UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549





FORM
      10-Q








QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the
      quarterly period ended March 31, 2007





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
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)





787
                Seventh Avenue New York, NY
            
            10019(Address
                of principal executive offices)
            
            (Zip
                Code)





(212)
      841-2000


(Registrant’s
      telephone number, including area code)





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 twelve 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 ninety days. Yes x No o




Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.




Large
      Accelerated Filer o Accelerated
      Filer o Non-Accelerated
      Filer x





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





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.




All
      outstanding shares of Common Stock were held by BNP Paribas at March 31,
      2007.





The
      number of shares outstanding of each of the issuer’s classes of common stock, as
      of the close of business on May 15, 2007, was as follows:


Class
            
            Number
                of SharesCommon
                Stock, $10,000 per share par value
            
            53,011










Form
      10-Q
      Index





PART
                I
              
              PAGEItem
                1:
              Condensed
                Financial Statements (Unaudited)Balance
                Sheets - As of March 31, 2007 and December 31, 2006
              3Statements
                of Income - Three Months Ended March 31, 2007 and 2006
              4Statements
                of Comprehensive Income(Loss) - Three Months EndedMarch
                31, 2007 and 2006
              5Statements
                  of Changes in Redeemable Common Securities, Preferred Securities
                  andSecurity
                Holders’ Equity - Three Months Ended March 31, 2007
              6Statements
                of Cash Flows - Three Months Ended March 31, 2007 and 2006
              7Notes
                to Financial Statements
              8Item
                2:
              Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
              13Item
                3:
              Quantitative
                and Qualitative Disclosures about Market Risk
              17Item
                4:
              Controls
                and Procedures
              19PART
                IIItem
                1:
              Legal
                Proceedings
              20Item
                1A:
              Risk
                Factors
              20Item
                2:
              Unregistered
                Sales of Equity Securities and Use of
                Proceeds
              21Item
                3:
              Defaults
                Upon Senior Securities
              21Item
                4:
              Submission
                of Matters to a Vote Security
                Holders
              21Item
                5:
              Other
                Information
              21Item
                6:
              Exhibits
              21







2




**Part
        I**


Item
      1.


FINANCIAL
        STATEMENTS




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


**BALANCE
        SHEETS**
 **(in
        thousands, except per share data)**


**March
                31, 2007**
            
            **December
                31, 2006****(unaudited)**
            
            **(audited)**ASSETSCash
                and cash equivalents
            
            56,968
            
            $
                26,821Certificates
                of deposit
            
            465,000
            
            325,000Investment
                securities (Notes 4)Available-for-sale,
                at fair value
            
            512,652
            
            666,209Receivable
                arising from payment for securities, pursuantto
                the application of SFAS 125, as replaced bySFAS
                140 (Note 3), at amortized cost
            
            8,186
            
            9,127Accounts
                receivable
            
            13
            
            11Accrued
                interest receivable
            
            11,403
            
            17,224TOTAL
                ASSETS
            
            $
            1,054,222
            
            $
            1,044,392LIABILITIESAccrued
                interest payable
            
            $
            113
            
            $
            2,247Accrued
                expenses
            
            
            331
            
            
            126Other
                liabilities
            
            
            3,040
            
            
            2,839TOTAL
                LIABILITIES
            
            
            3,484
            
            
            5,212Redeemable
                common securities, par value and redeemablevalue
                $10,000 per security; 150,000 securities
                authorized,53,011
                securities issued and outstanding
            
            
            530,110
            
            
            530,110Preferred
                securities, liquidation preference $10,000 persecurity;
                150,000 securities authorized, 50,000 securitiesissued
                and outstanding
            
            
            500,000
            
            
            500,000Additional
                paid-in capital
            
            
            803
            
            
            803Accumulated
                other comprehensive loss
            
            
            (10,456
            )
            
            (11,457
            )Retained
                earnings
            
            
            30,281
            
            
            19,724TOTAL
                REDEEMABLE COMMON SECURITIES,PREFERRED
                SECURITIES ANDSECURITY HOLDERS’
                EQUITY
            
            
            1,050,738
            
            
            1,039,180TOTAL
                LIABILITIES AND TOTAL REDEEMABLECOMMON
                SECURITIES, PREFERREDSECURITIES
                AND SECURITY HOLDERS’ EQUITY
            
            $
            1,054,222
            
            $
            1,044,392See
                Notes to the Financial Statements.








3




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


**For
                  the Three Months Ended March 31,**INTEREST
                  INCOME
              
              **2007**
              
              **2006**Collateralized
                  Mortgage Obligations:Floating-Rate
                  REMICs
              
              $
              30
              
              $
              33Fixed-Rate REMICs
              
              
              241
              
              
              352Mortgage
                  Backed Securities:Agency
                  ARMs
              
              
              57
              
              
              86Agency
                  Hybrid ARMs
              
              
              110
              
              
              149Agency
                  DUSs
              
              
              1,500
              
              
              1,995Agency
                  Debentures
              
              
              6,361
              
              
              6,489Interest
                  on deposits
              
              
              5,113
              
              
              2,920Total
              
              
              13,412
              
              
              12,024NONINTEREST
                  INCOME (EXPENSE)Other
                  financial instrument
              
              
              (2,613
              )
              
              1,024NONINTEREST
                  (EXPENSE)Fees
                  and expenses
              
              
              (242
              )
              
              (228
              )NET
                  INCOME APPLICABLE TO PREFERRED ANDREDEEMABLE
                  COMMON SECURITIES
              
              $
              10,557
              
              $
              12,820NET
                  INCOME PER REDEEMABLECOMMON
                  SECURITY
              
              $
              199.14
              
              $
              241.84See
                  Notes to the Financial Statements.









