UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                    For the quarter ended September 30, 2003

                        Commission file number: 000-23745


                             BNP U.S. Funding L.L.C.
             (Exact name of registrant as specified in its charter)



                   Delaware                                   13-3972207
                   --------                                   ----------
       (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                    Identification No.)

      787 Seventh Avenue, New York, N.Y.                         10019
      ----------------------------------                         -----
   (Address of principal executive offices)                   (Zip Code)


               Registrant's telephone number, including area code:
                                 (212) 841-2000
                                 --------------




         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 for 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 whether the Registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]


         All outstanding shares of Common Stock were held by BNP PARIBAS, the
Registrant's parent Company, at September 30, 2003


         Number of Shares of Common Stock outstanding on September 30, 2003:
53,011

<PAGE>

                                 Form 10-Q Index

Part I                                                                      Page
                                                                            ----

Item 1.   Financial Statements

          Balance Sheets at September 30, 2003 (Unaudited) and
              December 31, 2002                                                3

          Statements of Income (Unaudited) for the Three Months and Nine
              Months Ended September 30, 2003 and September 30, 2002           4

          Statements of Comprehensive Income (Unaudited) for the Three Months
                and Nine Months Ended September 30, 2003 and
                September 30, 2002                                             5

          Statements of Changes in Redeemable Common Securities,
                Preferred Securities and Securityholders' Equity
                (Unaudited) for the Three Months Ended March 31, 2003,
                June 30, 2003 and September 30, 2003                           6

          Statements of Cash Flows (Unaudited) for the Nine Months Ended
                September 30, 2003 and September 30, 2002                      7

          Notes to Financial Statements (Unaudited)                            8

Item 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operation                                      16

Item 3.   Quantitative and Qualitative Disclosures about Market Risk          21

Item 4.   Controls and Procedures                                             25

Part II

Item 1.   Legal Proceedings                                                   26

Item 2.   Changes in Securities and Use of the Proceeds                       26

Item 3.   Defaults upon Senior Securities                                     26

Item 4.   Submission of Matters to a Vote of Securityholders                  26

Item 5.   Other Information                                                   26

Item 6.   Exhibits and Current Reports on Form 8-K                            26

<PAGE>

<TABLE>
Part I
Item 1.

FINANCIAL STATEMENTS

                                           BNP U.S. FUNDING L.L.C.

                                               BALANCE SHEETS
                                    (in thousands, except per share data)


                                                                  September 30, 2003     December 31, 2002
                                                                 --------------------   -------------------
                                                                      (unaudited)
<S>                                                                <C>                   <C>
ASSETS

Cash and cash equivalents                                               $    31,228           $    40,180

Investment securities (Notes 3 and 4)
Available-for-sale, at fair value                                         1,080,502             1,013,910

Receivable arising from payment for securities, pursuant
     to the application of SFAS 125, as replaced by
     SFAS 140 (Note 3)                                                       39,525                85,660

Accounts receivable                                                             450                 1,052

Accrued interest receivable                                                   7,628                 8,400

Other asset                                                                     693                 1,683
                                                                    ----------------      ----------------

TOTAL ASSETS                                                            $ 1,160,026           $ 1,150,885
                                                                    ================      ================

LIABILITIES

Accrued interest payable                                                $     1,003           $     2,634
Accrued expenses                                                                255                   204
Other liabilities                                                            92,605                86,023
                                                                    ----------------      ----------------

TOTAL LIABILITIES                                                            93,863                88,861
                                                                    ----------------      ----------------
Redeemable common securities, par value and redeemable
     value $10,000 per security; 150,000 securities authorized,
     53,011 securities issued and outstanding (Note 5)                      530,110               530,110
Preferred securities, liquidation preference $10,000 per
     security; 150,000 securities authorized, 50,000 securities
     issued and outstanding                                                 500,000               500,000
Additional paid-in capital                                                      489                 1,044
Accumulated other comprehensive income                                       26,190                26,548
Retained earnings                                                             9,374                 4,322
                                                                    ----------------      ----------------

TOTAL REDEEMABLE COMMON SECURITIES,
     PREFERRED SECURITIES AND
     SECURITYHOLDERS' EQUITY                                              1,066,163             1,062,024
                                                                    ----------------      ----------------

TOTAL LIABILITIES AND TOTAL REDEEMABLE
     COMMON SECURITIES, PREFERRED
     SECURITIES AND SECURITYHOLDERS' EQUITY                             $ 1,160,026           $ 1,150,885
                                                                    ================      ================
</TABLE>


The accompanying Notes to Financial Statements are an integral part of
these statements.

<PAGE>

<TABLE>

                                           BNP U.S. FUNDING L.L.C.

                                      STATEMENTS OF INCOME (UNAUDITED)
                                    (in thousands, except per share data)



                                                 For the Three Months             For the Nine Months
                                                 Ended September 30,              Ended September 30,
                                           -----------------------------    -----------------------------
                                               2003             2002            2003             2002
                                           ------------     ------------    ------------     ------------
<S>                                          <C>              <C>             <C>              <C>
INTEREST INCOME

Collateralized Mortgage Obligations:
     Floating-Rate REMICs                      $    73          $   203        $    311        $    802
     Fixed-Rate REMICs                             148              820             902           2,450
Mortgage Backed Securities:
     Agency ARMs                                   141              416             581           1,650
     Agency Hybrid ARMs                            246              578             984           2,112
     Agency DUSs                                 1,324            1,654           4,042           4,638
Agency Debentures                                5,168            4,154          13,321          14,763
Interest on deposits                                64              144             256             509
                                             ----------       ----------      ----------      ----------

Total                                            7,164            7,969          20,397          26,924
                                             ----------       ----------      ----------      ----------

NONINTEREST EXPENSE

Other financial instrument                      (1,594)               -            (990)              -
Fees and expenses                                 (344)            (334)         (1,065)         (1,194)
                                             ----------       ----------      ----------      ----------
                                                (1,938)            (334)         (2,055)         (1,194)
                                             ----------       ----------      ----------      ----------

NET INCOME APPLICABLE TO PREFERRED AND
     REDEEMABLE COMMON SECURITIES              $ 5,226          $ 7,635        $ 18,342        $ 25,730
                                             ==========       ==========      ==========      ==========

NET INCOME PER REDEEMABLE
     COMMON SECURITY                           $ 98.58          $144.03        $ (18.92)       $ 120.45
                                             ==========       ==========      ==========      ==========


The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>

<PAGE>

<TABLE>

                                           BNP U.S. FUNDING L.L.C.

                               STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
                                               (in thousands)



                                                          For the Three Months       For the Nine Months
                                                          Ended September 30,        Ended September 30,
                                                      -------------------------   -------------------------
                                                         2003           2002         2003           2002
                                                      ----------     ----------   ----------     ----------
<S>                                                    <C>            <C>          <C>            <C>
NET INCOME                                               $ 5,226        $ 7,635     $ 18,342       $ 25,730


OTHER COMPREHENSIVE INCOME

Net change in unrealized gain (loss) in fair value
     of available-for-sale securities that are not
     treated as collateral (Note 3) and that are
     not hedged by derivative instruments                 (3,821)        11,193         (358)        12,223
                                                        ---------      ---------    ---------      ---------


TOTAL OTHER COMPREHENSIVE INCOME                          (3,821)        11,193         (358)        12,223
                                                        ---------      ---------    ---------      ---------


COMPREHENSIVE INCOME                                     $ 1,405       $ 18,828     $ 17,984       $ 37,953
                                                        =========      =========    =========      =========

The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>

<PAGE>

<TABLE>

                                                     BNP U.S. FUNDING L.L.C.

                                      STATEMENTS OF CHANGES IN REDEEMABLE COMMON SECURITIES,
                                   PREFERRED SECURITIES AND SECURITYHOLDERS' EQUITY (UNAUDITED)
                                                          (in thousands)


                                           For the Three Months Ended March 31, 2003, June 30, 2003 and September 30, 2003
                                     --------------------------------------------------------------------------------------------
                                                                                                                     Total
                                                                                                                   Redeemable
                                                                                Accumulated                    Common Securities,
                                     Redeemable                  Additional        Other                     Preferred Securities
                                       Common       Preferred     Paid-in      Comprehensive     Retained    and Securityholders'
                                     Securities    Securities     Capital         Income          Earnings           Equity
                                     ----------    ----------    ----------    -------------     --------    --------------------
<S>                                  <C>           <C>           <C>           <C>               <C>         <C>
Balance at December 31, 2002          $ 530,110     $ 500,000     $ 1,044         $ 26,548         $ 4,322         $ 1,062,024

Net income                                                                                           6,251               6,251
Other comprehensive income                                                             486                                 486
                                      ---------     ---------     -------         --------         -------         -----------

Balance at March 31, 2003               530,110       500,000       1,044           27,034          10,573           1,068,761

Net income                                                                                           6,865               6,865
Other comprehensive income                                                           2,977                               2,977
Additional paid-in capital                                          5,500                                                5,500
Dividends paid - preferred securities                              (6,055)                         (13,290)            (19,345)
                                      ---------     ---------     -------         --------         -------         -----------

Balance at June 30, 2003                530,110       500,000         489           30,011           4,148           1,064,758

Net income                                                                                           5,226               5,226
Other comprehensive income                                                          (3,821)                             (3,821)
                                      ---------     ---------     -------         --------         -------         -----------

Balance at September 30, 2003         $ 530,110     $ 500,000       $ 489         $ 26,190         $ 9,374         $ 1,066,163
                                      =========     =========     =======         ========         =======         ===========



The accompanying Notes to Financial Statements are an integral part of these
statements.

