SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 1)

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                   For the fiscal year ended December 31, 2003

                        Commission file number: 000-23745
                        ---------------------------------

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

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

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

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

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

                                                  Name of Each Exchange on
        Title of Each Class                           which Registered
 ------------------------------------       ------------------------------------
                 None                                     None

           Securities registered pursuant to Section 12(g) of the Act:

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

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No|_|

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

         Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes| | No|X|

         All outstanding shares of Common Stock were held by BNP PARIBAS at
December 31, 2003.

Number of Shares of Common Stock outstanding on December 31, 2003: 53,011


  Document incorporated by reference                  Part of Form 10-K
           in this Form 10-K                          which incorporated
 ------------------------------------       ------------------------------------
               None                                          --

<PAGE>


Explanatory Note:
----------------

         Due to a clerical error, a draft version of the Company's annual report
on Form 10-K for the year ended December 31, 2003 was filed instead of the final
version. This Amendment No. 1 is the complete and final version that we intended
to file when the annual report on Form 10-K for the year ended December 31, 2003
was filed and conforms the Form 10-K as filed to the version that was certified
by the Company's President and Chief Financial Officer pursuant to Rules
13a-14(a) and 13a-14(b) under the Securities Exchange Act of 1934, as amended
(Exchange Act).

         This Amendment No.1 continues to speak as of the date of the original
filing and the Company has not updated the disclosures contained therein to
reflect any events that occurred at a later date.

         No other changes are being made by means of this filing.


<PAGE>


<TABLE>
<CAPTION>

                                                       Form 10-K/A Index

                                                                                                              PAGE
                                                                                                              ----
PART I
<S>           <C>                                                                                           <C>
 Item 1:      Business ..........................................................................................3

 Item 2:      Properties ........................................................................................8

 Item 3:      Legal Proceedings .................................................................................8

 Item 4:      Submission of Matters to a Vote of Securityholders ................................................8

PART II

 Item 5:      Market for Registrant's Common Equity and Related Securityholder Matters ..........................8

 Item 6:      Selected Financial Data ...........................................................................8

 Item 7:      Management's Discussion and Analysis of Financial Condition and Results of Operations .............9

 Item 7A:     Quantitative and Qualitative Disclosures About Market Risk .......................................13

 Item 8:      Financial Statements and Supplementary Data ......................................................17

 Item 9:      Changes In and Disagreements With Accountants on Accounting and
              Financial Disclosure .............................................................................31

 Item 9A:     Controls and Procedures ..........................................................................31

PART III

 Item 10:     Directors and Executive Officers of the Company ..................................................32

 Item 11:     Executive Compensation ...........................................................................33

 Item 12:     Security Ownership of Certain Beneficial Owners and Management ...................................33

 Item 13:     Certain Relationships and Related Transactions ...................................................33

 Item 14:     Principal Accountant Fees and Services ...........................................................33

 PART IV

 Item 15:     Exhibits, Financial Statement Schedules and Reports on Form 8-K ..................................34


</TABLE>



<PAGE>


FORWARD LOOKING DISCLOSURE STATEMENT

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

Item 1: Business

General

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

The Company was initially capitalized on October 14, 1997, with the issuance to
the Branch of one share of the Company's redeemable common securities, $10,000
par value (the "Common Securities"). On December 5, 1997 (inception), the
Company commenced operations concurrent with the issuance of 50,000
noncumulative preferred securities, Series A, liquidation preference $10,000 per
security (the "Series A Preferred Securities"), to qualified institutional
buyers, and the issuance of an additional 53,010 Common Securities to the
Branch. These issuances raised in the aggregate $1,030,115,873 of net capital
(including $5,873 of additional paid-in capital). This entire amount was used to
acquire a portfolio of debt securities (the "Initial Portfolio") at their fair
values from the Branch. The Branch contributed additional paid-in capital of
$7,500,000, $5,500,000 and $3,000,000, on December 3, 2003, June 3, 2003, and
December 3, 2002, respectively.

The Company entered into a services agreement (the "Services Agreement") with
the Branch on December 5, 1997, pursuant to which the Branch maintains the
securities portfolio of the Company (the "Portfolio") and performs other
administrative functions. The Company has no employees. All of the Company's
officers are officers or employees of the Branch or the Bank or their
affiliates. The securities in the Portfolio are held by Citibank N.A., acting as
trustee (the "Trustee") under the trust agreement between the Company and
Citibank N.A. dated December 1, 1997 (the "Trust Agreement").

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

Available Information

The Company files reports and other information with the Securities and Exchange
Commission (the "SEC") pursuant to Section 13 or 15(d) of the Exchange Act. All
such reports and other information may be read and copied at the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a website
(http://www.sec.gov) that contains reports and other information regarding
registrants that file electronically with the SEC, including the Company.

General Description of the Portfolio

Types of Eligible Securities

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

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

Set forth below is a description, as of December 31, 2003, of the Portfolio. As
of December 31, 2003, the Eligible Securities included in the Portfolio had an
aggregate amortized cost of $1,002,108,253 and an estimated fair value of
$1,119,769,704. The composition of the Portfolio, stated in terms of amortized
cost, is presented in the following table:

<TABLE>
<CAPTION>

December 31, 2003
-----------------
                                                        Percentage of
                                                        Portfolio by                        Aggregate
                                                          Aggregate         Number of     Amortized Cost
                 Type of Security                       Amortized Cost     Securities        ($000)
--------------------------------------------------    ---------------      ----------   -----------------
<S>                                                        <C>                 <C>         <C>
Floating-Rate REMICs..............................         1.14%               7         $    11,470
Fixed-Rate REMICs.................................         1.03                2              10,298
Agency ARMs.......................................         1.24               24              12,418
Agency Hybrid ARMs................................         2.17               17              21,787
Agency DUSs.......................................        43.90               33             439,905
Agency Debentures.................................        50.52               13             506,230
                                                          -----               --         -----------
     December 31, 2003 Total Portfolio                   100.00%              96         $ 1,002,108
                                                         =======              ==         ===========

</TABLE>

Description of Types of Securities
----------------------------------

Floating-Rate REMICs
--------------------

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

<TABLE>
<CAPTION>

December 31, 2003
-----------------

                                                                              Weighted
                                                                               Average
                                               Current                          Life
                  Series                       Coupon         Life Cap         (Years)       Maturity Date       Amortized Cost
--------------------------------------------- --------        ----------       -------       -------------      -----------------
<S>                                             <C>             <C>             <C>          <C>                   <C>
FANNIE MAE 1993-210 FB.......................   1.56%           9.00%           0.67         10-25-2022            $ 3,387
FANNIE MAE 1997-28 FA........................   1.91            10.00           5.75          5-25-2027              1,222
FANNIE MAE 1990-121 F........................   2.96            11.50           2.71         10-25-2020              2,122
FANNIE MAE 1992-141 FA.......................   1.66            10.50           1.17          8-25-2007                552
Morgan Stanley Mortgage Trust 41 Class 1(1)..   1.80            10.00           2.60          2-20-2022                978
FREDDIE MAC 1040 H............................  2.14            11.00           2.76          2-15-2021              2,412
FANNIE MAE G92 60 F..........................   2.56            10.00           2.42         10-25-2022                797
                                                                                                                   --------
    Total Floating-Rate REMICs                                                                                     $11,470
                                                                                                                   ========
</TABLE>


(1) Morgan Stanley Mortgage Trust 41 was established as of December 1, 1991 by
    Morgan Stanley Capital I Inc.


Fixed-Rate REMICs
-----------------

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

<TABLE>
<CAPTION>
December 31, 2003
-----------------

                                                                              Weighted
                                                                               Average
                                               Current                          Life
              Series                           Coupon          Life Cap        (Years)        Maturity Date     Amortized Cost
----------------------------------            ---------       ----------      --------       --------------     ---------------
<S>                                           <C>              <C>              <C>           <C>                 <C>
FANNIE MAE 1997-56 PE.............             6.50%            9.00%           0.63          6-18-2026           $   298
FANNIE MAE 1997-M5 C..............             6.74            11.50            3.64          8-25-2007            10,000
                                                                                                                  --------
     Total Fixed-Rate REMICs                                   10.50                                              $10,298
                                                               =====                                              ========

</TABLE>

Agency ARMs
-----------

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

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

<TABLE>
<CAPTION>

December 31, 2003
-----------------
                                                                              Weighted
                                                                               Average
                                               Current                          Life
  Pool No. (1)                                 Coupon          Life Cap        (Years)        Maturity Date     Amortized Cost
---------------                               ---------       ----------      --------       --------------     ---------------

