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000 original
certificate principal amount. $ 0.00
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A
Certificates, per $1,000 original certificate principal
amount. $ 0.00
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A
Certificates, per $1,000 original certificate principal
amount. $ 0.00
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000 original
certificate principal amount. $ 672.16
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 5.49
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 666.67
<PAGE>
CC Master Credit Card Card Trust
Series 1994-2
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1994-2
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 126.00
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A Certificates,
per $1,000 original certificate principal amount. $ 1.00
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A Certificates,
per $1,000 original certificate principal amount. $ 125.00
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 1,018.04
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 18.04
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 1,000.00
<PAGE>
CC Master Credit Card Card Trust
Series 1994-3
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1994-3
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 253.17
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A Certificates,
per $1,000 original certificate principal amount. $ 3.17
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A Certificates,
per $1,000 original certificate principal amount. $ 250.00
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 1,028.12
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 28.12
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 1,000.00
<PAGE>
CC Master Credit Card Card Trust
Series 1994-4
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1994-4
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 317.21
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A Certificates,
per $1,000 original certificate principal amount. $ 4.71
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A Certificates,
per $1,000 original certificate principal amount. $ 312.50
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 1,030.84
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 30.84
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 1,000.00
<PAGE>
CC Master Credit Card Card Trust
Series 1994-5
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1994-5
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 59.11
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A Certificates,
per $1,000 original certificate principal amount. $ 59.11
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A Certificates,
per $1,000 original certificate principal amount. $ 0.00
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 61.24
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 61.24
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 0.00
<PAGE>
CC Master Credit Card Card Trust
Series 1995-1
1998 Distributions
Pursuant to Section 5.2 (c) of the CC Master Credit Card Trust Series 1995-1
Supplement to the Agreement, First USA Bank, N.A., must provide the following
information on an aggregate basis for the year ended December 31, 1998:
A. 1. The total amount of the distribution to Class A
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 59.01
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class A Certificates,
per $1,000 original certificate principal amount. $ 59.01
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class A Certificates,
per $1,000 original certificate principal amount. $ 0.00
B. 1. The total amount of the distribution to Class B
Certificateholders during 1998 per $1,000
original certificate principal amount. $ 60.53
2. The amount of the distribution set forth in paragraph 1
above in respect of interest on the Class B Certificates,
per $1,000 original certificate principal amount. $ 60.53
3. The amount of the distribution set forth in paragraph 1
above in respect of principal on the Class B Certificates,
per $1,000 original certificate principal amount. $ 0.00
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors of
Chevy Chase Bank, F.S.B.:
We have examined management's assertion, included in the accompanying
Management's Report on the Effectiveness of the Internal Control Structure
Relative to the Servicing of Consumer Revolving Credit Card Receivables,
that Chevy Chase Bank, F.S.B. (the "Bank") maintained an effective internal
control structure over financial reporting relative to the servicing of
consumer revolving credit card receivables owned by Chevy Chase Master
Credit Card Trust I Series 1994-5, 1994-6, 1994-7, 1995-1 and 1997-1 and
Chevy Chase Master Credit Card Trust II Series 1995-A, 1995-B, 1995-C,
1995-D, 1996-A, 1996-B and 1996-C, (collectively referred to as the
"Trusts" herein) as of September 29, 1998.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly,
included obtaining an understanding of the internal control structure over
financial reporting, testing, and evaluating the design and operating
effectiveness of the internal control structure, and such other procedures
as we considered necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure over financial reporting to
future periods are subject to the risk that the internal control structure
may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
On September 30, 1998, the Bank sold its credit card portfolio and related
operations, including the servicing of the consumer revolving credit card
receivables, to First USA Bank, N.A.
In our opinion, management's assertion that the Bank maintained an
effective internal control structure over financial reporting relative to
the servicing of consumer revolving credit card receivables owned by the
Bank's credit card Trusts as of September 29, 1998, is fairly stated, in
all material respects, based upon criteria established in Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
This report is intended solely for the information and use of the board of
directors and management of the Bank, Bankers Trust Company, MBIA Insurance
Corporation, Chevy Chase Bank Holding Corporation, Credit Suisse First
Boston Corporation, Standard & Poor's, Moody's Investor Service, Alpine
Securitization Corporation and Fitch Investors Service, L.P. and should not
be used for any other purpose.
/s/ Arthur Andersen LLP
Washington, D.C.
November 18, 1998
<PAGE>
[LETTERHEAD OF CHEVY CHASE BANK APPEARS HERE]
MANAGEMENT'S REPORT ON THE EFFECTIVENESS OF THE INTERNAL
CONTROL STRUCTURE RELATIVE TO THE SERVICING OF CONSUMER
REVOLVING CREDIT CARD RECEIVABLES
The management of the Bank is responsible for establishing and maintaining the
internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related
costs of control procedures. The objectives of an internal control structure are
to provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles.
We performed an evaluation of the effectiveness of the Bank's internal control
structure based on the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") relative to the servicing of consumer revolving credit card
receivables owned by Chevy Chase Master Credit Card Trust I Series 1994-5,
1994-6, 1994-7, 1995-1 and 1997-1 and Chevy Chase Master Credit Card Trust II
Series 1995-A, 1995-B, 1995-C, 1995-D, 1996-A, 1996-B and 1996-C (collectively
referred to as the "Trusts" herein) as of September 29, 1998, and we determined
that the Bank maintained an effective internal control structure over financial
reporting relative to the servicing of consumer revolving credit card
receivables owned by the Bank's Trusts as of September 29, 1998.
On September 30, 1998, the Bank sold its credit card portfolio and related
operations, including the servicing of the consumer revolving credit card
receivables, to First USA Bank, N.A.
However, there are inherent limitations in the effectiveness of any internal
control structure, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective internal
control structure can provide only reasonable assurance with respect to
reliability of financial statements and safeguarding and management of assets.
Furthermore, the effectiveness of any internal control structure can change with
changes in circumstances.
/s/ George P. Claney, Jr. /s/ Stephen R. Halpin, Jr.
- --------------------------- -----------------------------
George P. Claney, Jr. Stephen R. Halpin, Jr.
Executive Vice President Executive Vice President and
Chief Financial Officer
November 18, 1998
