UNITED STATESSECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of 
the Securities Exchange Act of 1934 
For the fiscal year ended December 31, 2005

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) 841-2000Securities registered pursuant to Section 12(b) of the Act: None

|                                                            | Name of Each Exchange on
|----------------------------------------------------------- | ------------------------
|Title of Each Class                                         | which Registered        
|                                                            |                         
|None                                                        | None                    
|                                                            |                         
|Securities registered pursuant to Section 12(g) of the Act:

Noncumulative Preferred Securities, Series A(Liquidation Preference US$10,000 per Series A Preferred Security)(Title of class)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YesoNox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YesoNox

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. Yesx Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

Large Accelerated Filero    Accelerated Filero    Non-Accelerated Filerx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  YesoNox

---



Form 10-K Index

|         |                                                                                       | PAGE
|-------- | ------------------------------------------------------------------------------------- | ----
|PART I   |                                                                                       |     
|Item 1:  | Business                                                                              | 3   
|Item 1A: | Risk Factors                                                                          | 8   
|Item 1B: | Unresolved Staff Comments                                                             | 8   
|Item
2:  | Properties                                                                            | 8   
|Item
3:  | Legal Proceedings                                                                     | 8   
|Item 4:  | Submission of Matters to a Vote of Securityholders                                    | 8   
|         |                                                                                       |     
|PART II  |                                                                                       |     
|Item 5:  | Market for Registrants Common Equity , Related Securityholder Matters and Issuer     |     
|         | Purchases of Equity Securities                                                        | 8   
|Item
6:  | Selected Financial Data                                                               | 8   
|Item
7:  | Managements Discussion and Analysis of Financial Condition and Results of Operations | 9   
|Item
7A: | Quantitative and Qualitative Disclosures About Market Risk                            | 13  
|Item
8:  | Financial Statements and Supplementary Data                                           | 17  
|Item 9:  | Changes In andDisagreements with Accountants on Accounting and                        |     
|         | Financial Disclosure                                                                  | 32  
|Item
9A: | Controls and Procedures                                                               | 32  
|Item 9B: | Other Information                                                                     | 32  
|        
|PART III |                                                                                       |     
|Item
10: | Directors and Executive Officers of the Registrant                                    | 32  
|Item
11: | Executive Compensation                                                                | 34  
|Item 12: | Security Ownership of Certain Beneficial Owners and Management and Related Matters    | 34  
|Item
13: | Certain Relationships and Related Transactions                                        | 34  
|Item 14: | Principal Accounting Fees and Services                                                | 34  
|PART IV  |                                                                                       |     
|Item 15: | Exhibits and Financial Statement Schedules                                            | 35  

2

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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 annual report on Form 10-K (or any other periodic reporting documents required by the Securities Exchange Act of 1934, 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 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.

**Part I**

Item 1: Business

General

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), asociété anonymeor 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 non-cumulative 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 $3,400,000, $6,800,000, $8,500,000, $7,500,000, $5,500,000 and $3,000,000, on June
2, 2005, December 2, 2004, June 3, 2004, December 3, 2003, June 3, 2003, and December 3, 2002, 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.

General Description of the Portfolio

Types of Eligible Securities

Pursuant to its Charter and resolutions adopted by its Board of Directors, the Company may invest only in specified types of securities (Eligible Securities).  Eligible Securities currently consist of (i)
mortgage pass-through securities issued or guaranteed by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)
that represent fractional undivided interests in pools

3

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of the relevant mortgage loans (Agency Securities); (ii) REMIC securities that are issued or guaranteed by GNMA, FHLMC or FNMA and that represent beneficial ownership interests in trusts established by GNMA,
FHLMC or FNMA, the assets of which consist directly or indirectly of Agency Securities or other, previously issued REMIC securities of this type (REMIC Agency Securities); (iii) REMIC securities that are issued by an unrelated private
company and secured directly or indirectly by Agency Securities and rated AAA by Standard & Poors as to creditworthiness, that represent beneficial ownership interests in a trust established by such private company, the assets of which
consist directly or indirectly of Agency Securities, REMIC Agency Securities, or other previously issued REMIC securities of this type (Agency Collateralized Securities); (iv) unsecured, current pay, direct debt obligations of FNMA and
FHLMC (Agency Debentures); (v) U.S. Treasury securities with a maturity of up to ten years (Treasuries); and (vi) specified short-term investments not subject to U.S. withholding tax (Short-Term Instruments and,
collectively with the securities included in (i)-(v) above, the Eligible Securities). Categories (i) through (iii) above are referred to herein as Mortgage-Backed Securities. REMIC Agency Securities include GNMA REMIC
Securities, FHLMC REMIC Securities and FNMA REMIC Securities. The trusts set up in connection with REMIC Agency Securities and Agency Collateralized Securities may have elected to be treated as real estate mortgage investment conduits
(REMICs) for federal income tax purposes.

The types of Agency Securities in the Portfolio are (i) securities backed only by mortgages with adjustable rates that reset annually at a given rate plus a net margin (Agency ARMs); (ii) securities backed by
mortgages with a fixed rate for a specified period of time, after which they reset annually at a given rate plus a net margin (Agency Hybrid ARMs); (iii) unsubordinated debentures which bear interest at a fixed rate and are not
redeemable by the issuer prior to maturity (Agency Debentures); and (iv) securities backed by fixed rate loans on multifamily properties (Agency DUSs).

Set forth below is a description, as of December 31, 2005, of the Portfolio. As of December 31, 2005, the Eligible Securities included in the Portfolio had an aggregate amortized cost of $788,479,084 and an estimated fair
value of $812,077,979. The composition of the Portfolio, stated in terms of amortized cost, is presented in the following table:

|December 31, 2005                 |  |                         |  |            |  |                |        
|--------------------------------- |  | ----------------------- |  | ---------- |  | -------------- | -------
|                                 
|                                  |  | Percentage of Portfolio |  |            |  | Aggregate     
|                                  |  | by Aggregate            |  | Number of  |  | Amortized Cost
|Type of Security                  |  | Amortized Cost          |  | Securities |  | ($000)        
|                                  |  |                         |  |            |  |                |        
|                                 
|Floating-Rate REMICs              |  | 0.40%                   |  | 5          |  | $              | 3,149  
|Fixed-Rate REMICs                 |  | 3.92                    |  | 1          |  |                | 30,915 
|Agency ARMs                       |  | 0.91                    |  | 23         |  |                | 7,210  
|Agency Hybrid ARMs                |  | 1.45                    |  | 17         |  |                | 11,445 
|Agency DUSs                       |  | 29.26                   |  | 27         |  |                | 230,667
|Agency Debentures                 |  | 64.06                   |  | 13         |  |                | 505,092
|December 31, 2005 Total Portfolio |  | 100.00%                 |  | 86         |  | $              | 788,478

Description of Types of Securities

Floating-Rate REMICs

Floating-Rate REMICs are backed by Agency Securities where a particular portion of the cash flows are directed to the Floating-Rate REMICs. FNMA, FHLMC, and GNMA all guarantee the full and timely payment of principal and
interest on the pools of mortgages, which flow through to the REMICs. These REMICs are floating-rate securities whose interest rates reset monthly at the then-current rate of one-month LIBOR plus a margin. The interest ratio is subject to a lifetime
cap and floor. The interest cap, floor, and margin all vary by security. The amortized cost of securities (in thousands):

|December 31, 2005          |  |         |  |          |  |              |  |               |            |               
|-------------------------- |  | ------- |  | -------- |  | ------------ |  | ------------- | ---------- | --------------
|                           |  |         |  |          |  | Weighted     |  |               |            |               
|                           |  | Current |  |          |  | Average      |  |               |            |               
|Series                     |  | Coupon  |  | Life Cap |  | Life (Years) |  | Maturity Date |            | Amortized Cost
|                           |  |         |  |          |  |              |  |               |            |               
|                          
|FANNIE MAE 1997-28 FA      |  | 3.81    |  | 10.00    |  | 2.34         |  |               | 5-25-2027  |               
|FANNIE MAE 1990-121 F      |  | 5.21    |  | 11.50    |  | 3.01         |  |               | 10-25-2020 |               
|FANNIE MAE 1992-141 FA     |  | 4.91    |  | 10.50    |  | .61          |  |               | 8-25-2007  |               
|FREDDIE MAC 1040 H         |  | 5.33    |  | 11.00    |  | 1.73         |  |               | 2-15-2021  |               
|FANNIE MAE G92 60 F        |  | 3.72    |  | 10.00    |  | 3.11         |  |               | 10-25-2022 |               
|Total Floating-Rate REMICs |  |         |  |          |  |              |  |               |            | $ 3,149       



4

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Fixed-Rate REMICs

Fixed-Rate REMICs are backed by Agency Securities where a particular portion of the cash flows is directed to the Fixed-Rate REMICs. FNMA, GNMA and FHLMC all guarantee the full and timely payment of principal and interest
on the pools of mortgages, which flow through to the Fixed-Rate REMICs. The amortized cost of securities (in thousands):

|December 31, 2005    |  |         |  |          |  |          |  |               |  |          
|-------------------- |  | ------- |  | -------- |  | -------- |  | ------------- |  | ---------
|                     |  |         |  |          |  | Weighted |  |               |  |          
|                     |  |         |  |          |  | Average  |  |               |  |          
|                     |  | Current |  |          |  | Life     |  |               |  | Amortized
|Series               |  | Coupon  |  | Life Cap |  | (Years)  |  | Maturity Date |  | Cost     
|                     |  |         |  |          |  |          |  |               |  |          
|FANNIE MAE 1997-M5 C |  | 6.74    |  | 11.50    |  | 1.65     |  | 8-25-2007     |  | $30,915  

Agency ARMs

The Agency ARMs in the Adjustable Rate Mortgage (ARM) pools consist of securities having the timely payment of principal and interest generally guaranteed by GNMA, FNMA and FHLMC. The securities consist of pools
of adjustable rate mortgages, whose interest rates reset annually at a rate equal to the then-current rate of the One-Year Constant Maturity Treasury Index (as defined below) plus a net margin. The interest ratio for each ARM pool is subject to a
periodic cap and a lifetime cap, which vary by agency and pool.