4







**BNP
        U.S. FUNDING L.L.C.**
  **STATEMENTS
          OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)**
 **(in
            thousands)**





**For
                  the Three Months Ended March 31,****2007**
              
              **2006**NET
                  INCOME
              
              $
              10,557
              
              $
              12,820OTHER
                  COMPREHENSIVE INCOME (LOSS)Net
                  change in unrealized gain in fair valueof
                  available-for-sale securities that are not treatedas
                  collateral and that are not hedged byderivative
                  instruments
              
              
              1,001
              
              
              (4,460
              )TOTAL
                  OTHER COMPREHENSIVE INCOME (LOSS)
              
              
              1,001
              
              
              (4,460
              )COMPREHENSIVE
                  INCOME (LOSS)
              
              $
              11,558
              
              $
              8,360See
                  Notes to the Financial Statements.







5







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




**STATEMENT
        OF CHANGES IN REDEEMABLE COMMON SECURITIES,**


**PREFERRED
        SECURITIES AND SECURITY HOLDERS' EQUITY (UNAUDITED)**


**(in
        thousands)**


**For
        the Three Months Ended March 31, 2007**





**Total****Redeemable****Accumulated**
                **Other**
                **Comprehensive**
              
              
              
              **Common
                  Securities,****Redeemable**
                **Common**
              
              
              
              **Additional**
                **Paid-in**
              
              
              
              
              **Preferred
                  Securities****Preferred**
              
              
              
              **Retained**
              
              **and
                Security holders'****Securities**
              
              **Securities**
              
              **Capital**
              
              **Income**
              
              **Earnings**
              
              **Equity****Balance
                  at December 31, 2006**
              
              $
              530,110
              
              $
              500,000
              
              $
              803
              
              $
              (11,457
              )
              $
              19,724
              
              $
              1,039,180Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              10,557
              
              
              10,557Other
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              1,001
              
              
              
              
              
              1,001**Balance
                  at March 31, 2007**
              
              $
              530,110
              
              $
              500,000
              
              $
              803
              
              $
              (10,456
              )
              $
              30,281
              
              $
              1,050,738See
                  Notes to the Financial Statements.






6






**BNP
        U.S. FUNDING L.L.C.**
  **STATEMENTS
          OF CASH FLOWS (UNAUDITED)**
 **(in
          thousands)**





**For
                  the Three Months Ended March 31,****2007**
              
              **2006****OPERATING
                  ACTIVITIES**Net
                  income
              
              $
              10,557
              
              $
              12,820Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Amortization
              
              
              169
              
              
              164Loss
                  (Gain) on other financial instrument
              
              
              2,613
              
              
              (1,024
              )Changes
                  in assets and liabilities:Interest
                  receivable
              
              
              5,820
              
              
              (2,115
              )Accounts
                  receivable
              
              
              (2
              )
              
              (48
              )Accrued
                  expenses
              
              
              205
              
              
              104Accrued
                interest payable
              
              
              (2,134
              )
              
              (1,595
              )Net
                  cash provided by operating activities
              
              
              17,228
              
              
              8,306**INVESTING
                  ACTIVITIES**Purchases
                  of certificate of deposits
              
              
              (140,000
              )
              
              (50,000
              )Proceeds
                  from principal payments of securities,not
                  treated as collateral
              
              
              152,000
              
              
              52,391Proceeds
                  from principal payments of securities,treated
                  as collateral
              
              
              919
              
              
              676Net
                  cash provided by investing activities
              
              
              12,919
              
              
              3,067NET
                  INCREASE  IN CASH AND CASH EQUIVALENTS
              
              
              30,147
              
              
              11,373CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              26,821
              
              
              19,485CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              56,968
              
              $
              30,858**NONCASH
                  FINANCING AND INVESTING ACTIVITIES**Decrease
                  in receivable arising from payment for securities, pursuantto
                  the application of SFAS 125, as replaced by SFAS 140 (Note
                  3)
              
              $
              919
              
              $
              676**SUPPLEMENTAL
                  CASH FLOW INFORMATION**Swap
                  interest paid
              
              $
              2,442
              
              $
              3,592See
                  Notes to the Financial Statements.








7




**UNAUDITED**




**NOTE
      1--ORGANIZATION AND BASIS OF PRESENTATION**




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




The
      Company was initially capitalized on October 14, 1997, with the issuance to
      the
      Branch of one share of the Company’s redeemable common securities, $10,000 par
      value (the “Common Securities”). On December 5, 1997 (inception), the Company
      commenced operations concurrent with the issuance of 50,000 noncumulative
      preferred securities, Series A, liquidation preference $10,000 per security
      (the
“Series A Preferred Securities”), to qualified institutional buyers, and the
      issuance of an additional 53,010 Common Securities to the Branch. These
      issuances raised in the aggregate $1,030,115,873 of net capital (including
      $5,873 of additional paid-in capital). This entire amount was used to acquire
      a
      portfolio of debt securities (the “Initial Portfolio”) at their fair values from
      the Branch. The Branch contributed additional paid-in capital of $3,000,000,
      $5,500,000, $7,500,000, $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. On June 20, 2006 and December 19, 2006 the Company repaid
      $6,000,000 and $7,000,000 of these contributions, 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 ("GAAP") 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.




The
      accompanying financial statements are unaudited but, in the opinion of
      management, contain all the adjustments (consisting of those of a normal
      recurring nature) considered necessary to present fairly the financial position
      and the results of operations and cash flows for the periods presented in
      conformity with GAAP applicable to interim periods. The 2006 Balance Sheet
      data
      was derived from audited financial statements, however, it does not include
      all
      the disclosures required by GAAP. The accompanying financial statements should
      be read in conjunction with the audited financial statements of BNP U.S. Funding
      L.L.C reported in Form 10-K for the year ended December 31, 2006, filed on
      April
      2, 2007.




