Exhibit 10.20



HOLMES FUNDING LIMITED



REPORT AND ACCOUNTS



FOR THE YEAR ENDED 31 DECEMBER 2003



Registered No. 3982428



---

HOLMES FUNDING LIMITED



Report of the Directors



The Directors submit their report together with the accounts for the year to 31 December 2003.



1. Principal activity for the year



The principal activity of the Company is to acquire an interest in a portfolio of mortgage loans and enter into financial arrangements with other group companies in that
connection. No future changes are envisaged.



The Company invests in beneficial
interests in the assets of Holmes Trustees Limited (the Trust), which assets comprise mortgage loans secured on residential property in England, Scotland and Wales. The Company receives a share of income from the Trust in proportion to
its share of the total mortgage assets of the Trust.



During the year the
Company purchased a further beneficial interest in the assets of the Trust of £2.4 billion on 26 March. This purchase was financed by a loan from Holmes Financing (No. 7) plc. Holmes Trustees Limited and Holmes Financing (No. 7) plc are both
group undertakings.



2. Results and Dividends



The results for the year are set out on page 4. The loss of £5,011,000 (2002 
loss of £8,272,000) will be transferred from reserves. The Directors do not recommend the payment of a dividend (2002: £nil).



The loss in the year has arisen as a result of the charge for provisions made against the Companys investment. On the release or utilisation of this provision in
future years, the Directors anticipate that the Company will make a profit.



3. Directors and their interests



The Directors who served
throughout the year, except as noted below were:



|                                  
|----------------------------------
|M McDermott                       
|R.Wise (resigned on 23 May 2003)  
|D.Green (appointed on 23 May 2003)
|SPV Management Limited            



At the year-end and the previous
year-end, Holmes Holdings Limited held one share in the Company. Holmes Holdings Limited and M McDermott jointly held the other share.



SPV Management Ltd and M. McDermott held one share in the holding company, Holmes Holdings Limited, at the year-end. The other share in Holmes Holdings Limited was held
by SPV Management Limited. M. McDermott is also a Director of SPV Management Limited.



None of the other Directors had a beneficial interest in the shares of the Company, or of the holding company, Holmes Holdings Limited, at the year-end.



Page 2



---

HOLMES FUNDING LIMITED



Report of the Directors (continued)



4. Directors Responsibility in respect of the Preparation of Accounts



The Directors are required by United Kingdom company law to prepare accounts for each financial year that give a true and fair view of the
state of affairs of the Company as at the end of the financial year, and of the profit or loss for that year.



The Directors confirm that suitable accounting policies have been used and applied consistently and reasonable and prudent judgements and estimates have been made in the preparation of the accounts for the year ended
31 December 2003. The Directors also confirm that applicable accounting standards have been followed and that the statements have been prepared on the going concern basis.



The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for the Companys system of internal control and for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.



5. Going concern



The Directors confirm
that they are satisfied that Holmes Funding Limited has adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt a going concern basis in preparing the financial statements.



6. Auditors



On 1 August 2003, Deloitte & Touche, the Companys auditors transferred their business to Deloitte & Touche LLP, a limited
liability partnership incorporated under the Limited Liability Partnerships Act 2000. The Companys consent has been given to treating the appointment of Deloitte & Touche as extending to Deloitte & Touche LLP with effect from 1 August
2003 under the provisions of section 26(5) of the Companies Act 1989.



The
Company has elected to dispense with the obligation to appoint auditors annually and, accordingly, Deloitte & Touche LLP will be the auditors of the company for the forthcoming financial year under the provisions of section 386(2) of the
Companies Act 1985.



By order of the Board



/s/ Cheryl Samuels



For and behalf of

Abbey National Secretariat Services Limited, Secretary



25 June 2004



Registered Office:

Abbey National House

2 Triton Square,

Regents Place,

London,

NW1 3AN.



Page 3



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HOLMES FUNDING LIMITED



INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF HOLMES FUNDING LIMITED



We have audited the financial statements of Holmes Funding Ltd for the year ended 31 December 2003 which comprise the profit and loss
account, the balance sheet and the related notes 1 to 16. These financial statements have been prepared under the accounting policies set out therein.