The One-Year Constant Maturity Treasury Index (CMT) is the weekly average yield on U.S. Treasury securities adjusted to a constant maturity of one year as published by the Federal Reserve Board in Statistical
Release H. 15(519) or any similar publication or, if not so published, as reported by any Federal Reserve Bank or by any U.S. Government department or agency. The Three-Year Constant Maturity Treasury Index is the weekly average yield on U.S.
Treasury securities adjusted to a constant maturity of three years as published in a similar manner as The One-Year Constant Maturity Treasury Index. The amortized cost of securities (in thousands):

|December 31, 2005                         |         |  |          |  |          |  |            |  |               
|----------------------------------------- | ------- |  | -------- |  | -------- |  | ---------- |  | --------------
|                                          |         |  |          |  | Weighted |  |            |  |               
|                                          |         |  |          |  | Average  |  |            |  |               
|                                          | Current |  |          |  | Life     |  | Maturity   |  |               
|P o o l  N o .( 1 )                       | Coupon  |  | Life Cap |  | (Years)  |  | Date       |  | Amortized Cost
|                                          |         |  |          |  |          |  |            |  |               
|                                         
|FH 846384                                 | 5.59%   |  | 11.77%   |  | 9.97     |  | 12-1-2026  |  | $ 490         
|FN 313190                                 | 5.61    |  | 12.12    |  | 11.82    |  | 9-1-2026   |  | 619           
|FN 313242                                 | 5.84    |  | 11.96    |  | 1.36     |  | 11-1-2026  |  | 129           
|FN 313311                                 | 5.54    |  | 11.86    |  | 2.20     |  | 12-1-2026  |  | 176           
|FN 313377                                 | 5.07    |  | 11.74    |  | 12.98    |  | 2-1-2027   |  | 502           
|FN 313432                                 | 5.70    |  | 11.84    |  | 12.78    |  | 2-1-2027   |  | 153           
|FN 363057                                 | 4.70    |  | 11.38    |  | 13.09    |  | 2-1-2027   |  | 49            
|FN 363070                                 | 5.08    |  | 11.49    |  | 13.21    |  | 3-1-2027   |  | 70            
|FN 370478                                 | 4.97    |  | 11.37    |  | 13.19    |  | 2-1-2027   |  | 71            
|FN 370479                                 | 5.05    |  | 11.31    |  | 4.70     |  | 3-1-2027   |  | 83            
|FN 374711                                 | 5.37    |  | 11.72    |  | 1.56     |  | 7-1-2027   |  | 162           
|FN 378243                                 | 5.73    |  | 12.23    |  | 13.37    |  | 7-1-2027   |  | 55            
|FN 391247                                 | 5.34    |  | 11.37    |  | 12.15    |  | 4-1-2027   |  | 628           
|FN 394850                                 | 5.71    |  | 12.07    |  | 13.49    |  | 7-1-2027   |  | 33            
|FN 397901                                 | 5.67    |  | 11.89    |  | 13.49    |  | 8-1-2027   |  | 86            
|FH 610727                                 | 5.39    |  | 12.35    |  | 13.32    |  | 5-1-2027   |  | 111           
|G 280094                                  | 4.75    |  | 11.00    |  | 3.15     |  | 7-20-2027  |  | 982           
|G 28506                                   | 4.75    |  | 12.50    |  | 3.92     |  | 9-20-2024  |  | 1,332         
|G 280001                                  | 4.13    |  | 11.00    |  | 8.22     |  | 10-20-2026 |  | 93            
|FH 786213                                 | 6.65    |  | 12.55    |  | 12.05    |  | 12-1-2027  |  | 608           
|FH 785825                                 | 5.27    |  | 12.18    |  | 8.64     |  | 5-1-2027   |  | 246           
|FH 786088                                 | 5.33    |  | 12.26    |  | 13.25    |  | 12-1-2027  |  | 491           
|FN 396355                                 | 5.62    |  | 11.80    |  | .54      |  | 8-1-2027   |  | 41            
|Total Agency ARMs                         |         |  |          |  |          |  |            |  | $7,210        
|                                         
|                                         
|(1)FN= FNMA; G= GNMA; and FH= FHLMC |         |  |          |  |          |  |            | 

5

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Agency Hybrid ARMs

The Agency Hybrid ARMs consist of securities having the timely payment of principal and interest generally guaranteed by FNMA and FHLMC. The securities consist of mortgages that have a fixed interest rate for a specified
period of time, after which the interest rate resets annually at a rate equal to the then-current rate of the One-Year Constant Maturity Treasury Index (as defined above) plus a security net margin, except that pools underlying the Fannie Mae 422268
have a coupon that resets every three years at a rate equal to the then-current rate of the Three-Year Constant Maturity Treasury Index (as defined above) plus a security net margin. The interest rate of each ARM pool is subject to a periodic cap
and a lifetime cap which vary by pool. The amortized cost of securities (in thousands):

|December 31, 2005  |  |                             |  |          |  |         |  |           |  |               
|------------------ |  | --------------------------- |  | -------- |  | ------- |  | --------- |  | --------------
|                   |  |                             |  |          |  |         |  | Weighted  |  |               
|                   |  |                             |  |          |  |         |  | Average   |  |               
|                   |  |                             |  | Current  |  |         |  | Life      |  | Maturity      
|P o o l N o .( 1 ) |  | Coupon                      |  | Life Cap |  | (Years) |  | Date      |  | Amortized Cost
|                   |  |                             |  |          |  |         |  |           |  |               
|                  
|FN 312824          |  | 5.28%                       |  | 12.38%   |  | 1.82    |  | 6-1-2025  |  | $ 102         
|FN 345856          |  | 5.46                        |  | 11.87    |  | 2.38    |  | 8-1-2036  |  | 1,098         
|FN 361370          |  | 5.42                        |  | 13.57    |  | 1.55    |  | 7-1-2026  |  | 1,836         
|FN 361372          |  | 5.36                        |  | 12.90    |  | 2.39    |  | 7-1-2026  |  | 1,595         
|FN 374138          |  | 4.73                        |  | 11.35    |  | 1.29    |  | 3-1-2027  |  | 1,045         
|FN 397136          |  | 8.07                        |  | 13.76    |  | 11.04   |  | 6-1-2027  |  | 815           
|FN 362968          |  | 5.57                        |  | 12.24    |  | 11.78   |  | 1-1-2026  |  | 188           
|FN 374917          |  | 4.95                        |  | 11.75    |  | 13.17   |  | 4-1-2027  |  | 260           
|FN 403006          |  | 6.00                        |  | 11.50    |  | 12.55   |  | 11-1-2027 |  | 185           
|FN 404484          |  | 5.87                        |  | 11.50    |  | 13.43   |  | 11-1-2027 |  | 159           
|FN 422265          |  | 5.37                        |  | 13.26    |  | 5.22    |  | 1-1-2026  |  | 940           
|FN 422268          |  | 5.91                        |  | 12.94    |  | 4.42    |  | 12-1-2024 |  | 310           
|FN 422276          |  | 5.52                        |  | 13.23    |  | 3.56    |  | 12-1-2027 |  | 2,192         
|FN 409850          |  | 5.22                        |  | 11.63    |  | .97     |  | 3-1-2028  |  | 105           
|FN 415286          |  | 5.22                        |  | 12.38    |  | 2.23    |  | 2-1-2028  |  | 206           
|FN 417833          |  | 5.40                        |  | 11.45    |  | 12.66   |  | 3-1-2028  |  | 324           
|FH 786414          |  | 5.39                        |  | 12.03    |  | 13.57   |  | 7-1-2028  |  | 85            
|                   |  | Total Agency Hybris ARMs    |  |          |  |         |  |           |  |               
|(1)                |  | FN= FNMA; and FH= FHLMC |  |          |  |         |  |           |  |               

Agency DUSs

Pursuant to a Board of Directors resolution of November 4, 1998, the Company may invest in Agency DUSs. A Delegated Underwriting and Servicing (DUS) pool is 100% guaranteed by FNMA and backed by loans on multifamily
properties. These are fixed-rate loans ranging in size from $1 million to $70 million.  FNMA guarantees timely payment of interest and principal, including any balloon payments. Loans include yield maintenance provisions that permit the borrower to
prepay his mortgage but only with a penalty that is sufficient to compensate the investor for early prepayment. Any yield maintenance collected is passed through to the investor. The amortized cost of securities (in thousands):

|December 31, 2005             |  |  |  |                         |  |  |                                       |  |  |              |  |  |               
|----------------------------- |  |  |  | ----------------------- |  |  | ------------------------------------- |  |  | ------------ |  |  | --------------
|Security
         Description |  |  |  | Current
         Coupon |  |  | Weighted Average
        Life (Years) |  |  | MaturityDate |  |  | Amortized Cost
|                              |  |  |  |                         |  |  |                                       |  |  |              |  |  |               
|                             
|FNMA 380491                   |  |  |  | 6.11%                   |  |  | 2.50                                  |  |  | 7-1-2008     |  |  | $             
|FNMA 381608                   |  |  |  | 5.93                    |  |  | 3.30                                  |  |  | 5-1-2009     |  |  |               
|FNMA 381640                   |  |  |  | 5.86                    |  |  | 3.22                                  |  |  | 4-1-2009     |  |  |               
|FNMA 380933                   |  |  |  | 5.92                    |  |  | 2.90                                  |  |  | 12-1-2008    |  |  |               
|FNMA 381152                   |  |  |  | 5.88                    |  |  | 3.06                                  |  |  | 1-1-2009     |  |  |               
|FNMA 381294                   |  |  |  | 5.81                    |  |  | 3.06                                  |  |  | 2-1-2009     |  |  |               
|FNMA 381488                   |  |  |  | 6.19                    |  |  | 3.23                                  |  |  | 4-1-2009     |  |  |               
|FNMA 381514                   |  |  |  | 6.19                    |  |  | 3.23                                  |  |  | 4-1-2009     |  |  |               
|FNMA 381730                   |  |  |  | 6.39                    |  |  | 3.39                                  |  |  | 6-1-2009     |  |  |               
|FNMA 381705                   |  |  |  | 6.26                    |  |  | 3.39                                  |  |  | 6-1-2009     |  |  |               
|FNMA 381450                   |  |  |  | 5.78                    |  |  | 3.21                                  |  |  | 3-1-2009     |  |  |               

6

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|FNMA 381115 |                   |  |  | 5.97  |  |  | 2.90 |  |  | 12-1-2008 |          |  |  | 10,905 | 
|----------- | ----------------- |  |  | ----- |  |  | ---- |  |  | --------- | -------- |  |  | ------ | 
|FNMA 381117 |                   |  |  | 5.80  |  |  | 3.06 |  |  | 1-1-2009  |          |  |  | 4,667  | 
|FNMA 381556 |                   |  |  | 6.04  |  |  | 3.22 |  |  | 4-1-2009  |          |  |  | 14,682 | 
|FNMA 380798 |                   |  |  | 5.64  |  |  | 2.74 |  |  | 10-1-2008 |          |  |  | 4,318  | 
|FNMA 375433 |                   |  |  | 6.68  |  |  | 1.79 |  |  | 10-1-2007 |          |  |  | 7,859  | 
|FNMA 375618 |                   |  |  | 6.42  |  |  | 1.99 |  |  | 12-1-2007 |          |  |  | 7,000  | 
|FNMA 375385 |                   |  |  | 6.87  |  |  | 1.71 |  |  | 9-1-2007  |          |  |  | 4,499  | 
|FNMA 535642 |                   |  |  | 6.95  |  |  | 1.14 |  |  | 10-1-2007 |          |  |  | 3,240  | 
|FNMA 313672 |                   |  |  | 6.981 |  |  | 1.46 |  |  | 6-1-2007  |          |  |  | 11,612 | 
|FNMA 382497 |                   |  |  | 7.41  |  |  | 1.55 |  |  | 7-1-2007  |          |  |  | 7,336  | 
|FNMA 375471 |                   |  |  | 6.63  |  |  | 1.79 |  |  | 10-1-2007 |          |  |  | 8,794  | 
|FNMA 460685 |                   |  |  | 4.90  |  |  | 1.59 |  |  | 8-1-2007  |          |  |  | 26,500 | 
|FNMA 73558  |                   |  |  | 7.24  |  |  | .57  |  |  | 7-1-2006  |          |  |  | 10,572 | 
|FNMA 313744 |                   |  |  | 6.86  |  |  | 1.39 |  |  | 10-1-2007 |          |  |  | 14,826 | 
|FNMA 360600 |                   |  |  | 6.57  |  |  | 2.32 |  |  | 4-1-2008  |          |  |  | 12,950 | 
|FNMA 323539 |                   |  |  | 5.96  |  |  | 2.98 |  |  | 2-1-2009  |          |  |  | 15,434 | 
|            | Total Agency DUSs |  |  |       |  |  |      |  |  |           | $230,667 | 