<S>                                            <C>             <C>              <C>            <C>                <C>
  FH 846384                                    3.64%           11.77%           3.24           12-1-2026          $   690
  FN 313190                                    3.63            12.12            4.67            9-1-2026              819
  FN 313242                                    3.45            11.96            3.38           11-1-2026              318
  FN 313311                                    3.84            11.86            5.87           12-1-2026              246
  FN 313377                                    3.89            11.74           11.90            2-1-2027              921
  FN 313432                                    3.69            11.84           12.90            2-1-2027              201
  FN 363057                                    4.33            11.38            0.48            2-1-2027               52
  FN 363070                                    3.58            11.49            0.50            3-1-2027               73
  FN 367349                                    4.35            11.98           13.38           12-1-2026               43
  FN 370478                                    4.09            11.37           13.44            2-1-2027               74
  FN 370479                                    3.97            11.31            2.87            3-1-2027              104
  FN 374711                                    3.32            11.72            1.78            7-1-2027              246
  FN 378243                                    3.60            12.23           13.37            7-1-2027               58
  FN 391247                                    3.50            11.37            2.58            4-1-2027              816
  FN 394850                                    3.59            12.07           13.71            7-1-2027               35
  FN 397901                                    3.38            11.89            1.02            8-1-2027              318
  FH 610727                                    3.77            12.35           11.71            5-1-2027              172
  G  280094                                    4.75            11.00            1.62           7-20-2027            2,044
  G   28506                                    4.75            12.50            1.93           9-20-2024            2,505
  G  280001                                    5.63            11.00            0.70          10-20-2026              355
  FH 786213                                    6.81            12.55            0.79           12-1-2027              960
  FH 785825                                    6.72            12.18            2.95            5-1-2027              587
  FH 786088                                    6.72            12.26            0.65           12-1-2027              663
  FN 396355                                    3.42            11.80           13.09            8-1-2027              118
                                                                                                                  --------
     Total Agency ARMs                                                                                            $12,418
                                                                                                                  ========
</TABLE>

(1)"FN"=  FNMA; "G"=  GNMA; and  "FH"=  FHLMC


Agency Hybrid ARMs
------------------

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

<TABLE>

December 31, 2003
-----------------
                                                                              Weighted
                                                                               Average
                                               Current                          Life
  Pool No. (1)                                 Coupon          Life Cap        (Years)        Maturity Date     Amortized Cost
---------------                               ---------       ----------      --------       --------------     ---------------
<S>                                            <C>             <C>             <C>            <C>                 <C>
  FN 312824                                    7.38%           12.38%          0.64           6-1-2025            $   180
  FN 345856                                    3.24            11.87           5.78           8-1-2026              1,727
  FN 361370                                    3.57            13.57           4.09           7-1-2026              3,499
  FN 361372                                    7.92            12.90           1.36           7-1-2026              3,224
  FN 374138                                    3.62            11.35           6.00           3-1-2027              2,398
  FN 397136                                    7.95            13.76           1.62           6-1-2027              1,317
  FN 362968                                    7.87            12.24           1.16           1-1-2026                255
  FN 374917                                    6.60            11.75           1.39           4-1-2027                648
  FN 403006                                    6.37            11.50           2.71          11-1-2027                644
  FN 404484                                    6.00            11.50           1.11          11-1-2027                257
  FN 422265                                    6.19            13.26           1.65           1-1-2026              1,472
  FN 422268                                    5.76            12.94           1.92          12-1-2024                469
  FN 422276                                    3.96            13.23           4.77          12-1-2027              3,617
  FN 409850                                    6.65            11.63           1.27           3-1-2028                329
  FN 415286                                    4.16            12.38           3.56           2-1-2028                772
  FN 417833                                    6.01            11.45           0.76           3-1-2028                626
  FH 786414                                    6.28            12.03           0.63           7-1-2028                353
                                                                                                                  --------
     Total Agency Hybris ARMs                                                                                     $21,787
                                                                                                                  ========
</TABLE>
(1)   "FN"=  FNMA;  and "FH"= FHLMC


Agency DUSs
-----------

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

<TABLE>

 December 31, 2003
 -----------------
    Security            Current          Weighted Average         Maturity
   Description          Coupon             Life (Years)             Date            Amortized Cost
 -----------------   ---------------   -----------------    -----------------      -----------------
<S>                    <C>                    <C>               <C>                   <C>
   FNMA 380491          6.11%                  4.38              7-1-2008              $  5,595
   FNMA 380583          6.15                   4.37              8-1-2008                18,672
   FNMA 381578          6.23                   5.39              5-1-2009                12,180
   FNMA 381608          5.93                   5.17              5-1-2009                 6,934
   FNMA 381640          5.86                   5.09              4-1-2009                 5,616
   FNMA 380933          5.92                   4.76             12-1-2008                 7,784
   FNMA 381152          5.88                   4.91              1-1-2009                 5,028
   FNMA 381294          5.81                   4.91              2-1-2009                 1,902
   FNMA 381488          6.19                   5.10              4-1-2009                 4,222
   FNMA 381514          6.19                   5.10              4-1-2009                 4,853
   FNMA 381730          6.39                   5.26              6-1-2009                15,389
   FNMA 381705          6.26                   5.26              6-1-2009                 3,918
   FNMA 381450          5.78                   4.99              3-1-2009                11,523
   FNMA 381115          5.97                   4.76             12-1-2008                11,289
   FNMA 381117          5.80                   4.91              1-1-2009                 4,830
   FNMA 380115          6.29                   4.07              3-1-2008                42,144
   FNMA 381556          6.04                   5.08              4-1-2009                15,139
   FNMA 380798          5.64                   4.60             10-1-2008                 4,475
   FNMA 375433          6.68                   3.69             10-1-2007                 8,129
   FNMA 375618          6.42                   3.97             12-1-2007                 7,000
   FNMA 375385          6.87                   3.61              9-1-2007                 4,650
   FNMA  20021          7.20                   2.73             10-1-2006                67,072
   FNMA 535642          6.94                   3.08             10-1-2007                 8,631
   FNMA 313672          7.01                   3.37              6-1-2007                19,134
   FNMA 382497          7.41                   3.49              7-1-2007                 7,489
   FNMA 375471          6.63                   3.68             10-1-2007                 9,098
   FNMA 460685          4.90                   3.78              8-1-2007                26,500
   FNMA  73440          6.83                   2.26              5-1-2006                 9,135
   FNMA  73558          7.24                   2.50              7-1-2006                10,937
   FNMA 313744          6.84                   2.37             10-1-2007                24,687
   FNMA 382741          6.96                   3.72             10-1-2007                16,230
   FNMA 360600          6.57                   4.30              4-1-2008                12,950
   FNMA 382497          5.95                   4.83              2-1-2009                26,770
                                                                                       --------
    Total Agency DUSs                                                                  $439,905
                                                                                       ========
</TABLE>


Agency Debentures
-----------------

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

December 31, 2003
-----------------                    Life to
  Security                Current   Maturity         Maturity
Description               Coupon     (Years)           Date    Amortized Cost
-----------               ------    ------------       ----    --------------
FHLMC 3134A2DT2            5.75%       4.29          4-15-2008    $ 24,660
FNMA 31359MCY7             2.13        3.78          10-9-2007     129,400
FNMA 31359MDR1             1.75        4.24          3-26-2008      60,496
FNMA 31359MDU4             6.00        4.38          5-15-2008      46,379
FNMA 31364C5BO             6.44        3.62          8-14-2007      23,937
FNMA 31364C6C7             6.48        3.66          8-27-2007       7,497
FNMA 31364CU55             6.70        3.47          6-19-2007      12,185
FNMA 31364CYE2             6.68        3.18           3-5-2007      50,000
FNMA 31364MGH0             6.63        3.79         10-15-2007      52,629
FNMA 31364CYX0             6.80        3.20          3-14-2007      50,000
FNMA 31364C5Q7             6.55        3.64          8-20-2007      19,042
FNMA 31359MPZ0             3.25        3.88         11-15-2007      20,031
FHLMC 3134A4NW0            4.88        3.21          3-15-2007       9,974
                                                                  --------
  Total Agency Debentures                                         $506,230
                                                                  ========

Item 2: Properties

The Company does not own or lease any property. It uses the facilities of the
Branch located at 787 Seventh Avenue, New York, New York 10019.

Item 3: Legal Proceedings

         None.

Item 4: Submission of Matters to a Vote of Securityholders

         None.

Item 5: Market for Registrant's Common Equity and Related Securityholder Matters

Market Information

There is no established public trading market for the Company's Common
Securities, all of which are held by the Branch. The Bank has agreed with the
Company that, so long as any Series A Preferred Securities are outstanding, it
will maintain direct or indirect ownership of 100% of the outstanding Common
Securities.

Dividends

Holders of Common Securities are entitled to receive dividends when, as and if
declared by the Company's Board of Directors, out of net gains from the
disposition of securities in the Portfolio and net income not required to be
applied to fund dividends with respect to the Series A Preferred Securities.
During 2003 the Company did not declare or pay any dividends with respect to
Common Securities.


