As filed with the Securities and Exchange Commission on June 30, 2003

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

                                   FORM 20-F

(Mark One)

|_|  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                                      OR

|X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the fiscal year ended 2002.

                                      OR

|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from _________to _________


Commission file number:  333-97023

                          GRANITE MORTGAGES 02-2 PLC
           (Exact name of Registrant 1 as specified in its charter)
         Fifth Floor, 100 Wood Street, London EC2V 7EX, United Kingdom
                            (011 44 20) 7606 5451
 (Address and telephone number of Registrant 1's principal executive offices)

                        GRANITE FINANCE FUNDING LIMITED
           (Exact name of Registrant 2 as specified in its charter)
                              4 Royal Mint Court
             London EC3N 4HJ, United Kingdom (011 44 20) 7073 7861
 (Address and telephone number of Registrant 2's principal executive offices)

                       GRANITE FINANCE TRUSTEES LIMITED
           (Exact name of Registrant 3 as specified in its charter)
       22 Grenville Street, St. Helier, Jersey JE4 8PX, Channel Islands
                             (011 44 1534 609892)
 (Address and telephone number of Registrant 3's principal executive offices)

                       --------------------------------

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

Securities registered or to be registered pursuant to
Section 12(g) of the Act:                                               None


<PAGE>


Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

Granite Mortgages 02-2 plc:
---------------------------

Title of each class(1)                Name of each exchange on which registered
-------------------                   -----------------------------------------
$650,000,000 series 1 class A1        London Stock Exchange
notes due January 2017

$1,150,000,000 series 1 class A2      London Stock Exchange
notes due January 2043

$60,000,000 series 1 class B          London Stock Exchange
notes due January 2043

$88,000,000 series 1 class C          London Stock Exchange
notes due January 2043

Intercompany Loan(2)                  None
Funding interest in the mortgages
trust(2)                              None


Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:

        Not Applicable

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.

                                                             |X| Yes    |_| No

Indicate by check mark which financial statement item the registrant has
elected to follow.

                                     Not Applicable  |_| Item 17   |_| Item 18


(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)


---------------------

1 The current balances of each class of notes issued by Granite Mortgages 02-2
plc as at April 30, 2003 are as follows: $310,000,000 series 1 class A1 notes;
$1,150,000,000 series 1 class A2 notes; $60,000,000 series 1 class B notes;
and $88,000,000 series 1 class C notes.

2 These items have not been offered directly to investors. Granite Finance
Trustees Limited is the registrant for Granite Finance Funding Limited's
interest in the mortgages trust and is holding that interest in the mortgages
trust on behalf of Granite Finance Funding Limited. The interest of Granite
Finance Funding Limited in the mortgages trust is the primary source of
payment on each intercompany loan. The intercompany loan made by Granite
Mortgages 02-2 plc to Granite Finance Funding Limited will be the primary
source of payments on the notes issued by Granite Mortgages 02-2 plc. Granite
Mortgages 02-2 plc is the registrant for the notes issued by Granite Mortgages
02-2 plc.


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<PAGE>


Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                                             |_|  Yes |_|  No


                                      3
<PAGE>


                          PRESENTATION OF INFORMATION

        This Annual Report on Form 20-F relates to:

        (1) Granite Mortgages 02-2 plc (the "issuer") and the following
securities (the "securities" or "notes"), which were issued pursuant to a
trust deed dated September 23, 2002 (the "issuer trust deed"), between the
issuer and the note trustee:

        o   $650,000,000 series 1 class A1 notes due January 2017

        o   $1,150,000,000 series 1 class A2 notes due January 2043

        o   $60,000,000 series 1 class B notes due January 2043

        o   $88,000,000 series 1 class C notes due January 2043; and

        (2) an intercompany loan (the "intercompany loan") made by the issuer
to Funding pursuant to an intercompany loan agreement dated September 23, 2002
(the "intercompany loan agreement") in the amount of (pound)2,748,444,619 (or
approximately $4,225,126,239(3)).

        This Annual Report on Form 20-F further relates to Funding's interest
in the mortgages trust, the property of which includes the initial mortgage
portfolio and the related security that Northern Rock plc (the "seller")
assigned to the mortgages trustee on March 26, 2001, the further mortgage
portfolios that the seller assigned to the mortgages trustee on September 28,
2001, March 20, 2002 and September 23, 2002, and each new mortgage portfolio
and the related security that the seller assigns to the mortgages trustee on
any interim assignment date, including any permitted replacement mortgage loan
in respect of any permitted product switch and any income generated by the
mortgage loans or their related security on or after the relevant assignment
date for the relevant mortgage portfolio (excluding third party amounts). In
addition, redraws made under flexible mortgage loans assigned to the mortgages
trustee also form part of the trust property. The trust property also includes
any contribution paid by either beneficiary to the mortgages trustee (until
the relevant funds are applied by the mortgages trustee in accordance with the
mortgages trust deed) and any money in the mortgages trustee transaction
account and the mortgages trustee guaranteed investment contract, or GIC
account. The mortgages trustee GIC account is the bank account in which the
mortgages trustee holds any cash that is part of the trust property until it
is distributed to the beneficiaries. The composition of the trust property
fluctuates as drawings under flexible mortgage loans and new mortgage loans
are added and as the mortgage loans that were previously part of the trust
property are repaid, mature, default or are repurchased by the seller.

        Certain terms used herein and not defined have the same meaning
ascribed to such terms in the Registration Statement on Form S-11 relating to
the securities (file number 333-97023) (the "Granite Mortgages 02-2
Registration Statement").

        References to "previous issuers" herein refer to each of Granite
Mortgages 01-1 plc (the "first issuer"), Granite Mortgages 01-2 plc (the
"second issuer") and Granite Mortgages 02-1 plc (the "third issuer").

