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, 2004



                        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 at
September 30, 2004.

         Number of Shares of Common Stock outstanding on September 30, 2004:
53,011




<PAGE>

<TABLE>
Part I                                                                                                    Page
                                                                                                          ----
Item 1.   Financial Statements

<S>                                                                                                         <C>
          Balance Sheets at September 30, 2004 (Unaudited) and December 31, 2003                            3

          Statements of Income (Unaudited) for the Three Months and Nine Months Ended September
                30, 2004 and September 30, 2003                                                             4

          Statements of Comprehensive Income (Unaudited) for the Three Months and Nine Months
                Ended September 30, 2004 and September 30, 2003                                             5

          Statement of Changes in Redeemable Common Securities,
                Preferred Securities and Securityholders' Equity
                (Unaudited) for the Three Months Ended March 31, 2004, June
                30, 2004 and September 30, 2004                                                             6

          Statements of Cash Flows (Unaudited) for the Nine Months Ended
                September 30, 2004 and September 30, 2003                                                   7

          Notes to Financial Statements (Unaudited)                                                         8
Item 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                                                  16

Item 3.   Quantitative and Qualitative Disclosures about Market Risk                                       21

Item 4.   Controls and Procedures                                                                          24

Part II

Item 1.   Legal Proceedings                                                                                25

Item 2.   Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                 25

Item 3.   Defaults upon Senior Securities                                                                  25

Item 4.   Submission of Matters to a Vote of Securityholders                                               25

Item 5.   Other Information                                                                                25

Item 6.   Exhibits and Current Reports on Form 8-K                                                         25

</TABLE>

<PAGE>

Part I
Item 1.
FINANCIAL STATEMENTS

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

                            BALANCE SHEETS
                (in thousands, except per share data)

<TABLE>
                                                                             September 30, 2004      December 31, 2003
                                                                                (unaudited)              (audited)
                                                                            ---------------------  ---------------------

ASSETS

<S>                                                                          <C>                   <C>
Cash and cash equivalents                                                    $            56,202   $             25,181

Investment securities (Notes 3 and 4)
Available-for-sale, at fair value                                                      1,043,219              1,088,876

Receivable arising from payment for securities, pursuant
     to the application of SFAS 125, as replaced by
     SFAS 140 (Note 3)                                                                    22,321                 30,663

Accounts receivable                                                                           24                     54

Accrued interest receivable                                                                7,857                  8,299
                                                                            ---------------------  ---------------------

TOTAL ASSETS                                                                $          1,129,623   $        $ 1,153,073
                                                                            =====================  =====================

LIABILITIES

Accrued interest payable                                                    $              1,038   $            $ 2,719
Accrued expenses                                                                             403                    242
Other liabilities                                                                         71,479                 94,598
                                                                            ---------------------  ---------------------

TOTAL LIABILITIES                                                                         72,920                 97,559
                                                                            ---------------------  ---------------------

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                                                                   483                    229
Accumulated other comprehensive income                                                    17,849                 22,969
Retained earnings                                                                          8,261                  2,206
                                                                            ---------------------  ---------------------

TOTAL REDEEMABLE COMMON SECURITIES,
     PREFERRED SECURITIES AND
     SECURITYHOLDERS' EQUITY                                                           1,056,703              1,055,514
                                                                            ---------------------  ---------------------

TOTAL LIABILITIES AND TOTAL REDEEMABLE
     COMMON SECURITIES, PREFERRED
     SECURITIES AND SECURITYHOLDERS' EQUITY                                 $          1,129,623   $          1,153,073
                                                                            =====================  =====================


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

<PAGE>

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

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


<TABLE>
                                                      For the Three Months          For the Nine Months
                                                       Ended September 30,          Ended September 30,
                                                    --------------------------   ---------------------------
INTEREST INCOME                                        2004           2003          2004            2003
                                                    -----------    -----------   -----------     -----------

<S>                                                 <C>            <C>           <C>             <C>
Collateralized Mortgage Obligations:
     Floating-Rate REMICs                           $       29     $       73    $       91      $      311
     Fixed-Rate REMICs                                     120            148           320             902
Mortgage Backed Securities:
     Agency ARMs                                            82            141           288             581
     Agency Hybrid ARMs                                    187            246           576             984
     Agency DUSs                                         1,522          1,324         4,190           4,042
Agency Debentures                                        4,067          5,168        12,432          13,321
Interest on deposits                                       143             64           250             256
                                                    -----------    -----------   -----------     -----------

Total                                                    6,150          7,164        18,147          20,397
                                                    -----------    -----------   -----------     -----------

NONINTEREST INCOME (EXPENSE)

Other financial instrument                                 189         (1,594)           46            (990)
Fees and expenses                                         (338)          (344)       (1,039)         (1,065)
                                                    -----------    -----------   -----------     -----------
                                                          (149)        (1,938)         (993)         (2,055)
                                                    -----------    -----------   -----------     -----------


NET INCOME APPLICABLE TO PREFERRED AND
     REDEEMABLE COMMON SECURITIES                   $    6,001     $    5,226    $   17,154      $   18,342
                                                    ===========    ===========   ===========     ===========

NET INCOME (LOSS) PER REDEEMABLE
     COMMON SECURITY                                $   113.20     $    98.58    $   (41.33)     $   (18.92)
                                                    ===========    ===========   ===========     ===========

</TABLE>




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

<PAGE>

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

                 STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
                                 (in thousands)


<TABLE>
                                                                 For the Three Months              For the Nine Months
                                                                 Ended September 30,               Ended September 30,
                                                             -----------------------------    -------------------------------
                                                                2004             2003             2004              2003
                                                             ------------    -------------    -------------     -------------


<S>                                                          <C>             <C>              <C>               <C>
NET INCOME                                                   $     6,001     $      5,226     $     17,154      $     18,342