</TABLE>

<PAGE>

<TABLE>
                                        BNP U.S. FUNDING L.L.C.

                                  STATEMENTS OF CASH FLOWS (UNAUDITED)
                                             (in thousands)



                                                                             For the Nine Months
                                                                             Ended September 30,
                                                                       --------------------------------
                                                                           2003                2002
                                                                       ------------        ------------
<S>                                                                    <C>                 <C>
OPERATING ACTIVITIES

Net income                                                                $ 18,342            $ 25,730
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Amortization                                                              908               1,127
     Loss on other financial instrument                                        990                   -
     Gain on hedge activity                                                   (716)             (1,287)
Changes in assets and liabilities:
     Interest receivable                                                       772                (535)
     Accounts receivable                                                       602               1,053
     Accrued expenses                                                           50                 174
     Accrued interest payable                                               (1,631)               (227)
     Payable for securities purchased                                            -              (9,802)
                                                                         ----------          ----------
Net cash provided by operating activities                                   19,317              16,233
                                                                         ----------          ----------

INVESTING ACTIVITIES

Purchase of investment securities:
     Agency DUSs                                                           (75,901)            (48,766)
     Agency Debentures                                                     (20,038)             (9,961)
     Agency Fixed Rate REMICs                                                    -             (10,000)
Proceeds from principal payments of securities
  available-for-sale, not treated as collateral                             35,686              31,305
Proceeds from principal payments of securities
  available-for-sale, treated as collateral                                 45,829              38,606
                                                                         ----------          ----------
Net cash provided by (used in) investing activities                        (14,424)              1,184
                                                                         ----------          ----------

FINANCING ACTIVITIES

Additional paid-in capital                                                   5,500                   -
Cash dividends - preferred securities                                      (19,345)            (19,345)
                                                                         ----------          ----------
Net cash used in financing activities                                      (13,845)            (19,345)
                                                                         ----------          ----------


NET DECREASE IN CASH AND CASH EQUIVALENTS                                   (8,952)             (1,928)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              40,180              31,084
                                                                         ----------          ----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $ 31,228            $ 29,156
                                                                         ==========          ==========

NONCASH FINANCING AND INVESTING ACTIVITIES

Decrease in receivable arising from payment for securities, pursuant
  to the application of SFAS 125, as replaced by SFAS 140 (Note 3)        $ 46,135            $ 31,877


The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>

<PAGE>

FORWARD LOOKING DISCLOSURE STATEMENT

From time to time, the company may publish, verbally or in written form,
forward-looking statements relating to such matters as anticipated financial
performance, economic conditions, interest rate levels, investment prospects and
similar matters. In fact, this Form 10-Q (or any other periodic reporting
documents required by the Securities Exchange Act of 1934 Act, as amended) may
contain forward-looking statements reflecting the current views of the Company
concerning potential future events or developments. The Private Securities
Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for
forward-looking statements. In order to comply with the terms of the "safe
harbor", the Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance and that a variety of
factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties which may
affect the operations, performance, development and results of the Company's
business include, but are not limited to, the following: uncertainties relating
to economic conditions and interest rate levels, and uncertainties relating to
government and regulatory policies. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
the statements were made.

NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION

BNP U.S. Funding L.L.C. (the "Company" or the "Registrant") is a Delaware
limited liability company formed on October 14, 1997, for the purpose of
acquiring and holding certain types of eligible securities that generate net
income for distribution to the holders of its Series A Preferred Securities (as
defined below) and its redeemable Common Securities (as defined below). The
Company has no subsidiaries and is a wholly owned subsidiary of the New York
Branch (the "Branch") of BNP PARIBAS (formerly, Banque Nationale de Paris), a
societe anonyme or limited liability corporation organized under the laws of the
Republic of France (the "Bank", "BNP PARIBAS" or "BNPP"). The Company was
continued pursuant to the Amended and Restated Limited Liability Company
Agreement of the Company (the "Company's Charter" or the "Charter") entered into
on December 5, 1997, by the Branch.

The Company was initially capitalized on October 14, 1997, with the issuance to
the Branch of one share of the Company's redeemable common securities, $10,000
par value (the "Common Securities"). On December 5, 1997 (inception), the
Company commenced operations concurrent with the issuance of 50,000
noncumulative preferred securities, Series A, liquidation preference $10,000 per
security (the "Series A Preferred Securities"), to qualified institutional
buyers, and the issuance of an additional 53,010 Common Securities to the
Branch. These issuances raised in the aggregate $1,030,115,873 of net capital
(including $5,873 of additional paid-in capital). This entire amount was used to
acquire a portfolio of debt securities (the "Initial Portfolio") at their fair
values from the Branch. The Branch contributed additional paid-in capital of
$3,000,000 and $5,500,000, on December 3, 2002, and June 3, 2003, respectively.

The Company entered into a services agreement (the "Services Agreement") with
the Branch on December 5, 1997, pursuant to which the Branch maintains the
securities portfolio of the Company (the "Portfolio") and performs other
administrative functions. All of the Company's officers and employees are
officers or employees of the Branch or the Bank or their affiliates. The
securities in the Portfolio are held by Citibank N.A., acting as trustee (the
"Trustee") under the trust agreement between the Company and Citibank N.A. dated
December 1, 1997 (the "Trust Agreement").

The accounting and financial reporting policies of the Company conform to U.S.
generally accepted accounting principles and current industry practices. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts and disclosures and may vary from
actual results.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT SECURITIES

Investments in debt securities are classified as available-for-sale and are
carried at fair value. The debt securities can be categorized as hedged or
non-hedged securities. For the hedged securities, changes in the fair market
value of both the securities and the derivatives used as hedging instruments
(cross currency and interest rate swaps) are reported in current earnings in the
Statements of Income, pursuant to application of SFAS 133, (see below,
"Accounting for Derivatives and Hedging Activities"). Unrealized gains and
losses on the non-hedged securities are reported as a component of "Other
Comprehensive Income".

Interest on securities is included in interest income and is recognized using
the interest method. Premiums and discounts are amortized in a manner that
approximates the constant yield method.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and short-term deposits with original
maturities of three months or less.

DIVIDENDS

Dividends on the Series A Preferred Securities, when, as and if declared by the
Company's Board of Directors, are payable semi-annually in arrears on a
non-cumulative basis on the fifth day of June and December of each year,
commencing June 5, 1998, at a rate per annum of 7.738% of the liquidation
preference through and including December 5, 2007. Thereafter, dividends, when,
as and if declared by the Company's Board of Directors, will be payable
quarterly in arrears on the third Wednesday of March, June, September, and
December of each year and will be calculated on a weekly basis in each quarter
at a rate per annum of the liquidation preference equal to 2.8% per annum above
one-week LIBOR for the week concerned as determined on the related LIBOR
Determination Date. Holders of Common Securities are entitled to receive
dividends when, as and if declared by the Company's Board of Directors out of
the Company's net income not required to be applied to fund dividends with
respect to the Series A Preferred Securities.

To date, the Company has declared and paid dividends as follows:

Security                                     Amount             Date Paid
-----------------------------             ------------      ------------------
Series A Preferred Securities             $ 19,345,000      June 5, 1998
Common Securities                         $  5,347,365      June 22, 1998
Series A Preferred Securities             $ 19,345,000      December 5, 1998
Common Securities                         $  8,787,127      December 15, 1998
Series A Preferred Securities             $ 19,345,000      June 5, 1999
Common Securities                         $  8,454,284      June 15, 1999
Series A Preferred Securities             $ 19,345,000      December 5, 1999
Common Securities                         $ 10,352,672      December 15, 1999
Series A Preferred Securities             $ 19,345,000      June 5, 2000
Common Securities                         $ 12,508,486      June 19, 2000
Series A Preferred Securities             $ 19,345,000      December 5, 2000
Common Securities                         $ 14,792,297      December 19, 2000
Series A Preferred Securities             $ 19,345,000      June 5, 2001
Common Securities                         $ 10,718,708      June 19, 2001
Series A Preferred Securities             $ 19,345,000      December 5, 2001
Series A Preferred Securities             $ 19,345,000      June 5, 2002
Series A Preferred Securities             $ 19,345,000      December 5, 2002
Series A Preferred Securities             $ 19,345,000      June 5, 2003



If the Bank's financial condition were to deteriorate with the consequence that
a Shift Event (as defined below) were to occur, substantially all of the Common
Securities would be redeemed automatically without prior redemption of the
Series A Preferred Securities and dividends payable on each Series A Preferred
Security could be substantially reduced or completely eliminated. In addition,
if the Bank's Tier 1 risk-based capital ratio were to decline below the minimum
percentage required by French banking regulations (currently 4%), the Company
would pay a special dividend consisting of all of the Company's net assets
(other than assets having a total market value of approximately $40,000,000) to
the Bank as holder of the Common Securities.