        The first issuer issued certain securities (the "first issuer
securities" or "first issuer notes") pursuant to a trust deed dated March 26,
2001 between the first issuer and the note trustee. The first


-----------------------------
(3) This translation of pounds sterling into US dollars was made at a rate of
(pound)0.6505 = $1.00, which reflects the noon buying rate in the City of New
York for cable transfers in sterling per $1.00 and certified for customs
purposes by the Federal Reserve Bank on August 23, 2002, which was the rate of
exchange used in the final prospectus dated September 12, 2002 relating to the
notes.
                                      4
<PAGE>


issuer securities were registered with the United States Securities and
Exchange Commission (the "SEC") pursuant to a Registration Statement on Form
S-11 relating to the first issuer securities (file number 333-13242).

        The second issuer issued certain securities (the "second issuer
securities" or "second issuer notes") pursuant to a trust deed dated September
28, 2001 between the second issuer and the note trustee. The second issuer
securities were registered with the SEC pursuant to a Registration Statement
on Form S-11 relating to the second issuer securities (file number 333-13884).

        The third issuer issued certain securities (the "third issuer
securities" or "third issuer notes" and, together with the first issuer notes
and the second issuer notes, the "previous notes") pursuant to a trust deed
dated March 20, 2002 between the third issuer and the note trustee. The third
issuer securities were registered with the SEC pursuant to a Registration
Statement on Form S-11 relating to the third issuer securities (file number
333-83194).

        On June 30, 2002, the first issuer and the second issuer, together
with Funding and the mortgages trustee, filed an annual report with the SEC on
Form 20-F for the fiscal year ended December 31, 2001. On December 31, 2002,
each of the first issuer and the second issuer filed a Certification and
Notice of Suspension of Duty to File Reports Under Section 13 of the
Securities and Exchange Act of 1934 on Form 15 and are therefore not required
to file an annual report for the fiscal year ended December 31, 2002.

        Certain items in Form 20-F are only applicable to registration
statements and not to annual reports filed on Form 20-F. Therefore, as used in
this Annual Report, "Not Applicable to Annual Reports Filed on Form 20-F"
means that the response to the referenced item is omitted in reliance on the
instructions to Form 20-F published by the SEC as of the date of this Annual
Report that specifically state that such item is inapplicable to annual
reports filed on Form 20-F. In addition, information required for some items
in Form 20-F is not applicable to the issuer, Funding or Granite Finance
Trustees Limited (the "mortgages trustee"). Therefore, as used in this Annual
Report, "Not Applicable" means the response to the referenced item is omitted
in reliance on the procedures outlined in numerous no-action letters issued by
the staff of the SEC with respect to issuers of substantially similar
asset-backed securities that file annual reports on Form 10-K, or that the
referenced item is otherwise not applicable.

                          FORWARD-LOOKING STATEMENTS

        This Annual Report may contain forward-looking statements, including,
but not limited to, statements made under Item 3, Sub-part D of this Annual
Report, entitled "Risk Factors". All statements regarding the future financial
condition, results of operations and business strategy, plans and objectives
of the seller of the mortgage portfolios, the issuer, Funding or the mortgages
trustee are forward-looking. These forward-looking statements can be
identified by the use of forward-looking terminology, such as the words
"believes", "expects", "may", "intends", "should" or "anticipates", or the
negative or other variations of those terms. These statements involve known
and unknown risks, uncertainties and other important factors that could cause
the actual results and performance of the notes, the seller or the mortgage
portfolios, the issuer, Funding, the mortgages trustee or the UK residential
mortgage industry to differ materially from any future results or performance
expressed or implied in the forward-looking statements. These risks and
uncertainties and other factors include, among others: general economic and
business conditions in the UK; currency exchange and interest fluctuations;
governmental, statutory, regulatory or administrative initiatives affecting
the seller of the mortgage portfolios, the issuer, the previous issuers,
Funding or the mortgages trustee; changes in business strategy, lending
practices or customer relationships; and other factors that may be referred to
in this Annual Report. Some of the most significant of these risks,
uncertainties and other factors are discussed in Item 3, Sub-part D of this
Annual Report, entitled "Risk Factors", and you are encouraged to carefully
consider those factors prior to making an investment decision relating to the
notes.


                                      5
<PAGE>


                      INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

        Each of the issuer, Funding and the mortgages trustee incorporates by
reference its periodic filings on Form 6-K, which contain all financial
information relating to the securities relevant to the holders of the notes.
References in this Annual Report to the "prospectus relating to the notes"
refers to the prospectus contained within the Registration Statement relating
to the notes.


                                      6
<PAGE>


                                    PART I

Item 1. Identity of Directors, Senior Management and Advisers

        A.     Directors and senior management.

        Not Applicable to Annual Reports Filed on Form 20-F

        B.     Advisers.

        Not Applicable to Annual Reports Filed on Form 20-F

        C.     Auditors.

        Not Applicable to Annual Reports Filed on Form 20-F

Item 2.  Offer Statistics and Expected Timetable

        A.     Offer statistics

        Not Applicable to Annual Reports Filed on Form 20-F

        B.      Method and expected timetable

        Not Applicable to Annual Reports Filed on Form 20-F

Item 3.  Key Information

        A.      Selected financial data.

        Each of the issuer, Funding and the mortgages trustee incorporates by
reference and attaches hereto as exhibits the following reports, filed on Form
6-K, which include all financial information relating to the securities that
is relevant to holders of the notes:

        o   Investor's Monthly Reports in respect of the issuer for October
            2002

        o   Investor's Monthly Reports in respect of the issuer for November
            2002

        o   Investor's Monthly Reports in respect of the issuer for December
            2002

        o   Investor's Quarterly Reports in respect of the issuer for the
            period from October 1, 2002 to December 31, 2002

        B.      Capitalization and indebtedness.

        Not Applicable to Annual Reports Filed on Form 20-F

        C.      Reasons for the offer and use of proceeds.

        Not Applicable to Annual Reports Filed on Form 20-F

        D.      RISK FACTORS.

        This section describes the principal risk factors associated with an
investment in the notes. If you are considering purchasing the notes, you
should carefully read and think about all the information contained in this
Annual Report and the Granite Mortgages 02-2 Registration Statement


                                      7
<PAGE>


(in respect of the notes), including the risk factors set out here, prior to
making any investment decision.