Item 6: Selected Financial Data

The following table sets forth selected financial data for the years then ended
(in thousands, except share and yield data):
<TABLE>

                                            December 31,    December 31,     December 31,    December 31,    December 31,
                                                2003            2002             2001            2000            1999
                                           --------------- ---------------- --------------- --------------- ----------------

Income Statement:
-----------------
<S>                                        <C>              <C>             <C>             <C>              <C>
Interest income                            $   26,219       $   34,548      $   52,568      $   67,330       $   58,485
Net income                                     22,759           32,894          52,277          66,341           57,685
Average number of Redeemable
   Common Securities outstanding               53,011           53,011          53,011          53,011           53,011
Net income (loss) per Redeemable
   Common Security                           (300.52)         (109.34)          256.31          521.61           358.33

Balance Sheet:
--------------
Investment securities at carrying value     1,119,539        1,099,570       1,041,244       1,019,696          981,352
Total assets                                1,153,073        1,150,885       1,081,823       1,056,505        1,263,193
Series A Preferred Securities outstanding     500,000          500,000         500,000         500,000          500,000
Total Redeemable Common Securities,
   Preferred Securities, and
   Securityholders' Equity                 $1,055,514       $1,062,024      $1,051,702      $1,039,143       $1,030,131

Other Data:
-----------
Comprehensive income                       $   19,180       $   46,012      $   61,968      $   75,003       $   43,477
Dividends paid on Series A
   Preferred Securities                    $   38,690       $   38,690      $   38,690      $   38,690       $   38,690
Dividends paid on Redeemable
   Common Securities                       $        -       $        -      $   10,719      $   27,301       $   18,807
Number of Series A Preferred
   Securities outstanding                      50,000           50,000          50,000          50,000           50,000
Number of Redeemable Common
   Securities outstanding                      53,011           53,011          53,011          53,011           53,011
Average yield on investment securities
   (before results of hedging activities)       6.03%            6.02%           6.40%           6.39%            6.07%
</TABLE>


Item 7: Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

The following discussion pertains to the years ended December 31, 2003, December
31, 2002 and December 31, 2001 (the "2003 Period", the "2002 Period" and the
"2001 Period", respectively).

General

The Company was formed on October 14, 1997, and commenced operations on December
5, 1997, by the sale to qualified institutional buyers of 50,000 Series A
Preferred Securities and the sale to the Branch of 53,010 Common Securities.
Together, such sales raised net capital of $1,030,115,873, which the Company
used to purchase the Initial Portfolio from the Branch. The Branch has
contributed $7,500,000, $5,500,000 and $3,000,000 of additional paid-in capital
on December 3, 2003, June 3, 2003 and December 3, 2002, respectively.

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.

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

Results of Operations

For the 2003 Period, 2002 Period and 2001 Period, the Company had revenues of
$26,219,327, $34,548,021 and $52,567,798, respectively. These amounts consisted
of interest income on the investment securities, the unrealized gain/loss on
hedged securities and derivatives used as hedging instruments, and interest on
deposits. The decline in revenue is due to the low interest rate environment
effecting the floating-rate instruments of the Company's swaps in 2003 as
compared to 2002 and 2001.

For the 2003 Period, 2002 Period and 2001 Period, interest on the securities in
the Portfolio amounted to $48,647,380, $48,742,745 and $50,881,325,
respectively, representing an aggregate yield of 6.03%, 6.02% and 6.40%,
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):

<TABLE>
                                        2003                       2002                     2001
                            -------------------------  -------------------------  -------------------------
<S>                         <C>                 <C>    <C>                 <C>    <C>                 <C>
Floating-Rate REMICs.....   $       363,945     2.02%  $      965,385      2.73%  $      3,425,596    4.90%
Fixed-Rate REMICs........   $     1,506,191     6.61%  $    3,462,521      6.18%  $      3,170,738    6.51%
Agency ARMs..............   $       702,677     4.07%  $    1,989,080      5.87%  $      4,074,858    6.40%
Agency Hybrid ARMs.......   $     1,220,873     4.35%  $    2,568,276      5.04%  $      5,512,599    6.04%
Agency DUS...............   $    25,913,738     6.41%  $   21,435,634      6.31%  $     19,117,776    6.79%
Agency Debentures........   $    18,939,956     5.98%  $   18,321,849      6.24%  $     15,579,758    6.50%
</TABLE>


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

During the 2003 Period, the yields on the Agency DUSs, Agency Debentures and
Fixed-Rate REMICs were approximately 1.34%, 3.40% and 4.19%, respectively, when
taking into account the income from the derivative products used to hedge these
securities. During the 2002 Period, the yields on the Agency DUSs, Agency
Debentures and Fixed-Rate REMICS were approximately 1.84%, 3.93%, and 5.65%,
respectively, when taking into account the income from the derivative products
used to hedge these securities. During the 2001 Period, the yields on the Agency
DUSs and Agency Debentures were approximately 4.96% and 4.78%, respectively,
when taking into account the income from the derivative products used to hedge
these securities.

The average amortized cost of the Portfolio during the 2003 Period, the 2002
Period and 2001 Period was $996,713,866, $993,381,314 and $983,343,224,
respectively. This reflects the following prepayments and reinvestments:

PREPAYMENTS                              2003           2002          2001
------------                         ------------   ------------  ------------
Floating-Rate REMICs..............   $ 13,857,026   $ 26,744,870  $ 33,209,726
Fixed-Rate REMICs.................   $ 36,011,701   $ 11,464,773  $  4,558,040
Agency ARMs.......................   $ 13,080,189   $ 21,818,440  $ 32,828,037
Agency Hybrid ARMs................   $ 15,560,694   $ 33,963,351  $ 36,295,472
Agency DUS........................   $ 17,763,221   $  3,652,294  $  4,100,197
Agency Debentures.................   $        ---   $        ---  $        ---


REINVESTMENTS                            2003           2002          2001
-------------                        ------------   ------------  ------------
Floating-Rate REMICs..............   $        ---   $        ---  $        ---
Fixed-Rate REMICs.................   $        ---   $ 10,000,000  $        ---
Agency ARMs.......................   $        ---   $        ---  $        ---
Agency Hybrid ARMs................   $        ---   $        ---  $        ---
Agency DUS........................   $ 92,159,666   $ 58,069,532  $ 49,267,414
Agency Debentures.................   $ 20,038,400   $  9,960,584  $ 72,206,900


The Company also recorded interest income from short-term investments for the
2003 Period, 2002 Period and 2001 Period of $309,122, $615,341, and $1,774,383,
respectively. These amounts are attributable to the interest earned on (i)
interest payments on securities in the Portfolio, (ii) prepayments of principal
pending their reinvestment and (iii) short-term investments classified as cash
equivalents.

As of December 31, 2003, 2002 and 2001, as calculated by aggregate amortized
cost, approximately 49.48%, 50.70% and 52.71%, respectively, of the Portfolio
consisted of collateralized mortgage obligations (Floating-Rate REMICs and
Fixed-Rate REMICs) and mortgage backed securities (Agency ARMs, Agency Hybrid
ARMs and Agency DUSs), and approximately 50.52%, 49.30%, and 47.29%,
respectively, consisted of Agency Debentures. As of December 31, 2003, 2002 and
2001, floating rate securities accounted for approximately 4.56%, 8.99% and
17.11%, respectively, of the Portfolio's collateralized mortgage obligations and
mortgage backed securities. In addition, a significant portion of the Agency
Debentures and the Agency DUSs are hedged so that in all but one case, the fixed
interest rates received on the bonds are converted into prevailing floating
rates.

The aggregate market value of the securities in the Portfolio as of December 31,
2003, 2002 and 2001 was higher than the amortized cost by approximateFly 11.74%,
11.47% and 3.63%, respectively, due to a net decrease in interest rates from the
time of their original purchase. For the hedged securities, changes in the fair
market value of both the securities and the derivatives used as hedging
instruments (cross currency and interest rate swaps) are reported in current
earnings in the Statements of Income, pursuant to application of SFAS 133 (Note
2). Unrealized gains and losses on the non-hedged securities are reported as a
component of Other Comprehensive Income.

Operating expenses for the 2003 Period, 2002 Period and 2001 Period totaled
$1,432,696, $1,406,521 and $1,229,832, respectively. Operating expenses
consisted largely of fees paid to the Branch under the Services Agreement, fees
to Citibank as Trustee, consulting fees and audit fees. The cost of Branch
personnel servicing the Company is based on actual man-hours devoted to the
activities of the Company and remains at arms length. Expenses incurred under
the Services Agreement for the 2003 Period, 2002 Period and 2001 Period totaled
$961,073, $1,109,960 and $807,343, respectively.