A "Shift Event" would be deemed to have occurred if (i) the Bank's total
risk-based capital ratio or Tier 1 risk-based capital ratio were to decline
below the minimum percentages required by French banking regulations, (ii) the
Bank were to become subject to certain specified receivership proceedings or
(iii) the French Banking Commission (Commission bancaire), in its sole
discretion, were to notify the Bank and the Company that it has determined that
the Bank's financial condition was deteriorating such that either of the
foregoing clauses (i) or (ii) would apply in the near term. French banking
regulations currently require French banks to maintain a minimum total
risk-based capital ratio of at least 8.0% and a minimum Tier 1 risk-based
capital ratio of at least 4.0%.

The Company may not pay dividends or make other distributions on the Common
Securities or the Series A Preferred Securities if, after giving effect to the
distributions, the Company's liabilities would exceed the fair value of its
assets. Additionally, as long as any Series A Preferred Securities are
outstanding, except during a Shift Period (i.e., following the occurrence of a
Shift Event causing a shift in dividend preference and before the termination
thereof), the amount of dividends on the Common Securities in any fiscal year
may not exceed the amount by which the net income of the Company for such fiscal
year exceeds the stated dividends on the Series A Preferred Securities scheduled
to be paid during such fiscal year irrespective of whether dividends on the
Series A Preferred Securities are in fact declared and paid. Additionally, other
than during a Shift Period, no dividends may be declared, paid or set apart for
payment on the Common Securities (a) with respect to any period of time included
in any Dividend Period unless full dividends have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series A Preferred Securities for the
then-current Dividend Period and (b) the Company may not declare, pay or set
apart funds for any dividends or other distributions with respect to any Common
Securities unless and until (x) full dividends on the Series A Preferred
Securities for the two most recent preceding Dividend Periods are declared and
paid, or declared and a sum sufficient for payment has been paid over to the
dividend disbursing agent for payment of such dividends and (y) the Company has
declared a cash dividend on the Series A Preferred Securities at the annual
dividend rate for the then-current Dividend Period, and sufficient funds have
been paid over to the dividend disbursing agent for payment of such cash
dividends for such then-current Dividend Period.

NET INCOME PER REDEEMABLE COMMON SECURITY

Net income per redeemable common security is calculated by dividing net income
after preferred dividends by the weighted average number of Common Securities
outstanding.

INCOME TAXES

The Company expects to be treated as a partnership for U.S. federal income tax
purposes. As a partnership is not a taxable entity, the Company will not be
subject to U.S. federal, state and local income tax on its income. Instead, each
securityholder is required to take into account its allocable share of items of
income, gain, loss and deduction of the partnership in computing its U.S.
federal tax liability. Accordingly, the Company has made no provision for income
taxes in the accompanying statements of income.

ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES

Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities", requires that an entity
measure all derivatives at fair value and recognize those derivatives as either
assets or liabilities on the balance sheet. The change in the derivative's fair
value is generally to be recognized in current period earnings. However, if
certain conditions are met, a derivative may be specifically designated as a
hedge of an exposure to changes in fair value, variability of cash flows, or
certain foreign currency exposures.

The Company has made an assessment of all its financial instruments and
concluded that it holds freestanding derivative instruments but no embedded
derivative instruments at September 30, 2003. As part of its asset management
activities the Company uses foreign exchange and interest rate swaps to modify
the interest rate and foreign exchange characteristics of existing assets. The
interest rate swaps have a high correlation between the instrument and the asset
being hedged, both at inception and throughout the hedge period.

FOREIGN CURRENCY TRANSLATION

Assets denominated in foreign currencies are translated to U.S. dollars using
applicable rates of exchange.

All of the Company's assets denominated in a foreign currency are included in
its available-for-sale securities portfolio, and their foreign currency exchange
risk is hedged by means of cross currency swaps. In accordance with the
requirements of SFAS 133, the change in fair value, due to the change in the
foreign currency exchange rate, of both the hedged securities and the hedging
instruments is recorded in current period earnings.

Revenues and expenses are translated monthly at amounts which approximate
weighted average exchange rates.

NOTE 3--RECEIVABLE ARISING FROM PAYMENT FOR SECURITIES

Pursuant to the application of SFAS 125, as replaced by Statement of Financial
Accounting Standards No. 140 ("SFAS 140"), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" addresses the
accounting for the transfer of financial assets. Under SFAS 140, transfers of
financial assets that do not meet certain sale accounting requirements must be
accounted for as a secured borrowing transaction with a pledge of collateral.

Due to the potential consequences of a Shift Event (as described above), the
Company's purchase of the Initial Portfolio from the Branch did not meet certain
SFAS 125, as replaced by SFAS 140, sale accounting requirements. Therefore, the
purchase of the Initial Portfolio has been accounted for as a secured borrowing
transaction with a pledge of collateral. In accounting for this transaction as a
secured borrowing transaction in accordance with SFAS 125, as replaced by SFAS
140, the Company has recorded a receivable in an amount equal to the remaining
amount paid to the Branch to acquire the Initial Portfolio. In this case,
however, having delivered the securities in the Initial Portfolio to the
Company, neither the Branch nor BNPP has any further obligation to the Company
to repay any part of the purchase price for the Initial Portfolio or otherwise
to repurchase or redeem any securities in the Initial Portfolio.

The Company has not sold or repledged the collateral; the securities within the
Initial Portfolio mature or prepay over time. As they do, the Company recognizes
the cash proceeds as a reduction in the receivable arising from payment for
securities. The collateral at September 30, 2003 and December 31, 2002 is
reported in Note 4 below.

NOTE 4--INVESTMENT SECURITIES

The amortized cost and estimated fair value of available-for-sale securities
were as follows based on management's prepayment assumptions (in thousands):

<TABLE>
September 30, 2003
------------------
                                                                Gross            Gross
                                                              Unrealized       Unrealized
 Non-Collateral                           Amortized Cost        Gains            Losses        Fair Value
----------------                          --------------      ----------       ----------      ----------
<S>                                       <C>                 <C>              <C>             <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                      $    2,380        $      38        $     ---      $     2,418
   Fixed-Rate REMICs                             10,000            1,475              ---           11,475
Mortgage Backed Securities:
   Agency ARMs                                    6,128               10               19            6,119
   Agency Hybrid ARMs                            10,538              195                7           10,726
   Agency DUSs                                  425,899           56,101              ---          482,000
Agency Debentures                               506,374           61,390              ---          567,764
                                             ----------        ---------        ---------      -----------
     Total Non-Collateral                    $  961,319        $ 119,209        $      26      $ 1,080,502
                                             ----------        ---------        ---------      -----------
Collateral
----------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                      $   13,013        $     ---        $     191      $    12,822
   Fixed-Rate REMICs                              5,050               20              ---            5,070
Mortgage Backed Securities:
   Agency ARMs                                    7,983              131               10            8,104
   Agency Hybrid ARMs                            13,479              256               25           13,710
   Agency DUSs                                      ---              ---              ---              ---
Agency Debentures                                   ---              ---              ---              ---
                                             ----------        ---------        ---------      -----------
     Total Collateral                        $   39,525        $     407        $     226      $    39,706
                                             ----------        ---------        ---------      -----------
September 30, 2003 Total Portfolio           $1,000,844        $ 119,616        $     252      $ 1,120,208
----------------------------------           ==========        =========        =========      ===========

                                                                 Gross            Gross
                                                               Unrealized       Unrealized
December 31, 2002                          Amortized Cost        Gains            Losses        Fair Value
-----------------                          --------------      ----------       ----------      ----------

Non-Collateral
--------------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                      $    6,286        $      73        $       2      $     6,357
   Fixed-Rate REMICs                             10,654            1,652              ---           12,306
Mortgage Backed Securities:
   Agency ARMs                                   14,182              116              ---           14,298
   Agency Hybrid ARMs                            18,275              216                7           18,484
   Agency DUSs                                  365,509           53,065              ---          418,574
Agency Debentures                               486,760           57,131              ---          543,891
                                             ----------        ---------        ---------      -----------
     Total Non-Collateral                    $  901,666        $ 112,253        $       9      $ 1,013,910
                                             ----------        ---------        ---------      -----------
Collateral
----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                      $   19,081        $      11        $     186      $    18,906
   Fixed-Rate REMICs                             35,655              771              ---           36,426
Mortgage Backed Securities:
   Agency ARMs                                   11,525              213               26           11,712
   Agency Hybrid ARMs                            19,399              234               35           19,598
   Agency DUSs                                      ---              ---              ---              ---
Agency Debentures                                   ---              ---              ---              ---
                                             ----------        ---------        ---------      -----------
     Total Collateral                        $   85,660        $   1,229        $     247      $    86,642
                                             ----------        ---------        ---------      -----------
December 31, 2002 Total Portfolio            $  987,326        $ 113,482        $     256      $ 1,100,552
---------------------------------            ==========        =========        =========      ===========

</TABLE>

The breakdown of the Company's available-for-sale securities by category and
weighted average life distribution (stated in terms of amortized cost) is
summarized below based on management's prepayment assumptions (Actual maturities
may differ from maturities shown below due to prepayments) (in thousands):