        The risks and uncertainties described below are not the only ones
relating to the notes. Additional risks and uncertainties not presently known
to the issuer may also impair your investment. In addition, this Annual Report
contains forward-looking statements that involve risks and uncertainties.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
described below and elsewhere in this Annual Report and the Granite Mortgages
02-2 Registration Statement.

        YOU CANNOT RELY ON ANY PERSON OTHER THAN THE ISSUER TO MAKE PAYMENTS
ON THE NOTES

        The issuer is the only party responsible for making payments on the
notes. The notes do not represent an obligation or the responsibility of any
of Northern Rock plc or any of its affiliates, any underwriter, Funding, any
previous issuer, the mortgages trustee, the security trustee, the note
trustee, any swap provider or any other party to the transaction other than
the issuer.

        THE ISSUER HAS A LIMITED AMOUNT OF RESOURCES AVAILABLE TO IT TO MAKE
PAYMENTS ON THE NOTES

        The issuer's ability to make payments of principal and interest on the
notes and to pay its operating and administrative expenses will depend
primarily on funds being received under the intercompany loan. In addition,
the issuer will rely on the related basis rate swap to provide payments on all
the notes and will rely on the related dollar currency swaps and the related
euro currency swaps to provide payments on the notes denominated in US dollars
and in euro, respectively.

        The issuer will not have any other significant sources of funds
available to meet its obligations under the notes and/or any other payments
ranking in priority to the notes. If the resources described above cannot
provide the issuer with sufficient funds to enable it to make required
payments on the notes, you may incur a loss of interest and/or principal which
would otherwise be due and payable on the notes.

        FUNDING IS NOT REQUIRED TO MAKE PAYMENTS ON THE INTERCOMPANY LOAN IF
IT DOES NOT HAVE ENOUGH MONEY TO DO SO, WHICH COULD ADVERSELY AFFECT PAYMENT
ON THE NOTES.

        Funding's ability to pay amounts due on the intercompany loan will
depend upon:

        o   Funding receiving enough funds from the Funding share of the trust
            property, including revenue receipts and principal receipts on the
            mortgage loans included in the mortgages trust on or before each
            payment date;

        o   on any payment date, Funding's entitlement to access funds
            standing to the credit of any issuer reserve fund and/or any
            issuer liquidity reserve fund, subject to certain limitations (as
            described in "Credit Structure - Issuer reserve fund" and "Credit
            structure - Issuer liquidity reserve fund" in the prospectus
            relating to the notes); and

        o   (in the case of interest due under the intercompany loan) the
            amount of funds credited to the Funding reserve fund (as described
            in "Credit structure - Funding reserve fund" in the prospectus
            relating to the notes).

        According to the terms of the mortgages trust deed, the mortgages
trustee is obliged to pay to Funding on each distribution date (a) that
portion of revenue receipts on the mortgage loans which is payable to Funding
in accordance with the terms of the mortgages trust deed and (b) that portion
of principal receipts on the mortgage loans which is payable to Funding in
accordance with the terms of the mortgages trust deed.


                                      8
<PAGE>


        On each payment date, however, Funding will only be obliged to pay
amounts due to the issuer under the intercompany loan to the extent that it
has funds available to it after making payments ranking in priority to the
issuer, such as payments of certain fees and expenses of Funding. Furthermore,
Funding is obligated to make payments to the previous issuers under the
previous intercompany loans and, if Funding subsequently enters into a new
intercompany loan with a new issuer, Funding will also be obliged to make
payments due to such new issuer under such new intercompany loan. These
payments will rank equally with payments to the issuer, other than in respect
of the priority made in respect of the allocation of principal receipts to a
new issuer that will have issued a money market note, all in accordance with
the relevant Funding priority of payments. If Funding does not pay amounts to
the issuer under the intercompany loan because it does not have sufficient
funds available, those amounts will be due but not payable until funds are
available to pay those amounts in accordance with the relevant Funding
priority of payments. Funding's failure to pay those amounts to the issuer
when due in such circumstances will not constitute an event of default under
the intercompany loan.

        If there is a shortfall between the amounts payable by Funding to the
issuer under the intercompany loan agreement and the amounts payable by the
issuer on the notes, then depending on the other sources of funds available to
Funding referred to above, you may not receive the full amount of interest
and/or principal which would otherwise be due and payable on the notes.

        THE ISSUER'S RECOURSE TO FUNDING UNDER THE INTERCOMPANY LOAN IS
LIMITED, WHICH COULD ADVERSELY AFFECT PAYMENT ON THE NOTES

        If, on the final repayment date of the intercompany loan, there is a
shortfall between the amount required by the issuer to pay all outstanding
interest and/or principal on the notes and the amount available to Funding to
pay amounts due under the intercompany loan to fund repayment of such amounts,
then Funding shall not be obliged to pay that shortfall to the issuer under
the intercompany loan agreement. Any claim that the issuer may have against
Funding in respect of that shortfall will then be extinguished. If there is a
shortfall in interest and/or principal payments under the intercompany loan
agreement, the issuer may not have sufficient funds to make payments on the
notes and you may incur a loss on interest and/or principal which would
otherwise be due and payable on the notes.