Respective responsibilities of directors and auditors



As described in the statement of directors responsibilities, the companys directors are responsible for the preparation of the financial statements in
accordance with applicable United Kingdom law and accounting standards. Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards.



We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also
report if, in our opinion, the directors report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or
if information specified by law regarding directors remuneration and transactions with the company is not disclosed.



We read the directors report for the above year and consider the implications for our report if we become aware of any apparent misstatements.



Basis of audit opinion



We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial
statements and of whether the accounting policies are appropriate to the companys circumstances, consistently applied and adequately disclosed.



We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to
give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in
the financial statements.



Opinion



In our opinion the financial statements give a true and fair view of the state of the
companys affairs as at 31 December 2003 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985.



Deloitte & Touche LLP

Chartered Accountants and Registered
Auditors

London, England



25 June 2004



Page 4



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HOLMES FUNDING LIMITED



Profit and Loss Account

For the year ended 31 December 2003



|                                                                          |  |      |  |           |   |  |           |  
|------------------------------------------------------------------------- |  | ---- |  | --------- | - |  | --------- | -
|                                                                          |  | Note |  | 2003£000 |   |  | 2002£000 |  
|Interest receivable and similar income                                    |  | 2    |  | 650,204   |   |  | 578,768   |  
|Interest payable                                                          |  | 3    |  | (599,306  | ) |  | (526,854  | )
|                                                                          |  |      |  |           |   |  |           |  
|Net interest income                                                       |  |      |  | 50,898    |   |  | 51,914    |  
|                                                                          |  |      | 
|Administrative expenses                                                   |  |      |  | (50,440   | ) |  | (52,081   | )
|Provision against investment in Trust property                            |  | 6    |  | (7,618    | ) |  | (11,644   | )
|                                                                          |  |      |  |           |   |  |           |  
|LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION                               |  | 4    |  | (7,160    | ) |  | (11,811   | )
|                                                                          |  |      | 
|Tax on loss on ordinary activities                                        |  | 1, 5 |  | 2,149     |   |  | 3,539     |  
|                                                                          |  |      |  |           |   |  |           |  
|LOSS ON ORDINARY ACTIVITIES AFTER TAXATION AND RETAINED LOSS FOR THE YEAR |  | 13   |  | (5,011    | ) |  | (8,272    | )
|                                                                          |  |      |  |           |   |  |           |  



There is no difference between the
loss on ordinary activities before taxation and the retained loss for the year stated above and their historical cost equivalents.



All transactions are derived from continuing operations within the United Kingdom.



There are no recognised gains and losses in the year other than the loss for the year and therefore no statement of total and recognised
gains and losses is required.



Page 5



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HOLMES FUNDING LIMITED



Balance Sheet

As at 31 December 2003



|                                                         |  |      |  |             |   |  |             |  
|-------------------------------------------------------- |  | ---- |  | ----------- | - |  | ----------- | -
|                                                         |  | Note |  | 2003 £000  |   |  | 2002 £000  |  
|FIXED ASSETS                                             |  |      |  |             |   |  |             |  
|Beneficial interest in mortgage portfolio                |  | 6    |  | 13,341,978  |   |  | 13,679,484  |  
|                                                         |  |      | 
|CURRENT ASSETS                                           |  |      |  |             |   |  |             |  
|Debtors                                                  |  | 7    |  | 24,751      |   |  | 28,599      |  
|Deferred taxation asset                                  |  | 1, 9 |  | 6,618       |   |  | 4,449       |  
|Cash at bank and in hand                                 |  | 8    |  | 1,200,597   |   |  | 1,202,356   |  
|                                                         |  |      |  |             |   |  |             |  
|                                                         |  |      |  | 1,231,966   |   |  | 1,235,404   |  
|                                                         |  |      | 
|CREDITORS - amounts falling due within one year          |  | 10   |  | (743,837    | ) |  | (1,166,612  | )
|                                                         |  |      |  |             |   |  |             |  
|NET CURRENT ASSETS                                       |  |      |  | 488,129     |   |  | 68,792      |  
|                                                         |  |      |  |             |   |  |             |  
|TOTAL ASSETS LESS CURRENT LIABILITIES                    |  |      |  | 13,830,107  |   |  | 13,748,276  |  
|                                                         |  |      |  |             |   |  |             |  
|CREDITORS - amounts falling due after more than one year |  | 11   |  | (13,845,377 | ) |  | (13,758,535 | )
|                                                         |  |      |  |             |   |  |             |  
|NET LIABILITIES                                          |  |      |  | (15,270     | ) |  | (10,259     | )
|                                                         |  |      |  |             |   |  |             |  
|CAPITAL AND RESERVES                                     |  |      |  |             |   |  |             |  
|                                                         |  |      | 
|Called-up share capital                                  |  | 12   |  |            |   |  |            |  
|Profit and loss account                                  |  |      |  | (15,270     | ) |  | (10,259     | )
|                                                         |  |      |  |             |   |  |             |  
|EQUITY SHAREHOLDERS DEFICIT                             |  | 13   |  | (15,270     | ) |  | (10,259     | )
|                                                         |  |      |  |             |   |  |             |  