**NOTE
      2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**Investment
      Securities**




Investments
      in debt securities are classified as available-for-sale (recorded on a
      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 (Loss)”. The
      hedged securities are generally valued using discounted cash flows in a yield-curve model based on
      LIBOR ,
      and
      obtained from independent market sources.




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.






8




**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 March
      31,
      2007 .
      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. These instruments qualify for hedge
      accounting.







**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 March
      31,
      2007 .
      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.




**New
      Accounting Pronouncements**




In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155 “Accounting for Certain Hybrid Instruments, an amendment of FASB Statement
      No. 133 and 140” (“SFAS 155”). SFAS 155 contains a variety of provisions which
      address fair value of hybrid financial instruments containing an embedded
      derivative, clarifies which interest only and principal only strips are not
      subject to SFAS 133, establishes requirements to evaluate securitized financial
      assets to identify embedded derivatives and addresses certain aspects of SFAS
      140 regarding qualifying special purpose entities and their holding of certain
      derivative financial instruments. SFAS
      155
      is effective for fiscal years beginning after September 15, 2006. Adoption
      of
      SFAS 155 did not have any impact upon the Company's financial condition or
      results of operations, since the Company only holds freestanding
      derivatives.




In
      March
      2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial
      Assets" ("SFAS 156"). The Statement amends SFAS No. 140, "Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
      with respect to accounting for separately recognized Mortgage Servicing Right
      (MSR). SFAS 156 requires all separately recognized MSR to be initially measured
      at fair value, if practicable. SFAS 156 permits an entity to choose either
      of
      the following subsequent measurement methods for each class of separately
      recognized servicing assets and liabilities: (1) amortizing servicing assets
      or
      liabilities in proportion to and over the period of estimated net servicing
      income or net servicing loss; or (2) reporting servicing assets or liabilities
      at fair value at each reporting date and reporting changes in fair value in
      earnings in the period in which the changes occur. In the event that the first
      method is selected, SFAS 156 requires an assessment of servicing assets or
      liabilities for impairment or increased obligation based on fair value at each
      reporting date. SFAS 156 further requires additional disclosures for all
      separately recognized MSR. SFAS 156 is effective as of commencement of the
      first
      fiscal year that begins after September 15, 2006. Adoption of SFAS 156 did
      not
      have any impact on the Company’s financial condition or results of
      operations.




In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
      157"), which defines fair value, establishes a framework for measuring fair
      value under GAAP, and expands disclosures about fair value measurements. Other
      current accounting pronouncements that require or permit fair value measurements
      will require application of SFAS 157. SFAS 157 does not require any new fair
      value measurements, however, does change the definition of fair value and the
      methods used to measure fair value, and expands disclosures about fair value
      measurements. SFAS 157 emphasizes fair value as a market-based measurement,
      not
      an entity-specific measurement. Under SFAS 157, a fair value measurement should
      be determined based on the assumptions that market participants would use in
      pricing the asset or liability. SFAS 157 further establishes a fair value
      hierarchy that distinguishes between (1) market participants’ assumptions
      developed based on market data obtained from sources independent of the
      reporting entity (observable inputs) and (2) the reporting entity’s own
      assumptions about market participants’ assumptions developed based on the best
      information available in the circumstances. SFAS 157 also expands disclosures
      about the use of fair value to measure assets and liabilities in interim and
      annual periods subsequent to initial recognition. SFA 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Adoption of SFAS 157 is not
      expected to have a material impact upon the Company's financial condition or
      results of operations.





In
      February 2007, the FASB issued SFAS No. 159 *,
      "* The
      Fair
      Value Option for Financial Assets and Financial Liabilities *"* ("SFAS
      159"). SFAS 159 permits companies to choose to measure many financial
      instruments and certain other items at fair value. SFAS No. 159 seeks to improve
      the overall quality of financial reporting by providing companies the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007. Management is evaluating the impact of SFAS 159 upon the
      Company's financial condition and results of operations.




9


Certificates of Deposit Beginning in 2004, the Company began reinvesting prepayments and payments on maturity of  securities in the Portfolio in certificates of deposit.  As of March 31, 2007, the Company had ten certificates of deposit stated at cost that mature in less than seven months.  The aggregate principal value of the certificates of deposit was $465,000,000, representing 44% of the Companys total assets.
 **Shift
      Event**




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%.




**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 secured borrowing transactions 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 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 March
      31,
      2007 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):





**March
                31, 2007****Non-Collateral**
            
            **Amortized
                Cost**
            
            **Gross
                Unrealized Gains**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**Collateralized
                Mortgage Obligations:Floating-Rate
                REMICs
            
            $
            297
            
            $
            4
            
            $
            ---
            
            $
            301Fixed-Rate
                REMICs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Mortgage
                Backed Securities:Agency
                ARMs
            
            
            1,544
            
            
            ---
            
            
            24
            
            
            1,520Agency
                Hybrid ARMs
            
            
            3,469
            
            
            11
            
            
            33
            
            
            3,447Agency
                DUSs
            
            
            108,833
            
            
            1,391
            
            
            59
            
            
            110,165Agency
                Debentures
            
            
            394,383
            
            
            3,095
            
            
            259
            
            
            397,219Total
                Non-Collateral
            
            $
            508,526
            
            $
            4,501
            
            $
            375
            
            $
            512,652**Collateral**Collateralized
                Mortgage Obligations:Floating-Rate
                REMICs
            
            $
            1,830
            
            $
            ---
            
            $
            22
            
            $
            1,808Fixed-Rate
                REMICs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Mortgage
                Backed Securities:Agency
                ARMs
            
            
            2,586
            
            
            ---
            
            
            23
            
            
            2,563Agency
                Hybrid ARMs
            
            
            3,770
            
            
            ---
            
            
            87
            
            
            3,683Agency
                DUSs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Agency
                Debentures
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Total
              Collateral
            
            $
            8,186
            
            $
            ---
            
            $
            132
            
            **$**
            $8,054**March
                31, 2007 Total Portfolio**
            
            **$**
            **516,712**
            
            **$**
            **4,501**
            
            **$**
            **507**
            
            **$**
            **520,706**







10




Because
      the Company has the ability and intent to hold those securities with unrealized
      losses until a recovery of fair value, which may be maturity, the Company does
      not consider these securities to be other-than-temporarily impaired at March
      31,
      2007.