        ENFORCEMENT OF THE ISSUER SECURITY IS THE ONLY REMEDY FOR A DEFAULT IN
THE ISSUER'S OBLIGATIONS, AND THE NOTE TRUSTEE WILL NOT BE ABLE TO ASSIGN ITS
OR THE ISSUER'S RIGHTS UNDER THE INTERCOMPANY LOAN AGREEMENT

        The only remedy for recovering amounts due on the notes is through the
enforcement of the issuer security. If Funding does not pay amounts due under
the intercompany loan because it does not have sufficient funds available,
those amounts will be deemed to be not due and payable, there will not be an
event of default under the intercompany loan and the issuer will not have
recourse to the assets of Funding in that instance. The issuer will only have
recourse to the assets of Funding if Funding has also defaulted on its
obligations under the intercompany loan and the security trustee (on the
issuer's behalf and on behalf of the other Funding secured creditors) has
enforced the Funding security.

        As the note trustee will not be entitled to assign to a third party
its or the issuer's rights under the intercompany loan agreement following the
service of a note enforcement notice, the most likely consequence of the
issuer security becoming enforceable will be that monies received by the note
trustee from Funding will be applied by the note trustee (or the issuer cash
manager on its behalf) to make payments on the notes in accordance with the
issuer post-enforcement priority of payments. However, the proceeds of that
enforcement may be insufficient to pay all interest and principal due on the
notes.


                                      9
<PAGE>


        THERE MAY BE A CONFLICT BETWEEN THE INTERESTS OF THE HOLDERS OF THE
VARIOUS CLASSES OF NOTES, AND THE INTERESTS OF OTHER CLASSES OF NOTEHOLDERS
MAY PREVAIL OVER YOUR INTERESTS

        The trust deed, the issuer deed of charge and the terms of the notes
will provide that the note trustee is to have regard to the interests of the
holders of all the classes of notes. There may be circumstances, however,
where the interests of one class of the noteholders conflict with the
interests of another class or classes of the noteholders. In general, the note
trustee will give priority to the interests of the holders of the most senior
class of notes such that:

        o   the note trustee is to have regard only to the interests of the
            class A noteholders in the event of a conflict between the
            interests of the class A noteholders on the one hand and the class
            B noteholders and/or the class C noteholders on the other hand;
            and

        o   (if there are no class A notes outstanding) the note trustee is to
            have regard only to the interests of the class B noteholders in
            the event of a conflict between the interests of the class B
            noteholders on the one hand and the class C noteholders on the
            other hand.

        THERE MAY BE A CONFLICT BETWEEN THE INTERESTS OF THE HOLDERS OF NOTES
OF ANY CLASS OF THE SERIES 1 NOTES AND THE HOLDERS OF THE SAME CLASS OF THE
SERIES 2 NOTES, AND THE INTERESTS OF OTHER NOTEHOLDERS MAY PREVAIL OVER YOUR
INTERESTS

        There may also be circumstances where the interests of a class of
noteholders of one series of notes conflict with the interests of the
noteholders of the same class of a different series of notes and/or, in
relation to the class A notes, the interests of the noteholders of the series
1 class A1 notes conflict with the interests of the noteholders of the series
1 class A2 notes. In general, the trust deed, the issuer deed of charge and
the terms of the notes will require a single meeting of the holders of each
series of the relevant class of notes whether or not there is a conflict of
interest between the holders of those different series of that class of notes.
As there will be no provision for separate meetings of the holders of a class
of notes of one series, a resolution may be passed by holders of notes of one
series of a relevant class which will bind the holders of each other series of
that same class.

        THERE MAY BE CONFLICTS BETWEEN THE ISSUER, THE PREVIOUS ISSUERS AND
ANY NEW ISSUERS, AND THE ISSUER'S INTERESTS MAY NOT PREVAIL, WHICH MAY
ADVERSELY AFFECT PAYMENTS ON THE NOTES

        The security trustee will exercise its rights under the Funding deed
of charge only in accordance with directions given by the note trustee. If
resolutions of holders of the previous notes and any new notes result in
conflicting directions being given to the note trustee (and, ultimately, from
the note trustee to the security trustee), the security trustee shall have
regard only to the directions of the noteholders of the issuer, each previous
issuer or new issuers that has or have the highest ranking class of notes
outstanding at such time. However, if more than one issuer has notes
outstanding that are the highest ranking notes outstanding among all issuers,
the note trustee shall instead have regard to the resolutions of the holders
of notes of that issuer that has the greatest aggregate principal amount of
notes outstanding at such time. If there is a conflict between the issuer, any
previous issuer and any new issuers and the issuer does not have the highest
ranking notes outstanding among all issuers (or the greatest aggregate
principal amount of notes outstanding at such time), the issuer's interests
may not prevail. This could ultimately cause a reduction in the payments that
you receive on the notes.

        IF FUNDING ENTERS INTO NEW INTERCOMPANY LOANS, THESE NEW INTERCOMPANY
LOANS AND ACCOMPANYING NEW NOTES MAY RANK AHEAD OF THE INTERCOMPANY LOANS AND
THE NOTES AS TO PAYMENTS

        It is expected that in the future, subject to satisfaction of certain
conditions, Funding will establish additional wholly-owned subsidiary
companies to issue new notes to investors. The proceeds of each new issue of
new notes will be used by the new issuer to make a new intercompany loan to


                                      10
<PAGE>


Funding. Funding will use the proceeds of the new intercompany loan (less any
amount utilized to fund any applicable reserve fund for any new issuer) to do
one or more of the following:

        o   pay to the mortgages trustee Funding's initial contribution for
            the Funding share in respect of any new trust property to be
            assigned by the seller to the mortgages trustee;

        o   pay to the mortgages trustee a further contribution (excluding any
            deferred contribution) to increase the Funding share of the trust
            property; and/or

        o   refinance an existing intercompany loan or intercompany loans
            outstanding at that time (and if the issuer's intercompany loan to
            Funding is refinanced, you could be repaid early).