The financial statements on page 4 to
11 were approved by the Board of Directors on 25 June 2004.



Signed on behalf
of the Board of Directors



/s/ Martin McDermott



Director



Page 6



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HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003



|1. | Accounting Policies
|-- | -------------------



Basis of Accounting



The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom law and accounting standards.
The particular accounting policies adopted are described below.



|(1) | Interest receivable is recognised on an accruals basis.
|--- | -------------------------------------------------------



|(2) | Investments held as fixed assets are stated at cost less provision for any impairment.
|--- | --------------------------------------------------------------------------------------



|(3) | Specific provisions are made against loans and advances which comprise the trust property in which the Company has a beneficial interest, when, as a result of regular appraisals of
the assets, it is considered that recovery is doubtful. A general provision is made against loans and advances to cover bad and doubtful debts that have not been separately identified but which are known from experience to be present in any
portfolio of loans and advances. The specific and general provisions are deducted from loans and advances. Provisions made during the year, less amounts released and recoveries of amounts written off in previous years are charged to the profit and
loss account.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Deferred consideration is payable to the originator of the loans and advances to customers, which is based upon the profitability of the company before the charge for the general
provision for bad and doubtful debts. This has resulted in a loss to date, however the directors anticipate that the company will make a profit over the life of the mortgage portfolio.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Value added tax is not recoverable by the Company and is included with its related cost.
|--- | ----------------------------------------------------------------------------------------



|(6) | Transactions are undertaken in derivative financial instruments, derivatives, which include interest rate swaps. Derivatives are entered into for the purpose of
eliminating risk from potential movements in interest rates inherent in the Companys non-trading assets and liabilities. Non-trading assets and liabilities are those intended for use on a continuing basis in the activities of the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A derivative is designated as non-trading where
there is an offset between the effects of potential movements in market rates of the derivative and the designated asset or liability being hedged. Non-trading derivatives are reviewed regularly for their effectiveness as hedges. Non-trading
derivatives are accounted for on an accruals basis, consistent with the asset or liability being hedged. Income and expense on non-trading derivatives are recognised as they accrue over the life of the instruments as an adjustment to interest
receivable or payable.



|(7) | The Company is a wholly owned subsidiary of Holmes Holdings Limited, a Company incorporated in Great Britain. Accordingly the Company is not required to produce a cash flow
statement as prescribed in paragraph 5 (a) of FRS 1 (revised 1996), Cash flow statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Deferred taxation is provided on all timing differences that have not reversed before the balance sheet date at the rate of tax expected to apply when those timing differences will
reverse. Deferred tax assets are recognised to the extent that they are regarded as recoverable.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Costs relating to the acquisition of the trust asset are deferred and charged over the period in which interest is earned on the asset.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



|2. | Interest Receivable and Similar Income
|-- | --------------------------------------



|                                                                                 |  |            |   |  |            |  
|-------------------------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                                                 |  | 2003 £000 |   |  | 2002 £000 |  
|Income from beneficial interest in mortgage portfolio                            |  | 708,024    |   |  | 648,054    |  
|Expense from derivatives used to hedge beneficial interest in mortgage portfolio |  | (91,841    | ) |  | (93,842    | )
|Bank interest receivable                                                         |  | 34,021     |   |  | 24,556     |  
|                                                                                 |  |            |   |  |            |  
|                                                                                 |  | 650,204    |   |  | 578,768    |  
|                                                                                 |  |            |   |  |            |  



The mortgage portfolio
is held on trust by Holmes Trustees Limited, a group undertaking.