Agency Debentures

Pursuant to a Board of Directors resolution of November 4, 1998, the Company may invest in Agency Debentures.  The Agency Debentures consist of conventional debt securities issued periodically directly by either FNMA or
FHLMC. Such Agency Debentures are not secured by any collateral and represent general unsecured obligations of FNMA or FHLMC. The Company is permitted to purchase only unsubordinated debentures which pay interest on a current basis.  The Agency
Debentures purchased by the Company bear interest at a fixed rate and are not redeemable by the issuer prior to maturity. The amortized cost of securities (in thousands):

|December 31, 2005       |  |         |  |                 |  |            |  |               
|----------------------- |  | ------- |  | --------------- |  | ---------- |  | --------------
|Security                |  | Current |  | Life to         |  | Maturity   |  |               
|Description             |  | Coupon  |  | Maturity(Years) |  | Date       |  | Amortized Cost
|                        |  |         |  |                 |  |            |  |               
|                       
|FHLMC 3134A2DT2         |  | 5.75%   |  | 2.30            |  | 4-15-2008  |  | $     24,912  
|FNMA 31359MCY7          |  | 2.13    |  | 1.78            |  | 10-9-2007  |  | 129,400       
|FNMA 31359MDR1          |  | 1.75    |  | 2.24            |  | 3-26-2008  |  | 60,232        
|FNMA 31359MDU4          |  | 6.00    |  | 2.38            |  | 5-15-2008  |  | 46,663        
|FNMA 31364C5BO          |  | 6.44    |  | 1.62            |  | 8-14-2007  |  | 23,972        
|FNMA 31364C6C7          |  | 6.48    |  | 1.66            |  | 8-27-2007  |  | 7,499         
|FNMA 31364CU55          |  | 6.70    |  | 1.47            |  | 6-19-2007  |  | 12,150        
|FNMA 31364CYE2          |  | 6.68    |  | 1.18            |  | 3-5-2007   |  | 50,000        
|FNMA 31359MGH0          |  | 6.63    |  | 1.79            |  | 10-15-2007 |  | 51,240        
|FNMA 31364CYX0          |  | 6.80    |  | 1.21            |  | 3-14-2007  |  | 50,000        
|FNMA 31364C5Q7          |  | 6.55    |  | 1.64            |  | 8-20-2007  |  | 19,019        
|FNMA 31359MPZ0          |  | 3.25    |  | 1.88            |  | 11-15-2007 |  | 20,015        
|FHLMC 3134A4NW0         |  | 4.88    |  | 1.21            |  | 3-15-2007  |  | 9,990         
|Total Agency Debentures |  |         |  |                 |  |            |  | $505,092      

Available Information

The Company files reports and other information with the Securities and Exchange Commission (the SEC) pursuant to Section 13 or 15(d) of the Exchange Act.  All such reports and other information may be read and
copied at the Public Reference Room of the SEC, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-202-551-8090.  The SEC also maintains a website
(http://www.sec.gov) that contains reports and other information regarding registrants that file electronically with the SEC, including the Company.

7

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|Item 1A: | Risk Factors
|-------- | ------------
|        

The following important factors, among others, could adversely affect the Company's results of operations and financial condition.



Since the major source of the Company's income is from interest payments, the Company is subject to interest rate risk.



The purpose of the Company is to acquire and hold eligible securities that will generate net income for distribution to the holders of the Series A Preferred Securities and the Common Securities.  The eligible securities in the Portfolio carry either fixed, adjustable or floating interest rates. Some of the fixed rate securities are hedged with derivatives instruments that aim to transform the fixed rate exposure into floating rate income, based on one-month and three-month Libor rates.As a consequence, a decreasing or low interest rate environment will negatively affect the net income of the Company through the floating rate component of the Portfolio, which may affect the ability of the Company to distribute dividends to the holders of the Series A Preferred Securities. Conversely, in an increasing or high interest rate environment, the net income of the Company will benefit from higher interest
income.

The Company's investments are subject to prepayment and reinvestment risks.



Mortgage-backed securities are subject to prepayment of the underlying loans. In a declining or low interest rate environment, mortgage-backed securities are exposed to more prepayments that shorten their average term.  Prepayments received in such a situation may be reinvested into securities that carry a lower current yield. In an increasing or high interest rate environment, mortgage-backed securities are less subject to prepayment.



The Company is subject to changes in French bank regulatory policies that may affect its ability to pay dividends.



As a subsidiary of the Bank, the Company is subject to the risk that French Banking Commission (Commission Bancaire), in their exercise of regulatory oversight with respect to the Bank, may make determinations that would restrict the Company's ability to make distributions to holders of its securities (including dividend payments to the holders of the Series A Preferred Securities) or to redeem its securities, or render other regulatory decisions that may impair or alter the Company's current operations.



A Shift Event could have materially adverse consequences for the Company and the Securityholders.



If a Shift Event (as defined below) occurs, then substantially all of the Common Securities would be automatically redeemed without prior redemption of the Series A Preferred Securities. 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 its 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, 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 has business relationships with affiliated parties that may generate conflicts of interest.



Because of the relationship between the Company and the Branch, the Bank and their affiliates, conflicts of interest may arise between the Branch, the Bank and their affiliates and the Company. The Company's officers, employees and directors (other than the independent director) are officers and employees of the Branch, the Bank or an affiliate. Conflicts of interest may arise in between the discharge by such individuals of their duties as officers, employees or directors of the Company on the one hand and the Branch, the Bank and its affiliates on the other hand.

|                                                                                                                                              |                                                                                                                     | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | 
|Item 1B:                                                                                                                                      | Unresolved Staff Comments                                                                                          
|                                                                                                                                              |                                                                                                                    
|                                                                                                                                              | Not Applicable                                                                                                     
|                                                                                                                                              |                                                                                                                     | 
|Item 2:                                                                                                                                       | Properties                                                                                                         
|                                                                                                                                              |                                                                                                                    
|The Company does not own or lease any property. It uses the facilities of the Branch located at 787 Seventh Avenue, New York, New York 10019.
|                                                                                                                                              |                                                                                                                    
|Item 3:                                                                                                                                       | Legal Proceedings                                                                                                  
|                                                                                                                                              |                                                                                                                    
|                                                                                                                                              | None                                                                                                               
|                                                                                                                                              |                                                                                                                    
|Item 4:                                                                                                                                       | Submission of Matters to a Vote of Securityholders                                                                 
|                                                                                                                                              |                                                                                                                    
|                                                                                                                                              | None                                                                                                               
|                                                                                                                                              |                                                                                                                    
|Part II                                                                                                                                       |                                                                                                                    
|                                                                                                                                              |                                                                                                                    
|Item 5:                                                                                                                                       | Market for Registrants Common Equity, Related Securityholder Matters and Issuer
    Purchases of Equity Securities
|                                                                                                                                              |                                                                                                                    

Market Information

There is no established public trading market for the Companys Common Securities, all of which are held by the Branch. The Bank has agreed with the Company that, so long as any Series A Preferred Securities are
outstanding, it will maintain direct or indirect ownership of 100% of the  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 net gains from the disposition of securities in the Portfolio and net income not
required to be applied to fund dividends with respect to the Series A Preferred Securities. During 2005, the Company did not declare or pay any dividends with respect to Common Securities.

Item 6: Selected Financial Data

The following table sets forth selected financial data for the years then ended(inthousands, except
share and yield data):

|                                          | December 31,
    2005 |           | December 31,
      2004 |   | December 31,
      2003 |  | December 31,         2002 |           | December 31,
      2001
|----------------------------------------- | --------------------- | --------- | ----------------------- | - | ----------------------- |  | ------------------------- | --------- | -----------------------
|                                          |                       |           |                         |  
|                                          |                       |           |                         |  
|Income Statement:                         |                       |           |                         |   |                         |  |                           |           |                        
|Interest income                           | $                     | 39,954    |                         | $ | 26,091                  |  | $                         | 26,219    |                        
|Net income                                |                       | 47,494    |                         |   | 23,365                  |  |                           | 22,760    |                        
|Average number of Redeemable              |                       |           |                         |   |                         |  |                           |           |                        
|Common Securities outstanding             |                       | 53,011    |                         |   | 53,011                  |  |                           | 53,011    |                        
|Net income (loss) per Redeemable          |                       |           |                         |   |                         |  |                           |           |                        
|Common Security                           |                       | 166.08    |                         |   | (289.09)                |  |                           | (300.50)  |                        
|                                          |                       |           |                         |   |                         |  |                           |           |                        
|Balance Sheet:                            |                       |           |                         |   |                         |  |                           |           |                        
|Investment securities at carrying value   |                       | 812,144   |                         |   | 1,007,087               |  |                           | 1,119,539 |                        
|Total assets                              |                       | 1,063,076 |                         |   | 1,127,852               |  |                           | 1,153,073 |                        
|Series A Preferred Securities outstanding |                       | 500,000   |                         |   | 500,000                 |  |                           | 500,000   |                        
|Total Redeemable Common Securities,       |                       |           |                         |   |                         |  |                           |           |                        
|Preferred Securities, and                 |                       |           |                         |   |                         |  |                           |           |                        
|Securityholders Equity                   | $                     | 1,042,679 |                         | $ | 1,049,350               |  | $                         | 1,055,514 |                        
|                                          |                       |           |                         |   |                         |  |                           |           |                        
|Other Data:                               |                       |           |                         |   |                         |  |                           |           |                        
|Comprehensive income                      | $                     | 28,619    |                         | $ | 17,226                  |  | $                         | 19,180    |                        
|Dividends paid on Series A                |                       |           |                         |   |                         |  |                           |           |                        
|Preferred Securities                      | $                     | 38,690    |                         | $ | 38,690                  |  | $                         | 38,690    |                        
|Dividends paid on Redeemable              |                       |           |                         |   |                         |  |                           |           |                        
|Common Securities                         | $                     | -         |                         | $ | -                       |  | $                         | -         |                        
|                                          |                       |           |                         |   |                         |  |                           |           |                        
|Number of Series A Preferred              |                       |           |                         |   |                         |  |                           |           |                        
|Securities outstanding                    |                       | 50,000    |                         |   | 50,000                  |  |                           | 50,000    |                        
|Number of Redeemable Common               |                       |           |                         |   |                         |  |                           |           |                        
|Securities outstanding                    |                       | 53,011    |                         |   | 53,011                  |  |                           | 53,011    |                        
|Average yield on investment securities    |                       |           |                         |   |                         |  |                           |           |                        
|(before results of hedging activities)    |                       | 5.86%     |                         |   | 6.20%                   |  |                           | 6.03%     |                        

---

8

---



|Item 7: |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- |  | -------------------------------------------------------------------------------------

Set forth on the following pages is managements discussion and analysis of the results of operations for the years ended December 31, 2005, 2004 and 2003. Such information should be read in conjunction with our
Financial Statements together with the Notes to the Financial Statements.

|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 $3,400,000, $6,800,000, $8,500,000, $7,500,000, $5,500,000 and $3,000,000
of additional paid-in capital on June 2, 2005, December 2, 2004, 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.

Critical Accounting Policies

The Notes to the Financial Statements contain a summary of the Company's significant accounting policies, including a discussion of recently issued accounting pronouncements. Certain of these policies as well as estimates
made by management are considered to be important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments and estimates, some of which may relate to matters that are
inherently uncertain. Additional information about these policies can be found in Note 2 to the Financial Statements.