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 ) :




**March
                31, 2007****Non-Collateral**
            
            **Due
                in 1 year or less**
            
            **Due
                after 1 through 5 years**
            
            **Due
                after 5 through 10 years**
            
            **Due
                after 10 years**
            
            **Total**Collateralized
                Mortgage Obligations:Floating-Rate
                REMICs
            
            $
            ---
            
            $
            ---
            
            $
            297
            
            $
            ---
            
            $
            297Fixed-Rate
                REMICs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Mortgage
                Backed Securities:Agency
                ARMs
            
            
            198
            
            
            1,256
            
            
            ---
            
            
            90
            
            
            1,544Agency
                Hybrid ARMs
            
            
            ---
            
            
            1,374
            
            
            1,092
            
            
            1,003
            
            
            3,469Agency
                DUSs
            
            
            36,900
            
            
            71,933
            
            
            ---
            
            
            ---
            
            
            108,833Agency
                Debentures
            
            
            322,474
            
            
            71,909
            
            
            ---
            
            
            ---
            
            
            394,383Total
                Non-Collateral
            
            $
            359,572
            
            $
            146,472
            
            $
            1,389
            
            $
            1,093
            
            $
            508,526**Collateral**Collateralized
                Mortgage Obligations:Floating-Rate
                REMICs
            
            $
            6
            
            $
            1,824
            
            $
            ---
            
            $
            ---
            
            $
            1,830Fixed-Rate
                REMICs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Mortgage
                Backed Securities:Agency
                ARMs
            
            
            318
            
            
            1,210
            
            
            388
            
            
            670
            
            
            2,586Agency
                Hybrid ARMs
            
            
            250
            
            
            3,458
            
            
            ---
            
            
            62
            
            
            3,770Agency
                DUSs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Agency
                Debentures
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Total
                Collateral
            
            $
            574
            
            $
            6,492
            
            $
            388
            
            $
            732
            
            $
            8,186**March
                31, 2007 Total Portfolio**
            
            **$**
            **360,146**
            
            **$**
            **152,964**
            
            **$**
            **1,777**
            
            **$**
            **1,825**
            
            **$**
            **516,712**






11




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




**March
                31, 2007**
            
            **Due in 1 year or less**
            
            **Due after 1 through 5 years**
            
            **Due after 5 through 10 years**
            
            **Due after 10 years**
            
            **Total**
            
            **Yield after
              Hedging**Collateralized
                Mortgage Obligations:Floating-Rate
                REMICs
            
            
            3.62
            %
            
            5.53
            %
            
            5.44
            %
            
            ---
            %
            
            5.51
            %
            
            5.51
            %Fixed-Rate
                REMICs
            
            
            6.74
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            6.74
            
            
            4.68Mortgage
                Backed Securities:Agency
                ARMs
            
            
            2.64
            
            
            5.36
            
            
            6.71
            
            
            6.70
            
            
            5.37
            
            
            5.37Agency
                Hybrid ARMs
            
            
            5.26
            
            
            5.96
            
            
            4.96
            
            
            6.91
            
            
            5.92
            
            
            5.92Agency
                DUSs
            
            
            5.61
            
            
            6.04
            
            
            ---
            
            
            ---
            
            
            5.89
            
            
            5.35Agency
                Debentures
            
            
            5.87
            
            
            6.31
            
            
            ---
            
            
            ---
            
            
            5.98
            
            
            5.44Total
            
            
            5.89
            %
            
            6.14
            %
            
            5.42
            %
            
            6.82
            %
            
            5.99
            %
            
            5.40
            %







**NOTE
      5--FAIR VALUE OF FINANCIAL INSTRUMENTS**




The
      fair
      values of securities at March
      31,
      2007 were
      obtained from independent market sources and are summarized in Note 4. The
      carrying value of securities, as shown in Note 4, approximates their fair value.
      The fair value of the receivable arising from payment for securities, pursuant
      to the application of SFAS 125, as replaced by SFAS 140, was $8,053,843 at March
      31,
      2007 .




The
      carrying value of cash and cash equivalents, accounts receivable, accrued
      interest receivable, accrued expenses, and accounts payable approximate fair
      value due to their short-term nature. The seven certificates of deposits also
      approximate fair value and mature within six **** months.




The
      fair
      value of the cross currency and interest rate swaps was $(3,040,047) at March
      31, 2007 and is
      reflected in “Other liabilities”.




**NOTE
      6--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. Hedge accounting may not be available on certain
      derivatives due to occurrence of hedge ineffectiveness.





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. Consequently, the Company does
      not
      require that collateral be provided by the counterparty.





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





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






12





**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 $(1,331,950) at March
      31,
      2007 ,
      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 three months ended March
      31,
      2007 ,
      the
      Company also recognized a loss of $2,613,060 in
      current year to date earnings related to cross currency swaps 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
      three months ended March
      31,
      2007 ,
      the
      Company did not enter into cash flow hedge transactions and it is not the
      intention of the Company to use interest rate swaps to convert floating rate
      financial instruments to fixed rate financial instruments as part of a cash
      flow
      hedge strategy.





