**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

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**FORM 10-K**

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**(Mark One)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

**                                               **For the fiscal year ended:December 31, 2006

** **

**or**

** **

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

**                                               **For Transition period *                    *

 

**CommissionFile Number of issuing entity:****333-130862-01**

**CAPITAL ONE MASTER TRUST**

**(Exact Name of Issuing Entity as Specified in Its Charter)**

**(Issuing Entity of the Collateral Certificate)**

** **

**Commission File Number ofdepositor: 333-130862**CAPITAL ONEFUNDING, LLC

**(Exact Name of Depositoras Specified in Its Charter)**

 

**New York**

**(State or Other Jurisdiction of Incorporation**

**or Organization of the Issuing Entity)**

 

**c/oCapital One Funding, LLC**

**140 East Shore DriveRoom 1071-BGlen Allen, VA 23059**

**(Address of Principal Executive Offices**

**of Issuing Entity)**

 

**(804) 290-6959**

**(Telephone number, including area code)**

 

**NotApplicable**

**(I.R.S. Employer Identification No.)**

 

**NotApplicable**

**(Former name, former address, if changed since last report)**

** **

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Securities registeredpursuant to Section 12(b) of the Act:            **None**

Securities registered pursuant to Section 12(g) ofthe Act:

**Class A 6.310% AssetBacked Certificates, Series 1998-1Class B 6.356% Asset Backed Certificates, Series 1998-1**(Titleof Class)

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o    No  x

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes  o    No  x

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 forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90days.    x  Yes    o  No

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part II of theForm 10-K or any amendment to this form 10-K.    x  [Item 405 of Regulation S-K is notapplicable.]

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

Large accelerated filer  o    Acceleratedfiler  o    Non-acceleratedfiler  x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

Registrant has no votingor non-voting common equity outstanding held by non-affiliates.

Documents Incorporated byReference.  None.

 

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**INTRODUCTORY NOTE**

On August 24, 1995, Sears Receivables Financing Group, Inc., asoriginator of Sears Credit Account Master Trust II, was issued a no-actionletter (the “No-Action Letter”) by the Securities and Exchange Commission withrespect to certain of the registrant’s reporting requirements pursuant toSection 13 or 15(d) of the Act.  ThisForm 10-K has been prepared in accordance with the terms of the No-ActionLetter.  Pursuant to the No-ActionLetter, the registrant is not required to respond to various items of Form10-K. Such items are designated herein as “Not Applicable”. This Form 10-K isnot subject to Regulation AB promulgated by the Securities and ExchangeCommission because this Form 10-K does not cover any securities issued afterDecember 31, 2005. The Capital One Master Trust (the “Trust”) and the CapitalOne Multi-asset Execution Trust have prepared a separate Form 10-K subject toRegulation AB covering securities issued after December 31, 2005. Capital OneBank is the servicer for the Trust and the Capital One Multi-asset ExecutionTrust. As required by Item 1122 of Regulation AB with respect to the Trust andthe Capital One Multi-asset Execution Trust, Capital One Bank has prepared anassertion on compliance with applicable Regulation AB criteria and Ernst &Young LLP has examined such assertion and issued a report thereon, which havebeen included in the Form 10-K for the Trust and the Capital One Multi-assetExecution Trust. The servicing platform to which such assertion relates is asset-backedsecurities transactions involving credit card receivables conducted by theTrust and the Capital One Multi-asset Execution Trust where the relatedasset-backed securities were outstanding during the Reporting Period of January1, 2006 through December 31, 2006. A copy of Capital One Bank’s report andErnst & Young LLP’s examination thereon are included in this Form 10-K asExhibit 99.4 and Exhibit 99.5, respectively.

**PART I**

**Item 1.Business.**

This Annual Report on Form 10-K (the “Report”) isfiled with respect to the Trust, a trust formed pursuant to an Amended andRestated Pooling and Servicing Agreement, dated as of September 30, 1993,amended and restated as of August 1, 2002 and January 13, 2006 (as amended andsupplemented from time to time, the “Pooling and Servicing Agreement”), amongCapital One Funding, LLC, as transferor, Capital One Bank, as servicer, and TheBank of New York, as trustee (the “Trustee”). Capitalized terms not defined in this Report have the meaning assignedto them in the Pooling and Servicing Agreement.

**Item 1A.Risk Factors.**

Not Applicable.

**Item 1B.Unresolved Staff Comments.**

Not Applicable.

**Item 2.Properties.**

Not Applicable.

**Item 3. Legal Proceedings.**

Over the pastseveral years, MasterCard International and Visa U.S.A., Inc., as well asseveral of their member banks and affiliated institutions, have been involvedin several different lawsuits challenging various practices of MasterCard andVisa.