Valuations of Financial Instruments

Investments include mortgage backed securities and derivatives. The Company carries its investments at fair value if they are considered to be available-for-sale. For a substantial majority of the Company's investments,
fair values are determined based upon quoted prices or validated models with externally verifiable model inputs. If available, quoted market prices provide the best indication of fair value. If quoted market prices are not available for mortgage
backed securities and derivatives, the Company discounts the expected cash flows using market interest rates commensurate with the duration of the investment.

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 December 31, 2005. 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 years ended December 31, 2005 and 2004, the Company recognized gains of $407,662 and $462,428, respectively, in earnings related to the
ineffective portion of fair value hedges. The fair value of these hedging instruments was $(14,283,663) and $(73,672,428) at December 31, 2005 and December 31, 2004, 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.

9

---

|Results of Operations
|---------------------

The following discussion pertains to the years ended December 31, 2005, December 31, 2004 and December 31, 2003 (the 2005 Period, the 2004 Period and the "2003 Period," respectively).

|Portfolio
|---------

The average amortized cost of the Portfolio during the 2005 Period, 2004 Period and 2003 Period was $852,537,552, $984,859,956 and $996,713,866, respectively. This reflects the following prepayments and reinvestments:

|PREPAYMENTS          | 2005 |   | 2004        |  | 2003
|-------------------- | ---- | - | ----------- |  | ----
|                     |      |   |             |  |     
|                    
|Floating-Rate REMICs |      | $ | 3,034,468   |  |     
|Fixed-Rate REMICs    |      | $ | ---         |  |     
|Agency ARMs          |      | $ | 1,439,321   |  |     
|Agency Hybrid ARMs   |      | $ | 4,542,778   |  |     
|Agency DUS           |      | $ | 117,681,515 |  |     
|Agency Debentures    |      | $ | ---         |  |     
|                     |      |   |             |  |     
|REINVESTMENTS        | 2005 |   | 2004        |  | 2003
|                     |      |   |             |  |     
|                     |      |   |             |  |     
|Floating-Rate REMICs |      | $ | ---         |  |     
|Fixed-Rate REMICs    |      | $ | ---         |  |     
|Agency ARMs          |      | $ | ---         |  |     
|Agency Hybrid ARMs   |      | $ | ---         |  |     
|Agency DUS           |      | $ | ---         |  |     
|Agency Debentures    |      | $ | ---         |  |     

As of December 31, 2005, 2004, and 2003, as calculated by aggregate amortized cost, approximately 35.94%, 44.79% and 49.48%, 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 64.06%, 55.21% and 50.52%, respectively, consisted of Agency Debentures.  As of December 31, 2005, 2004 and 2003,
floating rate securities accounted for approximately 2.77%, 3.38% and 4.56%, 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 December 31, 2005, 2004 and 2003 was higher than the amortized cost by approximately 2.99%, 9.95%, and 11.74%, respectively, due to a net increase 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 (see Note 2 to the Financial Statements in Item 8).  Unrealized gains and losses on the non-hedged securities are reported as a component of Other Comprehensive Income.

|Revenue
|-------

For the 2005 Period, 2004 Period and 2003 Period, the Company had revenues of $39,953,748, $26,091,163, and $26,219,327, 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. The Company believes the factor having the greatest impact on revenues is the interest rate environment. The increase in revenues is mainly due to
the derivatives used as hedging instruments. The floating rate component of the swaps has generated more income due to increasing interest rates in 2005 Period compared to 2004 Period and 2003 Period.

The Companys net income for the 2005 Period, 2004 Period and 2003 Period was $47,493,858, $23,365,027, and $22,759,655, respectively. The Company has declared and paid dividends for the 2005 Period, 2004 Period and
2003 Period as follows:

|Security           | Amount      | Date Paid       
|------------------ | ----------- | ----------------
|                   |             |                 
|Series A Preferred | $19,345,000 | December 5, 2005
|                   |             |                 
|Series A Preferred | $19,345,000 | June 5, 2005    
|                   |             |                 
|Series A Preferred | $19,345,000 | December 5, 2004
|                   |             |                 
|Series A Preferred | $19,345,000 | June 5, 2004    
|                   |             |                 
|Series A Preferred | $19,345,000 | December 5, 2003
|                   |             |                 

10

---

|Series A Preferred | $19,345,000 | June 5, 2003
|------------------ | ----------- | ------------
|                   |             |             
|                   |             |             

|Interest Income and Yields
|--------------------------

For the 2005 Period, 2004 Period and 2003 Period, interest on the securities in the Portfolio amounted to $39,074,231, $49,291,242 and $48,647,380, respectively, representing an aggregate yield of 5.89%, 6.20% 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):

|                     | 2005           |  | 2004  |  | 2003          
|-------------------- | -------------- |  | ----- |  | --------------
|                     |                |  |       |  |               
|                     |                |  |       |  |               
|Floating-Rate REMICs | $      140,465 |  | 2.89% |  | $      130,041
|Fixed-Rate REMICs    | $   2,072,094  |  | 6.70% |  | $   1,748,437 
|Agency ARMs          | $      322,699 |  | 4.01% |  | $      374,310
|Agency Hybrid ARMs   | $      572,358 |  | 4.01% |  | $      760,707
|Agency DUS           | $ 17,096,265   |  | 5.84% |  | $ 27,190,649  
|Agency Debentures    | $ 18,870,350   |  | 3.73% |  | $ 19,087,098  

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

During the 2005 Period, the yields on the Agency DUSs, Agency Debentures and Fixed-Rate REMICs were approximately 2.95%, 4.51% and 3.34%, respectively, when taking into account the income and expense from the derivative
  products used to hedge these securities. During the 2004 Period, the yields on the Agency DUSs, Agency Debentures and Fixed-Rate REMICS were approximately 1.48%, 3.49% and 1.91%, 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 1.34%, 3.40% and 4.19%, respectively, when taking into account the income and
  expense from the derivative products used to hedge these securities.

The Company also recorded interest income from short-term investments for the 2005 Period, 2004 Period and 2003 Period of $6,590,570, $515,903 and $309,122, 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.  Beginning in 2004, the Company began reinvesting prepayments
  mainly into Certificates of Deposits.

|Operating Expenses
|------------------

Operating expenses for the 2005 Period 2004 Period and 2003 Period totaled $1,365,587, $1,327,138 and $1,432,696, 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 2005 Period, 2004 Period and 2003 Period totaled $964,217, $938,513 and $961,073, respectively.

|Receivable Arising from Payment for Securities
|----------------------------------------------

Due to the potential consequences of a Shift Event (as defined in Item 8 Note 2 herein), the Companys purchase of the Initial Portfolio (as defined in Item 8 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 December 31, 2005 and December 31, 2004, the receivable arising from
payment for securities amounted to $13,690,440 and $20,868,801, 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 to the Financial Statements.

11

---

|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.

|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.

Increases in prevailing interest rates in 2005 had a positive impact on the interest income of the Company. As a result, the Branch made a substantially smaller contribution to the Companys capital in 2005 than in either of the previous two years. If interest rates remain at their 2005 levels or increase further, we expect the Companys interest income to continue to be higher than in the 2004 and 2003 Periods, and the Company may have sufficient capital after paying  dividends on the Series A Preferred Securities to pay one or more dividends to the Common Securities. However, no assurances can be given that interest rates will not decrease, which would have an adverse affect on the Companys income.

BNP PARIBAS Group's total and Tier 1 risk-based capital ratios at December 31, 2005 were 11.0% and 7.6%, and at December 31, 2004 were 10.6% and 8.1%, which are well above the minimum standards required by French banking
regulations, currently 8% for total risk-based capital and 4% for Tier 1 risk-based capital. A Shift Event would occur if BNP PARIBAS risk-based capital fell below these minimum standards of 8% and 4%, respectively.  See Note 2 of
the attached financial statements for a detailed explanation of Shift Events.

|Accounting and Reporting Developments
|-------------------------------------

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 150 (SFAS No. 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. The statement requires that an issuer classify financial instruments that are within its scope as a liability.  Many of those instruments were classified as equity under previous guidance. SFAS
No. 150 is effective for all financial instruments entered into or modified after May 31, 2003. Otherwise, it is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 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 No. 149), Amendment of Statement 133 on Derivative Instruments and
Hedging Activities (SFAS 149). SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, and decisions
made in connection with other FASB projects dealing with financial instruments and in connection with implementation issues raised in relation to the application of the definition of a derivative and characteristics of a derivative that contains
financing components.  In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the 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. SFAS 149 did not have 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.

12

---

Item 7A: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 December 31, 2005, by each category of investment, is depicted in Item 8.

|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.

Increases in prevailing interest rates in 2005 have improved the Companys income, through the floating rate component of the portfolio which is mainly indexed on short term rates, such as one-month and three-month Libor. Increasing interest rates make the pre-payment of the loans underlying the mortgage-backed securities in the Portfolio less likely, making it more likely that such securities will be held to maturity without redemption. However, no assurances can be given that interest rates will not decrease.

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

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

The Company is a party to twenty-two 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 dates maybe
earlier due to prepayments on some of these securities.

|                  |  |                   |  |            |  |                           |  | Fair Value at     |  |                 
|----------------- |  | ----------------- |  | ---------- |  | ------------------------- |  | ----------------- |  | ----------------
|                  |  |                   |  |            |  |                           |  | December 31, 2005 |  | Notional Balance
|Value Date        |  | Maturity Date     |  | Fixed Rate |  | Receive Rate              |  | (in 000s)        |  | (in 000s)      
|                  |  |                   |  |            |  |                           |  |                   |  |                 
|                 
|November 25, 1998 |  | March 26, 2008    |  | JPY 1.75   |  | U.S. Three Month LIBOR    |  | $ (1,824)         |  | $ 42,000        
|                  |  |                   |  |            |  | Plus Six Basis Points     |  |                   |  |                 
|                 
|February 11, 1999 |  | March 14, 2007    |  | U.S. 6.80  |  | U.S. Three Month LIBOR    |  | (1,967)           |  | 50,000          
|                  |  |                   |  |            |  | Minus Two Basis Points    |  |                   |  |                 
|February 12, 1999 |  | March 5, 2007     |  | U.S. 6.68  |  | U.S. Three Month LIBOR    |  | (2,043)           |  | 50,000          
|                  |  |                   |  |            |  | Minus Two Basis Points    |  |                   |  |                 
|                 
|February 25, 1999 |  | February 25, 2009 |  | U.S. 5.95  |  | U.S. One Month LIBOR      |  | (618)             |  | 19,628          
|                  |  |                   |  |            |  | Plus Three Basis Points   |  |                   |  |                 
|June 25, 1999     |  | June 25, 2009     |  | U.S. 6.06  |  | U.S. One Month LIBOR      |  | (770)             |  | 19,720          
|                  |  |                   |  |            |  | Plus Three and Half Basis |  |                   |  |                 
|                  |  |                   |  |            |  | Points                    |  |                   |  |                 