<TABLE>
September 30, 2003
------------------
                                                            Due after 1    Due after 5
                                           Due in 1 year     through 5      through 10     Due after 10
Non-Collateral                                or less          years          years           years            Total
--------------                             -------------    -----------    -----------     ------------     -----------
<S>                                        <C>              <C>            <C>             <C>              <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                     $     1,468      $     912      $     ---       $      ---      $     2,380
   Fixed-Rate REMICs                                ---         10,000            ---              ---           10,000
Mortgage Backed Securities:
   Agency ARMs                                    2,530          3,598            ---              ---            6,128
   Agency Hybrid ARMs                             3,466          7,072            ---              ---           10,538
   Agency DUSs                                      ---        307,212        118,687              ---          425,899
Agency Debentures                                   ---        506,374            ---              ---          506,374
                                            -----------      ---------      ---------       ----------      -----------
     Total Non-Collateral                   $     7,464      $ 835,168      $ 118,687       $      ---      $   961,319
                                            -----------      ---------      ---------       ----------      -----------

Collateral
----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                     $     4,801      $   8,212      $     ---       $      ---      $    13,013
   Fixed-Rate REMICs                              5,050            ---            ---              ---            5,050
Mortgage Backed Securities:
   Agency ARMs                                      126          4,591            732            2,534            7,983
   Agency Hybrid ARMs                               206         11,418          1,855              ---           13,479
   Agency DUSs                                      ---            ---            ---              ---              ---
Agency Debentures                                   ---            ---            ---              ---              ---
                                            -----------      ---------      ---------       ----------      -----------
     Total Collateral                       $    10,183      $  24,221      $   2,587       $    2,534      $    39,525
                                            -----------      ---------      ---------       ----------      -----------
September 30, 2003 Total Portfolio          $    17,647      $ 859,389      $ 121,274       $    2,534      $ 1,000,844
----------------------------------          ===========      =========      =========       ==========      ===========


December 31, 2002
-----------------
                                                            Due after 1    Due after 5
                                           Due in 1 year     through 5      through 10     Due after 10
Non-Collateral                                or less          years          years           years            Total
--------------                             -------------    -----------    -----------     ------------     -----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                     $     4,854      $   1,432      $     ---       $      ---      $     6,286
   Fixed-Rate REMICs                                654         10,000            ---              ---           10,654
Mortgage Backed Securities:
   Agency ARMs                                    5,373          8,752            ---               57           14,182
   Agency Hybrid ARMs                             1,074         17,201            ---              ---           18,275
   Agency DUSs                                      ---        170,495        195,014              ---          365,509
Agency Debentures                                   ---        486,760            ---              ---          486,760
                                            -----------      ---------      ---------       ----------      -----------
     Total Non-Collateral                   $    11,955      $ 694,640      $ 195,014       $       57      $   901,666
                                            -----------      ---------      ---------       ----------      -----------

Collateral
----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                     $       546      $  18,535      $     ---       $      ---      $    19,081
   Fixed-Rate REMICs                             35,655            ---            ---              ---           35,655
Mortgage Backed Securities:
   Agency ARMs                                      198          7,831          2,872              624           11,525
   Agency Hybrid ARMs                               ---         19,399            ---              ---           19,399
   Agency DUSs                                      ---            ---            ---              ---              ---
Agency Debentures                                   ---            ---            ---              ---              ---
                                            -----------      ---------      ---------       ----------      -----------
     Total Collateral                       $    36,399      $  45,765      $   2,872       $      624      $    85,660
                                            -----------      ---------      ---------       ----------      -----------
December 31, 2002 Total Portfolio           $    48,354      $ 740,405      $ 197,886       $      681      $   987,326
---------------------------------           ===========      =========      =========       ==========      ===========
</TABLE>

The breakdown of the Company's available-for-sale securities by category and
yield, before the result of hedges, is summarized below:

<TABLE>
                                               Due after 1    Due after 5
                              Due in 1 year     through 5      through 10     Due after 10                Yield after
September 30, 2003               or less          years          years           years           Total      Hedging
------------------            -------------    -----------    -----------     ------------      -------   -----------
<S>                           <C>              <C>            <C>             <C>               <C>        <C>
Collateralized Mortgage
Obligations:
   Floating-Rate REMICs             2.31%            1.88%          ---%            ---%         2.08%        2.08%
   Fixed-Rate REMICs                6.49             6.72           ---             ---          6.57         4.52
Mortgage Backed Securities:
   Agency ARMs                      4.19             4.27          3.80            3.57          4.13         4.13
   Agency Hybrid ARMs               5.26             4.22           ---             ---          4.38         4.38
   Agency DUSs                       ---             6.52          6.06             ---          6.38         1.37
Agency Debentures                    ---             5.96           ---             ---          5.96         3.49
                                  -------          -------       -------         -------       -------      -------
     Total                          4.92%            6.06%         6.01%           3.57%         5.99%        2.69%
                                  =======          =======       =======         =======       =======      =======
September 30, 2002
------------------

Collateralized Mortgage
Obligations:
   Floating-Rate REMICs             3.06%            2.62%          ---%            ---%         2.76%        2.76%
   Fixed-Rate REMICs                4.96             6.53           ---             ---          6.51         6.08
Mortgage Backed Securities:
   Agency ARMs                      2.16             6.17          5.18            4.86          5.97         5.97
   Agency Hybrid ARMs               5.32             5.03           ---             ---          5.07         5.07
   Agency DUSs                       ---             6.86          6.08             ---          6.37         1.90
Agency Debentures                    ---             6.20           ---             ---          6.20         4.04
                                  -------          -------       -------         -------       -------      -------
     Total                          3.89%            6.10%         6.07%           4.86%         6.03%        3.53%
                                  =======          =======      ========         =======       =======      =======
</TABLE>


NOTE 5--REDEEMABLE COMMON SECURITIES

General

The Company is authorized to issue up to 150,000 Common Securities; as of
September 30, 2003 and December 31, 2002, the Company had outstanding 53,011
Common Securities, all of which were held by the Branch. The Bank has agreed
with the Company in the Contingent Support Agreement that, so long as any Series
A Preferred Securities are outstanding, it will maintain direct or indirect
ownership of 100% of the outstanding Common Securities.

Dividends

Holders of Common Securities are entitled to receive dividends when, as and if
declared by the Company's Board of Directors out of the Company's net income not
required to be applied to fund dividends with respect to the Series A Preferred
Securities; provided that so long as any Series A Preferred Securities are
outstanding, no dividends or other distributions (including redemptions and
purchases) may be made with respect to the Common Securities unless full
dividends on all Series A Preferred Securities have been paid for the current
and the two immediately preceding Dividend Periods (except during a Shift Period
if the Bank does not distribute dividends on its common stock).

Redemption Requirements

If the Bank's financial condition were to deteriorate with the consequence that
a Shift Event were to occur, substantially all the Common Securities would be
redeemed automatically without prior redemption of any Series A Preferred
Securities.

Voting Rights

Subject to the rights, if any, of the holders of Series A Preferred Securities
(in particular the right to remove and replace any Independent Director and to
elect an additional director, in certain circumstances), all voting rights are
vested in the Common Securities. The holders of Common Securities are entitled
to one vote per security.

Rights Upon Liquidation

In the event of the dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, after there shall have been paid or set aside
for the holders of all Series A Preferred Securities the full preferential
amounts to which such holders are entitled, the holders of Common Securities
will be entitled to share equally and ratably in any assets remaining after the
payment of all debts and liabilities. Upon a liquidation of the Company during a
Shift Period, the Common Securities will have a preference over the Series A
Preferred Securities to the extent, if any, that the liabilities of the Bank
(including any debt instruments, such as titres participatifs and prets
participatifs) have not been paid in full.

NOTE 6--RELATED PARTY TRANSACTIONS

The Company entered into a Services Agreement with the Branch on December 5,
1997 pursuant to which the Branch manages the securities portfolio of the
Company and performs other administrative functions. Expenses incurred under
such Agreement were $720,561 and $990,510 for the nine months ended September
30, 2003 and September 30, 2002, respectively. Under a specific allocation
methodology, the costs of personnel servicing the Company is based on actual
man-hours devoted to the activities of the Company and remains at arms length.

The counterparty to all cross currency and interest rate swaps is BNP Paribas.
The fair value of these swap transactions is disclosed in Note 7.

The Branch also serves as the dividend paying agent, registrar and transfer
agent with respect to the Series A Preferred Securities. The fee is $4,000 per
annum for these services.

All of the Company's officers and employees and all but one of the members of
the Company's Board of Directors are officers and employees of the Branch or
BNP Paribas or their affiliates.

NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of securities at September 30, 2003 and December 31, 2002 were
obtained from independent market sources and are summarized in Note 4. The
carrying values of securities, as shown in Note 4, approximates their fair
value. The fair value of the receivable arising from payment for securities,
pursuant to the application of SFAS 125, as replaced by SFAS 140, was
$39,705,579 and $86,641,699 at September 30, 2003 and December 31, 2002,
respectively.

The carrying value of cash and cash equivalents, accounts receivable, accrued
interest receivable, accrued expenses, and accounts payable approximates fair
value.

The fair value of the cross currency and interest rate swaps was $(91,912,211)
and $(84,340,226) at September 30, 2003 and December 31, 2002, respectively, and
are reflected in "Other assets" and "Other liabilities".