OTHER COMPREHENSIVE INCOME (LOSS)

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                                 832           (3,821)          (5,120)             (358)
                                                             ------------    -------------    -------------     -------------

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)                              832           (3,821)          (5,120)             (358)
                                                             ------------    -------------    -------------     -------------


COMPREHENSIVE INCOME                                         $     6,833     $      1,405     $     12,034      $     17,984
                                                             ============    =============    =============     =============

</TABLE>




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


<PAGE>

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

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


 For the Three Months Ended March 31, 2004, June 30, 2004 and September 30, 2004


<TABLE>

                                                                                                                       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, 2003       $     530,110   $    500,000   $     229      $       22,969   $      2,206    $       1,055,514

Net income                                                                                               5,236                5,236
Other comprehensive income                                                                3,766                               3,766
                                   --------------  -------------  ----------     --------------  -------------   ------------------

Balance at March 31, 2004          $     530,110   $    500,000   $     229      $       26,735  $      7,442    $       1,064,516
                                   ==============  =============  ==========     ==============  =============   ==================

Net income                                                                                              5,917                5,917
Other comprehensive loss                                                                (9,718)                             (9,718)
Additional paid-in capital                                            8,500                                                  8,500
Dividends paid - preferred securities                                (8,246)                          (11,099)             (19,345)
                                   --------------  -------------  ----------     --------------  -------------   ------------------

Balance at June 30, 2004           $     530,110   $    500,000   $     483      $      17,017   $      2,260    $       1,049,870
                                   ==============  =============  ==========     ==============  =============   ==================

Net income                                                                                              6,001                6,001
Other comprehensive income                                                                 832                                 832
                                   --------------  -------------  ----------     --------------  -------------   ------------------
Balance at September 30, 2004      $     530,110   $    500,000   $     483      $      17,849   $      8,261    $       1,056,703
                                   ==============  =============  ==========     ==============  ==============   ==================

</TABLE>




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

<PAGE>

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

                      STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (in thousands)

<TABLE>
                                                                           For the Nine Months Ended September 30,
                                                                          -------------------------------------------
                                                                                 2004                   2003
                                                                          --------------------   --------------------
OPERATING ACTIVITIES

<S>                                                                       <C>                      <C>
Net income                                                                $       17,154           $       18,342
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Amortization                                                                    630                      908
     (Gain) loss on other financial instrument                                       (46)                     990
     Loss (gain) on hedge activity                                                   123                     (716)
Changes in assets and liabilities:
     Interest receivable                                                             442                      772
     Accounts receivable                                                              30                      602
     Accrued expenses                                                                161                       50
     Accrued interest payable                                                     (1,681)          $       (1,631)
                                                                          ---------------          ---------------
Net cash provided by operating activities                                         16,813                   19,317
                                                                          ---------------          ---------------

INVESTING ACTIVITIES

Purchase of investment securities:
     Agency DUSs                                                                       -                  (75,901)
     Agency Debentures                                                                 -                  (20,038)
     Fixed-Rate REMICs                                                           (20,915)                       -
Proceeds from principal payments of securities
  available-for-sale, not treated as collateral                                   37,769                   35,686
Proceeds from principal payments of securities
  available-for-sale, treated as collateral                                        8,199                   45,829
                                                                          ---------------          ---------------
Net cash provided by (used in) investing activities                               25,053                  (14,424)
                                                                          ---------------          ---------------

FINANCING ACTIVITIES

Additional paid-in capital                                                         8,500                    5,500
Cash dividends - preferred securities                                            (19,345)                 (19,345)
                                                                          ---------------          ---------------
Net cash used in financing activities                                            (10,845)                 (13,845)
                                                                          ---------------          ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              31,021                   (8,952)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    25,181                   40,180
                                                                          ---------------          ---------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $       56,202           $       31,228
                                                                          ===============          ===============

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)        $        8,342           $       46,135

</TABLE>

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



<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 quarterly report on Form 10-Q (or any other
periodic reporting documents required by the Securities Exchange Act of 1934
Act, as amended (the "Exchange Act")) 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, $5,500,000, $7,500,000 and $8,500,000 on December 3, 2002, June 3,
2003, December 3, 2003, and June 3, 2004, 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. The Company has no employees. All of the Company's
officers 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 (recorded on
trade-date basis) and are carried at fair value. The debt securities can be
categorized as hedged or non-hedged securities. Fair values of non-hedged debt
securities are based on quoted market prices. 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". The hedged securities are generally
valued using discounted cash flows in a yield-curve model based on LIBOR.
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. Dividends to the Preferred
Securityholders may be paid out of (i) net income, determined without regard to
capital gains or losses, and/or (ii) amounts contributed by the Bank or the
Branch to the Company's capital. As of September 30, 2004, the Branch has
contributed a total of $24,500,000 to the Company's additional paid-in capital,
which was used to facilitate the semi-annual payments of dividends to the
holders of 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
Series A Preferred Securities            $ 19,345,000         December 5, 2003
Series A Preferred Securities            $ 19,345,000         June 5, 2004


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 Branch 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 has elected and expects to be treated as a partnership for U.S.
federal income tax purposes, as a result 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 Company 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, 2004. 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

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, 2004 and December 31, 2003 is
reported in Note 4 below.