At March
      31,
      2007 ,
      the
      Company had outstanding interest rate and cross currency swap agreements with
      a
      notional principal amount of $298,232,811 .




**NOTE
      7--**  **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 $159,474  for  the
      period ended March
      31,
      2007 .
      Under a
      specific allocation methodology, the costs of personnel servicing the Company
      is
      based on actual man-hours devoted to the activities of the Company and remains
      at arm’s length.





The
      counterparty to all cross currency and interest rate swaps is BNP PARIBAS.
      For
      the three months ended March 31, 2007, interest rate swap income and expense
      were $5,441,381 and $3,501,014 ,
      respectively.





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 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.









**Item
      2:**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**




**FORWARD
      LOOKING DISCLOSURE STATEMENT**




From
      time
      to time, the Company may publish, verbally or in written form, forward-looking
      statements relating to such matters as anticipated financial performance,
      economic conditions, interest rate levels, investment prospects and similar
      matters. In fact, this quarterly report on Form 10-Q and our annual report
      on
      Form 10-K (or any other periodic reporting documents required by the Securities
      Exchange Act of 1934 Act, as amended (the “Exchange Act”)) may contain
      forward-looking statements reflecting the current views of the Company
      concerning potential future events or developments. The Private Securities
      Litigation Reform Act of 1995 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.




Set
      forth
      on the following pages is management’s discussion and analysis of the results of
      operations for the three months ended March
      31,
      2007 and
      2006. Such information should be read in conjunction with our Financial
      Statements together with the Notes to the Financial Statements.






13




**GENERAL**




The
      Company was formed on October 14, 1997, with the issuance of one share to the
      Branch 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 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. On June 20, 2006 and December 19, 2006 the
      Company repaid $6,000,000 and $7,000,000 of these contributions,
      respectively.




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 security holders. The Company’s major source of income is
      interest generated by the securities in the Portfolio.




**SUMMARY
      OF 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.





**Investment
      Securities**




Investments
      in debt securities are classified as available-for-sale (recorded on a
      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 (Loss)”. The
      hedged securities are generally valued using discounted cash flows in a yield-curve model based on
      LIBOR ,
      and
      obtained from independent market sources.




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.




**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 March  31,
      2007 .
      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. These instruments qualify for hedge
      accounting.







**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
        includingDecember
        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
        Security Holders may be paid out of (i) net income, determined without regard
        to
        capital gains or losses, and/or (ii) amounts contributed by the Bank or the
        Branch to the Company’s capital. As ofMarch
        31,
        2007,
        the
        Branch has contributed a total (net of a return of capital) of $21,700,000
        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. The Company has paid dividends on the Series A Preferred Securities as scheduled on each dividend date through and including the dividend date on December 5, 2006.  No dividends have been paid on the Common Securities since June 10, 2001, though the Company has paid returns of capital to the Branch of $6,000,000 and $7,000,000 on June 20, 2006 and December 19, 2006, respectively.


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%.




**THREE
      MONTH PERIOD**




**Results
      of Operations**




The
      following discussion pertains to the three months ended March
      31,
      2007 and March
      31,
      2006 (the
“2007 Period” and the “2006 Period”, respectively).







**Revenue**




The
      Company’s net income for the 2007 Period and 2006 Period was $10,556,530
      and $12,820,120 ,
      respectively .




For
      the
      2007 Period and 2006 Period, the Company had revenues of $13,412,395 and $12,024,053, respectively. These amounts consisted of interest income on the investment
      securities, the unrealized gain/loss on hedged securities and derivatives used
      as hedging instruments, net swap revenue, and interest on short-term
      investments. Interest revenue and expense is a function of the mix of financial
      instruments owned and hedging activities, the prevailing level of interest
      rates, and the term structure of our derivatives. The interest revenue in the
      2007 Period rose 11.5% compared with the corresponding 2006 Period, principally
      attributable to an increase in short-term interest rates of the floating rate
      component of the swaps used as hedging instruments offset by the decrease in
      the
      total outstanding swap contracts.









**Interest
      Income and Yields**




For
      the
      2007 Period and 2006 Period interest on the securities in the Portfolio amounted
      to $6,358,611
      and $8,311,940, respectively, representing an aggregate yield of
      5.99%
      and 5.93%, 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):




**2007
                Period**
            
            **2006
                Period**Floating-Rate
                REMICs
            
            $
            30,203
            
            
            5.51
            %
            $
            33,390
            
            
            4.44
            %Fixed-Rate
                REMICs
            
            $
            347,278
            
            
            6.74
            %
            $
            520,918
            
            
            6.74
            %Agency
                ARMs
            
            $
            57,046
            
            
            5.37
            %
            $
            86,020
            
            
            4.94
            %Agency
                Hybrid ARMs
            
            $
            109,418
            
            
            5.92
            %
            $
            149,276
            
            
            5.40
            %Agency
                DUS
            
            $
            1,652,125
            
            
            5.89
            %
            $
            2,776,106
            
            
            6.09
            %Agency
                Debentures
            
            $
            4,162,540
            
            
            5.98
            %
            $
            4,746,230
            
            
            3.76
            %





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





During
      the 2007 Period, the yields on the Agency DUSs, Agency Debentures and Fixed-Rate
      REMICs were approximately 5 .35%,
      5.44% and 4.68%, respectively ,
      when
      taking into account the income and expense from the derivative products used
      to
      hedge these securities. During the 2006 Period, the yields on the Agency DUSs,
      Agency Debentures and Fixed-Rate REMICS were approximately 4.38%,
      5.08% and 4.56% ,
      respectively, when taking into account the income and expense from the
      derivative products used to hedge these securities.




14




The
      Company also recorded interest income from short-term investments for the 2007
      Period and 2006 Period of $5,113,417
      and $2,919,769, 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.
      The Company began reinvesting prepayments in certificate of deposits in fourth
      quarter of 2004.