NOTE 8-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company maintains an overall risk management strategy that incorporates the
use of derivative instruments to hedge the interest rate risk and foreign
currency risk of fixed-income securities. As a result of interest rate or
exchange rate fluctuations, hedged fixed-rate assets will appreciate or
depreciate in market value. The effect of this unrealized appreciation or
depreciation is expected to substantially offset the Company's gains or losses
on the derivative instruments that are linked to these hedged assets and
liabilities. The Company considers its use of derivatives to be a prudent method
of managing interest rate and foreign currency rate sensitivity, as it prevents
earnings from being exposed to undue risk posed by changes in interest and
exchange rates in compliance with the Company's policies.

Derivative instruments that are used as part of the Company's interest rate risk
management strategy include interest rate and cross currency swap contracts that
have indices related to the pricing of specific balance sheet assets and
liabilities. As a matter of policy, the Company does not use highly leveraged
derivative instruments for interest rate risk management. Interest rate swaps
generally involve the exchange of fixed and variable rate interest payments
between two parties, based on a common notional principal amount and maturity
date.

By using derivative instruments, the Company exposes itself to credit and market
risk. If a counterparty fails to fulfill its performance obligations under a
derivative contract, the Company's credit risk will equal the fair value gain in
a derivative. Generally, when the fair value of a derivative contract is
positive, this indicates that the counterparty owes the Company, thus creating a
repayment risk for the Company. When the fair value of a derivative contract is
negative, the Company owes the counterparty and, therefore, assumes no repayment
risk. The Company minimizes the credit (or repayment) risk in derivative
instruments by entering into transactions with BNP PARIBAS S.A. Consequently,
the Company does not require that collateral be provided by the counterparty.

Market risk is the adverse effect that a change in interest rates, currency, or
implied volatility rates might have on the value of a financial instrument. The
Company does not expose itself to market risk by using derivatives but rather
reduces market risk since it uses derivatives only for fair value hedges that
effectively offset fluctuations in the fair value of the hedged items.

The Company formally documents all relationships between derivatives and hedged
items, as well as its risk management objectives and strategies for undertaking
various hedge transactions. This process includes linking all derivatives that
are designated as fair value or cash flow hedges to (1) assets and liabilities
on the balance sheet, (2) firm commitments or (3) forecasted transactions.


Fair Value Hedges

The Company mainly enters into interest rate swaps and cross currency interest
rate swaps to convert fixed rate Agency Debentures, Agency DUSs and Fixed-Rate
REMICs into variable rate securities.

The fair value of the hedging instruments was $(92,605,724) and $(86,023,329) at
September 30, 2003 and December 31, 2002, respectively, and has been recorded in
"Other liabilities". It has been offset, except for the ineffective portion of
the hedge, by the revaluation of the respective hedged investment securities.
The fair value of the hedging instruments does not include accrued interest
receivable and payable, which are shown separately on the balance sheet. For the
nine months ended September 30, 2003, the Company recognized a gain of $716,866
in current year earnings related to the ineffective portion of fair value
hedges. The Company also recognized a loss of $(989,590) in current year
earnings related to a cross currency swap that no longer qualified as a fair
value hedging instrument.

Cash Flow Hedges

For the nine months ended September 30, 2003 and September 30, 2002, the Company
did not enter into cash flow hedge transactions and it is not the intention of
the Company to use interest rate swaps to convert floating rate financial
instruments to fixed rate financial instruments as part of a cash flow hedge
strategy.


At September 30, 2003 and December 31, 2002, the Company had outstanding
interest rate and cross currency swap agreements with a notional principal
amount of $725,298,358 and $664,908,744, respectively.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

General

The Company was formed on October 14, 1997, and commenced operations on December
5, 1997, by the sale to qualified institutional buyers of 50,000 Series A
Preferred Securities and the sale to the Branch of 53,010 Common Securities.
Together, such sales raised net capital of $1,030,115,873, which the Company
used to purchase the Initial Portfolio from the Branch. The Branch has
contributed $5,500,000 and $3,000,000 of additional paid-in capital on June 3,
2003 and December 3, 2002, respectively.

All of the Company's officers and employees and all but one of the members of
the Company's Board of Directors are officers and employees of the Branch or BNP
Paribas or their affiliates.

The Company's sole business is to acquire, hold and manage debt instruments,
largely consisting of mortgage obligations, in the Portfolio, which generate net
income for distribution to securityholders. The Company's major source of income
is interest generated by the securities in the Portfolio.

Results of Operations

NINE MONTH PERIOD

The following discussion pertains to the Nine month period ended September 30,
2003 (the "2003 Period") and the Nine month period ended September 30, 2002 (the
"2002 Period").

For the 2003 Period and 2002 Period, the Company had revenues of $20,396,192 and
$26,923,934, respectively. These amounts consisted of interest income on the
investment securities, the unrealized gain/loss on hedged securities and
derivatives used as hedging instruments, and interest on deposits.

For the 2003 Period and 2002 Period, interest on the securities in the Portfolio
amounted to $36,188,940 and $36,472,220, respectively, representing an aggregate
yield of 5.99% and 6.03%, respectively. Interest earned and average yield with
respect to each category of security in the Portfolio was as follows (yield
based on average amortized cost):

                                             2003                   2002
                                     --------------------   --------------------

Floating-Rate REMICs..............   $    311,195   2.08%   $    801,796   2.76%
Fixed-Rate REMICs.................   $  1,311,816   6.57%   $  2,621,051   6.51%
Agency ARMs.......................   $    581,077   4.13%   $  1,650,190   5.97%
Agency Hybrid ARMs................   $    983,538   4.38%   $  2,111,679   5.07%
Agency DUS........................   $ 18,805,449   6.38%   $ 15,549,006   6.37%
Agency Debentures.................   $ 14,195,865   5.96%   $ 13,738,498   6.20%

The yield on Agency Debentures is based on U.S. dollar denominated securities
which excludes the Japanese Yen denominated securities.

During the 2003 Period, the yields on the Agency DUSs, Agency Debentures and
Fixed-Rate REMICs were approximately 1.37%, 3.49% and 4.52%, respectively, when
taking into account the income from the derivative products used to hedge these
securities. During the 2002 Period, the yields on the Agency DUSs, Agency
Debentures and Fixed-Rate REMICS were approximately 1.90%, 4.04%, and 6.08%,
respectively, when taking into account the income from the derivative products
used to hedge these securities.

The average amortized cost of the Portfolio during the 2003 Period and the 2002
Period was $993,586,956 and $986,821,307, respectively. This reflects the
following prepayments and reinvestments:

PREPAYMENTS                                    2003                  2002
------------------------------           ----------------      ----------------
Floating-Rate REMICs..................     $  9,941,546          $ 22,121,586
Fixed-Rate REMICs.....................     $ 31,259,753          $    242,812
Agency ARMs...........................     $ 11,416,919          $ 17,547,852
Agency Hybrid ARMs....................     $ 13,383,518          $ 27,358,604
Agency DUS............................     $ 15,513,112          $  2,640,095
Agency Debentures.....................     $        ---          $       ---


REINVESTMENTS                                  2003                  2002
------------------------------           ----------------      ----------------
Floating-Rate REMICs..................     $        ---          $        ---
Fixed-Rate REMICs.....................     $        ---          $ 10,000,000
Agency ARMs...........................     $        ---          $        ---
Agency Hybrid ARMs....................     $        ---          $        ---
Agency DUS............................     $ 75,902,726          $ 48,766,532
Agency Debentures.....................     $ 20,038,400          $  9,960,584


The Company also recorded interest income from short-term investments for the
2003 Period and 2002 Period of $255,505 and $509,280, respectively. These
amounts are attributable to the interest earned on (i) interest payments on
securities in the Portfolio, (ii) prepayments of principal pending their
reinvestment and (iii) short-term investments classified as cash equivalents.

As of September 30, 2003, and September 30, 2002, as calculated by aggregate
amortized cost, approximately 49.41% and 51.64%, respectively, of the Portfolio
consisted of collateralized mortgage obligations (Floating-Rate REMICs and
Fixed-Rate REMICs) and mortgage backed securities (Agency ARMs, Agency Hybrid
ARMs and Agency DUSs), and approximately 50.59% and 48.36%, respectively,
consisted of Agency Debentures. As of September 30, 2003, and September 30,
2002, floating rate securities accounted for approximately 5.35% and 10.39%,
respectively, of the Portfolio's collateralized mortgage obligations and
mortgage backed securities. In addition, a significant portion of the Agency
Debentures and the Agency DUSs are hedged so that in all but one case, the fixed
interest rates received on the bonds are converted into prevailing floating
rates.

The aggregate market value of the securities in the Portfolio as of September
30, 2003 and September 30, 2002 was higher than the amortized cost by
approximately 11.93% and 10.73%, respectively, due to a net decrease in interest
rates from the time of their original purchase. For the hedged securities,
changes in the fair market value of both the securities and the derivatives used
as hedging instruments (cross currency and interest rate swaps) are reported in
current earnings in the Statements of Income, pursuant to application of SFAS
133 (Note 2). Unrealized gains and losses on the non-hedged securities are
reported as a component of Other Comprehensive Income.