NOTE 4--INVESTMENT SECURITIES

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

<TABLE>
September 30, 2004
------------------
                                                                     Gross             Gross
 Non-Collateral                                Amortized Cost   Unrealized Gains    Unrealized        Fair Value
 --------------                                                                       Losses
                                               -------------    --------------      ------------     ------------
<S>                                               <C>               <C>               <C>             <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                           $      578        $        6        $      ---      $       584
   Fixed-Rate REMICs                                  30,915             2,963               ---           33,878
Mortgage Backed Securities:
   Agency ARMs                                         3,455                 7                38            3,424
   Agency Hybrid ARMs                                  7,115                85               ---            7,200
   Agency DUSs                                       406,238            36,280               ---          442,518
Agency Debentures                                    505,803            49,837                25          555,615
                                                  ----------         ---------        ----------       ----------
     Total Non-Collateral                         $  954,104         $  89,178        $       63      $ 1,043,219
                                                  ----------         ---------        ----------      -----------
Collateral
----------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                           $    6,543        $      ---        $       67      $     6,476
   Fixed-Rate REMICs                                     ---               ---               ---              ---
Mortgage Backed Securities:
   Agency ARMs                                         5,728                48               ---            5,776
   Agency Hybrid ARMs                                 10,050                51               100           10,001
   Agency DUSs                                           ---               ---               ---              ---
Agency Debentures                                        ---               ---               ---              ---
                                                  ----------         ---------        ----------      -----------
     Total Collateral                             $   22,321        $       99        $      167      $    22,253
                                                  ----------        ----------        ----------      -----------
September 30, 2004 Total Portfolio                $  976,425        $   89,277        $      230      $ 1,065,472
                                                  ==========        ==========        ==========      ===========

December 31, 2003
-----------------                                                    Gross             Gross
Non-Collateral                                 Amortized Cost   Unrealized Gains    Unrealized        Fair Value
--------------                                                                        Losses
                                               -------------    --------------      ------------     ------------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                           $      797        $      ---        $        8      $       789
   Fixed-Rate REMICs                                  10,000             1,276               ---           11,276
Mortgage Backed Securities:
   Agency ARMs                                         5,071                 6                18            5,059
   Agency Hybrid ARMs                                  9,442               182                15            9,609
   Agency DUSs                                       439,905            50,006               ---          489,911
Agency Debentures                                    506,230            66,002               ---          572,232
                                                  ----------        ----------        ----------      -----------
     Total Non-Collateral                         $  971,445        $  117,472        $       41      $ 1,088,876
                                                  ----------        ----------        ----------      -----------
Collateral
----------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                           $   10,673        $      ---        $      117      $    10,556
   Fixed-Rate REMICs                                     298               ---               ---              298
Mortgage Backed Securities:
   Agency ARMs                                         7,347               138                 3            7,482
   Agency Hybrid ARMs                                 12,345               255                42           12,558
   Agency DUSs                                           ---               ---               ---              ---
Agency Debentures                                        ---               ---               ---              ---
                                                  ----------       -----------        ----------      -----------
     Total Collateral                             $   30,663        $      393        $      162      $    30,894
                                                  ----------        ----------        ----------      -----------
December 31, 2003 Total Portfolio                 $1,002,108        $  117,865        $      203      $ 1,119,770
---------------------------------                 ==========        ==========        ==========      ===========
</TABLE>

The breakdown of the Company's 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, 2004
------------------                                          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                    $         ---   $         578  $       ---     $      ---       $       578
   Fixed-Rate REMICs                                 ---          30,915          ---            ---            30,915
Mortgage Backed Securities:
   Agency ARMs                                       ---           2,922          533            ---             3,455
   Agency Hybrid ARMs                                196           2,719        3,479            721             7,115
   Agency DUSs                                       ---         406,238          ---            ---           406,238
Agency Debentures                                    ---         505,803          ---            ---           505,803
                                           -------------   -------------  -----------     ----------       -----------
     Total Non-Collateral                  $         196   $     949,175  $     4,012     $      721       $   954,104
                                           -------------   -------------  -----------     ----------       -----------

Collateral
----------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                    $       1,676   $       4,867  $       ---     $      ---       $     6,543
   Fixed-Rate REMICs                                 ---             ---          ---            ---               ---
Mortgage Backed Securities:
   Agency ARMs                                       633           2,386          327          2,382             5,728
   Agency Hybrid ARMs                                ---           8,355          140          1,555            10,050
   Agency DUSs                                       ---             ---          ---            ---               ---
Agency Debentures                                    ---             ---          ---            ---               ---
                                           -------------   -------------  -----------     ----------       -----------
     Total Collateral                      $       2,309   $      15,608  $       467     $    3,937       $    22,321
                                           -------------   -------------  -----------     ----------       -----------
September 30, 2004 Total Portfolio         $       2,505   $     964,783  $     4,479     $    4,658       $   976,425
                                           =============   =============  ===========     ==========       ===========

December 31, 2003
-----------------                                           Due after 1    Due after 5
                                           Due in 1 year     through 5      through 10     Due after 10
                                              or less          years          years           years           Total
                                           -------------   -------------  -----------     -------------    -----------
Non-Collateral
--------------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                    $         ---   $         797  $       ---     $      ---       $       797
   Fixed-Rate REMICs                                 ---          10,000          ---            ---            10,000
Mortgage Backed Securities:
   Agency ARMs                                     1,978           3,093          ---            ---             5,071
   Agency Hybrid ARMs                                979           8,463          ---            ---             9,442
   Agency DUSs                                       ---         371,653       68,252            ---           439,905
Agency Debentures                                    ---         506,230          ---            ---           506,230
                                           -------------   -------------  -----------     ----------       -----------
     Total Non-Collateral                  $       2,957   $     900,236  $    68,252     $      ---       $   971,445
                                           -------------   -------------  -----------     ----------       -----------