The Company's net income for the 2003 Period, 2002 Period and 2001 Period was
$22,759,655, $32,893,445 and $52,276,636, respectively. The Company has declared
and paid dividends for the 2003 Period, 2002 Period and 2001 Period as follows:

Security                 Amount            Date Paid
--------                 ------            ---------

Series A Preferred       $19,345,000       December 5, 2003
Series A Preferred       $19,345,000       June 5, 2003
Series A Preferred       $19,345,000       December 5, 2002
Series A Preferred       $19,345,000       June 5, 2002
Series A Preferred       $19,345,000       December 5, 2001
Series A Preferred       $19,345,000       June 5, 2001
Common Securities        $10,718,708       June 19, 2001

Investment Income

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

Receivable Arising from Payment for Securities

Due to the potential consequences of a Shift Event (as defined in Item 8 Note 2
herein), the Company's purchase of the Initial Portfolio (as defined in Item 1
herein) from the Branch did not meet certain SFAS 125, as replaced by SFAS 140,
sale accounting requirements. Accordingly, the Company recorded at December 5,
1997 a receivable for the consideration paid to the Branch for the Initial
Portfolio treated as collateral. As a legal and economic matter, however, there
is no such receivable since (a) neither the Bank nor the Branch has any
obligation to repay any part of the purchase price for the Initial Portfolio or
to repurchase or redeem any of the securities included therein, and (b) the
Company has no obligation to return any of such securities to the Bank or the
Branch (except in the limited circumstances and to the extent that the
occurrence of a Shift Event under the Charter would require the transfer of any
assets held by the Company at the time). As the securities in the Initial
Portfolio are paid, the receivable will be deemed to be realized by an amount
corresponding to the amount of the payments received. At December 31, 2003 and
2002, the receivable arising from payment for securities amounted to $30,662
,719 and $85,660,254, respectively. The decrease in the amount of such
receivable between the two dates reflects the prepayment of securities in the
Initial Portfolio. The Company recognized the cash proceeds of such prepayments
as a reduction in the receivable. Such decreases in the receivable did not
affect the Company's results of operations or cash flow. Disclosures required
under SFAS 125, as replaced by SFAS 140, are included in Note 3.

Liquidity and Capital Resources

The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. The
Company's sole liquidity needs are to acquire reinvestment securities as
original securities repay or prepay and to pay dividends on the Series A
Preferred Securities. The acquisition of reinvestment securities is funded with
the proceeds of principal repayments or prepayments on original securities, and
the payments of dividends on the Series A Preferred Securities are funded
through interest income from the securities in the Portfolio. The low interest
rate environment has adversely affected the Company's income. The Company has
not declared dividends on the Common Securities since June 2001 in order to
retain earnings available for the payment of dividends to the holders of the
Series A Preferred Securities. Dividends to the Preferred Securityholders may be
paid out of (i) net income, determined without regard to capital gains or
losses, or (or (ii) amounts contributed by the Bank or the Branch to the
Company's capital. As of December 31, 2003, the Branch has contributed a total
of $16,000,000 of additional paid-in capital, which was used to facilitate the
semi-annual payments of dividends to the holders of the Series A Preferred
Securities.

Based on 2004 projected earnings, the Company may require an additional cash
contribution from the Branch to ensure payment of preferred dividends. The
Company cannot make any assurances that further decreases in interest rates or a
sustained low interest rate environment will not have a further adverse effect
on the Company's income.

BNP PARIBAS Group's total and Tier 1 risk-based capital ratios at December 31,
2003 were 12.9% and 9.4%, and at December 31, 2002 were 10.9% and 8.1%, which
are well above the minimum standards required by French banking regulations,
currently 8% for total risk-based capital and 4% for Tier 1 risk-based capital.
A "Shift Event" would occur if BNP PARIBAS' risk-based capital fell below these
minimum standards of 8% and 4%, respectively. See Note 2 of the attached
financial statements for a detailed explanation of "Shift Events".

Critical Accounting Policies

Management believes its critical accounting policies relate to recognition and
valuation of financial instruments, as further defined in Item 8, Note 2.

Accounting and Reporting Developments

In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 150 ("SFAS No. 150"), "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". The statement requires that an issuer classify financial instruments
that are within its scope as a liability. Many of those instruments were
classified as equity under previous guidance. SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003. Otherwise, it
is effective at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS No. 150 did not have an impact on the Company's
Balance Sheet or Statement of Income.

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

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

The Company has made an assessment of all its financial instruments and
concluded that it holds freestanding derivative instruments but no embedded
derivative instruments at December 31, 2003. As part of its asset management
activities the Company uses foreign exchange and interest rate swaps to modify
the interest rate and foreign exchange characteristics of existing assets. The
interest rate swaps have a high correlation between the instrument and the asset
being hedged, both at inception and throughout the hedge period.

All of the Company's outstanding hedging transactions are fair value hedges. For
the years ended December 31, 2003 and 2002, the Company recognized gains of
$534,474 and $1,225,111, respectively, in earnings related to the ineffective
portion of fair value hedges. The fair value of these hedging instruments was
$(94,253,884) and $(86,023,329) at December 31, 2003 and 2002, respectively, and
has been recorded in "Other liabilities". It has been offset, except for the
ineffective portion of the hedge, by the revaluation of the respective hedged
investment securities. The fair value of the hedging instruments does not
include accrued interest receivable and payable, which are shown separately on
the balance sheet.

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


Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

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

The outstanding principal amount and estimated fair value as of December 31,
2003, by each category of investment, is depicted in Item 8.

Interest Rate Risk

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

For the year ended December 31, 2003, the interest rate environment remained at
a low but stable level. Therefore, the interest income generated by the
Portfolio was stabilized at the level of income at the end of 2002. This
situation has affected the Company's income through the floating rate component
of the portfolio (floating-rate securities and fixed-rate securities converted
to floating-rate instruments through interest rate swaps). It is anticipated
that this situation may continue for 2004, and the income will remain linked to
the evolution of the yield curve.

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

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

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

                                                                                                 Fair Value at
                                                                                               December 31, 2003    Notional Balance
      Value Date           Maturity Date        Fixed Rate             Receive Rate               (in 000's)           (in 000's)
-----------------       ------------------    ----------------    ----------------------     -----------------      ----------------
<S>      <C> <C>        <C>                 <C>                   <C>                            <C>                  <C>
November 25, 1998       March 26, 2008        JPY 1.75            U.S. Three Month LIBOR          $   (7,073)          $  42,000
                                                                  Plus Six Basis Points

November 25, 1998       October 9, 2007       JPY 2.125           U.S. Three Month LIBOR             (11,066)             58,000
                                                                  Plus Six Basis Points

November 25, 1998       August 25, 2008       U.S. 6.15           U.S. One Month LIBOR                (2,062)             18,672
                                                                  Plus Five Basis Points

February 11, 1999       March 14, 2007        U.S. 6.80           U.S. Three Month LIBOR              (6,859)             50,000
                                                                  Minus Two Basis Points

February 12, 1999       March 5, 2007         U.S. 6.68           U.S. Three Month LIBOR              (7,017)             50,000
                                                                  Minus Two Basis Points

February 25, 1999       February 25, 2009     U.S. 5.95           U.S. One Month LIBOR                (2,120)             20,309
                                                                  Plus Three Basis Points

March 29, 1999          October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (4,778)             30,000
                                                                  Minus Two and Half
                                                                  Basis Points

April 6, 1999           October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (5,085)             26,400
                                                                  Minus One Basis Point

May 25, 1999            May 25, 2009          U.S. 6.23           U.S. One Month LIBOR                (1,506)             12,180
                                                                  Plus One and Half Basis
                                                                  Points

June 25, 1999           June 25, 2009         U.S. 6.06           U.S. One Month LIBOR                (2,840)             25,543
                                                                  Plus Three and Half
                                                                  Basis Points

July 1, 1999            June 25, 2009         U.S. 6.39           U.S. One Month LIBOR                (1,969)             15,389
                                                                  Plus Three and Half
                                                                  Basis Points

September 27, 1999      March 25, 2008        U.S. 6.29           U.S. One Month LIBOR                (4,800)             42,144
                                                                  Plus Five Basis Points

September 27, 1999      March 25, 2009        U.S. 5.858          U.S. One Month LIBOR                (2,780)             27,642
                                                                  Plus Four Basis Points

November 26, 1999       April 25, 2009        U.S. 6.04           U.S. One Month LIBOR                (1,660)             15,140
                                                                  Plus Four Basis Points

June 26, 2000           October 1, 2007       U.S. 6.68           U.S. One Month LIBOR                (1,013)              8,129
                                                                  Plus One and Half Basis
                                                                  Points

June 26, 2000           October 1, 2008       U.S. 6.26           U.S. One Month LIBOR                (1,019)              9,125

August 1, 2000          December 1, 2007      U.S. 6.42           U.S. One Month LIBOR                  (851)              7,000

August 1, 2000          October 1, 2006       U.S. 7.20           U.S. One Month LIBOR                (3,568)             28,745
                                                                  Minus Two Basis Points

October 2, 2000         June 1, 2007          U.S. 7.007          U.S. One Month LIBOR                  (921)              7,011
                                                                  Minus Two Basis Points