13

---

|                   |  |                   |  |            |  |                           |  | Fair Value at     |  |                 
|------------------ |  | ----------------- |  | ---------- |  | ------------------------- |  | ----------------- |  | ----------------
|                   |  |                   |  |            |  |                           |  | December 31, 2005 |  | Notional Balance
|Value Date         |  | Maturity Date     |  | Fixed Rate |  | Receive Rate              |  | (in 000s)        |  | (in 000s)      
|                   |  |                   |  |            |  |                           |  |                   |  |                 
|                   |  |                   |  |            |  |                           |  |                   |  |                 
|July 1, 1999       |  | June 25, 2009     |  | U.S. 6.39  |  | U.S. One Month LIBOR      |  | (725)             |  | 14,983          
|                   |  |                   |  |            |  | Plus Three and Half Basis |  |                   |  |                 
|                   |  |                   |  |            |  | Points                    |  |                   |  |                 
|September 27, 1999 |  | March 25, 2009    |  | U.S. 5.858 |  | U.S. One Month LIBOR      |  | (794)             |  | 26,714          
|                   |  |                   |  |            |  | Plus Four Basis Points    |  |                   |  |                 
|November 26, 1999  |  | April 25, 2009    |  | U.S. 6.04  |  | U.S. One Month LIBOR      |  | (522)             |  | 14,683          
|                   |  |                   |  |            |  | Plus Four Basis Points    |  |                   |  |                 
|June 26, 2000      |  | October 1, 2007   |  | U.S. 6.68  |  | U.S. One Month LIBOR      |  | (279)             |  | 7,859           
|                   |  |                   |  |            |  | Plus One and Half Basis   |  |                   |  |                 
|                   |  |                   |  |            |  | Points                    |  |                   |  |                 
|June 26, 2000      |  | October 1, 2008   |  | U.S. 6.26  |  | U.S. One Month LIBOR      |  | (526)             |  | 8,817           
|August 1, 2000     |  | December 1, 2007  |  | U.S. 6.42  |  | U.S. One Month LIBOR      |  | (217)             |  | 7,000           
|October 2, 2000    |  | June 1, 2007      |  | U.S. 7.024 |  | U.S. One Month LIBOR      |  | (136)             |  | 4,255           
|                   |  |                   |  |            |  | Minus Two Basis Points    |  |                   |  |                 
|October 2, 2000    |  | July 1, 2007      |  | U.S. 7.405 |  | U.S. One Month LIBOR      |  | (293)             |  | 7,336           
|                   |  |                   |  |            |  | Minus Two Basis Points    |  |                   |  |                 
|March 25, 2001     |  | October 25, 2007  |  | U.S. 6.94  |  | U.S. One Month LIBOR      |  | (496)             |  | 3,240           
|                   |  |                   |  |            |  | Plus Two Basis Points     |  |                   |  |                 
|May 1, 2002        |  | October 1, 2007   |  | U.S. 6.63  |  | U.S. One Month LIBOR      |  | (277)             |  | 8,794           
|                   |  |                   |  |            |  | Plus One Basis Point      |  |                   |  |                 
|May 3, 2002        |  | August 25, 2007   |  | U.S. 6.74  |  | U.S. One Month LIBOR      |  | (309)             |  | 10,000          
|                   |  |                   |  |            |  | Plus One Basis Point      |  |                   |  |                 
|August 25, 2002    |  | August 25, 2007   |  | U.S. 4.90  |  | U.S. One Month LIBOR      |  | (39)              |  | 26,500          
|                   |  |                   |  |            |  | Plus Five Basis Points    |  |                   |  |                 
|September 25, 2002 |  | June 25, 2007     |  | U.S. 7.007 |  | U.S. One Month LIBOR      |  | (225)             |  | 7,357           
|                   |  |                   |  |            |  | Plus Seven Basis Points   |  |                   |  |                 
|March 21, 2003     |  | February 25, 2009 |  | U.S. 5.945 |  | U.S. One Month LIBOR      |  | (461)             |  | 15,434          
|                   |  |                   |  |            |  | Plus Nine Basis Points    |  |                   |  |                 
|May 8, 2003        |  | July 25, 2006     |  | U.S. 7.239 |  | U.S. One Month LIBOR      |  | (151)             |  | 10,572          
|                   |  |                   |  |            |  | Plus Seven Basis Points   |  |                   |  |                 
|August 1, 2003     |  | April 25, 2008    |  | U.S. 6.568 |  | U.S. One Month LIBOR      |  | (479)             |  | 12,950          
|                   |  |                   |  |            |  | Plus Ten Basis Points     |  |                   |  |                 
|August 1, 2003     |  | October 25, 2007  |  | U.S. 6.812 |  | U.S. One Month LIBOR      |  | (500)             |  | 14,826          
|                   |  |                   |  |            |  | Plus Ten Basis Points     |  |                   |  |                 
|April 1, 2004      |  | August 25, 2007   |  | U.S. 6.74  |  | U.S. One Month LIBOR      |  | (633)             |  | 20,914          
|                   |  |                   |  |            |  | Plus Five Basis Points    |  |                   |  |                 
|                  
|                  
|Total Swaps- Fair  |  |                   |  |            |  |                           |  | $ (14,284)        |  | $ 403,582       
|Value Hedges       |  |                   |  |            |  |                           |  |                   |  |                 
|November 25, 1998  |  | October 9, 2007   |  | JPY 2.125  |  | U.S. Three Month LIBOR    |  | (2,732)           |  | 58,000          
|                   |  |                   |  |            |  | Plus Six Basis Points     |  |                   |  |                 
|March 29, 1999     |  | October 9, 2007   |  | JPY 2.125  |  | U.S. Three Month LIBOR    |  | (534)             |  | 30,000          
|                   |  |                   |  |            |  | Minus Two and Half Basis  |  |                   |  |                 
|                   |  |                   |  |            |  | Points                    |  |                   |  |                 
|April 6, 1999      |  | October 9, 2007   |  | JPY 2.125  |  | U.S. Three Month LIBOR    |  | (1,254)           |  | 26,400          
|                   |  |                   |  |            |  | Minus One Basis Point     |  |                   |  |                 
|November 2, 2000   |  | October 9, 2007   |  | JPY 2.125  |  | U.S. Three Month LIBOR    |  | 876               |  | 15,000          
|                   |  |                   |  |            |  | Minus Two Basis Points    |  |                   |  |                 
|January 17, 2001   |  | March 26, 2008    |  | JPY 1.750  |  | U.S. 5.80                 |  | 459               |  | 18,000          
|                  
|Other Swap         |  |                   |  |            |  |                           |  | (3,185)           |  | 147,400         
|                  
|Total Swap         |  |                   |  |            |  |                           |  |                   |  |                 
|Portfolio (Other   |  |                   |  |            |  |                           |  |                   |  |                 
|liabilities)       |  |                   |  |            |  |                           |  | $ (17,469)        |  | $ 550,982       

The fair value of the swap portfolio was $(17,468,967) and $(75,415,299) at December 31, 2005 and December 31, 2004, respectively. The change in fair value was primarily due to changes in prevailing market interest rates.

14

---

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 Company estimates
to the prepayment rate  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 Company periodically evaluates this prepayment risk and analyzes the impact such conditions may have on 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):

|December 31, 2005                
|---------------------------------
|                                 
|                                 
|Non-Collateral                   
|                                 
|                                 
|Fixed-Rate Instruments:          
|Fixed-Rate REMICs                
|Agency DUS                       
|Agency Debentures                
|                                 
|Total Fixed-Rate Instruments     
|                                 
|                                 
|Floating-Rate Instruments:       
|Floating-Rate REMICs             
|Agency ARMs                      
|Agency Hybrid ARMs               
|                                 
|Total Floating-Rate Instruments  
|                                 
|Total Non-Collateral             
|                                 
|                                 
|Collateral                       
|                                 
|Fixed-Rate Instruments:          
|Fixed-Rate REMICs                
|Agency DUS                       
|Agency Debentures                
|                                 
|Total Fixed-Rate Instruments     
|                                 
|                                 
|Floating-Rate Instruments:       
|Floating-Rate REMICs             
|Agency ARMs                      
|Agency Hybrid ARMs               
|                                 
|Total Floating-Rate Instruments  
|                                 
|                                 
|Total Collateral                 
|                                 
|                                 
|December 31, 2005 Total Portfolio
|                                 

15

---









|December 31, 2004                
|---------------------------------
|                                 
|                                 
|Non-Collateral                   
|                                 
|                                 
|Fixed-Rate Instruments:          
|Fixed-Rate REMICs                
|Agency DUS                       
|Agency Debentures                
|                                 
|Total Fixed-Rate Instruments     
|                                 
|                                 
|Floating-Rate Instruments:       
|Floating-Rate REMICs             
|Agency ARMs                      
|Agency Hybrid ARMs               
|                                 
|Total Floating-Rate Instruments  
|                                 
|Total Non-Collateral             
|                                 
|                                 
|Collateral                       
|                                 
|Fixed-Rate Instruments:          
|Fixed-Rate REMICs                
|Agency DUS                       
|Agency Debentures                
|                                 
|Total Fixed-Rate Instruments     
|                                 
|                                 
|Floating-Rate Instruments:       
|Floating-Rate REMICs             
|Agency ARMs                      
|Agency Hybrid ARMs               
|                                 
|Total Floating-Rate Instruments  
|                                 
|                                 
|Total Collateral                 
|                                 
|                                 
|December 31, 2004 Total Portfolio
|                                 







| | 16 | 
| | -- | 





---









|Item 8.FINANCIAL STATEMENTS
|---------------------------









Report of Independent Registered Public Accounting Firm



Tothe Board of Directors and Securityholders

of BNP U.S. Funding L.L.C.:



In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of BNP U.S. Funding L.L.C. at December 31, 2005 and 2004, and the results of its operations and itscash flows for each of the three years in the period ended December 31, 2005in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying indexpresent fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements and schedules in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





/s/ PricewaterhouseCoopers LLP



New York, New York

March 30, 2006











---













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

BALANCE SHEETS(in thousands, except per share data)



|                                                                                         |   | December 31, 2005 |  |   | December 31, 2004
|---------------------------------------------------------------------------------------- | - | ----------------- |  | - | -----------------
|                                                                                        
|ASSETS                                                                                   |   |                   |  |   |                  
|                                                                                        
|Cash and cash equivalents                                                                | $ | 19,485            |  | $ | 112,207          
|                                                                                        
|Certificates of deposit                                                                  |   | 220,000           |  |   | -                
|                                                                                        
|Investment securities (Notes 4)                                                          |   |                   |  |   |                  
|Available-for-sale, at fair value                                                        |   | 798,454           |  |   | 986,218          
|                                                                                        
|Receivable arising from payment for securities, pursuant                                 |   |                   |  |   |                  
|to the application of SFAS 125, as replaced by                                           |   |                   |  |   |                  
|SFAS 140 (Note 3), at amortized cost                                                     |   | 13,690            |  |   | 20,869           
|                                                                                        
|Accounts receivable                                                                      |   | 16                |  |   | 27               
|                                                                                        
|Accrued interest receivable                                                              |   | 11,431            |  |   | 8,531            
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|TOTAL ASSETS                                                                             | $ | 1,063,076         |  |   | $ 1,127,852      
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|LIABILITIES                                                                              |   |                   |  |   |                  
|                                                                                        
|Accrued interest payable                                                                 | $ | 2,385             |  | $ | 2,749            
|Accrued expenses                                                                         |   | 543               |  |   | 338              
|Other liabilities                                                                        |   | 17,469            |  |   | 75,415           
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|TOTAL LIABILITIES                                                                        |   | 20,397            |  |   | 78,502           
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|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                                                               |   | 803               |  |   | 651              
|Accumulated other comprehensive income (loss)                                            |   | (2,045)           |  |   | 16,830           
|Retained earnings                                                                        |   | 13,811            |  |   | 1,759            
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|TOTAL REDEEMABLE COMMON SECURITIES,                                                      |   |                   |  |   |                  
|PREFERRED SECURITIES AND                                                                 |   |                   |  |   |                  
|SECURITYHOLDERS EQUITY                                                                  |   | 1,042,679         |  |   | 1,049,350        
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|TOTAL LIABILITIES AND TOTAL REDEEMABLE                                                   |   |                   |  |   |                  
|COMMON SECURITIES, PREFERRED                                                             |   |                   |  |   |                  
|SECURITIES AND SECURITYHOLDERS EQUITY                                                   | $ | 1,063,076         |  | $ | 1,127,852        
|                                                                                         |   |                   |  |   |                  
|                                                                                        
|                                                                                        
|The accompanying Notes to Financial Statements are an integral part of these statements. |   |                   |  |  