Collateral
----------

Collateralized Mortgage Obligations:
   Floating-Rate REMICs                    $       3,387   $       6,064  $     1,222     $      ---       $    10,673
   Fixed-Rate REMICs                                 298             ---          ---            ---               298
Mortgage Backed Securities:
   Agency ARMs                                       125           5,355          246          1,621             7,348
   Agency Hybrid ARMs                                180           8,040        4,125            ---            12,345
   Agency DUSs                                       ---             ---          ---            ---               ---
Agency Debentures                                    ---             ---          ---            ---               ---
                                           -------------   -------------  -----------     ----------       -----------
     Total Collateral                      $       3,990   $      19,459  $     5,593     $    1,621       $    30,663
                                           -------------   -------------  -----------     ----------       -----------
December 31, 2003 Total Portfolio          $       6,947   $     919,695  $    73,845     $    1,621       $ 1,002,108
---------------------------------          =============   =============  ============    ==========       ===========

</TABLE>

The breakdown of the Company's 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, 2004                     or less          years          years             years         Total          Hedging
------------------                     -------          -----          -----             -----         -----          -------
<S>                                       <C>              <C>             <C>            <C>          <C>             <C>
Collateralized Mortgage
Obligations:
   Floating-Rate REMICs                   1.08%            1.49%           ---%            ---%        1.37%           1.37%
   Fixed-Rate REMICs                       ---             6.74            ---             ---         6.74            1.78
Mortgage Backed Securities:
   Agency ARMs                            1.53             3.87           5.16            3.42         3.65            3.65
   Agency Hybrid ARMs                     5.17             4.26           3.50            4.00         4.09            4.09
   Agency DUSs                             ---             6.51            ---             ---         6.50            1.31
Agency Debentures                          ---             6.00            ---             ---         6.00            3.28
                                          ----             -----          -----           ----         -----           -----
     Total                                4.71%            6.20%          3.82%           3.70%        6.16%           2.40%
                                          =====            =====          =====           =====        =====           =====
December 31, 2003
-----------------

Collateralized Mortgage
Obligations:
   Floating-Rate REMICs                   2.33%            1.59%           ---%            ---%        2.02%           2.02%
   Fixed-Rate REMICs                      6.50             6.74            ---             ---         6.61            4.19
Mortgage Backed Securities:
   Agency ARMs                            4.30             4.10           3.49            3.38         4.07            4.07
   Agency Hybrid ARMs                     5.25             4.47            ---             ---         4.35            4.35
   Agency DUSs                             ---             6.45           6.23             ---         6.41            1.34
Agency Debentures                          ---             5.98            ---             ---         5.98            3.40
                                          ----             -----          -----           ----         -----           -----
     Total                                4.84%            6.09%          6.00%           3.38%        6.03%           2.60%
                                          =====            =====          =====           =====        =====           =====
</TABLE>


NOTE 5--REDEEMABLE COMMON SECURITIES AND PREFERRED SECURITIES

REDEEMABLE COMMON SECURITIES

General

The Company is authorized to issue up to 150,000 Common Securities; as of
September 30, 2004 and December 31, 2003, 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). As disclosed in
Note 1, the Branch contributed additional paid-in capital of $24,500,000 to
date. In the event the dividends to the Series A Preferred Securities can not be
funded out of net income, determined without regard to capital gains or losses,
or out of contributions by the Bank or the Branch to the Company's capital, such
dividends would not be accrued as they are noncumulative.

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.

PREFERRED SECURITIES

The Series A Preferred Securities will not be redeemable prior to December 5,
2007. On or after December 5, 2007, the Series A Preferred Securities will be
redeemable at the option of the Company, in whole or in part, at a redemption
price of $10,000 per security. Prior to December 5, 2007, the Company will also
have the right to redeem the Series A Preferred Securities upon the occurrence
of a Regulatory Event, which is defined as either a Change of Capital Event or a
Tax Event, for a redemption price equal to the higher of $10,000 per security or
a Make-Whole Amount per security. A "Change of Capital Event" means a
notification to the Bank by the French Banking Commission (Commission Bancaire)
of its determination that the Series A Preferred Securities do not constitute
Tier 1 capital of BNP PARIBAS on a consolidated basis for purposes of the
application of French banking regulations. A "Tax Event" means the receipt by
the Company of an opinion of a nationally recognised law firm that there is more
than an insubstantial risk that (i) the Company is, or will be subject to more
than a de minimis amount of additional taxes, duties or other governmental
charges or civil claims or (ii) the payments on the Series A Preferred
Securities will not be respected as payments to Series A Preferred Securities
for tax purposes, and, as a result, the bank is or will be subject to more than
a de minimis amount of additional taxes, duties, governmental charges or civil
claims. The "Make-Whole Amount" consists of the present value of the liquidation
preference of the Series A Preferred Securities at December 5, 2007 together
with the present values of scheduled noncumulative dividend payments from the
Regulatory Event Redemption Date to December 5, 2007.

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 $724,826 and $720,561 for the periods ended September 30,
2004 and 2003, 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, 2004 and December 31, 2003 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
$22,252,013 and $30,893,778 at September 30, 2004 and December 31, 2003,
respectively.

The carrying value of cash and cash equivalents, accounts receivable, accrued
interest receivable, accrued expenses, and accounts payable approximates fair
value due to their short-term maturity of less than nine months.

The fair value of the cross currency and interest rate swaps was $(71,478,910)
and $(94,597,757) at September 30, 2004 and December 31, 2003, respectively, and
are recorded in "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 $(71,181,265) and $(94,253,884) at
September 30, 2004 and December 31, 2003, 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, 2004, the Company recognized a loss of
$(122,985) in earnings related to the ineffective portion of fair value hedges.
The Company also recognized a gain of $46,228 in current year's 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, 2004 and September 30, 2003, the Company
did not enter into cash flow hedges 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, 2004 and December 31, 2003, the Company had outstanding
interest rate and cross currency swap agreements with a notional principal
amount of $726,552,995 and $739,305,189, 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 $8,500,000, $7,500,000, $5,500,000, and $3,000,000 of additional
paid-in capital on June 3, 2004, December 3, 2003, 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

Overview

The Company believes the factor having the greatest impact on revenues is the
sustained low interest rate environment. The decrease in revenue is mainly due
to an increase in net swap expense where its floating rate component has
generated less income due to low interest rates generated by such floating
rates. This has been offset somewhat by an increase in interest income on the
securities. During 2003 and continuing in 2004, the Company began reinvesting
prepayments mainly into fixed-rate securities.