October 2, 2000         July 1, 2007          U.S. 7.405          U.S. One Month LIBOR                (1,108)              7,489
                                                                  Minus Two Basis Points

November 2, 2000        October 9, 2007       JPY 2.125           U.S. Three Month LIBOR              (1,091)             15,000
                                                                  Minus Two Basis Points

March 25, 2001          October 25, 2007      U.S. 6.94           U.S. One Month LIBOR                (1,061)              8,630
                                                                  Plus Two Basis Points

September 4, 2001       October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                (2,358)             19,164
                                                                  Plus Two Basis Points

October 2, 2001         October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                (1,166)              9,582
                                                                  Plus Seven Basis Points

January 2, 2002         October 16, 2006      U.S. 7.20           U.S. One Month LIBOR                (1,158)              9,582
                                                                  Plus Ten Basis Points

May 1, 2002             October 25, 2007      U.S. 6.63           U.S. One Month LIBOR                (1,122)              9,098
                                                                  Plus One Basis Point

May 3, 2002             August 25, 2007       U.S. 6.74           U.S. One Month LIBOR                (1,276)             10,000
                                                                  Plus One Basis Point

August 25, 2002         August 25, 2007       U.S. 4.90           U.S. One Month LIBOR                (1,672)             26,500
                                                                  Plus Five Basis Points

September 25, 2002      June 25, 2007         U.S. 7.007          U.S. One Month LIBOR                (1,557)             12,123
                                                                  Plus Seven Basis Points

October 25, 2002        May 25, 2006          U.S. 6.83           U.S. One Month LIBOR                  (898)              9,134
                                                                  Plus Seven Basis Points

March 21, 2003          February 25, 2009     U.S. 5.945          U.S. One Month LIBOR                (2,730)             26,770
                                                                  Plus Nine Basis Points

May 8, 2003             July 25, 2006         U.S. 7.239          U.S. One Month LIBOR                (1,254)             10,937
                                                                  Plus Seven Basis Points

August 1, 2003          April 1, 2008         U.S. 6.568          U.S. One Month LIBOR                (1,642)             12,950
                                                                  Plus Ten Basis Points

August 1, 2003          October 1, 2007       U.S. 6.812          U.S. One Month LIBOR                (2,990)             24,687
                                                                  Plus Ten Basis Points

October 9, 2003         October 1, 2007       U.S. 6.96           U.S. One Month LIBOR                (2,184)             16,230
                                                                  Plus Five Basis Points              -------             ------

Total Swaps- Fair
Value Hedges                                                                                       $ (94,254)          $ 721,305
-----------------                                                                                  ----------          ---------

January 17, 2001        March 26, 2008        JPY 1.750           U.S. 5.80                             (344)             18,000
                                                                                                   ----------          ---------

Other Swap                                                                                         $    (344)          $  18,000
                                                                                                   ----------          ---------

Total Swap Portfolio(Other liabilities)                                                            $ (94,598)          $ 739,305
                                                                                                   ==========          =========
</TABLE>

The fair value of the swap portfolio was $(94,597,757) and $(84,340,226) at
December 31, 2003 and 2002, respectively. The change in fair value was primarily
due to changes in prevailing market interest rates.

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

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


<PAGE>


<TABLE>
                                                    December 31, 2003
                                                    -----------------

                                      Due       Due        Due          Due          Due        Due         Due
                                      In       after      after        after        after      After       After
Non-Collateral                       2004       2004       2005         2006         2007       2008        2009        Total
--------------                       ----       ----       ----         ----         ----       ----        ----        -----
<S>                                <C>        <C>     <C>           <C>          <C>       <C>          <C>       <C>

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

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

Total Non-Collateral               $2,957     $5,935   $223,833     $453,393     $217,076   $ 68,251     $   ---   $  971,445
                                    -----      -----    -------      -------      -------     ------      ------      -------
Collateral
----------
Fixed-Rate Instruments
  Fixed-Rate REMICs                $  298     $  ---   $    ---     $    ---     $    ---   $    ---     $   ---   $      298
  Agency DUS                          ---        ---        ---          ---          ---        ---         ---          ---
  Agency Debentures                   ---        ---        ---          ---          ---        ---         ---          ---
                                    -----      -----    -------      -------      -------     ------      ------      -------
Total Fixed-Rate Instruments          298        ---        ---          ---          ---        ---         ---          298
                                    -----      -----    -------      -------      -------     ------      ------      -------

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

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


<PAGE>


<TABLE>

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

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

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

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

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


<PAGE>


Item 8:  Financial Statements and Supplementary Data

                         Report of Independent Auditors
                         ------------------------------

To the Board of Directors and Securityholders of BNP U.S. Funding L.L.C.:

In our opinion, the accompanying balance sheets and the related statements of
income, of comprehensive income, of changes in redeemable common securities,
preferred securities and securityholders' equity and of cash flows present
fairly, in all material respects, the financial position of BNP U.S. Funding
L.L.C. at December 31, 2003 and 2002, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As more fully described in Note 2 to the financial statements, the Company
adopted Statement of Financial Accounting Standards No. 133, Accounting for
Derivatives and Hedging Activities, as amended, on January 1, 2001.






PricewaterhouseCoopers LLP
New York, New York
March 11, 2004

/s/ PricewaterhouseCoopers LLP


<PAGE>
PART II
<TABLE>

Item 8.

FINANCIAL STATEMENTS


                            BNP U.S. FUNDING L.L.C.
                                 BALANCE SHEETS
                      (in thousands, except per share data)



                                                                              December 31,
                                                                     -----------------------------
                                                                         2003            2002
                                                                     --------------  -------------

ASSETS

<S>                                                                        <C>            <C>
Cash and cash equivalents                                                  $ 25,181       $ 40,180

Investment securities (Notes 3 and 4)
Available-for-sale, at fair value                                         1,088,876      1,013,910

Receivable arising from payment for securities, pursuant
     to the application of SFAS 125, as replaced by
     SFAS 140 (Note 3)                                                       30,663         85,660

Accounts receivable                                                              54          1,052

Accrued interest receivable                                                   8,299          8,400

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

TOTAL ASSETS                                                            $ 1,153,073    $ 1,150,885
                                                                      ==============  =============

LIABILITIES

Accrued interest payable                                                    $ 2,719        $ 2,634
Accrued expenses                                                                242            204
Other liabilities                                                            94,598         86,023
                                                                      --------------  -------------

TOTAL LIABILITIES                                                            97,559         88,861
                                                                      --------------  -------------

Redeemable common securities, par value and redeemable
     value $10,000 per security; 150,000 securities authorized,
     53,011 securities issued and outstanding (Note 5)                      530,110        530,110
Preferred securities, liquidation preference $10,000 per
     security; 150,000 securities authorized, 50,000 securities
     issued and outstanding                                                 500,000        500,000
Additional paid-in capital                                                      229          1,044
Accumulated other comprehensive income                                       22,969         26,548
Retained earnings                                                             2,206          4,322
                                                                      --------------  -------------

TOTAL REDEEMABLE COMMON SECURITIES,
     PREFERRED SECURITIES AND
     SECURITYHOLDERS' EQUITY                                              1,055,514      1,062,024
                                                                      --------------  -------------

TOTAL LIABILITIES AND TOTAL REDEEMABLE
     COMMON SECURITIES, PREFERRED
     SECURITIES AND SECURITYHOLDERS' EQUITY                             $ 1,153,073    $ 1,150,885
                                                                      ==============  =============
</TABLE>

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

<PAGE>

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

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





                                                                     For the Years Ended December 31,
                                                                  ----------------------------------------
                                                                     2003          2002           2001
                                                                  -----------   -----------    -----------
INTEREST INCOME
<S>                                                                    <C>           <C>          <C>
Collateralized Mortgage Obligations:
     Floating-Rate REMICs                                              $ 364         $ 965        $ 3,425
     Fixed-Rate REMICs                                                   956         3,165          3,171
Mortgage Backed Securities:
     Agency ARMs                                                         703         1,989          4,075
     Agency Hybrid ARMs                                                1,221         2,568          5,513
     Agency DUSs                                                       5,413         6,251         13,959
Agency Debentures                                                     17,253        18,995         20,650
Interest on deposits                                                     309           615          1,775
                                                                  -----------   -----------    -----------
Total                                                                 26,219        34,548         52,568
                                                                  -----------   -----------    -----------

NONINTEREST EXPENSE

Other financial instrument                                            (2,027)         (248)             -
Fees and expenses                                                     (1,433)       (1,406)        (1,230)
                                                                  -----------   -----------    -----------
                                                                      (3,460)       (1,654)        (1,230)
                                                                  -----------   -----------    -----------

Cumulative effect of the change in accounting principle for
  derivative and hedging activities (SFAS 133)                             -             -            939
                                                                  -----------   -----------    -----------

NET INCOME APPLICABLE TO PREFERRED AND
     REDEEMABLE COMMON SECURITIES                                  $  22,759     $  32,894       $ 52,277
                                                                  ===========   ===========    ===========

NET INCOME (LOSS) PER REDEEMABLE
     COMMON SECURITY                                               $ (300.52)    $ (109.34)      $ 256.31
                                                                  ===========   ===========    ===========
</TABLE>
The  accompanying  Notes to Financial  Statements  are an integral part of these
statements.