**Operating
      Expenses**




Operating
      expenses for the 2007 Period and 2006 Period totaled $242,805
      and $228,341 ,
      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 arm’s
      length. Expenses incurred under the Services Agreement for the 2007 Period
      and
      2006 Period totaled $159,474
      and $154,696, respectively.







**Financial
      Condition**




**Portfolio**




The
      average amortized cost of the Portfolio during the 2007 Period and 2006 Period
      was $614,336,501
      and $739,151,754 ,
      respectively. This reflects the following prepayments and
      reinvestments:





**PREPAYMENTS**
            
            **2007
                Period**
            
            **2006
                Period**Floating-Rate
                REMICs
            
            $
            189,568
            
            $
            271,797Fixed-Rate
                REMICs
            
            $
            30,915,000
            
            $
            ---Agency
                ARMs
            
            $
            472,783
            
            $
            365,984Agency
                Hybrid ARMs
            
            $
            582,125
            
            $
            502,228Agency
                DUS
            
            $
            10,759,100
            
            $
            51,927,233Agency
                Debentures
            
            $
            110,000,000
            
            $
            ---








**REINVESTMENTS**
            
            **2007
                Period**
            
            **2006
                Period**Floating-Rate
                REMICs
            
            $
            ---
            
            $
            ---Fixed-Rate
                REMICs
            
            $
            ---
            
            $
            ---Agency
                ARMs
            
            $
            ---
            
            $
            ---Agency
                Hybrid ARMs
            
            $
            ---
            
            $
            ---Agency
                DUS
            
            $
            ---
            
            $
            ---Agency
                Debentures
            
            $
            ---
            
            $
            ---







**Receivable
      Arising from Payment for Securities**




Due
      to
      the potential consequences of a Shift Event (as defined in Item 1 Note 2 to
      Financial Statements), the Company’s purchase of the Initial Portfolio (as
      defined in Item 1 herein) from the Branch did not meet certain SFAS 125, as
      replaced by SFAS 140, sale accounting requirements. Accordingly, the Company
      recorded at December 5, 1997 a receivable for the consideration paid to the
      Branch for the Initial Portfolio treated as collateral. As a legal and economic
      matter, however, there is no such receivable since (a) neither the Bank nor
      the
      Branch has any obligation to repay any part of the purchase price for the
      Initial Portfolio or to repurchase or redeem any of the securities included
      therein, and (b) the Company has no obligation to return any of such securities
      to the Bank or the Branch (except in the limited circumstances and to the extent
      that the occurrence of a Shift Event under the Charter would require the
      transfer of any assets held by the Company at the time). As the securities
      in
      the Initial Portfolio are paid, the receivable will be deemed to be realized
      by
      an amount corresponding to the amount of the payments received. At March
      31,
      2007 ,
      the
      receivable arising from payment for securities amounted to $8,185,621 .
      The
      decrease in the amount of such receivable 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
      Financial Statements.




15




**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. 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 respective 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 through August, 2006 and their relative
      stabilization since then have increased the Company’s income compared to prior
      periods, 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. This situation should
      stabilize the structure of the portfolio to its natural pre-payment trend;
      however, sporadic large pre-payments can still occur at current mortgage rate
      levels and no assurances can be given that interest rates will not
      decrease.







BNP
      PARIBAS Group's total and Tier 1 risk-based capital ratios at March
      31,
      2007 were
      10.4% and 7.4%,, which are well above the minimum standards required by French
      banking regulations, currently 8% for total risk-based capital and 4% for Tier
      1
      risk-based capital. A “Shift Event” would occur if BNP PARIBAS’ risk-based
      capital fell below these minimum standards of 8% and 4%, respectively. See
      Note
      2 of the attached financial statements for a detailed explanation of “Shift
      Events”.





**Accounting
      and Reporting Developments**







In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155 “Accounting for Certain Hybrid Instruments, an amendment of FASB Statement
      No. 133 and 140” (“SFAS 155”). SFAS 155 contains a variety of provisions which
      address fair value of hybrid financial instruments containing an embedded
      derivative, clarifies which interest only and principal only strips are not
      subject to SFAS 133, establishes requirements to evaluate securitized financial
      assets to identify embedded derivatives and addresses certain aspects of SFAS
      140 regarding qualifying special purpose entities and their holding of certain
      derivative financial instruments **.** SFAS
      155
      is effective for fiscal years beginning after September 15, 2006. Adoption
      of
      SFAS 155 did not have any impact upon the Company's financial condition or
      results of operations, since the Company only holds freestanding
      derivatives.





In
      March
      2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial
      Assets" ("SFAS 156"). The Statement amends SFAS No. 140, "Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
      with respect to accounting for separately recognized Mortgage Servicing Rights
      (“MSR”). SFAS 156 requires all separately recognized MSR to be initially
      measured at fair value, if practicable. SFAS 156 permits an entity to choose
      either of the following subsequent measurement methods for each class of
      separately recognized servicing assets and liabilities: (1) amortizing servicing
      assets or liabilities in proportion to and over the period of estimated net
      servicing income or net servicing loss; or (2) reporting servicing assets or
      liabilities at fair value at each reporting date and reporting changes in fair
      value in earnings in the period in which the changes occur. In the event that
      the first method is selected, SFAS 156 requires an assessment of servicing
      assets or liabilities for impairment or increased obligation based on fair
      value
      at each reporting date. SFAS 156 further requires additional disclosures for
      all
      separately recognized MSR. SFAS 156 is effective as of commencement of the
      first
      fiscal year that begins after September 15, 2006. Adoption of SFAS 156 did
      not
      have any impact on the Company’s financial condition or results of
      operations.