NINE MONTH PERIOD

The following discussion pertains to the Nine months ended September 30, 2004
(the "2004 Period") and the Nine months ended September 30, 2003 (the "2003
Period").

For the 2004 Period and 2003 Period, the Company had revenues of $18,147,442 and
$20,396,192, 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 2004 Period and 2003 Period, interest on the securities in the Portfolio
amounted to $37,239,743, and $36,188,940, respectively, representing an
aggregate yield of 6.16% and 5.99%, 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):

                                         2004                           2003
                                         ----                           ----

Floating-Rate REMICs......  $       91,091     1.37%     $      311,195    2.08%
Fixed-Rate REMICs.........  $    1,210,940     6.74%     $    1,311,816    6.57%
Agency ARMs...............  $      287,542     3.65%     $      581,077    4.13%
Agency Hybrid ARMs........  $      576,384     4.09%     $      983,538    4.38%
Agency DUS................  $   20,839,124     6.50%     $   18,805,449    6.38%
Agency Debentures.........  $   14,234,662     6.00%     $   14,195,865    5.96%

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

During the 2004 Period, the yields on the Agency DUSs, Agency Debentures and
Fixed-Rate REMICs were approximately 1.31%, 3.28% and 1.78%, respectively, when
taking into account the income and expense from the derivative products used to
hedge these 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 and expense from the
derivative products used to hedge these securities.

The average amortized cost of the Portfolio during the 2004 Period and 2003
Period was $995,479,392 and $993,586,956, respectively. This reflects the
following prepayments and reinvestments:

PREPAYMENTS                                    2004                  2003
-----------                                    ----                  ----
Floating-Rate REMICs..................     $  4,310,032          $  9,941,546
Fixed-Rate REMICs.....................     $    298,027          $ 31,259,753
Agency ARMs...........................     $  3,175,712          $ 11,416,919
Agency Hybrid ARMs....................     $  4,516,881          $ 13,383,518
Agency DUS............................     $ 33,667,194          $ 15,513,112
                                           $        ---          $        ---
Agency Debentures.....................

REINVESTMENTS                                   2004                 2003
-------------                                   ----                 ----
Floating-Rate REMICs..................     $        ---          $        ---
Fixed-Rate REMICs.....................     $ 20,915,000          $        ---
Agency ARMs...........................     $        ---          $        ---
Agency Hybrid ARMs....................     $        ---          $        ---
Agency DUS............................     $        ---          $ 75,902,726
Agency Debentures.....................     $        ---          $ 20,038,400


The Company also recorded interest income from short-term investments for the
2004 Period and 2003 Period of $250,231 and $255,505, 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, 2004 and 2003, as calculated by aggregate amortized cost,
approximately 48.20% and 49.41%, 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 51.80% and 50.59%, respectively, consisted of Agency
Debentures. As of September 30, 2004 and 2003, floating rate securities
accounted for approximately 3.43% and 5.35%, 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, 2004 and 2003 was higher than the amortized cost by approximately 9.12% and
11.93%, 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 2004 Period and 2003 Period totaled $1,039,427 and
$1,064,441, 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. The cost of Branch personnel servicing the Company is based
on actual man-hours devoted to the activities of the Company and remains at arms
length. Expenses incurred under the Services Agreement for the 2004 and 2003
Period totaled $724,826 and $720,561, respectively.

The Company's net income for the 2004 Period and 2003 Period was $17,154,243 and
$18,342,161, respectively. As of September 30, 2004, the Company has declared
and paid dividends as follows:


Security                             Amount                   Date Paid
--------                             ------                   ---------
Series A Preferred                   $19,345,000              June 5, 2004
Series A Preferred                   $19,345,000              December 5, 2003
Series A Preferred                   $19,345,000              June 5, 2003

THREE MONTH PERIOD

The following discussion pertains to the Three months ended September 30, 2004
(the "2004 Quarter") and the Three months ended September 30, 2003 (the "2003
Quarter").

For the 2004 Quarter and 2003 Quarter, the Company had revenues of $6,149,952
and $7,164,558, 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 2004 Quarter and 2003 Quarter, interest on the securities in the
Portfolio amounted to $12,172,799, and $12,135,575, respectively, representing
an aggregate yield of 6.16% 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):

                                         2004                           2003
                                         ----                           ----

Floating-Rate REMICs......  $      29,257      1.56%     $       73,152    1.75%
Fixed-Rate REMICs.........  $     520,918      6.74%     $      288,299    6.64%
Agency ARMs...............  $      82,259      3.52%     $      141,327    3.70%
Agency Hybrid ARMs........  $     186,260      4.28%     $      246,283    3.87%
Agency DUS................  $   6,610,014      6.46%     $    6,642,674    6.42%
Agency Debentures.........  $   4,744,091      6.00%     $    4,743,840    6.00%


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

During the 2004 Quarter, the yields on the Agency DUSs, Agency Debentures and
Fixed-Rate REMICs were approximately 1.49%, 3.23% and 1.56%, respectively, when
taking into account the income and expense from the derivative products used to
hedge these 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 and expense from the
derivative products used to hedge these securities.