<PAGE>


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

             STATEMENTS OF COMPREHENSIVE INCOME
                       (in thousands)

<TABLE>


                                                                       For the Years Ended December 31,
                                                                     -------------------------------------
                                                                       2003          2002         2001
                                                                     ----------    ----------  -----------



<S>                                                                   <C>           <C>          <C>
NET INCOME                                                            $ 22,759      $ 32,894     $ 52,277


OTHER COMPREHENSIVE INCOME (LOSS)

Net change in unrealized gain (loss) in fair value
     of available-for-sale securities that are not treated
     as collateral (Note 3) and that are not hedged by
     derivative instruments                                             (3,579)       13,118       10,630

Transition adjustment pursuant to the application
  of SFAS 133                                                                -             -         (939)
                                                                     ----------    ----------  -----------

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)                                 (3,579)       13,118        9,691
                                                                     ----------    ----------  -----------


COMPREHENSIVE INCOME                                                  $ 19,180      $ 46,012     $ 61,968
                                                                     ==========    ==========  ===========
</TABLE>


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


<PAGE>


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

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


<TABLE>

                                                       For the Years Ended December 31, 2001, 2002 and 2003
                              -----------------------------------------------------------------------------------------------------
                                                                                                                      Total
                                                                                                                    Redeemable
                                                                               Accumulated                       Common Securities,
                                Redeemable                     Additional        Other                          Preferred Securities
                                  Common         Preferred      Paid-in       Comprehensive      Retained       and Securityholders'
                                Securities      Securities      Capital          Income          Earnings             Equity
                              ---------------  -------------- -----------    ---------------   --------------   -------------------


<S>                                 <C>            <C>           <C>             <C>              <C>                <C>
Balance at December 31, 2000       $ 530,110      $ 500,000    $       6        $   3,739        $   5,288            $1,039,143

Net income                                                                                          52,277                52,277

Other comprehensive income                                                          9,691                                  9,691

Dividends paid - preferred
securities                                                                                         (38,690)              (38,690)

Dividends paid - common
securities                                                                                         (10,719)              (10,719)
                                   ---------      ---------    ---------        ---------        ----------            ---------

Balance at December 31, 2001         530,110        500,000            6           13,430            8,156             1,051,702

Net income                                                                                          32,894                32,894

Other comprehensive income                                                         13,118                                 13,118

Additional paid-in capital                                         3,000                                                   3,000

Dividends paid - preferred
securities                                                        (1,962)                          (36,728)              (38,690)
                                   ---------      ---------    ---------        ---------        ---------             ----------

Balance at December 31, 2002         530,110        500,000        1,044           26,548            4,322             1,062,024

Net income                                                                                          22,759                22,759

Other comprehensive loss                                                           (3,579)                                (3,579)

Additional paid-in capital                                        13,000                                                  13,000

Dividends paid - preferred
securities                                                       (13,815)                          (24,875)              (38,690)
                                   ---------      ---------    ---------        ---------        ---------             ----------

Balance at December 31, 2003       $ 530,110      $ 500,000    $     229        $  22,969        $   2,206            $1,055,514
                                   =========      =========    =========        =========        =========            ===========
</TABLE>



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



<PAGE>


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

                       STATEMENTS OF CASH FLOWS
                            (in thousands)


<TABLE>

                                                                                    For the Years Ended December 31,
                                                                       ---------------------------------------------------------
                                                                              2003                 2002               2001
                                                                       -------------------   ------------------  ---------------
OPERATING ACTIVITIES

<S>                                                                              <C>                  <C>              <C>
Net income                                                                       $ 22,759             $ 32,894         $ 52,277
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Amortization                                                                   1,143                1,491            1,360
     Loss on other financial instrument                                             2,027                  248                -
     Gain on hedge activity                                                          (534)              (1,225)            (102)
Changes in assets and liabilities:
     Interest receivable                                                              101               (1,076)            (888)
     Accounts receivable                                                              996                1,119           (2,171)
     Accrued expenses                                                                  39                   67               86
     Accrued interest payable                                                          85                1,456            1,178
     Payable for securities purchased                                                   -               (9,802)           9,802
     Cumulative effect of the change in accounting principle
       for derivatives and hedging activities ( SFAS 133)                               -                    -             (939)
                                                                                ---------            ---------        ---------
Net cash provided by operating activities                                          26,616               25,172           60,603
                                                                                ---------            ---------        ---------

INVESTING ACTIVITIES

Purchase of investment securities:
     Agency DUSs                                                                  (92,160)             (58,069)         (72,207)
     Agency Debentures                                                            (20,038)              (9,961)         (49,267)
     Agency Fixed Rate REMICs                                                           -              (10,000)               -
Proceeds from principal payments of securities
  available-for-sale, not treated as collateral                                    41,654               48,749           54,886
Proceeds from principal payments of securities
  available-for-sale, treated as collateral                                        54,619               48,895           56,105
                                                                                ---------            ---------        ---------
Net cash provided by (used in) investing activities                               (15,925)              19,614          (10,483)
                                                                                ---------            ---------        ---------

FINANCING ACTIVITIES

Additional paid-in capital                                                         13,000                3,000                -
Cash dividends - common securities                                                      -                    -          (10,719)
Cash dividends - preferred securities                                             (38,690)             (38,690)         (38,690)
                                                                                ---------            ----------       ---------
Net cash used in financing activities                                             (25,690)             (35,690)         (49,409)
                                                                                ---------            ----------       ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (14,999)               9,096              711

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                       40,180               31,084           30,373
                                                                                ---------            ---------        ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                                           $ 25,181             $ 40,180         $ 31,084
                                                                                =========            =========        =========

NONCASH FINANCING AND INVESTING ACTIVITIES

Decrease in receivable arising from payment for securities, pursuant
  to the application of SFAS 125, as replaced by SFAS 140 (Note 3)               $ 54,997             $ 49,595         $ 57,174

</TABLE>

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




<PAGE>



NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION

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

The Company was initially capitalized on October 14, 1997, with the issuance to
the Branch of one share of the Company's redeemable common securities, $10,000
par value (the "Common Securities"). On December 5, 1997 (inception), the
Company commenced operations concurrent with the issuance of 50,000
noncumulative preferred securities, Series A, liquidation preference $10,000 per
security (the "Series A Preferred Securities"), to qualified institutional
buyers, and the issuance of an additional 53,010 Common Securities to the
Branch. These issuances raised in the aggregate $1,030,115,873 of net capital
(including $5,873 of additional paid-in capital). This entire amount was used to
acquire a portfolio of debt securities (the "Initial Portfolio") at their fair
values from the Branch. The Branch contributed additional paid-in capital of
$3,000,000, $5,500,000, and $7,500,000 on December 3, 2002, June 3, 2003, and
December 3, 2003, respectively.

The Company entered into a services agreement (the "Services Agreement") with
the Branch on December 5, 1997, pursuant to which the Branch maintains the
securities portfolio of the Company (the "Portfolio") and performs other
administrative functions. The Company has no employees. All of the Company's
officers and employees are officers or employees of the Branch or the Bank or
their affiliates. The securities in the Portfolio are held by Citibank N.A.,
acting as trustee (the "Trustee") under the trust agreement between the Company
and Citibank N.A. dated December 1, 1997 (the "Trust Agreement").

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

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT SECURITIES

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

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

CASH AND CASH EQUIVALENTS

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

DIVIDENDS

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

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



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



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

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

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

PREFERRED SECURITIES

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

NET INCOME PER REDEEMABLE COMMON SECURITY

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

INCOME TAXES

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

ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES

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

The Company has made an assessment of all its financial instruments and
concluded that it holds freestanding derivative instruments but no embedded
derivative instruments at December 31, 2003. As part of its asset management
activities the Company uses foreign exchange and interest rate swaps to modify
the interest rate and foreign exchange characteristics of existing assets. The
interest rate swaps have a high correlation between the instrument and the asset
being hedged, both at inception and throughout the hedge period.

FOREIGN CURRENCY TRANSLATION

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

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

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

NOTE 3--RECEIVABLE ARISING FROM PAYMENT FOR SECURITIES

Statement of Financial Accounting Standards No. 140 ("SFAS 140"), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" addresses the accounting for the transfer of financial assets.
Under SFAS 140, transfers of financial assets that do not meet certain sale
accounting requirements must be accounted for as a secured borrowing transaction
with a pledge of collateral. Due to the potential consequences of a Shift Event
(as described above), the Company's purchase of the Initial Portfolio from the
Branch did not meet certain SFAS 125, as replaced by SFAS 140, sale accounting
requirements. Therefore, the purchase of the Initial Portfolio has been
accounted for as a secured borrowing transaction with a pledge of collateral. In
accounting for this transaction as a secured borrowing transaction in accordance
with SFAS 125, as replaced by SFAS 140, the Company has recorded a receivable in
an amount equal to the remaining amount paid to the Branch to acquire the
Initial Portfolio. In this case, however, having delivered the securities in the
Initial Portfolio to the Company, neither the Branch nor BNPP has any further
obligation to the Company to repay any part of the purchase price for the
Initial Portfolio or otherwise to repurchase or redeem any securities in the
Initial Portfolio.