        Funding will apply amounts it receives from the trust property to pay
amounts it owes under the intercompany loan, the previous intercompany loans
and any new intercompany loan without regard to when the relevant intercompany
loan was made. You should note that payments by Funding to the previous
issuers under the previous intercompany loans and to new issuers under any new
intercompany loans will rank equally in priority with payments made by Funding
to the issuer under the intercompany loan, other than in respect of the
priority made in the allocation of principal receipts to any new issuer that
will have issued a money market note. Funding will initially allocate
principal to repay each outstanding intercompany loan in no order of priority
between them but in proportion to the issuer's allocable interest in the
Funding share of the trust property (or, if provided under the intercompany
loan agreement, will set aside that allocable interest in the Funding share of
principal receipts for the issuer).

        The amount and timing of payments on the intercompany loan are
determined by the amount and timing of payments on the notes and by the
priorities for payment applicable to those notes. The terms of the previous
notes issued by the previous issuers and of any new notes issued by a new
issuer may therefore result in those previous notes and the related previous
intercompany loans or those new notes and the related new intercompany loans
being repaid prior to the repayment of the notes under the prospectus relating
to the notes and the intercompany loan.

        If Funding establishes new issuers to make new intercompany loans to
Funding, you will not have any right of prior review or consent with respect
to those new intercompany loans or the corresponding issuance by new issuers
of new notes. Similarly, the terms of the Funding transaction documents
(including the mortgage sale agreement, the mortgages trust deed, the Funding
deed of charge, the definitions of the trigger events and the criteria for the
assignment of new loans to the mortgages trustee) may be amended to reflect
the new issue. Your consent to these changes will not be required. There can
be no assurance that these changes will not affect the cashflow available to
pay amounts due on the notes.

        Before issuing new notes, however, a new issuer will be required to
satisfy a number of conditions, including that the ratings of the notes will
not be downgraded or otherwise adversely affected at the time a new issuer
issues new notes.

        NEW ISSUERS WILL SHARE IN THE SAME SECURITY GRANTED BY FUNDING TO THE
ISSUER, AND THIS MAY ULTIMATELY CAUSE A REDUCTION IN THE PAYMENTS YOU RECEIVE
ON THE NOTES

        A new issuer will become party to the Funding deed of charge and will
be entitled to share, on an equal ranking, in the security granted by Funding
for the issuer's benefit (and the benefit of the other Funding secured
creditors) under the Funding deed of charge. If the Funding security is
enforced and there are insufficient funds to make the payments that are due to
each previous issuer, the issuer and each new issuer, the issuer will only be
entitled to its proportionate share of those limited funds. This could
ultimately cause a reduction in the payments you receive on the notes.


                                      11
<PAGE>


        THE PREVIOUS ISSUERS AND THE OTHER FUNDING SECURED CREDITORS ALREADY
SHARE IN THE SAME SECURITY GRANTED BY FUNDING TO THE ISSUER, AND THIS MAY
ULTIMATELY CAUSE A REDUCTION IN THE PAYMENTS YOU RECEIVE ON THE NOTES

        Funding has entered into previous intercompany loan agreements and it
has also entered into various agreements with other Funding secured creditors
in connection with the issuance of the previous intercompany loans. These
Funding secured creditors are already parties to the Funding deed of charge
and are entitled to share, on an equal ranking, in the security granted by
Funding for the benefit of the issuer. If the Funding security is enforced and
there are insufficient funds to make the payments that are due to the previous
issuers and to the issuer, the issuer will only be entitled to its
proportionate share of those limited funds. This could ultimately cause a
reduction in the payments you receive on the notes.

        AS NEW MORTGAGE LOANS ARE ASSIGNED TO THE MORTGAGES TRUSTEE AND AS
MORTGAGE LOANS ARE IN CERTAIN CIRCUMSTANCES REMOVED FROM THE MORTGAGES TRUST,
THE CHARACTERISTICS OF THE TRUST PROPERTY MAY CHANGE FROM THOSE EXISTING AT
THE CLOSING DATE, AND THOSE CHANGES MAY DELAY OR REDUCE PAYMENTS ON THE NOTES

        The issuer cannot guarantee that the characteristics of any new
mortgage loans assigned to the mortgages trustee will have the same
characteristics as the mortgage loans in the mortgage portfolio as of the date
of this report. In particular, new mortgage loans may have different payment
characteristics than the mortgage loans in the mortgage portfolio as of the
date of this report. The ultimate effect of this could be to delay or reduce
the payments you receive on the notes or increase the rate of repayment of the
notes. However, the new mortgage loans will be required to meet the conditions
described in "Assignment of the mortgage loans and their related security" in
the prospectus relating to the notes.

        In addition, in order to promote the retention of borrowers, the
seller may periodically contact certain borrowers in respect of the seller's
total portfolio of outstanding mortgage loans in order to encourage a borrower
to review the seller's other mortgage products and to discuss shifting that
borrower to an alternative Northern Rock mortgage product. The seller also may
periodically contact borrowers in the same manner in order to offer to a
borrower the opportunity to apply for a further advance. The employee of the
seller who contacts a borrower will not know whether that borrower's original
mortgage loan has been sold to the mortgages trust. However, if the relevant
original mortgage loan made to that borrower happens to have been sold to the
mortgages trust and that borrower decides to switch mortgage products or take
a further advance, the seller then has the option of repurchasing that
original mortgage loan from the mortgages trust.

        Generally, the borrowers that the seller may periodically contact are
those borrowers whose mortgage loans are not in arrears and who are otherwise
in good standing. To the extent that these borrowers switch to a different
Northern Rock mortgage product or take a further advance and their original
mortgage loans are repurchased by the seller, the percentage of fully
performing mortgage loans in the mortgage portfolio may decrease, which could
delay or reduce payments you receive on the notes. However, as described
above, the seller's decision as to which borrowers to target for new mortgage
products and/or further advances and the decision whether to approve a new
mortgage product and/or further advance for a particular borrower will be made
without regard to whether a borrower's mortgage loan is included in the
mortgage portfolio.