Page 7



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HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003 (continued)



|3. | Interest Payable
|-- | ----------------



|                                                  |  |            |  |           
|------------------------------------------------- |  | ---------- |  | ----------
|                                                  |  | 2003 £000 |  | 2002 £000
|Interest payable on loans from group undertakings |  | 596,486    |  | 524,200   
|Interest payable on start-up loans                |  | 2,820      |  | 2,654     
|                                                  |  |            |  |           
|                                                  |  | 599,306    |  | 526,854   
|                                                  |  |            |  |           



|4. | Loss on Ordinary Activities before Taxation
|-- | -------------------------------------------



Loss on ordinary activities before taxation is stated after charging:



|                                    |  |            |  |           
|----------------------------------- |  | ---------- |  | ----------
|                                    |  | 2003 £000 |  | 2002 £000
|Auditors remuneration - audit fees |  | 107        |  | 23        
|                                    |  |            |  |           

|
|

The Company has no employees (2002: none) other than its directors.



No emoluments were paid to the Directors by the Company during the year
(2002: £nil).



|5. | Tax on Loss on Ordinary Activities
|-- | ----------------------------------



|                                                   |  |            |   |  |            |  
|-------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                   |  | 2003 £000 |   |  | 2002 £000 |  
|UK corporation tax for the year at 28% (2002: 28%) |  | 20         |   |  | 27         |  
|Adjustments in respect of prior years              |  |           |   |  | 7          |  
|Deferred taxation                                  |  | (2,169     | ) |  | (3,573     | )
|                                                   |  |            |   |  |            |  
|Tax receivable                                     |  | (2,149     | ) |  | (3,539     | )
|                                                   |  |            |   |  |            |  



The company pays
corporation tax at 30% with marginal relief.



The tax charge
in the year arises due to the disallowable general provision on the Trust mortgage income.



The tax assessed for the year is higher than the standard 30% rate of corporation tax in the UK. The differences are explained below:



The corporation tax charge is made up as follows:



|                                                                                            |  |            |   |  |            |  
|------------------------------------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                                                            |  | 2003 £000 |   |  | 2002 £000 |  
|Loss on ordinary activities before tax                                                      |  | (7,160     | ) |  | (11,811    | )
|                                                                                            |  |            |   |  |            |  
|Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% |  | (2,148     | ) |  | (3,543     | )
|                                                                                            |  |           
|Effects of:                                                                                 |  |            |   |  |            |  
|Non tax-deductable general provisions                                                       |  | 2,169      |   |  | 3,573      |  
|Benefit of small companies corporation tax rate                                             |  | (1         | ) |  | (3         | )
|Adjustments to tax charge in respect of previous periods                                    |  |           |   |  | 7          |  
|                                                                                            |  |            |   |  |            |  
|                                                                                            |  | 20         |   |  | 34         |  
|                                                                                            |  |            |   |  |            |  



Page 8



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HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003 (continued)



|6. | Beneficial interest in mortgage portfolio
|-- | -----------------------------------------