17

---

BNP U.S. FUNDING L.L.C. STATEMENTS OF INCOME(in thousands, except per share data)


|                                           |      | For the Years Ended December 31,
|------------------------------------------ | ---- | --------------------------------
|INTEREST INCOME                            | 2005 |                                 
|                                           |      |                                 
|                                          
|Collateralized Mortgage Obligations:       |      |                                 
|Floating-Rate REMICs                       | $    | 140                             
|Fixed-Rate REMICs                          |      | 1,033                           
|Mortgage Backed Securities:                |      |                                 
|Agency ARMs                                |      | 323                             
|Agency Hybrid ARMs                         |      | 572                             
|Agency DUSs                                |      | 8,528                           
|Agency Debentures                          |      | 22,767                          
|Interest on deposits                       |      | 6,591                           
|                                           |      |                                 
|                                          
|Total                                      |      | 39,954                          
|                                           |      |                                 
|                                          
|NONINTEREST INCOME                         |      |                                 
|                                          
|Other financial instrument                 |      | 8,905                           
|                                           |      |                                 
|                                          
|NONINTEREST (EXPENSE)                      |      |                                 
|                                          
|Other financial instrument                 |      | -                               
|Fees and expenses                          |      | (1,365)                         
|                                           |      |                                 
|                                           |      | (1,365)                         
|                                           |      |                                 
|                                          
|                                          
|NET INCOME APPLICABLE TO PREFERRED AND     |      |                                 
|REDEEMABLE COMMON SECURITIES               | $    | 47,494                          
|                                           |      |                                 
|                                          
|NET INCOME (LOSS) APPLICABLE TO REDEEMABLE |      |                                 
|COMMON SECURITIES                          | $    | 8,804                           
|                                           |      |                                 
|                                          
|NET INCOME (LOSS) PER REDEEMABLE           |      |                                 
|COMMON SECURITY                            | $    | 166.08                          
|                                           |      |                                 

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

18

---

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

STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

|                                                      |      | For the Years Ended December 31,
|----------------------------------------------------- | ---- | --------------------------------
|                                                      | 2005 |                                 
|                                                      |      |                                 
|NET INCOME                                            | $    | 47,494                          
|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                                |      | (18,875)                        
|                                                      |      |                                 
|TOTAL OTHER COMPREHENSIVE INCOME (LOSS)               |      | (18,875)                        
|                                                      |      |                                 
|COMPREHENSIVE INCOME                                  | $    | 28,619                          
|                                                      |      |                                 

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

19

---

|BNP U.S. FUNDING L.L.C.                              
|-----------------------------------------------------
|                                                     
|STATEMENT OF CHANGES IN REDEEMABLE COMMON SECURITIES,
|PREFERRED SECURITIES AND SECURITYHOLDERS' EQUITY     
|(in thousands)                                       
|                                                     
|For the Years Ended December 31, 2005, 2004 and 2003 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Balance at December 31, 2002                         
|                                                     
|Net income                                           
|Other comprehensive income                           
|Additional paid-in capital                           
|Dividends paid - preferred securities                
|                                                     
|                                                     
|Balance at December 31, 2003                         
|                                                     
|                                                     
|Net income                                           
|Other comprehensive loss                             
|Additional paid-in capital                           
|Dividends paid - preferred securities                
|                                                     
|                                                     
|Balance at December 31, 2004                         
|                                                     
|                                                     
|Net income                                           
|Other comprehensive loss                             
|Additional paid-in capital                           
|Dividends paid - preferred securities                
|                                                     
|                                                     
|Balance at December 31, 2005                         
|                                                     

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

20

---

|BNP U.S. FUNDING L.L.C.                                                                 
|----------------------------------------------------------------------------------------
|                                                                                        
|STATEMENTS OF CASH FLOWS                                                                
|(in thousands)                                                                          
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|OPERATING ACTIVITIES                                                                    
|                                                                                        
|Net income                                                                              
|Adjustments to reconcile net income to net cash                                         
|provided by operating activities:                                                       
|Amortization                                                                            
|(Gain) loss on other financial instrument                                               
|(Gain) loss on hedge activity                                                           
|Changes in assets and liabilities:                                                      
|Interest receivable                                                                     
|Accounts receivable                                                                     
|Accrued expenses                                                                        
|Accrued interest payable                                                                
|                                                                                        
|Net cash provided by operating activities                                               
|                                                                                        
|                                                                                        
|INVESTING ACTIVITIES                                                                    
|                                                                                        
|Purchase of investment securities:                                                      
|Agency DUSs                                                                             
|Agency Debentures                                                                       
|Fixed-Rate REMICs                                                                       
|Certificates of Deposit                                                                 
|Proceeds from principal payments of securities,                                         
|not treated as collateral                                                               
|Proceeds from principal payments of securities,                                         
|treated as collateral                                                                   
|                                                                                        
|Net cash provided by (used in) investing activities                                     
|                                                                                        
|                                                                                        
|FINANCING ACTIVITIES                                                                    
|                                                                                        
|Additional paid-in capital                                                              
|Cash dividends - preferred securities                                                   
|                                                                                        
|Net cash used in financing activities                                                   
|                                                                                        
|                                                                                        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    
|                                                                                        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          
|                                                                                        
|                                                                                        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                
|                                                                                        
|                                                                                        
|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)                        
|                                                                                        
|                                                                                        
|The accompanying Notes to Financial Statements are an integral part of these statements.

21

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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), asociété anonymeor 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, $8,500,000,
$6,800,000 and $3,400,000 on December 3, 2002, June 3, 2003, December 3, 2003, June 3, 2004, December 2, 2004 and June 2, 2005, 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 estimated based on quoted market price for these securities. For the hedged securities, changes in the fair market value of both the securities and the derivatives used as hedging instruments (cross currency and interest rate swaps) are reported in current earnings in the Statements of Income, pursuant to application of SFAS 133, (see below, Accounting for Derivatives and Hedging Activities). Unrealized gains and losses on the non-hedged securities are reported as a component of Other Comprehensive Income. 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

The Company considers all highly liquid investments with a maturity of three months or less at acquisition date to be cash equivalents.

CERTIFICATES OF DEPOSITS

The Company has five certificates of deposits at cost that mature in thirteen months or less.





| | 22 | 
| | -- | 





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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, or (ii) amounts contributed by the Bank or the Branch to the Companys capital. As of December 31, 2005, the Branch has contributed a total of $34,700,000 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.

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                                                  
|Series A Preferred Securities
        Series A Preferred Securities
        Series A Preferred Securities | $19,345,000
        $19,345,000
        $19,345,000 | December 5, 2004
        June 5, 2005
        December 5, 2005



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%.





| | 23 | 
| | -- | 





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

NET INCOME PER REDEEMABLE COMMON SECURITY

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



INCOME TAXES

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



ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES

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

The Company has made an assessment of all its financial instruments and concluded that it holds freestanding derivative instruments but no embedded derivative instruments at December 31, 2005. 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.

COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130, (SFAS 130), Reporting Comprehensive Income, established standards for reporting and display of comprehensive income and its components. Components of comprehensive income include net income. Other comprehensive income consists of unrealized gains and losses on marketable securities available for sale.





| | 24 | 
| | -- | 





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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 December 31, 2005 and December 31, 2004 is reported in Note 4 below.



NOTE 4--INVESTMENT SECURITIES

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



|December 31, 2005                    |                |         |                       |   |                        |  |            |     |  |   |        
|------------------------------------ | -------------- | ------- | --------------------- | - | ---------------------- |  | ---------- | --- |  | - | -------
|                                     | Amortized Cost |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | Fair Value
|Non-Collateral                       |                |         |                      
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Collateralized Mortgage Obligations: |                |         |                       |   |                        |  |            |     |  |   |        
|Floating-Rate REMICs                 | $              | 390     |                       | $ | ---                    |  | $          | --- |  | $ | 390    
|Fixed-Rate REMICs                    |                | 30,915  |                       |   | 942                    |  |            | --- |  |   | 31,857 
|Mortgage Backed Securities:          |                |         |                       |   |                        |  |            |     |  |   |        
|Agency ARMs                          |                | 2,770   |                       |   | 9                      |  |            | 46  |  |   | 2,733  
|Agency Hybrid ARMs                   |                | 4,954   |                       |   | 47                     |  |            | 2   |  |   | 4,999  
|Agency DUSs                          |                | 230,667 |                       |   | 7,508                  |  |            | --- |  |   | 238,175
|Agency Debentures                    |                | 505,092 |                       |   | 15,754                 |  |            | 546 |  |   | 520,300
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Total Non-Collateral                 | $              | 774,788 |                       | $ | 24,260                 |  | $          | 594 |  | $ | 798,454
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Collateral                           |                |         |                       |   |                        |  |            |     |  |   |        
|Collateralized Mortgage Obligations: |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Floating-Rate REMICs                 | $              | 2,759   |                       | $ | ---                    |  | $          | 32  |  | $ | 2,727  
|Fixed-Rate REMICs                    |                | ---     |                       |   | ---                    |  |            | --- |  |   | ---    
|Mortgage Backed Securities:          |                |         |                       |   |                        |  |            |     |  |   |        
|Agency ARMs                          |                | 4,441   |                       |   | 15                     |  |            | 6   |  |   | 4,450  
|Agency Hybrid ARMs                   |                | 6,490   |                       |   | 16                     |  |            | 59  |  |   | 6,447  
|Agency DUSs                          |                | ---     |                       |   | ---                    |  |            | --- |  |   | ---    
|Agency Debentures                    |                | ---     |                       |   | ---                    |  |            | --- |  |   | ---    
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Total Collateral                     | $              | 13,690  |                       | $ | 31                     |  | $          | 97  |  | $ | 13,624 
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|December 31, 2005 Total Portfolio    | $              | 788,478 |                       | $ | 24,291                 |  | $          | 691 |  | $ | 812,078
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|December 31, 2004                    |                |         |                       |   |                        |  |            |     |  |   |        
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|                                     | Amortized Cost |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | Fair Value
|Non-Collateral                       |                |         |                      
|                                     |                |         |                       |   |                        |  |            |     |  |   |        
|Collateralized Mortgage Obligations: |                |         |                       |   |                        |  |            |     |  |   |        
|Floating-Rate REMICs                 | $              | 532     |                       | $ | 3                      |  | $          | --- |  | $ | 535    