        THE SELLER MAY CHANGE THE LENDING CRITERIA RELATING TO MORTGAGE LOANS
WHICH ARE SUBSEQUENTLY ASSIGNED TO THE MORTGAGES TRUSTEE WHICH COULD AFFECT
THE CHARACTERISTICS OF THE TRUST PROPERTY, AND WHICH COULD LEAD TO A DELAY OR
A REDUCTION IN THE PAYMENTS RECEIVED ON THE NOTES OR COULD INCREASE THE RATE
OF REPAYMENT OF THE NOTES

        Each of the mortgage loans was originated in accordance with the
seller's lending criteria applicable at the time of origination, which lending
criteria in the case of each mortgage loan to be


                                      12
<PAGE>


included in the mortgage portfolio as of the related closing date were the
same as or substantially similar to the criteria described in the prospectus
relating to the notes under "The mortgage loans - Origination of the mortgage
loans - Lending criteria". These lending criteria consider a variety of
factors such as a potential borrower's credit history, employment history and
status and repayment ability, as well as the value of the property to be
mortgaged. In the event of the assignment of any new mortgage loans and new
related security to the mortgages trustee, the seller will warrant to the
mortgages trustee, Funding and the security trustee that those new mortgage
loans and new related security were originated in accordance with the seller's
lending criteria applicable at the time of their origination. However, the
seller retains the right to revise its lending criteria as determined from
time to time, and so the lending criteria applicable to any new mortgage loan
at the time of origination may not be the same as those set out in the section
"The mortgage loans - Origination of the mortgage loans - Lending criteria" in
the prospectus relating to the notes.

        If new mortgage loans that have been originated under revised lending
criteria are assigned to the mortgages trustee, the characteristics of the
trust property could change. This could lead to a delay or a reduction in the
payments received on the notes or it could increase the rate of repayment of
the notes.

        IF PROPERTY VALUES DECLINE PAYMENTS ON THE NOTES COULD BE ADVERSELY
AFFECTED

        The security granted by Funding in respect of the intercompany loan,
which is the principal source of funding for the notes, consists, among other
things, of Funding's interest in the mortgages trust. Since the value of the
mortgage portfolio held by the mortgages trustee may increase or decrease, the
value of that security may decrease and will decrease if there is a general
decline in property values. The issuer cannot guarantee that the value of a
mortgaged property will remain at the same level as on the date of origination
of the related mortgage loan. If the residential property market in the United
Kingdom experiences an overall decline in property values, the value of the
security created by the mortgage loans could be significantly reduced and,
ultimately, may result in losses to you if the security is required to be
enforced.

        THE TIMING AND AMOUNT OF PAYMENTS ON THE MORTGAGE LOANS COULD BE
AFFECTED BY GEOGRAPHIC CONCENTRATION OF THE MORTGAGE LOANS

        To the extent that specific geographic regions have experienced or may
experience in the future weaker regional economic conditions and housing
markets than other regions, a concentration of the mortgage loans in such a
region may be expected to exacerbate all of the risks relating to the mortgage
loans described in this section. The issuer cannot predict either when or
where such regional economic declines may occur nor to what extent or for how
long such conditions may continue. See "The mortgage loans - The cut-off date
mortgage portfolio" in the prospectus relating to the notes.

        THE TIMING AND AMOUNT OF PAYMENTS ON THE MORTGAGE LOANS COULD BE
AFFECTED BY VARIOUS FACTORS WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE NOTES

        Various factors influence mortgage delinquency rates, prepayment
rates, repossession frequency and the ultimate payment of interest and
principal. These factors include changes in the national or international
economic climate, regional economic or housing conditions, changes in tax
laws, interest rates, inflation, the availability of financing, yields on
alternative investments, political developments and government policies. Other
factors in borrowers' personal or financial circumstances may affect the
ability of borrowers to repay mortgage loans. Loss of earnings, illness,
divorce and other similar factors may lead to an increase in delinquencies by
and bankruptcies of borrowers, and could ultimately have an adverse impact on
the ability of borrowers to repay mortgage loans.

        In addition, the ability of a borrower to sell a property given as
security for a mortgage loan at a price sufficient to repay the amounts
outstanding under the mortgage loan will depend upon a


                                      13
<PAGE>


number of factors, including the availability of buyers for that property, the
value of that property and property values and the property market in general
at the time.

        The intercompany loan is the issuer's principal source of income for
repayment of the notes. The principal source of income for repayment by
Funding of the intercompany loan is its interest in the mortgage loans held on
trust by the mortgages trustee for the benefit of Funding and the seller. If
the timing and payment of the mortgage loans is adversely affected by any of
the risks described above, the payments on the notes could be reduced or
delayed.

        THE YIELD TO MATURITY OF THE NOTES MAY BE ADVERSELY AFFECTED BY
PREPAYMENTS OR REDEMPTIONS ON THE MORTGAGE LOANS OR REPURCHASES OF MORTGAGE
LOANS BY THE SELLER

        The yield to maturity of the notes of each class will depend mostly on
(a) the amount and timing of the repayment of principal on the mortgage loans
and (b) the price paid by the noteholders of each class of notes. The yield to
maturity of the notes of each class may be adversely affected by a higher or
lower than anticipated rate of prepayments on the mortgage loans.