The average amortized cost of the Portfolio during the 2004 Quarter and 2003
Quarter was $980,165,179 and $995,301,335, respectively. This reflects the
following prepayments and reinvestments:

PREPAYMENTS                                 2004                         2003
-----------                                 ----                         ----
Floating-Rate REMICs......             $  1,145,956                 $  3,524,548
Fixed-Rate REMICs.........             $        ---                 $  6,609,345
Agency ARMs...............             $  1,015,504                 $  3,277,963
Agency Hybrid ARMs........             $  1,042,837                 $  3,787,340
Agency DUS................             $ 21,173,682                 $  2,225,883
Agency Debentures.........             $        ---                 $

REINVESTMENTS                              2004                          2003
-------------                              ----                          ----
Floating-Rate REMICs......             $        ---                 $        ---
Fixed-Rate REMICs.........             $        ---                 $        ---
Agency ARMs...............             $        ---                 $        ---
Agency Hybrid ARMs........             $        ---                 $        ---
Agency DUS...............              $        ---                 $ 37,780,977
Agency Debentures.........             $        ---                 $        ---


The Company also recorded interest income from short-term investments for the
2004 Quarter and 2003 Quarter of $142,980 and $64,458, 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 2004 Quarter and 2003 Quarter totaled $337,575 and
$344,449, 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. The cost of Branch personnel servicing the Company is based
on actual man-hours devoted to the activities of the Company and remains at arms
length. Expenses incurred under the Services Agreement for the 2004 and 2003
Quarter totaled $224,803 and $240,653, respectively.

The Company's net income for the 2004 Quarter and 2003 Quarter was $6,001,724
and $5,225,973, 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 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, 2004 and
December 31, 2003, the receivable arising from payment for securities amounted
to $22,321,002 and $30,662,719, 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 continued to adversely affect 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, and/or (ii) amounts contributed by
the Bank or the Branch to the Company's capital. As of September 30, 2004, the
Branch has contributed a total of $24,500,000 of additional paid-in capital,
which was used to facilitate the semi-annual payments of dividends to the
holders of the Series A Preferred Securities.

Based on 2004 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 interest rates will increase
sufficiently or that the 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,
2004 were 10.8% and 8%, and at December 31, 2003 were 12.9% and 9.4%, 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 150 ("SFAS 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 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 150 did not have an impact on the Company's Balance Sheet or
Statement of Income.

In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS 149"), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities".
SFAS 149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS 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 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 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, 2004. 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 nine months ended September 30, 2004 and 2003, the Company recognized a gain
(loss) of $(122,985) and $716,866, respectively, in earnings related to the
ineffective portion of fair value hedges. The fair value of these hedging
instruments was $(71,181,265) and $(94,253,884) at September 30, 2004 and
December 31, 2003, 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 a further discussion on derivative instruments and hedging activities, see
Note 8 to the financial statements.

Item 3:  Quantitative and Qualitative Disclosures 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,
2004, 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.

For the quarter ended September 30, 2004, the interest rate environment remained
at a low level. This situation continues to affect 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). This situation will prevail as long as interest rates remain low.

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 thirty 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. The notional amount of each swap is tied to the
outstanding principal of the securities they hedge. The maturity dates of the
swaps reflect the maturity of these securities. However, the maturity date maybe
earlier due to prepayments on some of these securities.