Operating expenses for the 2003 Period and 2002 Period totaled $1,064,441 and
$1,193,833, respectively. Operating expenses consisted largely of fees paid to
the Branch under the Services Agreement, fees to Citibank as Trustee, consulting
fees and audit fees. Expenses incurred under the Services Agreement for the 2003
Period and 2002 Period totaled $720,561 and $990,510, respectively.

The Company's net income for the 2003 Period and 2002 Period was $18,342,161 and
$25,730,101, respectively. As of September 30, 2003, the Company has declared
and paid dividends as follows:

Security                             Amount                 Date Paid
---------                          ----------               -----------
Series A Preferred                 $19,345,000              June 5, 2003
Series A Preferred                 $19,345,000              December 5, 2002
Series A Preferred                 $19,345,000              June 5, 2002


THREE MONTH PERIOD

The following discussion pertains to the Three month period ended September 30,
2003 (the "2003 Quarter") and the Three month period ended September 30, 2002
(the "2002 Quarter").

For the 2003 Quarter and 2002 Quarter, the Company had revenues of $7,164,558
and $7,968,640, respectively. These amounts consisted of interest income on the
investment securities, the unrealized gain/loss on hedged securities and
derivatives used as hedging instruments, and interest on deposits.

For the 2003 Quarter and 2002 Quarter, interest on the securities in the
Portfolio amounted to $12,135,575 and $12,163,521, respectively, representing an
aggregate yield of 6.03% and 5.92%, respectively. Interest earned and average
yield with respect to each category of security in the Portfolio was as follows
(yield based on average amortized cost):

                                             2003                   2002
                                     --------------------   --------------------

Floating-Rate REMICs...............  $     73,152   1.75%   $    202,723   2.52%
Fixed-Rate REMICs..................  $    288,299   6.64%   $    941,101   6.40%
Agency ARMs........................  $    141,327   3.70%   $    416,164   5.20%
Agency Hybrid ARMs.................  $    246,283   3.87%   $    578,393   4.86%
Agency DUSs........................  $  6,642,674   6.42%   $  5,408,695   6.22%
Agency Debentures..................  $  4,743,840   6.00%   $  4,616,445   6.08%


The yield on Agency Debentures is based on U.S. dollar denominated securities
which excludes the Japanese Yen denominated securities.

During the 2003 Quarter, the yields on the Agency DUSs, Agency Debentures and
Fixed-Rate REMICs were approximately 1.28%, 4.04% and 3.41%, respectively, when
taking into account the income from the derivative products used to hedge these
securities. During the 2002 Quarter, the yields on the Agency DUSs, Agency
Debentures and Fixed-Rate REMICS were approximately 1.95%, 3.42%, and 5.70%,
respectively, when taking into account the income from the derivative products
used to hedge these securities.

The average amortized cost of the Portfolio during the 2003 Quarter and 2002
Quarter was $995,301,335 and $993,043,825, respectively. This reflects the
following prepayments and reinvestments:

PREPAYMENTS                                    2003                  2002
------------------------------           ----------------      ----------------
Floating-Rate REMICs..................     $  3,524,548          $  6,010,133
Fixed-Rate REMICs.....................     $  6,609,345          $     97,875
Agency ARMs...........................     $  3,277,963          $  5,353,765
Agency Hybrid ARMs....................     $  3,787,340          $  7,372,157
Agency DUS............................     $  2,225,883          $    907,742
Agency Debentures.....................              ---          $        ---


REINVESTMENTS                                 2003                   2002
------------------------------           ----------------      ----------------
Floating-Rate REMICs..................     $        ---          $        ---
Fixed-Rate REMICs.....................     $        ---          $        ---
Agency ARMs...........................     $        ---          $        ---
Agency Hybrid ARMs....................     $        ---          $        ---
Agency DUS............................     $ 37,780,977          $ 39,446,571
Agency Debentures.....................     $        ---          $        ---


The Company also recorded interest income from short-term investments for the
2003 Quarter and 2002 Quarter of $64,458 and $144,200, respectively. These
amounts are attributable to the interest earned on (i) interest payments on
securities in the Portfolio, (ii) prepayments of principal pending their
reinvestment and (iii) short-term investments classified as cash equivalents.

Operating expenses for the 2003 Quarter and 2002 Quarter totaled $344,449 and
$333,567, respectively. Operating expenses consisted largely of fees paid to the
Branch under the Services Agreement, fees to Citibank as Trustee, consulting
fees and audit fees. Expenses incurred under the Services Agreement for the 2003
Quarter and 2002 Quarter totaled $240,653 and $272,445, respectively.

The Company's net income for the 2003 Quarter and 2002 Quarter was $5,225,973
and $7,635,072, respectively.

Investment Income

The interest income on the investment securities includes interest income on the
remaining securities in the Initial Portfolio, which are considered to be
collateral held by the Company and which are no longer recognized on the balance
sheet pursuant to new guidance in Statement of Financial Accounting Standards
No. 140 ("SFAS 140"), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, a replacement of SFAS 125", which
modified SFAS 125 in this respect, as explained in Note 3 to the financial
statements. The receivable for the consideration paid to the Branch for the
Initial Portfolio is recognized on the balance sheet and is an asset of similar
size as the remaining securities in the Initial Portfolio. The balance sheet
presentation results from compliance with SFAS 140 but does not reflect the
economic substance of the transaction, as further explained in the section on
the application of SFAS 125, as replaced by SFAS 140, below. For all economic
intent and purposes, the securities in the Initial Portfolio are owned by the
Company and managed as any other investment security, with related revenues
belonging to the Company and recorded as such in the income statements.

Receivable Arising from Payment for Securities

Due to the potential consequences of a Shift Event (as defined in Item 1 Note 2
herein), the Company's purchase of the Initial Portfolio (as defined in Item 1
herein) from the Branch did not meet certain SFAS 125, as replaced by SFAS 140,
sale accounting requirements. Accordingly, the Company recorded at December 5,
1997 a receivable for the consideration paid to the Branch for the Initial
Portfolio treated as collateral. As a legal and economic matter, however, there
is no such receivable since (a) neither the Bank nor the Branch has any
obligation to repay any part of the purchase price for the Initial Portfolio or
to repurchase or redeem any of the securities included therein, and (b) the
Company has no obligation to return any of such securities to the Bank or the
Branch (except in the limited circumstances and to the extent that the
occurrence of a Shift Event under the Charter would require the transfer of any
assets held by the Company at the time). As the securities in the Initial
Portfolio are paid, the receivable will be deemed to be realized by an amount
corresponding to the amount of the payments received. At September 30, 2003 and
December 31, 2002, the receivable arising from payment for securities amounted
to $39,525,295 and $85,660,254, respectively. The decrease in the amount of such
receivable between the two dates reflects the prepayment of securities in the
Initial Portfolio. The Company recognized the cash proceeds of such prepayments
as a reduction in the receivable. Such decreases in the receivable did not
affect the Company's results of operations or cash flow. Disclosures required
under SFAS 125, as replaced by SFAS 140, are included in Note 3.

Liquidity and Capital Resources

The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. The
Company's sole liquidity needs are to acquire reinvestment securities as
original securities repay or prepay and to pay dividends on the Series A
Preferred Securities. The acquisition of reinvestment securities is funded with
the proceeds of principal repayments or prepayments on original securities, and
the payments of dividends on the Series A Preferred Securities are funded
through interest income from the securities in the Portfolio.

The low interest rate environment has adversely affected the Company's income.
The Company has not declared dividends on the Common Securities since June 2001
in order to retain earnings available for the payment of dividends to the
holders of the Series A Preferred Securities. Dividends to the Preferred
Securityholders may be paid out of (i) net income, determined without regard to
capital gains or losses, or (ii) amounts contributed by the Bank or the Branch
to the Company's capital. In the continued low interest rate environment in
2003, the Branch contributed $5,500,000 of additional paid-in capital, which was
used to facilitate the semi-annual payment of dividends to the holders of the
Series A Preferred Securities.

Based on 2003 projected earnings, the Company may require an additional cash
contribution from the Branch to ensure payment of preferred dividends. The
Company cannot make any assurances that further decreases in interest rates or a
sustained low interest rate environment will not have a further adverse effect
on the Company's income.

BNP PARIBAS Group's total and Tier 1 risk-based capital ratios at September 30,
2003 were 13.0% and 9.2%, and at December 31, 2002 were 10.9% and 8.1%, which
are well above the minimum standards required by French banking regulations,
currently 8% for total risk-based capital and 4% for Tier 1 risk-based capital.
A "Shift Event" would occur if BNP PARIBAS' risk-based capital fell below these
minimum standards of 8% and 4%, respectively. See Note 2 of the attached
financial statements for a detailed explanation of "Shift Events".

Critical Accounting Policies

Management believes its critical accounting policies relate to recognition and
valuation of financial instruments, as further defined in Item 1, Note 2.

Accounting and Reporting Developments

In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 150 ("SFAS No. 150"), "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". The statement requires that an issuer classify financial instruments
that are within its scope as a liability. Many of those instruments were
classified as equity under previous guidance. SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003. Otherwise, it
is effective at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS No. 150 will have no impact on the Company's
unaudited Balance Sheet or Statement of Income.