        The rate of prepayment of mortgage loans is influenced by a wide
variety of economic, social and other factors, including prevailing mortgage
market interest rates, the availability of alternative financing programs,
local and regional economic conditions and homeowner mobility. For instance,
prepayments on the mortgage loans may be due to borrowers refinancing their
mortgage loans and sales of mortgaged properties by borrowers (either
voluntarily or as a result of enforcement action taken), as well as the
receipt of proceeds from buildings insurance and life insurance policies. The
rate of prepayment of mortgage loans may also be influenced by the presence or
absence of early repayment charges. You should note that certain of the
seller's flexible mortgage loan products allow the borrower to make
overpayments or repay the entire current balance under the flexible mortgage
loan at any time without incurring an early repayment charge. See "The
mortgage loans - Characteristics of the mortgage loans - Early repayment
charges" in the prospectus relating to the notes.

        Variation in the rate and timing of prepayments of principal on the
mortgage loans may affect each class of notes differently depending upon
amounts already repaid by Funding to the issuer under the intercompany loan
and whether a trigger event has occurred or the security granted by the issuer
under the issuer deed of charge has been enforced. If prepayments on the
mortgage loans occur less frequently than anticipated, then the actual yields
on the notes may be lower than you anticipate and the amortization of the
notes may take much longer than is presently anticipated.

        The yield to maturity of the notes may be affected by the repurchase
of mortgage loans subject to product switches, further advances or for
breaches of representations and warranties. If the seller is required to
repurchase from the mortgages trustee a mortgage loan or mortgage loans under
a mortgage account and their related security because one of the mortgage
loans does not comply with the mortgage loan representations and warranties in
the mortgage sale agreement, then the payment received by the mortgages
trustee will have the same effect as a prepayment of such mortgage loan or
mortgage loans. Because these factors are not within the issuer's control or
the control of Funding or the mortgages trustee, the issuer cannot give any
assurances as to the level of prepayments that the mortgage portfolio may
experience.

        In addition, if a mortgage loan is subject to a product switch or a
further advance, the seller may repurchase the mortgage loan or mortgage loans
and their related security from the mortgages trustee. In the case of any such
repurchase, the payment received by the mortgages trustee will have the same
effect as a prepayment of such mortgage loan or mortgage loans.

        In order to promote the retention of borrowers, the seller may
periodically contact certain borrowers in respect of the seller's total
portfolio of outstanding mortgage loans in order to encourage a borrower to
review the seller's other mortgage products and to discuss shifting that
borrower to an


                                      14
<PAGE>


alternative Northern Rock mortgage product. The employee of the seller who
contacts a borrower will not know whether that borrower's original mortgage
loan has been sold to the mortgages trust. However, if the relevant original
mortgage loan made to that borrower happens to have been sold to the mortgages
trust and that borrower decides to switch mortgage loan products, the seller's
retention policy may ultimately result in that mortgage loan becoming the
subject of a product switch which ultimately may result in a prepayment as
described in the preceding paragraph. Furthermore, the seller also may
periodically contact certain borrowers in respect of the seller's total
portfolio of outstanding mortgage loans in order to offer a borrower the
opportunity to apply for a further advance. If the borrower decides to take a
further advance and the seller decides to repurchase the mortgage loan subject
to that further advance, the mortgage loan will be prepaid.

        As the decision by the seller whether to repurchase a mortgage loan
subject to a product switch or a further advance is not within the issuer's
control or the control of Funding or the mortgages trustee, the issuer cannot
give any assurance as to the level of effective prepayments that the mortgage
portfolio may experience.

        THE INCLUSION OF FLEXIBLE MORTGAGE LOANS MAY AFFECT THE YIELD TO
MATURITY OF AND THE TIMING OF PAYMENTS ON THE NOTES

        Certain of the mortgage loans in the mortgage portfolio are flexible
mortgage loans. Flexible mortgage loans provide the borrower with a range of
options that gives that borrower greater flexibility in the timing and amount
of payments made under the mortgage loan. Subject to the terms and conditions
of the mortgage loans which may require in some cases notification to the
seller and in other cases the consent of the seller, under a flexible mortgage
loan a borrower may "overpay" or prepay principal on any day or make a re-draw
in specified circumstances. For a detailed summary of the characteristics of
the flexible mortgage loans, see "The mortgage loans - Characteristics of the
mortgage loans - Flexible mortgage loans" in the prospectus relating to the
notes. In addition, certain of the seller's flexible mortgage loan products
allow the borrower to make overpayments or repay the entire current balance
under the flexible mortgage loan at any time without incurring an early
repayment charge. See "The mortgage loans - Characteristics of the mortgage
loans - Early repayment charges" in the prospectus relating to the notes.

        The inclusion of Together Connections mortgage loans, which are
another type of flexible mortgage loan, in the mortgages trust may also affect
the yield to maturity of, and the timing of payments on, the notes.
Application of the Together Connections Benefit, a feature of Together
Connections mortgage loans, will reduce the principal amount outstanding on a
Together Connections mortgage loan. As a result, less of a related borrower's
contractual monthly payment (which the borrower is nevertheless obligated to
continue making in full) will be required to pay interest, and proportionately
more of that contractual monthly payment will be allocated as a repayment of
principal. This reallocation may lead to amortization of the related mortgage
loan more quickly than would otherwise be the case. For a description of
Together Connections mortgage loans and the Together Connections Benefit, see
"The mortgage loans - Characteristics of the mortgage loans - Mortgage loan
products offered by the seller" in the prospectus relating to the notes.

        If the notes are not repaid on or before the step-up date, then to the
extent that borrowers under flexible mortgage loans consistently prepay
principal or to the extent that Together Connections mortgage loans amortize
more quickly than otherwise expected, the timing of payments on the notes may
be adversely affected.