| | 25 | 
| | -- | 





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|Fixed-Rate REMICs                    |   | 30,915  |  |   | 2,464  |  |   | --- |  |   | 33,379   
|------------------------------------ | - | ------- |  | - | ------ |  | - | --- |  | - | ---------
|Mortgage Backed Securities:          |   |         |  |   |        |  |   |     |  |   |          
|Agency ARMs                          |   | 3,122   |  |   | 10     |  |   | 40  |  |   | 3,092    
|Agency Hybrid ARMs                   |   | 6,466   |  |   | 74     |  |   | 2   |  |   | 6,538    
|Agency DUSs                          |   | 348,349 |  |   | 26,613 |  |   | --- |  |   | 374,962  
|Agency Debentures                    |   | 505,660 |  |   | 62,187 |  |   | 135 |  |   | 567,712  
|                                     |   |         |  |   |        |  |   |     |  |   |          
|Total Non-Collateral                 | $ | 895,044 |  | $ | 91,351 |  | $ | 177 |  | $ | 986,218  
|                                     |   |         |  |   |        |  |   |     |  |   |          
|                                     |   |         |  |   |        |  |   |     |  |   |          
|Collateral                           |   |         |  |   |        |  |   |     |  |   |          
|Collateralized Mortgage Obligations: |   |         |  |   |        |  |   |     |  |   |          
|Floating-Rate REMICs                 | $ | 5,682   |  | $ | ---    |  | $ | 62  |  | $ | 5,620    
|Fixed-Rate REMICs                    |   | ---     |  |   | ---    |  |   | --- |  |   | ---      
|Mortgage Backed Securities:          |   |         |  |   |        |  |   |     |  |   |          
|Agency ARMs                          |   | 5,556   |  |   | 52     |  |   | --- |  |   | 5,608    
|Agency Hybrid ARMs                   |   | 9,631   |  |   | 51     |  |   | 65  |  |   | 9,617    
|Agency DUSs                          |   | ---     |  |   | ---    |  |   | --- |  |   | ---      
|Agency Debentures                    |   | ---     |  |   | ---    |  |   | --- |  |   | ---      
|                                     |   |         |  |   |        |  |   |     |  |   |          
|Total Collateral                     | $ | 20,869  |  | $ | 103    |  | $ | 127 |  | $ | 20,845   
|                                     |   |         |  |   |        |  |   |     |  |   |          
|                                     |   |         |  |   |        |  |   |     |  |   |          
|December 31, 2004 Total Portfolio    | $ | 915,913 |  | $ | 91,454 |  | $ | 304 |  | $ | 1,007,063
|                                     |   |         |  |   |        |  |   |     |  |   |          
|                                     |   |         |  |   |        |  |   |     |  |   |          



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):

|December 31, 2005                    |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|------------------------------------ | - | ------------- |  | - | ----------- |  | - | ----------- |  | - | ------------ |  | - | -------
|                                     |   |               |  |   | Due after 1 |  |   | Due after 5 |  |   |              |  |   |        
|                                     |   | Due in 1 year |  |   | through 5   |  |   | through 10  |  |   | Due after 10 |  |   |        
|Non-Collateral                       |   | or less       |  |   | years       |  |   | years       |  |   | years        |  |   | Total  
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Collateralized Mortgage Obligations: |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Floating-Rate REMICs                 | $ | ---           |  | $ | 390         |  | $ | ---         |  | $ | ---          |  | $ | 390    
|Fixed-Rate REMICs                    |   | ---           |  |   | 30,915      |  |   | ---         |  |   | ---          |  |   | 30,915 
|Mortgage Backed Securities:          |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Agency ARMs                          |   | ---           |  |   | 1,332       |  |   | 339         |  |   | 1,099        |  |   | 2,770  
|Agency Hybrid ARMs                   |   | 105           |  |   | 2,708       |  |   | 940         |  |   | 1,201        |  |   | 4,954  
|Agency DUSs                          |   | 10,572        |  |   | 220,095     |  |   | ---         |  |   | ---          |  |   | 230,667
|Agency Debentures                    |   | ---           |  |   | 505,092     |  |   | ---         |  |   | ---          |  |   | 505,092
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Total Non-Collateral                 | $ | 10,677        |  | $ | 760,532     |  | $ | 1,279       |  | $ | 2,300        |  | $ | 774,788
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |  
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Collateral                           |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Collateralized Mortgage Obligations: |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Floating-Rate REMICs                 | $ | 115           |  | $ | 2,644       |  | $ | ---         |  | $ | ---          |  | $ | 2,759  
|Fixed-Rate REMICs                    |   | ---           |  |   | ---         |  |   | ---         |  |   | ---          |  |   | ---    
|Mortgage Backed Securities:          |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Agency ARMs                          |   | 41            |  |   | 1,533       |  |   | 490         |  |   | 2,377        |  |   | 4,441  
|Agency Hybrid ARMs                   |   | ---           |  |   | 5,676       |  |   | ---         |  |   | 814          |  |   | 6,490  
|Agency DUSs                          |   | ---           |  |   | ---         |  |   | ---         |  |   | ---          |  |   | ---    
|Agency Debentures                    |   | ---           |  |   | ---         |  |   | ---         |  |   | ---          |  |   | ---    
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|Total Collateral                     | $ | 156           |  | $ | 9,853       |  | $ | 490         |  | $ | 3,191        |  | $ | 13,690 
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|December 31, 2005 Total Portfolio    | $ | 10,833        |  | $ | 770,385     |  | $ | 1,769       |  | $ | 5,491        |  | $ | 788,478
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        
|                                     |   |               |  |   |             |  |   |             |  |   |              |  |   |        







| | 26 | 
| | -- | 





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|December 31, 2004                    | Due in 1 year
        or less |       | Due after 1
        through 5
        years |                             | Due after 5
  through 10 
      years |       |   |       |  |   |      
|------------------------------------ | ----------------------------- | ----- | ------------------------------------------- | --------------------------- | ------------------------------------- | ----- | - | ----- |  | - | -----
|                                     |                               |       |                                             | Due after 10 
        years |                                       |       |  
|                                     |                               |       |                                             |                             |                                       | Total
|Non-Collateral                       |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Collateralized Mortgage Obligations: |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Floating-Rate REMICs                 | $                             | ---   |                                             | $                           | 532                                   |       | $ | ---   |  | $ | ---  
|Fixed-Rate REMICs                    |                               | ---   |                                             |                             | 30,915                                |       |   | ---   |  |   | ---  
|Mortgage Backed Securities:          |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Agency ARMs                          |                               | ---   |                                             |                             | 3,122                                 |       |   | ---   |  |   | ---  
|Agency Hybrid ARMs                   |                               | 271   |                                             |                             | 4,854                                 |       |   | 766   |  |   | 575  
|Agency DUSs                          |                               | ---   |                                             |                             | 348,349                               |       |   | ---   |  |   | ---  
|Agency Debentures                    |                               | ---   |                                             |                             | 505,660                               |       |   | ---   |  |   | ---  
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Total Non-Collateral                 | $                             | 271   |                                             | $                           | 893,432                               |       | $ | 766   |  | $ | 575  
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Collateral                           |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Collateralized Mortgage Obligations: |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Floating-Rate REMICs                 | $                             | 1,208 |                                             | $                           | 4,474                                 |       | $ | ---   |  | $ | ---  
|Fixed-Rate REMICs                    |                               | ---   |                                             |                             | ---                                   |       |   | ---   |  |   | ---  
|Mortgage Backed Securities:          |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Agency ARMs                          |                               | 102   |                                             |                             | 2,090                                 |       |   | 95    |  |   | 3,269
|Agency Hybrid ARMs                   |                               | ---   |                                             |                             | 4,957                                 |       |   | 3,129 |  |   | 1,545
|Agency DUSs                          |                               | ---   |                                             |                             | ---                                   |       |   | ---   |  |   | ---  
|Agency Debentures                    |                               | ---   |                                             |                             | ---                                   |       |   | ---   |  |   | ---  
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|Total Collateral                     | $                             | 1,310 |                                             | $                           | 11,521                                |       | $ | 3,224 |  | $ | 4,814
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      
|December 31, 2004 Total Portfolio    | $                             | 1,581 |                                             | $                           | 904,953                               |       | $ | 3,990 |  | $ | 5,389
|                                     |                               |       |                                             |                             |                                       |       |   |       |  |   |      



The breakdown of the Companys securities by category and yield, before the result of hedges, is summarized below:

|                            |               |  | Due after 1 |  | Due after 5 |  |              |  |       |  |            
|--------------------------- | ------------- |  | ----------- |  | ----------- |  | ------------ |  | ----- |  | -----------
|                            | Due in 1 year |  | through 5   |  | through 10  |  | Due after 10 |  |       |  | Yield after
|December 31, 2005           | or less       |  | years       |  | years       |  | years        |  | Total |  | Hedging    
|                            |               |  |             |  |             |  |              |  |       |  |            
|                            |               |  |             |  |             |  |              |  |       |  |            
|Collateralized Mortgage     |               |  |             |  |             |  |              |  |       |  |            
|Obligations:                |               |  |             |  |             |  |              |  |       |  |            
|Floating-Rate REMICs        | 1.76%         |  | 3.25%       |  | ---%        |  | ---%         |  | 2.89% |  | 2.89%      
|Fixed-Rate REMICs           | ---           |  | 6.70        |  | ---         |  | ---          |  | 6.70  |  | 3.34       
|Mortgage Backed Securities: |               |  |             |  |             |  |              |  |       |  |            
|Agency ARMs                 | 3.12          |  | 3.33        |  | 4.36        |  | 4.60         |  | 4.01  |  | 4.01       
|Agency Hybrid ARMs          | 4.40          |  | 3.63        |  | 4.64        |  | 5.58         |  | 4.01  |  | 4.01       
|Agency DUSs                 | 4.85          |  | 6.08        |  | ---         |  | ---          |  | 5.84  |  | 2.95       
|Agency Debentures           | ---           |  | 3.73        |  | ---         |  | ---          |  | 3.73  |  | 4.51       
|                            |               |  |             |  |             |  |              |  |       |  |            
|Total                       | 4.78%         |  | 5.98%       |  | 4.52%       |  | 4.97%        |  | 5.86% |  | 3.91%      
|                            |               |  |             |  |             |  |              |  |       |  |            
|                            |               |  |             |  |             |  |              |  |       |  |            
|December 31, 2004           |               |  |             |  |             |  |              |  |       |  |            
|                            |               |  |             |  |             |  |              |  |       |  |            
|Collateralized Mortgage     |               |  |             |  |             |  |              |  |       |  |            
|Obligations:                |               |  |             |  |             |  |              |  |       |  |            
|Floating-Rate REMICs        | 1.14%         |  | 1.75%       |  | ---%        |  | ---%         |  | 1.58% |  | 1.58%      
|Fixed-Rate REMICs           | ---           |  | 6.80        |  | ---         |  | ---          |  | 6.81  |  | 1.91       
|Mortgage Backed Securities: |               |  |             |  |             |  |              |  |       |  |            
|Agency ARMs                 | 1.13          |  | 3.98        |  | 3.35        |  | 3.37         |  | 3.71  |  | 3.71       
|Agency Hybrid ARMs          | 6.19          |  | 4.35        |  | 3.62        |  | 3.92         |  | 4.18  |  | 4.18       
|Agency DUSs                 | 6.58          |  | 6.52        |  | ---         |  | ---          |  | 6.53  |  | 1.48       
|Agency Debentures           | ---           |  | 6.04        |  | ---         |  | ---          |  | 6.04  |  | 3.49       
|                            |               |  |             |  |             |  |              |  |       |  |            
|Total                       | 5.79%         |  | 6.24%       |  | 3.61%       |  | 3.58%        |  | 6.20% |  | 2.60%      
|                            |               |  |             |  |             |  |              |  |       |  |            
|                            |               |  |             |  |             |  |              |  |       |  |            







| | 27 | 
| | -- | 





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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 December 31, 2005 and December 31, 2004, 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$34,700,000to date. In the event the dividends to the Series A Preferred Securities cannot 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 astitres participatifsandprêts 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.





| | 28 | 
| | -- | 





---









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$ 964,217 and $938,513forthe periods ended December 31, 2005 and 2004, respectively. Under a specific allocation methodology, the costs of personnel servicing the Company are 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 December 31, 2005 and December 31, 2004 were obtained from independent market sources and are summarized in Note 4. The carrying values of securities, as shown in Note 4, approximate 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$13,624,480 and$20,845,013at December 31, 2005 and December 31, 2004, 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$(17,468,967) and$(75,415,299)at December 31, 2005 and December 31, 2004, respectively, and are reflected 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



| | 29 | 
| | -- | 





---





designated as fair value or cash flow hedges to (1) assets and liabilities on the balance sheet, (2) firm commitments or (3) forecasted transactions.