|                                                     |  |            |   |  |            |  
|---------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                     |  | 2003 £000 |   |  | 2002 £000 |  
|Cost:                                                |  |            |   |  |            |  
|At 1 January                                         |  | 13,694,537 |   |  | 11,973,516 |  
|Additions                                            |  | 2,403,550  |   |  | 3,999,221  |  
|Capital repayments                                   |  | (2,733,372 | ) |  | (2,278,200 | )
|                                                     |  |            |   |  |            |  
|At 31 December                                       |  | 13,364,715 |   |  | 13,694,537 |  
|                                                     |  |            |   |  |            |  
|Provisions:                                          |  |            |   |  |            |  
|At 1 January                                         |  |            |   |  |            |  
|General                                              |  | 14,831     |   |  | 2,921      |  
|Specific                                             |  | 222        |   |  | 605        |  
|                                                     |  |            |   |  |            |  
|                                                     |  | 15,053     |   |  | 3,526      |  
|Transfer from profit and loss account                |  | 7,618      |   |  | 11,644     |  
|Irrecoverable amounts written back / (off)           |  | 66         |   |  | (117       | )
|                                                     |  |            |   |  |            |  
|At 31 December                                       |  | 22,737     |   |  | 15,053     |  
|                                                     |  |            |   |  |            |  
|Being:                                               |  |            |   |  |            |  
|General                                              |  | 22,061     |   |  | 14,831     |  
|Specific                                             |  | 676        |   |  | 222        |  
|                                                     |  |            |   |  |            |  
|                                                     |  | 22,737     |   |  | 15,053     |  
|                                                     |  |            |   |  |            |  
|Net book value:                                      |  |            |   |  |            |  
|At 31 December                                       |  | 13,341,978 |   |  | 13,679,484 |  
|                                                     |  |            |   |  |            |  
|Repayable:                                           |  |            |   |  |            |  
|On demand or at short notice                         |  | 29,808     |   |  | 6,395      |  
|In not more than three months                        |  | 36,913     |   |  | 60,767     |  
|In more than three months but not more than one year |  | 219,416    |   |  | 187,805    |  
|In more than one year but not more than five years   |  | 1,319,525  |   |  | 1,131,596  |  
|In more than five years                              |  | 11,759,053 |   |  | 12,307,974 |  
|                                                     |  |            |   |  |            |  
|At 31 December 2003                                  |  | 13,364,715 |   |  | 13,694,537 |  
|                                                     |  |            |   |  |            |  
|Fixed rate                                           |  | 2,380,538  |   |  | 3,674,765  |  
|Variable rate                                        |  | 10,984,177 |   |  | 10,019,772 |  
|Less: provisions (see note 4)                        |  | (22,737    | ) |  | (15,053    | )
|                                                     |  |            |   |  |            |  
|                                                     |  | 13,341,978 |   |  | 13,679,484 |  
|                                                     |  |            |   |  |            |  



The mortgage portfolio
in which the Company holds a beneficial interest is held on trust for the Company and the originator of the mortgage loans by Holmes Trustees Limited, a group undertaking. During the year the company increased its interest in the trust property in
one tranche. The mortgage loans are secured on residential property in England and Wales. At 31 December 2003 the total mortgage assets held on trust for the beneficiaries amounted to £23,162,383,000 (2002 - £23,104,300,000).



Page 9



---

HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003 (continued)



|7. | Debtors
|-- | -------



|              |  |            |  |           
|------------- |  | ---------- |  | ----------
|              |  | 2003 £000 |  | 2002 £000
|Other debtors |  | 24,751     |  | 28,599    
|              |  |            |  |           
|Total         |  | 24,751     |  | 28,599    
|              |  |            |  |           



|8. | Cash at bank and in hand
|-- | ------------------------



|                               |  |            |  |           
|------------------------------ |  | ---------- |  | ----------
|                               |  | 2003 £000 |  | 2002 £000
|Guaranteed Investment Contract |  | 1,182,231  |  | 1,202,356 
|Share of Trust cash            |  | 18,366     |  |          
|                               |  |            |  |           
|Total                          |  | 1,200,597  |  | 1,202,356 
|                               |  |            |  |           



The Guaranteed
Investment Contract pays interest based on LIBOR.



|9. | Deferred taxation asset
|-- | -----------------------



|                                                                    |  |            |  |           
|------------------------------------------------------------------- |  | ---------- |  | ----------
|                                                                    |  | 2003 £000 |  | 2002 £000
|As at 1 January                                                     |  | 4,449      |  | 876       
|Transfer to profit and loss account                                 |  | 2,169      |  | 3,573     
|                                                                    |  |            |  |           
|As at 31 December                                                   |  | 6,618      |  | 4,449     
|                                                                    |  |            |  |           
|Provided on:                                                        |  |            |  |           
|General provision against beneficial interest in mortgage portfolio |  | 6,618      |  | 4,449     
|                                                                    |  |            |  |           