16




In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
      157"), which defines fair value, establishes a framework for measuring fair
      value under GAAP, and expands disclosures about fair value measurements. Other
      current accounting pronouncements that require or permit fair value measurements
      will require application of SFAS 157. SFAS 157 does not require any new fair
      value measurements, however, does change the definition of fair value and the
      methods used to measure fair value, and expands disclosures about fair value
      measurements. SFAS 157 emphasizes fair value as a market-based measurement,
      not
      an entity-specific measurement. Under SFAS 157, a fair value measurement should
      be determined based on the assumptions that market participants would use in
      pricing the asset or liability. SFAS 157 further establishes a fair value
      hierarchy that distinguishes between (1) market participants’ assumptions
      developed based on market data obtained from sources independent of the
      reporting entity (observable inputs) and (2) the reporting entity’s own
      assumptions about market participants’ assumptions developed based on the best
      information available in the circumstances. SFAS 157 also expands disclosures
      about the use of fair value to measure assets and liabilities in interim and
      annual periods subsequent to initial recognition. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Adoption of SFAS 157 is not
      expected to have a material impact upon the Company's financial condition or
      results of operations.





In
      February 2007, the FASB issued SFAS No. 159 *,
      "* The
      Fair
      Value Option for Financial Assets and Financial Liabilities *"* ("SFAS
      159"). SFAS 159 permits companies to choose to measure many financial
      instruments and certain other items at fair value. SFAS No. 159 seeks to improve
      the overall quality of financial reporting by providing companies the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007. Management is evaluating the impact of SFAS 159 upon the
      Company's financial condition and results of operations.








**Item
      3:**  **Quantitative and Qualitative Disclosures About Market Risk**




**Interest
      Rate Sensitivity**




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




The
      outstanding principal amount and estimated fair value of the Company’s
      investments as of March
      31,
      2007 ,
      by each
      category of investment, is depicted in the Financial Statements.





**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 through August, 2006 and their relative
      stabilization since then have increased the Company’s income compared to prior
      periods, 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. This situation should
      stabilize the structure of the portfolio to its natural pre-payment trend;
      however, sporadic large pre-payments can still occur at current mortgage rate
      levels and 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
      ten **** intere st
      rate
      swaps and six cross
      currency swaps, all with BNP PARIBAS as counterparty, 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.





17





**Trade
                Date**
            
            **Maturity
                Date**
            
            **Fixed
                Rate**
            
            **Receive
                Rate**
            
            **Fair
                Value at March 31, 2007 (in 000’s)**
            
            **Notional
                Balance**
              **(in
                000’s)**February
                25, 1999
            
            
            February
                25, 2009
            
            
            U.S.
                5.95
            
            
            U.S.
                One Month LIBOR Plus Three Basis Points
            
            
            (197
            )
            
            14,410June
                25, 1999
            
            
            June
                25, 2009
            
            
            U.S.
                6.06
            
            
            U.S.
                One Month LIBOR Plus Three and Half Basis Points
            
            
            (319
            )
            
            15,584July
                1, 1999
            
            
            June
                25, 2009
            
            
            U.S.
                6.39
            
            
            U.S.
                One Month LIBOR Plus Three and Half Basis Points
            
            
            (434
            )
            
            14,693September
                27, 1999
            
            
            March
                25, 2009
            
            
            U.S.
                5.858
            
            
            U.S.
                One Month LIBOR Plus Four Basis Points
            
            
            (219
            )
            
            15,192June
                26, 2000
            
            
            October
                1, 2008
            
            
            U.S.
                6.26
            
            
            U.S.
                One Month LIBOR
            
            
            (36
            )
            
            4,209October
                2, 2000
            
            
            July
                1, 2007
            
            
            U.S.
                7.405
            
            
            U.S.
                One Month LIBOR Minus Two Basis Points
            
            
            (49
            )
            
            7,224March
                25, 2001
            
            
            October
                25, 2007
            
            
            U.S.
                6.94
            
            
            U.S.
                One Month LIBOR Plus Two Basis Points
            
            
            ---
            
            
            964August
                25, 2002
            
            
            August
                25, 2007
            
            
            U.S.
                4.90
            
            
            U.S.
                One Month LIBOR Plus Five Basis Points
            
            
            59
            
            
            26,500March
                21, 2003
            
            
            February
                25, 2009
            
            
            U.S.
                5.945
            
            
            U.S.
                One Month LIBOR Plus Nine Basis Points
            
            
            (122
            )
            
            7,845August
                1, 2003
            
            
            October
                25, 2007
            
            
            U.S.
                6.812
            
            
            U.S.
                One Month LIBOR Plus Ten Basis Points
            
            
            (15
            )
            
            2,212**Total
                Swaps- Fair Value Hedges**
            
            
            
            
            
            
            
            
            
            
            $
            (1,332
            )
            $
            108,833November
                25, 1998
            
            
            March
                26, 2008
            
            
            JPY
                1.75
            
            
            U.S.
                Three Month LIBOR Plus Six Basis Points
            
            
            (902
            )
            
            42,000November
                25, 1998
            
            
            October
                9, 2007
            
            
            JPY
                2.125
            
            
            U.S.
                Three Month LIBOR Plus Six Basis Points
            
            
            (1,616
            )
            
            58,000March
                29, 1999
            
            
            October
                9, 2007
            
            
            JPY
                2.125
            
            
            U.S.
                Three Month LIBOR Minus Two and Half Basis Points
            
            
            57
            
            
            30,000April
                6, 1999
            
            
            October
                9, 2007
            
            
            JPY
                2.125
            
            
            U.S.
                Three Month LIBOR Minus One Basis Point
            
            
            (726
            )
            