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

NOTE 4--INVESTMENT SECURITIES

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

December 31, 2003
-----------------
                                                                    Gross Unrealized  Gross Unrealized
 Non-Collateral                                 Amortized Cost           Gains             Losses         Fair Value
 --------------                                ---------------      ---------------   ----------------   ------------
<S>                                                 <C>                 <C>               <C>            <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                             $      797          $    ---          $     8        $      789
   Fixed-Rate REMICs                                    10,000             1,276              ---            11,276
Mortgage Backed Securities:
   Agency ARMs                                           5,071                 6               18             5,059
   Agency Hybrid ARMs                                    9,442               182               15             9,609
   Agency DUSs                                         439,905            50,006              ---           489,911
Agency Debentures                                      506,230            66,002              ---           572,232
                                                    ----------          --------          -------        ----------
     Total Non-Collateral                           $  971,445          $117,472          $    41        $1,088,876
                                                    ----------          --------          -------        ----------
Collateral
----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                             $   10,673          $    ---          $   117        $   10,556
   Fixed-Rate REMICs                                       298               ---              ---               298
Mortgage Backed Securities:
   Agency ARMs                                           7,347               138                3             7,482
   Agency Hybrid ARMs                                   12,345               255               42            12,558
   Agency DUSs                                             ---               ---              ---               ---
Agency Debentures                                          ---               ---              ---               ---
                                                    ----------          --------          -------        ----------
     Total Collateral                               $   30,663          $    393          $   162        $   30,894
                                                    ----------          --------          -------        ----------
December 31, 2003 Total Portfolio                   $1,002,108          $117,865          $   203        $1,119,770
---------------------------------                   ==========          ========          =======        ==========
</TABLE>

<TABLE>
<CAPTION>

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


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

December 31, 2003
-----------------
                                                   Due in      Due after 1     Due after 5
                                                   1 year       through 5       through 10     Due after 10
Non-Collateral                                     or less       years            years           years          Total
--------------                                  -----------    ----------      -----------     ------------   -----------
<S>                                              <C>           <C>              <C>             <C>           <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                          $    ---      $     797        $    ---        $    ---      $      797
   Fixed-Rate REMICs                                  ---         10,000             ---             ---          10,000
Mortgage Backed Securities:
   Agency ARMs                                      1,978          3,093             ---             ---           5,071
   Agency Hybrid ARMs                                 979          8,463             ---             ---           9,442
   Agency DUSs                                        ---        371,653          68,252             ---         439,905
Agency Debentures                                     ---        506,230             ---             ---         506,230
                                                 --------      ---------        --------        --------      ----------
     Total Non-Collateral                        $  2,957      $ 900,236        $ 68,252        $    ---      $  971,445
                                                 --------      ---------        --------        --------      ----------
Collateral
----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                          $  3,387      $   6,064        $  1,222        $    ---      $   10,673
   Fixed-Rate REMICs                                  298            ---             ---             ---             298
Mortgage Backed Securities:
   Agency ARMs                                        125          5,355             246           1,621           7,347
   Agency Hybrid ARMs                                 180          8,040           4,125             ---          12,345
   Agency DUSs                                        ---            ---             ---             ---             ---
Agency Debentures                                     ---            ---             ---             ---             ---
                                                 --------      ---------        --------        --------      ----------
     Total Collateral                            $  3,990      $  19,459        $  5,593        $  1,621      $   30,663
                                                 --------      ---------        --------        --------      ----------
December 31, 2003 Total Portfolio                $  6,947      $ 919,695        $ 73,845        $  1,621      $1,002,108
---------------------------------                ========      =========        ========        ========      ==========
</TABLE>

<TABLE>
<CAPTION>

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

                                                   Due in      Due after 1     Due after 5
                                                   1 year       through 5       through 10     Due after 10
Non-Collateral                                     or less       years            years           years          Total
--------------                                  -----------    ----------      -----------     ------------   -----------
<S>                                              <C>           <C>              <C>             <C>           <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                          $  4,854      $   1,432        $    ---        $    ---      $    6,286
   Fixed-Rate REMICs                                  654         10,000             ---             ---          10,654
Mortgage Backed Securities:
   Agency ARMs                                      5,373          8,752             ---              57          14,182
   Agency Hybrid ARMs                               1,074         17,201             ---             ---          18,275
   Agency DUSs                                        ---        170,495         195,014             ---         365,509
Agency Debentures                                     ---        486,760             ---             ---         486,760
                                                 --------      ---------        --------        --------      ----------
     Total Non-Collateral                        $ 11,955      $ 694,640        $195,014        $     57      $  901,666
                                                 --------      ---------        --------        --------      ----------
 Collateral
 ----------
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                          $    546      $  18,535        $    ---        $    ---      $   19,081
   Fixed-Rate REMICs                               35,655            ---             ---             ---          35,655
Mortgage Backed Securities:
   Agency ARMs                                        198          7,831           2,872             624          11,525
   Agency Hybrid ARMs                                 ---         19,399             ---             ---          19,399
   Agency DUSs                                        ---            ---             ---             ---             ---
Agency Debentures                                     ---            ---             ---             ---             ---
                                                 --------      ---------        --------        --------      ----------
     Total Collateral                            $ 36,399      $  45,765        $  2,872        $    624      $   85,660
                                                 --------      ---------        --------        --------      ----------
December 31, 2002 Total Portfolio                $ 48,354      $ 740,405        $197,886        $    681      $  987,326
---------------------------------                ========      =========        ========        ========      ==========
</TABLE>

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

                                                     Due after 1    Due after 5
                                    Due in 1 year     through 5      through 10     Due after 10                    Yield after
December 31, 2003                      or less          years          years           years           Total          Hedging
----------------                    ------------     ----------     -----------     ------------     --------       ------------
<S>                                       <C>            <C>             <C>             <C>             <C>             <C>
Collateralized Mortgage
Obligations:
   Floating-Rate REMICs                   2.33%          1.59%            ---%            ---%           2.02%           2.02%
   Fixed-Rate REMICs                      6.50           6.74             ---             ---            6.61            4.19
Mortgage Backed Securities:
   Agency ARMs                            4.30           4.10            3.49            3.38            4.07            4.07
   Agency Hybrid ARMs                     5.25           4.47             ---             ---            4.35            4.35
   Agency DUSs                             ---           6.45            6.23             ---            6.41            1.34
Agency Debentures                          ---           5.98             ---             ---            5.98            3.40
                                       -------        -------          ------          ------          ------         -------
     Total                                4.84%          6.09%           6.00%           3.38%           6.03%           2.60%
                                       =======        =======          ======          ======          ======         =======
December 31, 2002
-----------------
Collateralized Mortgage
Obligations:
   Floating-Rate REMICs                   3.16%          2.54%            ---%            ---%           2.73%           2.73%
   Fixed-Rate REMICs                      6.54           4.54             ---             ---            6.18            5.65
Mortgage Backed Securities:
   Agency ARMs                            6.38           5.83            4.77            5.23            5.87            5.87
   Agency Hybrid ARMs                     5.44           5.02             ---             ---            5.04            5.04
   Agency DUSs                             ---           6.54            6.14             ---            6.31            1.84
Agency Debentures                          ---           6.24             ---             ---            6.24            3.93
                                       -------        -------          ------          ------          ------         -------
     Total                                5.95%          5.99%           6.11%           5.23%           6.02%           3.40%
                                       =======        =======          ======          ======          ======         =======
</TABLE>


NOTE 5--REDEEMABLE COMMON SECURITIES

General

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

Dividends

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

Redemption Requirements

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

Voting Rights

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

Rights Upon Liquidation

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

NOTE 6-- RELATED PARTY TRANSACTIONS

The Company entered into a Services Agreement with the Branch on December 5,
1997 pursuant to which the Branch manages the securities portfolio of the
Company and performs other administrative functions. Expenses incurred under
such Agreement were $961,073 and $1,109,960 for the years ended December 31,
2003 and 2002, respectively. Under a specific allocation methodology, the costs
of personnel servicing the Company is based on actual man-hours devoted to the
activities of the Company and remains at arms length.

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

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

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

NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of securities at December 31, 2003 and 2002 were obtained from
independent market sources and are summarized in Note 4. The carrying values of
securities, as shown in Note 4, approximates their fair value. The fair value of
the receivable arising from payment for securities, pursuant to the application
of SFAS 125, as replaced by SFAS 140, was $30,893,778 and $86,641,699 at
December 31, 2003 and 2002, respectively.