The deferred tax asset
has been recognised under FRS 19 (Deferred tax) since it is considered more likely than not that there will be sufficient future profits against which the future reversal of the general provision can be deducted.



|10. | Creditors: amounts falling due within one year
|--- | ----------------------------------------------



|                                  |  |            |  |           
|--------------------------------- |  | ---------- |  | ----------
|                                  |  | 2003 £000 |  | 2002 £000
|Loans from group undertakings     |  | 482,320    |  | 961,292   
|Amounts due to group undertakings |  | 129,940    |  | 178,889   
|Corporation tax                   |  | 20         |  | 28        
|Other creditors                   |  | 120,787    |  | 20,907    
|Accrued interest payable          |  | 10,770     |  | 5,496     
|                                  |  |            |  |           
|Total                             |  | 743,837    |  | 1,166,612 
|                                  |  |            |  |           



Page 10



---

HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003 (continued)



|11. | Creditors: amounts falling due after more than one year
|--- | -------------------------------------------------------



|                                      |  |            |  |           
|------------------------------------- |  | ---------- |  | ----------
|                                      |  | 2003 £000 |  | 2002 £000
|Loans from group undertakings         |  | 13,627,717 |  | 13,593,987
|Start-up loans                        |  | 74,546     |  | 62,450    
|Other creditors                       |  | 143,114    |  | 102,098   
|                                      |  |            |  |           
|Total                                 |  | 13,845,377 |  | 13,758,535
|                                      |  |            |  |           
|The amounts are repayable as follows: |  |            |  |           
|                                      |  |           
|Due 2  5 years                       |  | 4,566,917  |  | 3,447,498 
|Due over 5 years                      |  | 9,278,460  |  | 10,311,037
|                                      |  |            |  |           
|Total                                 |  | 13,845,377 |  | 13,758,535
|                                      |  |            |  |           



Interest payable on
the loans from group undertakings and the start-up loans is based on LIBOR.



Amounts due over 5 years are paid in order of priority when cash is available after other commitments have been fulfilled.



|12. | Share Capital
|--- | -------------



|                                    |  |            |  |           
|----------------------------------- |  | ---------- |  | ----------
|                                    |  | 2003 £000 |  | 2002 £000
|Authorised:                         |  |            |  |           
|100 Ordinary shares of £1 each      |  |           |  |          
|                                    |  |            |  |           
|Called up, allotted and fully paid: |  |            |  |           
|2 Ordinary shares of £1 each        |  |           |  |          
|                                    |  |            |  |           



|13. | Reconciliation of Movements in Shareholders Deficit
|--- | ----------------------------------------------------



|                              |  |            |  
|----------------------------- |  | ---------- | -
|                              |  | 2003 £000 |  
|Opening shareholders deficit |  | (10,259    | )
|Retained loss for the year    |  | (5,011     | )
|                              |  |            |  
|Closing shareholders deficit |  | (15,270    | )
|                              |  |            |  



|14. | Capital Commitments and Contingent Liabilities
|--- | ----------------------------------------------



There were no outstanding capital commitments or contingent liabilities at 31 December 2003 (2002 - £nil).



|15. | Related Party Transactions
|--- | --------------------------



The Company has taken advantage of the exemption covered by paragraph 3 (c) of FRS 8, Related party disclosures, not to disclose transactions
with entities that are part of the Holmes Group.



Page 11



---

HOLMES FUNDING LIMITED



Notes to the Accounts for the year ended 31 December 2003 (continued)



|16. | Parent and Controlling Party
|--- | ----------------------------



The immediate parent of the Company is Holmes Holdings Limited, a company incorporated in Great Britain and registered in England and Wales, which
prepares the only accounts into which the Company is consolidated.



SPV Management Limited, a company incorporated in Great Britain and registered in England and Wales, holds all of the shares in the Company (one jointly with M McDermott as nominee) as trustee under a discretionary charitable trust dated 17
February 1999 for the benefit of nurses employed in the UK and for charities.



The administration, operations, accounting and financial reporting functions of the Company are performed by Abbey National plc, which is incorporated in Great Britain. During the year, Abbey National plc has
delegated administration and servicing functions in respect of the loans on behalf of the mortgages trustee and the beneficiaries to a service provider.



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