At December 31, 2005 and December 31, 2004, the Company had outstanding interest rate and cross currency swap agreements with a notional principal amount of $550,982,287 and $668,663,803, respectively.

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 $(14,283,663) and $(73,672,428) at December 31, 2005 and December 31, 2004, 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 twelve months ended December 31, 2005, the Company recognized a gain of $407,622 in earnings related to the ineffective portion of fair value hedges. The Company also recognized a gain of $8,905,697 in current years earnings related to cross currency swap that no longer meet the requirements of FAS 133 for the hedge effectiveness to qualify as a fair value
hedging instrument.



Cash Flow Hedges

For the years ended December 31, 2005 and December 31, 2004, the Company did not enter into cash flow hedge transactions and it is not the intention of the Company to use interest rate swaps to convert floating rate financial instruments to fixed rate financial instruments as part of a cash flow hedge strategy.









| | 30 | 
| | -- | 





---







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

FINANCIAL INFORMATION BY QUARTER (UNAUDITED)

(in thousands, except per share data)



|2005 for Quarter Ended                                |  |   | 03/31/05 |  |   | 06/30/05  |  |   | 09/30/05 |  |   | 12/31/05 |  |  |   | Total   
|----------------------------------------------------- |  | - | -------- |  | - | --------- |  | - | -------- |  | - | -------- |  |  | - | --------
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|INTEREST INCOME:                                      |  |   | 5,781    |  |   | 12,111    |  |   | 10,983   |  |   | 11,079   |  |  |   | 39,954  
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|NONINTEREST INCOME (EXPENSE)                          |  |   | (49)     |  |   | 578       |  |   | (184)    |  |   | 7,195    |  |  |   | 7,540   
|NET INCOME APPLICABLE TO PREFERRED AND                |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|REDEEMABLE COMMON SECURITIES                          |  | $ | 5,732    |  | $ | 12,689    |  | $ | 10,799   |  | $ | 18,274   |  |  | $ | 47,494  
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|NET INCOME (LOSS) PER REDEEMABLE COMMON               |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|SECURITY                                              |  | $ | 108.13   |  |   | $(125.52) |  | $ | 203.73   |  | $ | (20.21)  |  |  | $ | 166.08  
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|                                                     
|2004 for Quarter Ended                                |  |   | 03/31/04 |  |   | 06/30/04  |  |   | 09/30/04 |  |   | 12/31/04 |  |  |   | Total   
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|INTEREST INCOME:                                      |  |   | 6,006    |  |   | 5,992     |  |   | 6,150    |  |   | 7,943    |  |  |   | 26,091  
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|NONINTEREST EXPENSE (INCOME)                          |  |   | (770)    |  |   | (75)      |  |   | (149)    |  |   | (1,732)  |  |  |   | (2,726) 
|NET INCOME APPLICABLE TO PREFERRED AND                |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|REDEEMABLE COMMON SECURITIES                          |  | $ | 5,236    |  | $ | 5,917     |  | $ | 6,001    |  | $ | 6,211    |  |  | $ | 23,365  
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         
|NET INCOME (LOSS) PER REDEEMABLE COMMON  
   SECURITY |  | $ | 98.77    |  | $ | (253.31)  |  | $ | 113.20   |  | $ | (247.76) |  |  | $ | (289.09)
|                                                      |  |   |          |  |   |           |  |   |          |  |   |          |  |  |   |         





|Item 9: | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.

|Item 9A: | Controls and Procedures
|-------- | -----------------------

Evaluation of Disclosure Controls and Procedures



We have evaluated, with the participation of our President and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2005. 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 our evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it
is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. There have been no significant changes in the Companys internal control over financial reporting that occurred during the fiscal year that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

|Item 9B: | Other Information
|-------- | -----------------

None

|**PART III** |                                                   
|------------ | --------------------------------------------------
|             |                                                   
|Item 10:     | Directors and Executive Officers of the Registrant

The following table sets forth information concerning the directors and executive officers of the Company as of March 31, 2006. The directors serve 3-year terms (5 years in the case of the independent director), subject to earlier resignation or removal. On August 12, 2002, the Board of Directors of the Company elected Diana Mitchell as Assistant Secretary. Donald J. Puglisi, the independent director, was reappointed by the Board of Directors and the Branch, as holder of the Common Securities of the Company, and his current term of office commenced as of December 5, 2002. As of December 5, 2003, Michel Eydoux was reappointed as Chairman and as a Director, and Martine Billeaud, Olivier Meisel, Sady Karet and Thomas Clyne were reappointed as Directors. On December 16, 2005, Martine Billeaud replaced Olivier Meisel as President. On March 21, 2006 Betty Whelchel was appointed by Board of Directors to replace John Powers as
Secretary and Olivier Meisel resigned from the Board of Directors.



| | 31 | 
| | -- | 





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|Name and Age           | Position and Offices Held           
|---------------------- | ------------------------------------
|Michel Eydoux (55)     | Chairman and Director               
|Martine Billeaud (60)  | President and Director              
|Betty Whelchel (49)    | Secretary                           
|Donald J. Puglisi (60) | Independent Director                
|Sady Karet (51)        | Treasurer and Director              
|Thomas Clyne (49)      | Chief Financial Officer and Director
|Diana E. Mitchell (50) | Assistant Secretary                 
|                       |                                     



The following is a summary of the experience of the executive officers and directors of the Company:



Michel Eydoux is currently Head of Treasury for Asset and Liability Management of BNP PARIBAS, and a member of the Executive Committee for Corporate and Investment Banking. Born in 1950, he graduated in 1973 from Ecole des Hautes Etudes Commerciales de Paris. He started his career with Banque Paribas, where he handled several assignments. In 1989, he was appointed Deputy General Manager for Paribas in Spain and in 1991, Head of ALM Treasury for Paribas. He was appointed to his current position in 1999.



Martine Billeaud is Head of the Banks medium and long term funding activities related to Asset and Liability Management. She is also Vice-President and Manager of the BNP Paribas US Medium-Term Note Program and the BNP Paribas US Structured Medium-Term Note Program, and a director of BNP Paribas Capital Preferred L.L.C., BNP Paribas Capital Preferred II L.L.C., BNP Paribas Capital Preferred III L.L.C., BNP Paribas Capital Preferred IV L.L.C., BNP Paribas Capital Preferred V L.L.C. and BNP Paribas Capital Preferred VI L.L.C. She was previously responsible for domestic treasury business. Ms. Billeaud was born in Choisy-le-Roi, France.



Betty Welchel is a Managing Director and General Counsel for BNP Paribas in North America. In her last position, she was the Global General Counsel for Deutsche Asset Management, with offices in U.S., Europe and Asia. Prior to that, Betty was the Deputy General Counsel for Deutsche Bank's New York branch, an attorney with Shearman Sterling both in New York and Tokyo and Attorney-Advisor with the U. S. Treasury in Washington, D.C.



Donald J. Puglisi, the Independent Director, is the MBNA America Professor of Business Emeritus at the University of Delaware, where he was on the faculty from 1971 until retiring in 2001. In addition, he is the Managing Director of Puglisi and Associates, a company which provides investment management, accounting and other administrative services to a variety of different companies.



Sady Karet is Vice President in charge of Asset and Liability analysis of the Bank's US branches. He was previously posted in Hong Kong where he was in charge of Market Risks for North Asia (excluding Japan). Mr. Karet was born in Paris, France in 1954.



Thomas Clyne is a Managing Director in Finance responsible for U.S. Non-Banking subsidiaries of BNP Paribas in North America. Mr. Clyne has been with BNP Paribas since 1998. He has worked in the investment banking and financial services industry for over thirty years. Prior to joining the Bank, he worked for Credit Lyonnais as Managing Director and Chief Financial Officer of Credit Lyonnais Securities (USA) Inc. Mr. Clyne was born in Brooklyn, New York in 1956.



Diana E. Mitchell is a Director and Assistant General Counsel for BNP Paribas in North America. In her current position, she assists the General Counsel for the corporate and investment banking businesses of BNP Paribas in North America on matters with broad relevance to the U.S. operations of BNP Paribas, focusing, in particular, on regulatory and compliance related issues. Ms. Mitchell joined the corporate banking legal department for Paribas in 1994. Prior to this time, Ms. Mitchell worked as an associate at Brown Raysman & Millstein starting in 1991 and Lord Day & Lord, Barrett Smith starting in 1989.







| | 32 | 
| | -- | 





---







Audit Committee Financial Expert



The Board of Directors serves as the Audit Committee of the Company. The Board of Directors has sole and direct authority to engage, appoint, evaluate and replace the independent auditor. The Board of Directors has determined that Donald J. Puglisi is an Audit Committee Financial Expert as defined under the Exchange Act and is independent as defined in the listing standard of the New York Stock Exchange.



Code of Ethics



The Company has adopted a Code of Ethics that applies to the President, Chief Financial Officer, controller and other persons performing similar functions. A copy of the Code of Ethics is filed as an exhibit to this Annual Report on Form 10-K.

|Item 11: | Executive Compensation
|-------- | ----------------------

The Independent Director Donald J. Puglisi, receives directors fees of $6,000 per year. All of the other members of the Companys Board of Directors and Officers are also officers or employees of the Branch or the Bank or their affiliates and do not receive compensation from the Company or additional compensation from the Branch or the Bank or any affiliate for services rendered to the Company.



|Item 12: | Security Ownership of Certain Beneficial Owners and Management and Related Matters
|-------- | ----------------------------------------------------------------------------------

None.

|Item 13: | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------

Reference is hereby made to Item 1. Business and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the Companys various relationships with the Bank, including the Branch, the sole holder of all its outstanding Common Securities.



|Item 14: | Principal Accounting Fees and Services
|-------- | --------------------------------------

Set forth below are the services rendered and related fees billed by PricewaterhouseCoopers LLP for 2005 and 2004:

|Audit Fees                | 2005     |  | 2004    
|------------------------- | -------- |  | --------
|Financial Statement Audit | $46,400  |  | $51,400 
|Audit-Related Fees        | 5,000    |  | ---     
|                          |          |  |         
|Other Fees                | ---      |  | 54,000  
|Total fees                | $ 51,400 |  | $105,400
|                          |          |  |         



Engagement of the Independent Auditor

The Board of Directors is responsible for approving every engagement of the Companys independent auditor for the performance of audit or non-audit services before any such service is provided. The Board of Directors does not rely on pre-approval policies or procedures.



Auditor Selection for 2006

PricewaterhouseCoopers LLP has been selected to serve as the Companys independent auditor for the year ended December 31, 2006.







| |  | 
| |  | 





| | 33 | 
| | -- | 





---

Part IV



|Item 15: | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------
|EXHIBITS | A) Exhibits:                              



| | 11)      Computation of net gain 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

| | 14)Code of Ethics for Finance Professionals
| | -------------------------------------------

| | 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
| | -------------------------------------------------------------------------------------------------------------------------





| | 34 | 
| | -- | 





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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: March 31, 2006 | By _______________________
        Martine BilleaudPresident and Director          
|Date: March 31, 2006 | By _______________________
        Thomas ClyneChief Financial Officer and Director