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

The fair value of the cross currency and interest rate swaps was $(94,597,757)
and $(84,340,226) at December 31, 2003 and 2002, respectively, and are reflected
in "Other assets" and "Other liabilities".

NOTE 8--DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

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

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

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

Fair Value Hedges

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

The fair value of the hedging instruments was $(94,253,884) and $(86,023,329) at
December 31, 2003 and 2002, respectively, and has been recorded in "Other
liabilities". It has been offset, except for the ineffective portion of the
hedge, by the revaluation of the respective hedged investment securities. The
fair value of the hedging instruments does not include accrued interest
receivable and payable, which are shown separately on the balance sheet. The
Company recognized gains of $534,474 and $1,225,111, at December 31, 2003 and
2002, respectively, in earnings related to the ineffective portion of fair value
hedges. The Company also recognized losses of $(2,026,976) and $(248,056) at
December 31, 2003 and 2002, respectively, in earnings related to a cross
currency swap that no longer qualified as a fair value hedging instrument.

Cash Flow Hedges

For the years ended December 31, 2003 and 2002, the Company did not enter into
cash flow hedge transactions and it is not the intention of the Company to use
interest rate swaps to convert floating rate financial instruments to fixed rate
financial instruments as part of a cash flow hedge strategy.

At December 31, 2003 and 2002, the Company had outstanding interest rate and
cross currency swap agreements with a notional principal amount of $739,305,189
and $664,908,744, respectively.



<PAGE>



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

                   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                      (in thousands, except per share data)

<TABLE>
<CAPTION>


                                               First Quarter   Second Quarter  Third Quarter   Fourth Quarter    Total
INTEREST INCOME:                               ------------    --------------  -------------   -------------  ------------
<S>                                             <C>             <C>              <C>            <C>             <C>
Collateralized Mortgage Obligations:
   Floating-Rate REMICs                         $    130        $    108         $     73       $     53        $    364
   Fixed-Rate REMICs                                 473             281              148             54             956
Mortgage Backed Securities:
   Agency ARMs                                       240             200              141            122             703
   Agency Hybrid ARMs                                419             318              246            238           1,221
   Agency DUSs                                     1,312           1,406            1,324          1,371           5,413
Agency Debentures                                  4,211           3,942            5,168          3,932          17,253
Interest on deposits                                 102              89               64             54             309
                                                --------        --------         --------       --------        --------
Total                                              6,887           6,344            7,164          5,824          26,219
                                                --------        --------         --------       --------        --------
NONINTEREST EXPENSE (INCOME)
Fees and expenses                                    332             388              344            369           1,433
Other financial instrument                           304            (909)           1,594          1,038           2,027
                                                --------        --------         --------       --------        --------
                                                     636            (521)           1,938          1,407           3,460
                                                --------        --------         --------       --------        --------

NET INCOME APPLICABLE TO PREFERRED AND
   REDEEMABLE COMMON SECURITIES
                                                $  6,251        $  6,865         $  5,226       $  4,417        $ 22,759
                                                ========        ========         ========       ========        ========
NET INCOME (LOSS) PER REDEEMABLE COMMON
   SECURITY                                     $ 117.92        $(235.42)        $  98.58       $(281.60)       $(300.52)
                                                ========        ========         ========       ========        ========
</TABLE>

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

None.

Item 9A: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2003, the Company carried out an evaluation under the
supervision and with the participation of the Company's management, including
the President and Chief Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. There are
inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives. Based upon and as of the date of the
Company's evaluation, the President and Chief Financial Officer concluded that
the disclosure controls and procedures are effective in all material respects to
provide reasonable assurance that information required to be disclosed in the
reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as when required. There have been no
significant changes in the Company's internal control over financial reporting
that occurred during the fourth fiscal quarter, that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.

Item 10: Directors and Executive Officers of the Company

The following table sets forth information concerning the directors and
executive officers of the Company. The directors serve 3-year terms (5 years in
the case of the independent director), subject to earlier resignation or
removal. On August 12, 2002, the Board of Directors of the Company elected John
Powers as Secretary, Thomas Clyne as Chief Financial Officer and Diana Mitchell
as Assistant Secretary. Donald J. Puglisi, the independent director, was
reappointed by the Board of Directors and the Branch, as holder of the Common
Securities of the Company, and his current term of office commenced as of
December 5, 2002. On November 29, 2002, Olivier Meisel became President and
Director. On March 23, 2003, Thomas Clyne was appointed a Director. On August
22, 2003 Michel Eydoux replaced Georges Chodron de Courcel as Chairman and
Director. On December 5, 2003, Martine Billeaud and Sady Karet were reappointed
as Directors.

     Name and Age                               Position and Offices Held
     ------------                               -------------------------
     Michel Eydoux (53)                         Chairman and Director
     Martine Billeaud (58)                      Director
     Olivier Meisel (40)                        President and Director
     John D. Powers (52)                        Secretary
     Donald J. Puglisi (58)                     Independent Director
     Sady Karet (49)                            Treasurer and Director
     Thomas Clyne (47)                          Chief Financial Officer
                                                and Director
     Diana E. Mitchell (48)                     Assistant Secretary

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

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

Martine Billeaud is in charge of the Bank's medium and long term funding
activities related to Asset and Liability Management. She was previously
responsible for domestic treasury business. Ms. Billeaud was born in
Choisy-le-Roi, France in 1945.

Olivier Meisel is in charge of the ALM Treasury activities for BNP Paribas in
North America. He began his career as a derivative trader in the Paris and
London in offices of Banque Paribas before joining the ALM Treasury Metier in
1997. His previous position was as Head of ALM Treasury in Japan. Mr. Meisel was
born in Suresnes, France in 1963.

John D. Powers became General Counsel for the corporate and investment banking
businesses of BNP Paribas in North America after the merger of BNP and Paribas
in 2000. Before assuming his duties as General Counsel, Mr. Powers was the lead
counsel for Paribas' capital market businesses in North America from the time he
joined Paribas in 1992. Prior to this time, Mr. Powers was Assistant General
Counsel for Barclays Bank PLC, which he joined in 1983 after working as an
associate at Cravath, Swaine & Moore starting in 1980.

Donald J. Puglisi, the Independent Director, is the MBNA America Business
Professor of Business Emeritus at the University of Delaware where he has been
on the faculty since 1971. In addition, he is the Managing Director of Puglisi
and Associates, a company which provides investment management, accounting and
other administrative services to a variety of different companies. Mr. Puglisi
holds a Directorship or Trusteeship in the following companies that are
registered under either the Exchange Act or the 1940 Act: AJL PEPS Trust,
Automatic Common Exchange Security Trust II, DECS Trust, DECS Trust II, Dole
Food Automatic Common Exchange Security Trust, Great Lakes Fund, Inc., Huron
Investment Fund, Inc., Mandatory Common Exchange Trust, Nextel STRYPES Trust,
Select Asset Fund, Series 1, Inc., Select Asset Fund, Series 2, Inc., Snyder
STRYPES Trust, and WBK STRYPES Trust.

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

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

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

Audit Committee Financial Expect

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

Code of Ethics

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

Item 11: Executive Compensation

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

Item 12: Security Ownership of Certain Beneficial Owners and Management

None.

Item 13: Certain Relationships and Related Transactions

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

Item 14: Principal Accountant Fees and Services

Set forth below are the services rendered and related fees billed by
PricewaterhouseCoopers LLP for 2003 and 2002:

                                                       2003              2002
                                                   -----------        ----------
Audit Fees
----------
Financial Statement Audit                            $ 48,500          $ 16,500

Audit-Related Fees                                       ---               ---
------------------

Tax Fees
--------
Tax preparation-Partnership K-1s                       54,000            48,545

Other Fees                                               ---               ---
----------                                         -----------        ----------
Total fees                                           $102,500          $ 65,045
                                                   ===========        ==========

Engagement of the Independent Auditor

The Board of Directors is responsible for approving every engagement audit or
non-audit service before any service is provided.

Auditor Selection for 2004

PricewaterhouseCoopers LLP has been selected to serve as the Company's
independent auditor for the year ended December 31, 2004

Item 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K

EXHIBITS AND CURRENT REPORTS ON FORM 8-K

         A) Exhibits:

               11) Computation of net (loss) per common security

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

               14)   Code of Ethics for the President, Chief Financial Officer,
                     Controller, and other persons performing similar functions

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

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

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



         B) Reports on Form 8-K: NONE



<PAGE>


                                    Signature


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

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



Date: March 30, 2005                  By  /s/ Oliver Meisel
                                          -----------------------
                                           Olivier Meisel
                                           President and Director

Date: March 30, 2005                  By  /s/ Thomas Clyne
                                          ----------------------
                                           Thomas Clyne
                                           Chief Financial Officer and Director