            26,400November
                2, 2000
            
            
            October
                9, 2007
            
            
            JPY
                2.125
            
            
            U.S.
                Three Month LIBOR Minus Two Basis Points
            
            
            1,155
            
            
            15,000January
                17, 2001
            
            
            March
                26, 2008
            
            
            JPY
                1.750
            
            
            U.S.
                5.80
            
            
            324
            
            
            18,000**Othe****r
                Swap**
            
            
            
            
            
            
            
            
            
            
            $
            (1,708
            )
            $
            189,400**Total
                Swap Portfolio (Other liabilities)**
            
            
            
            
            
            
            
            
            
            
            $
            (3,040
            )
            $
            298,233








The
      main
      feature of 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 uses an estimate of
      the
      prepayment rate given either by the CPR (Conditional Prepayment Rate) or the
      PSA
      (Public Securities Association) prepayment model. Because of this risk, the
      securities are valued based on their average life rather than on their stated
      maturity date. The prepayment risk is evaluated and analyzed as this impacts
      the
      structure of the portfolio and the re-investment policy.




18





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):




**March
        31, 2007**




**Non-Collateral**
            
            **Due**
              **In**
              **2007**
            
            **Due
                after**
              **2007**
            
            **Due
                after**
              **2008**
            
            **Due
                after**
              **2009**
            
            **Due**
              **After**
              **2010**
            
            **Due**
              **After**
              **2011**
            
            **Total**Fixed-Rate
                Instruments:Fixed-Rate
                REMICs
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---Agency
                DUS
            
            
            36,900
            
            
            27,462
            
            
            44,471
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            108,833Agency
                Debentures
            
            
            262,408
            
            
            131,975
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            394,383Total
                Fixed-Rate Instruments
            
            
            299,308
            
            
            159,437
            
            
            44,471
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            503,216Floating-Rate
                Instruments:Floating-Rate
                REMICs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            297
            
            
            297Agency
                ARMs
            
            
            ---
            
            
            489
            
            
            ---
            
            
            965
            
            
            ---
            
            
            90
            
            
            1,544Agency
                Hybrid ARMs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            1,374
            
            
            ---
            
            
            2,095
            
            
            3,469Total
                Floating-Rate Instruments
            
            
            ---
            
            
            489
            
            
            ---
            
            
            2,339
            
            
            ---
            
            
            2,482
            
            
            5,310Total
                Non-Collateral
            
            $
            299,308
            
            $
            159,926
            
            $
            44,471
            
            $
            2,339
            
            $
            ---
            
            $
            2,482
            
            $
            508,526**Collateral**Fixed-Rate
                Instruments:Fixed-Rate
                REMICs
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---Agency
                DUS
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Agency
                Debentures
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Total
                Fixed-Rate Instruments
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---Floating-Rate
                Instruments:Floating-Rate
                REMICs
            
            
            6
            
            
            ---
            
            
            1,043
            
            
            781
            
            
            ---
            
            
            ---
            
            
            1,830Agency
                ARMs
            
            
            87
            
            
            660
            
            
            ---
            
            
            ---
            
            
            781
            
            
            1,058
            
            
            2,586Agency
                Hybrid ARMs
            
            
            250
            
            
            ---
            
            
            1,378
            
            
            981
            
            
            1,099
            
            
            62
            
            
            3,770Total
                Floating-Rate Instruments
            
            
            343
            
            
            660
            
            
            2,421
            
            
            1,762
            
            
            1,880
            
            
            1,120
            
            
            8,186Total
                Collateral
            
            $
            343
            
            $
            660
            
            $
            2,421
            
            $
            1,762
            
            $
            1,880
            
            $
            1,120
            
            $
            8,186**March
                31, 2007 Total Portfolio**
            
            **$**
            **299,651**
            
            **$**
            **160,586**
            
            **$**
            **46,892**
            
            **$**
            **4,101**
            
            **$**
            **1,880**
            
            **$**
            **3,602**
            
            **$**
            **516,712**







**Item
      4:**  **Controls and Procedures**







Evaluation
      of Disclosure Controls and Procedures





As
      of
      March 31, 2007, the Company carried out an evaluation under the supervision
      and
      with the participation of the Company’s management, including the President and
      Chief Financial Officer, of the effectiveness of the design and operation of
      the
      Company’s disclosure controls and procedures. There are inherent limitations to
      the effectiveness of any system of disclosure controls and procedures, including
      the possibility of human error and the circumvention or overriding of the
      controls and procedures. Accordingly, even effective disclosure controls and
      procedures can only provide reasonable assurance of achieving their control
      objectives. Based upon and as of the date of the Company’s evaluation, the
      President and Chief Financial Officer concluded that the disclosure controls
      and
      procedures are effective in all material respects to provide reasonable
      assurance that information required to be disclosed in the reports the Company
      files and submits under the Exchange Act is recorded, processed, summarized
      and
      reported as and when required. There has been no change in the Company’s
      internal control over financial reporting that occurred during the third fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, the Company’s internal control over financial reporting.




19





**Part
      II**




**Item
      1:**  **Legal
      Proceedings**




None.




**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 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 holders 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.





20




**Item
      2:**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**




None.




**Item
      3:**  **Defaults
      upon Senior Securities**




None.




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




None.




**Item
      5:**  **Other
      Information**




None.






**Item
      6:**  **Exhibits**




EXHIBITS




A)
            Exhibits:




11)
            Computation
                of Per Share Earnings (omitted in accordance with section (b)(11)
                of Item
                601 of Regulation S-K)12)
            Computation of ratio of earnings to fixed charges and preferred security dividends31.1)
            Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2)
            Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 200232)
            Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





21


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.**RegistrantDate: May
              15,
              2007
            By:
            /s/ Martine BilleaudMartine
              BilleaudPresident
              and Director




Date: May
              15,
              2007
            By:
            /s/ Thomas ClyneThomas
              ClyneChief
              Financial Officer and Director