In 1998, theUnited States Department of Justice filed an antitrust lawsuit against theMasterCard and Visa membership associations composed of financial institutionsthat issue MasterCard or Visa credit or debit cards (“associations”), alleging,among other things, that the associations had violated antitrust law andengaged in unfair practices by not allowing member banks to issue cards fromcompeting brands, such as American Express and Discover Financial Services. In2001, a New York district court entered judgment in favor of the Department ofJustice and ordered the associations to repeal these policies. The UnitedStates Court of Appeals for the Second Circuit affirmed the district court and,on October 4, 2004, the United States Supreme Court denied certiorari inthe case. In November 2004, American Express filed an antitrust lawsuit (the “Amexlawsuit”) against MasterCard and Visa and several member banks and affiliatedinstitutions alleging, among other things, that the defendants jointly andseverally implemented and enforced illegal exclusionary agreements thatprevented member banks from issuing American Express cards. The complaintrequests civil monetary damages, which could be trebled. Capital One Bank,Capital One, F.S.B. and Capital One Financial Corporation are named defendantsin this lawsuit.

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Separately, a numberof entities, each purporting to represent a class of retail merchants, havealso filed antitrust lawsuits (the “Interchange lawsuits”) against MasterCardand Visa and several member banks and affiliated institutions, includingCapital One Bank, Capital One, F.S.B. and Capital One Financial Corporationalleging among other things, that the defendants conspired to fix the level ofinterchange fees. The complaints request civil monetary damages, which could betrebled. In October 2005, the Interchange lawsuits were consolidated before theUnited States District Court for the Eastern District of New York for certainpurposes, including discovery.

Finally, a numberof individual plaintiffs, each purporting to represent a class of cardholders,have filed antitrust lawsuits (the “Fee Antitrust lawsuits”) against severalinstitutions, including Capital One Financial Corporation, alleging among otherthings that the defendants conspired to fix the level of late fees andover-limit fees charged to cardholders and that these fees are excessive. Thecomplaints request civil monetary damages, which could be trebled.

Capital One Bank,Capital One, F.S.B. and Capital One Financial Corporation believe that theyhave meritorious defenses with respect to these cases and intend to defendthese cases vigorously. At the present time, Capital One Financial Corporationis not in a position to determine whether the resolution of these cases willhave a material adverse effect on either the consolidated financial position ofCapital One Financial Corporation or Capital One Financial Corporation’sresults of operations in any future reporting period.

In addition,several merchants filed class action antitrust lawsuits, which weresubsequently consolidated, against the associations relating to certain debitcard products. In April 2003, the associations agreed to settle the lawsuit inexchange for payments to plaintiffs and for changes in policies and interchangerates for debit cards. Certain merchant plaintiffs have opted out of the settlementsand have commenced separate lawsuits. Additionally, consumer class actionlawsuits with claims mirroring the merchants’ allegations have been filed inseveral courts. Finally, MasterCard and Visa, as well as certain member banks,continue to face additional lawsuits regarding policies, practices, productsand fees.

With the exceptionof the Fee Antitrust lawsuits, the Interchange lawsuits, and the Amex lawsuit,Capital One Financial Corporation, Capital One Bank and Capital One F.S.B. arenot parties to the lawsuits against MasterCard and Visa described above andtherefore will not be directly liable for any amount related to any possible orknown settlements of such lawsuits. However, Capital One Financial Corporation’ssubsidiary banks are member banks of MasterCard and Visa and thus may beaffected by settlements or lawsuits relating to these issues, including changesin interchange payments. In addition, it is possible that the scope of theselawsuits may expand and that other member banks, including Capital OneFinancial Corporation’s subsidiary banks, may be brought into the lawsuits orfuture lawsuits. During the second quarter of 2006, MasterCardsuccessfully completed its initial public offering and Visa revised itsgovernance structure. Both entities now rely upon independent directors forcertain decisions, including the setting of interchange rates.

Given thecomplexity of the issues raised by these lawsuits and the uncertaintyregarding: (i) the outcome of these suits, (ii) the likelihood andamount of any possible judgments, (iii) the likelihood, amount andvalidity of any claim against the member banks, Capital One FinancialCorporation and its subsidiary banks, (iv) changes in industry structurethat may result from the suits and (v) the effects of these suits, inturn, on competition in the industry, member banks, and interchange fees, wecannot determine at this time the long-term effects of these suits on CapitalOne Financial Corporation, Capital One Bank and Capital One, F.S.B. and on thepayment of principal and interest on the notes.

Except asdisclosed above, there are no pending material legal or other proceedingsinvolving Capital One Bank, as sponsor and servicer, Capital One Funding, LLC,as depositor, Capital One Master Trust, as the issuing entity, or The Bank ofNew York, as trustee, or of which any property of the foregoing is the subject,that, individually or in the aggregate, would have a material adverse impact oninvestors in the securities to which this report on Form 10-K relates.

**Item 4.Submission to Matters to a Vote of Security Holders.**

None.

 

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**PARTII**

**Item 5:**                         Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.

To the best knowledge ofthe registrant, there is no established public trading market for the InvestorCertificates.