In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS No. 149"), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149").
SFAS 149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133, and decisions made in connection with other FASB
projects dealing with financial instruments and in connection with
implementation issues raised in relation to the application of the definition of
a derivative and characteristics of a derivative that contains financing
components. In addition, it clarifies when a derivative contains a financing
component that warrants special reporting in the unaudited statement of cash
flows. SFAS 149 is effective for contracts entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003. We do not
anticipate SFAS 149 having a material impact on our unaudited Balance Sheet or
Statement of Income.

SFAS 133 requires that an entity measure all derivatives at fair value and
recognize those derivatives as either assets or liabilities on the balance
sheet. The change in the derivative's fair value is generally to be recognized
in current period earnings. However, if certain conditions are met, a derivative
may be specifically designated as a hedge of an exposure to changes in fair
value, variability of cash flows, or certain foreign currency exposures.

The Company has made an assessment of all its financial instruments and
concluded that it holds freestanding derivative instruments but no embedded
derivative instruments at September 30, 2003. As part of its asset management
activities the Company uses foreign exchange and interest rate swaps to modify
the interest rate and foreign exchange characteristics of existing assets. The
interest rate swaps have a high correlation between the instrument and the asset
being hedged, both at inception and throughout the hedge period.

All of the Company's outstanding hedging transactions are fair value hedges. For
the periods ended September 30, 2003 and September 30, 2002, the Company
recognized gain of $716,866 and $1,287,125, respectively, in earnings related to
the ineffective portion of fair value hedges. The fair value of these hedging
instruments was $(92,605,724) at September 30, 2003 and $(86,023,329) at
December 31, 2002, and has been recorded in "Other liabilities". It has been
offset, except for the ineffective portion of the hedge, by the revaluation of
the respective hedged investment securities. The fair value of the hedging
instruments does not include accrued interest receivable and payable, which are
shown separately on the balance sheet.

For a further discussion on derivative instruments and hedging activities, see
Note 8 to the financial statements.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Sensitivity

The Company's principal market risk exposure is to changes in interest rates.
This exposure arises from its investments in collateralized mortgage
obligations, mortgage-backed securities, agency debentures, agency DUSs and
certain derivative instruments used by the Company to modify interest rate
exposure.

The outstanding principal amount and estimated fair value as of September 30,
2003, by each category of investment, is depicted in Item 1.

Interest Rate Risk

The Company's income consists primarily of interest payments on collateralized
mortgage obligations, mortgage-backed securities, agency debentures and agency
DUSs. Currently, the Company uses derivative products to manage a portion of its
interest rate risk.

During the nine month period ended September 30, 2003, the interest rate
environment remained at a low but stable level. Therefore, the interest income
generated by the Portfolio was stabilized at the level of income at the end of
2002. This situation has affected the Company's income through the floating rate
component of the portfolio (floating-rate securities and fixed-rate securities
converted to floating-rate instruments through interest rate swaps). It is
anticipated that this situation may continue for the remainder of 2003, and the
income will remain linked to the evolution of the yield curve.

The Company regularly reviews its hedging requirements. In the future, the
Company expects to enter into additional swaps and unwind part or all of the
initial and any future swaps. This strategy is implemented in order to rebalance
the fixed and floating mix of interest obligations (including those arising as a
result of previous interest rate swaps entered into) and the fixed and floating
mix of interest payments.

The Company's interest rate management strategy will continue to be rebalanced
with any purchases of new investments. There can be no assurance, however, that
the Company's interest rate risk management strategies will be effective in this
regard.

The Company is a party to twenty-nine interest rate swaps and six cross currency
swaps with BNP PARIBAS, as set out in the table below. In all but one of these
swaps, the Company pays a fixed coupon and receives floating rate payments on
the notional balances.

<TABLE>
                                                                                           Fair Value at       Notional
                                                                                           September 30,        Balance
   Value Date             Maturity Date        Fixed Rate        Receive Rate             2003 (in 000's)      (in 000's)
-----------------         ---------------      ----------      ----------------------     ---------------     ------------
<S>                       <C>                  <C>             <C>                        <C>                 <C>
November 25, 1998         March 26, 2008       JPY 1.75        U.S. Three Month LIBOR        $   (4,736)      $   42,000
                                                               Plus Six Basis Points

November 25, 1998         October 9, 2007      JPY 2.125       U.S. Three Month LIBOR            (8,428)          58,000
                                                               Plus Six Basis Points

November 25, 1998         August 25, 2008      U.S. 6.15       U.S. One Month LIBOR              (2,430)          18,748
                                                               Plus Five Basis Points

May 25, 1999              May 25, 2009         U.S. 6.23       U.S. One Month LIBOR              (1,761)          12,180
                                                               Plus One and Half Basis
                                                               Points

February 12, 1999         March 5, 2007        U.S. 6.68       U.S. Three Month LIBOR            (6,935)          50,000
                                                               Minus Two Basis Points

February 11, 1999         March 14, 2007       U.S. 6.80       U.S. Three Month LIBOR            (7,097)          50,000
                                                               Minus Two Basis Points

March 29, 1999            October 9, 2007      JPY 2.125       U.S. Three Month LIBOR            (3,461)          30,000
                                                               Minus Two and Half Basis
                                                               Points

April 6, 1999             October 9, 2007      JPY 2.125       U.S. Three Month LIBOR            (3,891)          26,400
                                                               Minus One Basis Point

June 25, 1999             June 25, 2009        U.S. 6.06       U.S. One Month LIBOR              (3,352)          25,627
                                                               Plus Three and Half
                                                               Basis Points

February 25, 1999         February 25, 2009    U.S. 5.95       U.S. One Month LIBOR              (2,524)          20,387
                                                               Plus Three Basis Points

July 1, 1999              June 25, 2009        U.S. 6.39       U.S. One Month LIBOR              (2,292)          15,437
                                                               Plus Three and Half
                                                               Basis Points

September 27, 1999        March 25, 2008       U.S. 6.29       U.S. One Month LIBOR              (5,608)          42,310
                                                               Plus Five Basis Points

November 26, 1999         April 25, 2009       U.S. 6.04       U.S. One Month LIBOR              (1,961)          15,194
                                                               Plus Four Basis Points

September 27, 1999        March 25, 2009       U.S. 5.858      U.S. One Month LIBOR              (3,313)          27,750
                                                               Plus Four Basis Points

August 1, 2000            December 1, 2007     U.S. 6.42       U.S. One Month LIBOR                (985)           7,000

August 1, 2000            October 1, 2006      U.S. 7.20       U.S. One Month LIBOR              (4,124)          28,832
                                                               Minus Two Basis Points

June 26, 2000             October 1, 2007      U.S. 6.68       U.S. One Month LIBOR              (1,175)           8,160
                                                               Plus One and Half Basis
                                                               Points

June 26, 2000             October 1, 2008      U.S. 6.26       U.S. One Month LIBOR              (1,199)           9,162

October 2, 2000           June 1, 2007         U.S. 7.007      U.S. One Month LIBOR              (1,115)           7,362
                                                               Minus Two Basis Points

October 2, 2000           July 1, 2007         U.S. 7.405      U.S. One Month LIBOR              (1,267)           7,507
                                                               Minus Two Basis Points

March 25, 2001            October 25, 2007     U.S. 6.94       U.S. One Month LIBOR              (1,220)           8,664
                                                               Plus Two Basis Points

September 4, 2001         October 16, 2006     U.S. 7.20       U.S. One Month LIBOR              (2,727)          19,222
                                                               Plus Two Basis Points

October 2, 2001           October 16, 2006     U.S. 7.20       U.S. One Month LIBOR              (1,349)           9,611
                                                               Plus Seven Basis Points

January 2, 2002           October 16, 2006     U.S. 7.20       U.S. One Month LIBOR              (1,340)           9,611
                                                               Plus Ten Basis Points

May 1, 2002               October 25, 2007     U.S. 6.63       U.S. One Month LIBOR              (1,301)           9,133
                                                               Plus One Basis Point

May 3, 2002               August 25, 2007      U.S. 6.74       U.S. One Month LIBOR              (1,475)          10,000
                                                               Plus One Basis Point

August 25, 2002           August 25, 2007      U.S. 4.90       U.S. One Month LIBOR              (2,079)          26,500
                                                               Plus Five Basis Points

September 25, 2002        June 25, 2007        U.S. 7.007      U.S. One Month LIBOR              (1,888)          12,730
                                                               Plus Seven Basis Points

October 25, 2002          May 25, 2006         U.S. 6.83       U.S. One Month LIBOR              (1,048)           9,172
                                                               Plus Seven Basis Points

March 21, 2003            February 25, 2009    U.S. 5.945      U.S. One Month LIBOR              (3,247)          26,878
                                                               Plus Nine Basis Points

August 1, 2003            April 1, 2008        U.S. 6.568      U.S. One Month LIBOR              (1,904)          12,950
                                                               Plus Ten Basis Points

May 8, 2003               July 25, 2006        U.S. 7.239      U.S. One Month LIBOR              (1,456)          10,978
                                                               Plus Seven Basis Points

August 1, 2003            October 1, 2007      U.S. 6.812      U.S. One Month LIBOR              (3,436)          24,795
                                                               Plus Ten Basis Points

November 2, 2000          October 9, 2007      JPY 2.125       U.S. Three Month LIBOR              (481)          15,000
                                                               Minus Two Basis Points        -----------      -----------

Total Swaps- Fair Value Hedges (Other liabilities)                                           $  (92,605)      $  707,300
--------------------------------------------------                                           -----------      -----------

January 17, 2001          March 26, 2008       JPY 1.750       U.S. 5.80                            693           18,000
                                                                                             -----------      -----------

Other Swap (Other asset)                                                                     $      693       $   18,000
------------------------                                                                     -----------      -----------

Total Swap Portfolio                                                                         $  (91,912)      $  725,300
--------------------                                                                         ===========      ===========
</TABLE>


The fair value of the swap portfolio was $(91,912,211) and $(84,340,226) at
September 30, 2003 and December 31, 2002, respectively. The change in fair value
was primarily due to changes in prevailing market interest rates.