<TABLE>
                                                                                               Fair Value at
                                                                                            September 30, 2004      Notional Balance
      Value Date           Maturity Date          Fixed Rate            Receive Rate            (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          $   (5,454)         $   42,000
                                                                  Plus Six Basis Points
---------------------------------------------------------------------------------------------------------------------------------
November 25, 1998       October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (9,125)             58,000
                                                                  Plus Six Basis Points
---------------------------------------------------------------------------------------------------------------------------------
November 25, 1998       August 25, 2008       U.S. 6.15           U.S. One Month LIBOR                (1,683)             18,437
                                                                  Plus Five Basis Points
---------------------------------------------------------------------------------------------------------------------------------
February 11, 1999       March 14, 2007        U.S. 6.80           U.S. Three Month LIBOR              (4,324)             50,000
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
February 12, 1999       March 5, 2007         U.S. 6.68           U.S. Three Month LIBOR              (4,430)             50,000
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
February 25, 1999       February 25, 2009     U.S. 5.95           U.S. One Month LIBOR                (1,793)             20,064
                                                                  Plus Three Basis Points
---------------------------------------------------------------------------------------------------------------------------------
March 29, 1999          October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (3,784)             30,000
                                                                  Minus Two and Half
                                                                  Basis Points
---------------------------------------------------------------------------------------------------------------------------------
April 6, 1999           October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (4,189)             26,400
                                                                  Minus One Basis Point
---------------------------------------------------------------------------------------------------------------------------------
June 25, 1999           June 25, 2009         U.S. 6.06           U.S. One Month LIBOR                (2,464)             25,295
                                                                  Plus Three and Half
                                                                  Basis Points
---------------------------------------------------------------------------------------------------------------------------------
July 1, 1999            June 25, 2009         U.S. 6.39           U.S. One Month LIBOR                (1,701)             15,247
                                                                  Plus Three and Half
                                                                  Basis Points
---------------------------------------------------------------------------------------------------------------------------------
September 27, 1999      March 25, 2008        U.S. 6.29           U.S. One Month LIBOR                (3,763)             41,629
                                                                  Plus Five Basis Points
---------------------------------------------------------------------------------------------------------------------------------
September 27, 1999      March 25, 2009        U.S. 5.858          U.S. One Month LIBOR                (2,361)             27,308
                                                                  Plus Four Basis Points
---------------------------------------------------------------------------------------------------------------------------------
November 26, 1999       April 25, 2009        U.S. 6.04           U.S. One Month LIBOR                (1,415)             14,978
                                                                  Plus Four Basis Points
---------------------------------------------------------------------------------------------------------------------------------
June 26, 2000           October 1, 2007       U.S. 6.68           U.S. One Month LIBOR                  (767)              8,032
                                                                  Plus One and Half Basis
                                                                  Points
---------------------------------------------------------------------------------------------------------------------------------
June 26, 2000           October 1, 2008       U.S. 6.26           U.S. One Month LIBOR                  (890)              9,015
---------------------------------------------------------------------------------------------------------------------------------
August 1, 2000          December 1, 2007      U.S. 6.42           U.S. One Month LIBOR                  (660)              7,000
---------------------------------------------------------------------------------------------------------------------------------
August 1, 2000          October 1, 2006       U.S. 7.20           U.S. One Month LIBOR                (2,284)             26,714
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
October 2, 2000         June 1, 2007          U.S. 7.007          U.S. One Month LIBOR                  (631)              6,421
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
October 2, 2000         July 1, 2007          U.S. 7.405          U.S. One Month LIBOR                  (834)              7,436
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
November 2, 2000        October 9, 2007       JPY 2.125           U.S. Three Month LIBOR                (631)             15,000
                                                                  Minus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
March 25, 2001          October 25, 2007      U.S. 6.94           U.S. One Month LIBOR                  (777)              7,418
                                                                  Plus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
September 4, 2001       October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                (1,508)             17,810
                                                                  Plus Two Basis Points
---------------------------------------------------------------------------------------------------------------------------------
October 2, 2001         October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                  (745)              8,905
                                                                  Plus Seven Basis Points
---------------------------------------------------------------------------------------------------------------------------------
January 2, 2002         October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                  (740)              8,905
                                                                  Plus Ten Basis Points
---------------------------------------------------------------------------------------------------------------------------------
May 1, 2002             October 25, 2007      U.S. 6.63           U.S. One Month LIBOR                  (854)              8,989
                                                                  Plus One Basis Point
---------------------------------------------------------------------------------------------------------------------------------
May 3, 2002             August 25, 2007       U.S. 6.74           U.S. One Month LIBOR                  (966)             10,000
                                                                  Plus One Basis Point
---------------------------------------------------------------------------------------------------------------------------------
August 25, 2002         August 25, 2007       U.S. 4.90           U.S. One Month LIBOR                (1,198)             26,500
                                                                  Plus Five Basis Points
---------------------------------------------------------------------------------------------------------------------------------
September 25, 2002      June 25, 2007         U.S. 7.007          U.S. One Month LIBOR                (1,064)             11,101
                                                                  Plus Seven Basis Points
---------------------------------------------------------------------------------------------------------------------------------
October 25, 2002        May 25, 2006          U.S. 6.83           U.S. One Month LIBOR                  (571)              9,018
                                                                  Plus Seven Basis Points
---------------------------------------------------------------------------------------------------------------------------------
March 21, 2003          February 25, 2009     U.S. 5.945          U.S. One Month LIBOR                (1,374)             15,806
                                                                  Plus Nine Basis Points
---------------------------------------------------------------------------------------------------------------------------------
May 8, 2003             July 25, 2006         U.S. 7.239          U.S. One Month LIBOR                  (817)             10,807
                                                                  Plus Seven Basis Points
---------------------------------------------------------------------------------------------------------------------------------
August 1, 2003          April 1, 2008         U.S. 6.568          U.S. One Month LIBOR                (1,318)             12,950
                                                                  Plus Ten Basis Points
---------------------------------------------------------------------------------------------------------------------------------
August 1, 2003          October 1, 2007       U.S. 6.812          U.S. One Month LIBOR                (2,400)             24,348
                                                                  Plus Ten Basis Points
---------------------------------------------------------------------------------------------------------------------------------
October 9, 2003         October 1, 2007       U.S. 6.96           U.S. One Month LIBOR                (1,669)             16,105
                                                                  Plus Five Basis Points
---------------------------------------------------------------------------------------------------------------------------------
April 1, 2004           August 25, 2007       U.S. 6.74           U.S. One Month LIBOR                (1,997)             20,915
                                                                  Plus Five Basis Points              -------             ------


Total Swaps- Fair Value Hedges                                                                     $ (71,181)        $   708,553
------------------------------                                                                     ----------        -----------

January 17, 2001        March 26, 2008        JPY 1.75            U.S. 5.80                        $    (298)        $    18,000
                                                                                                   ----------        -----------
Other Swap                                                                                              (298)             18,000
----------                                                                                         ----------        -----------

Total Swap Portfolio (Other liabilities)                                                           $ (71,479)        $   726,553
                                                                                                   ==========        ===========
</TABLE>

The fair value of the swap portfolio was $(71,478,910) and $(94,597,757) at
September 30, 2004 and December 31, 2003, 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 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):



<PAGE>




                                                        September 30, 2004
                                                        ------------------
<TABLE>

                                           Due       Due       Due          Due         Due        Due         Due
                                           In       after     after        after       after      After       After
Non-Collateral                            2004       2004      2005         2006        2007       2008        2009       Total
--------------                            ----       ----      ----         ----        ----       ----        ----       -----

<S>                                      <C>          <C>    <C>          <C>        <C>           <C>       <C>         <C>
Fixed-Rate Instruments:
  Fixed-Rate REMICs..................    $  ---    $   ---   $    ---     $ 30,915   $    ---      $   ---   $  ---      $30,915
  Agency DUS.........................       ---        ---     82,158      127,948    129,227       66,905      ---      406,238
  Agency Debentures .................       ---        ---        ---      374,166    131,637          ---      ---      505,803
                                         ------    -------   --------     --------   --------      -------   ------     --------
Total Fixed-Rate Instruments.........       ---        ---     82,158      533,029    260,864       66,905      ---      942,956
                                         ------    -------   --------     --------   --------      -------   ------     --------

Floating-Rate Instruments:
  Floating-Rate REMICs...............       ---        ---        ---          578        ---          ---      ---          578
  Agency ARMs........................       ---        138      2,784          ---        ---          533      ---        3,455
  Agency Hybrid ARMs.................       ---        196        971          357      1,171          220    4,200        7,115
                                         ------    -------   --------     --------   --------      -------   ------     --------
Total Floating-Rate Instruments......       ---        334      3,755          935      1,171          753    4,200       11,148
                                         ------    -------   --------     --------   --------      -------   ------     --------