Each publicly-offeredclass of the Trust’s Investor Certificates is delivered and held in book-entryform through the facilities of The Depository Trust Company (“DTC”), a “clearingagency” registered pursuant to the provisions of Section 17A of the SecuritiesExchange Act of 1934, as amended.  Eachpublicly-offered class of the Trust’s Investor Certificates is represented byone or more certificates registered in the name of Cede & Co. (“Cede”), thenominee of DTC.

**Item 6:**                         SelectedFinancial Data.

Not Applicable.

**Item 7:**                         Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

Not Applicable.

**Item 7A:**                Quantitativeand Qualitative Disclosures about Market Risk.

Notapplicable.

**Item 8:**                         FinancialStatements and Supplementary Data.

Not Applicable.

**Item 9:**                         Changesin and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

**Item 9A:**                Controlsand Procedures.

Notapplicable.

**Item 9B:**                Other Information.

None.

**PART III**

**Item 10:**                  Directors,Executive Officers and Corporate Governance.

Not Applicable.

**Item 11:**                  ExecutiveCompensation.

Notapplicable.

**Item 12:**                  SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters.

Eachpublicly-offered class of Investor Certificates is represented by one or morecertificates registered in the name of Cede, the nominee of DTC, and aninvestor holding an interest in such class of Investor Certificates is notentitled to receive a certificate representing such interest except in limitedcircumstances set forth in the Pooling and Servicing Agreement.  Accordingly, Cede is the sole holder ofrecord of such InvestorCertificates, which it holds on behalf of brokers, dealers, banks, and otherdirect participants in the DTC system. Such direct participants may hold the investor certificates for theirown accounts or for the account of their customers.  The name and address of Cede is Cede &Co., c/o The Depository Trust Company, 55 Water Street, New York, NY 10041.

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CapitalOne Funding, LLC owns 100% of the Transferor Certificate, which representsbeneficial ownership of a residual interest in the assets of the Trust asprovided in the Pooling and Servicing Agreement.

**Item 13:**                  CertainRelationships and Related Transactions, and Director Independence.

Theregistrant knows of no transaction or series of transactions during the mostrecently completed fiscal year, or any currently proposed transaction or seriesof transactions, in an amount exceeding $60,000, involving the Trust in whichany Investor Certificateholder identified in Item 12 above or any otherbeneficial owner of more than five percent of Investor Certificates known tothe registrant had or will have a direct or indirect material interest.

TheTrust does not have any directors.

**Item 14:**                  PrincipalAccountant Fees and Services.

Notapplicable.

**PART IV**

**Item 15. Exhibits, FinancialStatement Schedules.**

(a)(1)             Notapplicable.

(a)(2)             Notapplicable.

(a)(3)             Theexhibits filed in response to Item 601 of Regulation S-K are listed in theExhibit Index.

(b)                          The exhibits filed in response to Item 601 ofRegulation S-K are listed in the Exhibit Index.

(c)                           Not applicable.

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.
|        | ** ** | **Capital One Master Trust** |
|--------|------------|------------------------------|
|   |       |                         |   |   |
|   |       | By:                          |   | Capital One Funding, LLC, as depositor |
|   |       |                         |   |   |
|   |       | By:                          |   | /s/ Stephen Linehan |
|   |       |                         |   | Name:  Stephen  Linehan |
|   |       |                         |   | Title:    President |
|   |       |                         |   |   |
|   |       |                         |   | Date: March 30, 2007 |

 

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EXHIBIT INDEX
| Exhibit  Number | ** ** | **Description**                                                                                                                                         |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1            |       | Certification pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 and relevant rules and regulations of the  Securities and Exchange Commission. |
|            |       |                                                                                                                                                    |
| 99.1            |       | Capital One Master Trust Aggregated Data for 2006.                                                                                                      |
|            |       |                                                                                                                                                    |
| 99.2            |       | 2006 Annual Certificateholders’ Statements prepared  by the Servicer                                                                               |
|            |       |                                                                                                                                                    |
|            |       | (a) Series  1998-1                                                                                                                                      |
|            |       | (b) Series  2000-3                                                                                                                                      |
|            |       | (c) Series  2001-1                                                                                                                                      |
|            |       | (d) Series  2001-6                                                                                                                                      |
|            |       | (e) Series  2002-1                                                                                                                                      |
|            |       | (f) Series  2002-2                                                                                                                                      |
|            |       | (g) Series 2002-4                                                                                                                                       |
|            |       |                                                                                                                                                    |
| 99.3            |       | Servicer Compliance Statement of Capital One Bank.                                                                                                      |
|            |       |                                                                                                                                                    |
| 99.4            |       | Report on Assessment of Compliance with Servicing  Criteria for Capital One Bank.                                                                       |
|            |       |                                                                                                                                                    |
| 99.5            |       | Attestation Report of Independent Registered Public  Accounting Firm on Assessment of Compliance with Servicing Criteria relating  to Capital One Bank. |

 

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