The main feature of the mortgage securities is their sensitivity to the
prepayment of mortgage loans, creating a contraction risk when interest rates
decline and an extension risk when interest rates increase. The estimate of the
prepayment rate is given either by the CPR (Conditional Prepayment Rate) or the
PSA (Public Securities Association) prepayment model. Because of this risk, the
securities are valued based on their average life rather than on their stated
maturity date. The prepayment risk is evaluated and analyzed as this impacts the
structure of the portfolio and the re-investment policy.

The breakdown of the Company's available-for-sale securities by category and
weighted average life distribution (stated in terms of amortized cost) is
summarized below based on management's prepayment assumptions (see Note 4 under
Item 1 for yield information) (actual maturities may differ from maturities
shown below due to prepayments) (in thousands):

<TABLE>
                                                          September 30, 2003
                                                          ------------------

                                            Due       Due         Due        Due        Due         Due        Due
                                            In       after       after      after      after       after      After
Non-Collateral                             2003       2003        2004       2005       2006        2007       2008          Total
--------------                            ------     ------     ------     ------     ------      ------     ------       ---------
<S>                                       <C>        <C>        <C>        <C>        <C>         <C>        <C>          <C>
Fixed-Rate Instruments:
  Fixed-Rate REMICs......................$    ---    $   ---    $   ---   $    ---   $  10,000   $   ---     $    ---    $   10,000
  Agency DUS.............................     ---        ---        ---    112,221      91,724    141,950      80,004       425,899
  Agency Debentures .....................     ---        ---        ---    109,972     335,872     60,530         ---       506,374
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Fixed-Rate Instruments.............     ---        ---        ---    222,193     437,596    202,480      80,004       942,273
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Floating-Rate Instruments:
  Floating-Rate REMICs...................   1,468        ---        ---        912         ---        ---         ---         2,380
  Agency ARMs............................     ---      3,219        ---      2,909         ---        ---         ---         6,128
  Agency Hybrid ARMs.....................     ---      3,762      2,170        878       3,728        ---         ---        10,538
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Floating-Rate Instruments..........   1,468      6,981      2,170      4,699       3,728        ---         ---        19,046
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Total Non-Collateral.....................$  1,468    $ 6,981    $ 2,170   $226,892   $ 441,324   $202,480    $ 80,004    $  961,319
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Collateral
----------
Fixed-Rate Instruments:
  Fixed-Rate REMICs......................$    ---    $ 5,050    $   ---   $    ---   $     ---   $    ---    $    ---    $    5,050
  Agency DUS.............................     ---        ---        ---        ---         ---        ---         ---           ---
  Agency Debentures......................     ---        ---        ---        ---         ---        ---         ---           ---
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Fixed-Rate Instruments.............     ---      5,050        ---        ---         ---        ---         ---         5,050
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Floating-Rate Instruments:
  Floating-Rate REMICs...................     ---      5,456        ---      6,298       1,259        ---         ---        13,013
  Agency ARMs............................     ---        446      4,271        ---         ---        ---       3,266         7,983
  Agency Hybrid ARMs.....................     ---        206      5,363      3,638       2,417        ---       1,855        13,479
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Floating-Rate Instruments..........     ---      6,108      9,634      9,936       3,676        ---       5,121        34,475
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Total Collateral.........................$    ---    $11,158    $ 9,634   $  9,936   $   3,676   $    ---    $  5,121    $   39,525
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
September 30, 2003 Total Portfolio       $  1,468    $18,139    $11,804   $236,828   $ 445,000   $202,480    $ 85,125    $1,000,844
                                         ========    =======    =======   ========   =========   ========    ========    ==========

                                                           December 31, 2002
                                                           -----------------

                                            Due        Due       Due        Due        Due         Due        Due
                                            In        after     after      after      after       after      After
Non-Collateral                             2003       2003       2004       2005       2006        2007       2008          Total
--------------                            ------     ------     ------     ------     ------      ------     ------       ---------
Fixed-Rate Instruments:
  Fixed-Rate REMICs......................$    654    $   ---    $   ---   $    ---   $  10,000   $    ---    $    ---    $   10,654
  Agency DUS.............................     ---        ---        ---    123,994      46,501    114,986      80,028       365,509
  Agency Debentures .....................     ---        ---        ---    172,637     314,123        ---         ---       486,760
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Fixed-Rate Instruments.............     654        ---        ---    296,631     370,624    114,986      80,028       862,923
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Floating-Rate Instruments:
  Floating-Rate REMICs...................   4,854        ---      1,432        ---         ---        ---         ---         6,286
  Agency ARMs............................   5,373      3,791        ---      4,961         ---        ---          57        14,182
  Agency Hybrid ARMs.....................   1,074     15,830      1,371        ---         ---        ---         ---        18,275
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Floating-Rate Instruments..........  11,301     19,621      2,803      4,961         ---        ---          57        38,743
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Non-Collateral.....................$ 11,955    $19,621    $ 2,803   $301,592   $ 370,624   $114,986    $ 80,085    $  901,666
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Collateral
----------
Fixed-Rate Instruments:
  Fixed-Rate REMICs......................$ 35,655    $   ---    $   ---   $    ---   $     ---   $    ---    $    ---    $   35,655
  Agency DUS.............................     ---        ---        ---        ---         ---        ---         ---           ---
  Agency Debentures .....................     ---        ---        ---        ---         ---        ---         ---           ---
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Fixed-Rate Instruments.............  35,655        ---        ---        ---         ---        ---         ---        35,655
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Floating-Rate Instruments:
  Floating-Rate REMICs...................     546      8,331     10,204        ---         ---        ---         ---        19,081
  Agency ARMs............................     198      5,805      1,322        331         373      1,384       2,112        11,525
  Agency Hybrid ARMs.....................     ---     13,622        ---      5,777         ---        ---         ---        19,399
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
Total Floating-Rate Instruments..........     744     27,758     11,526      6,108         373      1,384       2,112        50,005
                                         --------    -------    -------   --------   ---------   --------    --------    ----------

Total Collateral.........................$ 36,399    $27,758    $11,526   $  6,108   $     373   $  1,384    $  2,112    $   85,660
                                         --------    -------    -------   --------   ---------   --------    --------    ----------
December 31, 2002 Total Portfolio        $ 48,354    $47,379    $14,329   $307,700   $ 370,997   $116,370    $ 82,197    $  987,326
                                         ========    =======    =======   ========   =========   ========    ========    ==========
</TABLE>


Item 4.

CONTROLS AND PROCEDURES

As of the end of the quarter ended September 30, 2003, the Company carried out
an evaluation under the supervision and with the participation of the Company's
management, including the President and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives. Based upon and as of
the date of the Company's evaluation, the President and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in all
material respects to provide reasonable assurance that information required to
be disclosed in the reports the Company files and submits under the Exchange Act
is recorded, processed, summarized and reported as when required. There has
been no change in the Company's internal control over financial reporting during
the Company's quarter ended September 30, 2003 that has materially affected, or
is reasonably likely to materially affected, the Company's internal control over
financial reporting.

Part II

Item 1.

LEGAL PROCEEDINGS

None.

Item 2.

CHANGES IN SECURITIES AND USE OF THE PROCEEDS

None.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None.

Item 5.

OTHER INFORMATION

None.

Item 6.

EXHIBITS AND CURRENT REPORTS ON FORM 8-K

      A) Exhibits:

           11)   Computation of net income per common security

           12)   (a) Computation of ratio of earnings to fixed charges
                 (b) Computation of ratio of earnings to fixed charges and
                     preferred security dividends

           31.1) Certification of Chief Financial Officer pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002

           31.2) Certification of President pursuant to Section 302 of the
                 Sarbanes-Oxley Act of 2002

           32)   Certification pursuant to Section 906 of the Sarbanes-Oxley
                 Act of 2002


      B) Reports on Form 8-K: NONE

<PAGE>

                                    Signature


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.

                                         BNP U.S. FUNDING L.L.C.
                                         -----------------------
                                                    Registrant



Date: November 14, 2003                  By /s/ Oliver Meisel
                                            ---------------------------
                                            Olivier Meisel
                                            President and Director

Date: November 14, 2003                  By /s/ Thomas Clyne
                                            ---------------------------
                                            Thomas Clyne
                                            Chief Financial Officer and Director