Total Non-Collateral                     $  ---    $   334   $ 85,913     $533,964   $262,035      $67,658   $4,200     $954,104
                                         ------    -------   --------     --------   --------      -------   ------     --------
Collateral
---------

Fixed-Rate Instruments:
  Fixed-Rate REMICs..................    $  ---    $   ---   $    ---     $    ---   $    ---      $   ---   $  ---     $    ---
  Agency DUS.........................       ---        ---        ---          ---        ---          ---      ---          ---
  Agency Debentures .................       ---        ---        ---          ---        ---          ---      ---          ---
                                            ---        ---        ---          ---        ---          ---      ---          ---
Total Fixed-Rate Instruments.........       ---        ---        ---          ---        ---          ---      ---          ---
                                            ---        ---        ---          ---        ---          ---      ---          ---

  Floating-Rate Instruments:
  Floating-Rate REMICs...............       ---      1,676        ---        3,955        912          ---      ---        6,543
  Agency ARMs........................       ---        633        158        1,700        528          ---    2,709        5,728
  Agency Hybrid ARMs.................       ---        ---        ---        4,300        946        3,108    1,696       10,050
                                         ------    -------   --------     --------   --------      -------   ------     --------
Total Floating-Rate Instruments......       ---      2,309        158        9,955      2,386        3,108    4,405       22,321
                                         ------    -------   --------     --------   --------      -------   ------     --------

Total Collateral.....................    $  ---    $ 2,309   $    158     $  9,955   $  2,386      $ 3,108   $4,405     $ 22,321
                                         ------    -------   --------     --------   --------      -------   ------     --------
September 30, 2004 Total Portfolio       $  ---    $ 2,643   $ 86,071     $543,919   $264,421      $70,766   $8,605     $976,425
                                         ======    =======   ========     ========   ========      =======   ======     ========



<PAGE>



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

Fixed-Rate Instruments:
  Fixed-Rate REMICs..................    $  ---   $   ---   $    ---     $ 10,000     $    ---   $   ---       $ ---    $    10,000
  Agency DUS.........................       ---       ---    111,830      106,861      152,963    68,251         ---        439,905
  Agency Debentures .................       ---       ---    109,974      335,760       60,496       ---         ---        506,230
                                         ------   -------   --------     --------     --------   -------      ------    -----------
Total Fixed-Rate Instruments.........       ---       ---    221,804      452,621      213,459    68,251         ---        956,135
                                         ------   -------   --------     --------     --------   -------      ------    -----------

Floating-Rate Instruments:
  Floating-Rate REMICs...............       ---       ---        797          ---          ---       ---         ---            797
  Agency ARMs........................     1,978     2,505        588          ---          ---       ---         ---          5,071
  Agency Hybrid ARMs.................       979     3,430        644          772        3,617       ---         ---          9,442
                                         ------   -------   --------     --------     --------   -------      ------    -----------
Total Floating-Rate Instruments......     2,957     5,935      2,029          772        3,617       ---         ---         15,310
                                         ------   -------   --------     --------     --------   -------      ------    -----------

Total Non-Collateral................     $2,957   $ 5,935   $223,833     $453,393     $217,076   $68,251      $  ---    $   971,445
                                         ------   -------   --------     --------     --------   -------      ------    -----------
Collateral
----------

Fixed-Rate Instruments:
  Fixed-Rate REMICs..................    $  298   $   ---   $    ---     $    ---     $    ---   $   ---      $  ---    $       298
  Agency DUS.........................       ---       ---        ---          ---          ---       ---         ---            ---
  Agency Debentures .................       ---       ---        ---          ---          ---       ---         ---            ---
                                            ---       ---        ---          ---          ---       ---         ---            ---
Total Fixed-Rate Instruments.........       298       ---        ---          ---          ---       ---         ---            298
                                            ---       ---        ---          ---          ---       ---         ---            ---

Floating-Rate Instruments:
  Floating-Rate REMICs...............     3,387       552      5,511          ---          ---     1,223         ---         10,673
  Agency ARMs........................       125     2,608        920        1,008          819       245       1,622          7,347
  Agency Hybrid ARMs.................       180     4,541        ---          ---        3,499     4,125         ---         12,345
                                         ------   -------   --------     --------     --------   -------      ------    -----------
Total Floating-Rate Instruments......     3,692     7,701      6,431        1,008        4,318     5,593       1,622         30,365
                                         ------   -------   --------     --------     --------   -------      ------    -----------

Total Collateral.....................    $3,990   $ 7,701   $  6,431     $  1,008     $  4,318   $ 5,593      $1,622    $    30,663
                                         ------   -------   --------     --------     --------   -------      ------    -----------
December 31, 2003 Total Portfolio        $6,947   $13,636   $230,264     $454,401     $221,394   $73,844      $1,622    $ 1,002,108
                                         ======   =======   ========     ========     ========   =======      ======    ===========
</TABLE>


Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 as of September 30, 2004. 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 the Company's evaluation, the
President and Chief Financial Officer concluded that the disclosure controls and
procedures as of September 30, 2004 were 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 have been no significant changes in the Company's internal control over
financial reporting that occurred during the third fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

Part II

Item 1:  Legal Proceedings

         None.

Item 2:  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
         Securities

         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

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 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     B) Current 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 12, 2004                       By /s/ Oliver Meisel
                                                     ---------------------------
                                                     Olivier Meisel
                                                     President and Director

Date: November 12, 2004                       By /s/ Thomas Clyne
                                                     ------------------------
                                                     Thomas Clyne
                                                     Chief Financial Officer and
                                                     Director