        THE OCCURRENCE OF AN ASSET TRIGGER EVENT OR ENFORCEMENT OF THE ISSUER
SECURITY MAY ACCELERATE THE REPAYMENT OF CERTAIN NOTES AND/OR DELAY THE
REPAYMENT OF OTHER NOTES

        If no trigger event has occurred and the issuer security has not been
enforced, then related payments of principal on a class of notes on any
payment date will not be greater than the controlled amortization amount for
that class on that payment date. If an asset trigger event has occurred, the


                                      15
<PAGE>


mortgages trustee will distribute principal receipts on the mortgage loans to
Funding and the seller proportionally based on their percentage shares (or, in
certain circumstances, their weighted average percentage shares) of the trust
property and Funding will on each payment date apply those principal receipts
to repay the intercompany loan, the previous intercompany loans and each new
intercompany loan (if any) in proportion to the outstanding principal balance
of the relevant intercompany loan.

        Following the occurrence of an asset trigger event or enforcement of
the issuer security, the issuer will apply these principal repayments of the
intercompany loan which are available for payment to noteholders on each
payment date to repay, in no order of priority, the class A notes until their
outstanding principal balances have been reduced to zero, without regard to
their controlled amortization amounts, then, in no order of priority, the
class B notes until their outstanding principal balances have been reduced to
zero, without regard to their controlled amortization amounts and finally, in
no order of priority, the class C notes until their outstanding principal
balances have been reduced to zero, without regard to their controlled
amortization amounts.

        As the priority of payment in respect of the series 1 class A1 notes,
the series 1 class A2 notes and the series 2 class A notes rank equally after
the occurrence of an asset trigger event or enforcement of the issuer
security, and as repayments of principal in these circumstances will not be
limited to or controlled by the respective controlled amortization amounts for
the relevant class of the notes, this may result in certain noteholders being
repaid more rapidly than if an asset trigger event or enforcement of the
security had not occurred, and may result in other noteholders being repaid
less rapidly than if an asset trigger event had not occurred.

        THE OCCURRENCE OF A NON-ASSET TRIGGER EVENT MAY ACCELERATE THE
REPAYMENT OF CERTAIN NOTES AND/OR DELAY THE REPAYMENT OF OTHER NOTES

        If a non-asset trigger event has occurred, the mortgages trustee will
distribute all principal receipts to Funding until the Funding share
percentage of the trust property is zero. Funding will on each payment date
apply these principal receipts to repay the previous intercompany loans, the
intercompany loan and each new intercompany loan (if any) equally and in
proportion to the outstanding principal balance of the intercompany loan.

        Following the occurrence of a non-asset trigger event, the issuer will
apply these principal repayments of the intercompany loan which are available
for payment to noteholders on each payment date to repay the series 1 class A1
notes until the outstanding principal balance of the series 1 class A1 notes
has been reduced to zero, without regard to their controlled amortization
amounts, then the series 1 class A2 notes until the outstanding principal
balance of the series 1 class A2 notes has been reduced to zero, without
regard to their controlled amortization amounts, then the series 2 class A
notes until the outstanding principal balance of the series 2 class A notes
has been reduced to zero, without regard to their controlled amortization
amounts, then in no order of priority, the class B notes until their
outstanding principal balances have been reduced to zero, without regard to
their controlled amortization amounts and finally, in no order of priority,
the class C notes until their outstanding principal balances have been reduced
to zero, without regard to their controlled amortization amounts.

        As the repayments of principal in these circumstances will not be
limited to or controlled by the respective controlled amortization amounts for
the relevant class of notes, this may result in certain noteholders being
repaid more rapidly than if a non-asset trigger event or enforcement of the
issuer security had not occurred, and may result in other noteholders being
repaid less rapidly than if a non-asset trigger event had not occurred.

        COMPETITION IN THE UK MORTGAGE LOAN INDUSTRY COULD INCREASE THE RISK
OF AN EARLY REDEMPTION OF THE NOTES

        The mortgage loan industry in the United Kingdom is highly
competitive. Both traditional and new lenders use heavy advertising, targeted
marketing, aggressive pricing competition and loyalty


                                      16
<PAGE>


schemes in an effort to expand their presence in or to facilitate their entry
into the market and compete for customers. For example, certain of the
seller's competitors have implemented loyalty discounts for long-time
customers to reduce the likelihood that these customers would refinance their
mortgage loans with other lenders such as the seller.

        This competitive environment may affect the rate at which the seller
originates new mortgage loans and may also affect the level of attrition of
the seller's existing borrowers. If the rate at which new mortgage loans are
originated declines significantly or if existing borrowers refinance their
mortgage loans with lenders other than the seller, then the risk of a trigger
event occurring increases, which could result in an early redemption of the
notes.

        IF THE SELLER DOES NOT REPURCHASE FIXED RATE MORTGAGE LOANS UNDER
WHICH THE BORROWER EXERCISES HIS OR HER RE-FIX OPTION THEN THE ISSUER MAY NEED
TO ENTER INTO NEW HEDGING ARRANGEMENTS AND THE ISSUER MAY NOT FIND A
COUNTERPARTY AT THE RELEVANT TIME

        If the seller does not elect within 30 days of the end of the relevant
fixed rate period to repurchase the relevant mortgage loan from the mortgages
trustee if it becomes a re-fixed mortgage loan, then this will necessitate the
entry by the issuer into further hedging arrangements with an alternative
basis rate swap counterparty satisfactory to the rating agencies. Entering
into additional hedging arrangements may increase the issuer's obligations on
any payment date which may adversely affect payments on the notes. In
addition, the issuer cannot provide assurance that an alternative basis rate
swap counterparty will be available at the relevant time.

        TERMINATION PAYMENTS ON THE BASIS RATE SWAP MAY ADVERSELY AFFECT THE
FUNDS AVAILABLE TO MAKE PAYMENTS ON THE NOTES

        The amount of revenue receipts that Funding receives will fluctuate
according to the interest rates applicable to the mortgage loans in the
mortgages trust. However, the amount of interest payable by Funding to the
issuer under the intercompany loan will depend upon the aggregate amount
payable by the issuer to the basis rate swap provider in exchange for payments
which will depend upon the variable interest rates at which interest accrues
on the notes.

        To hedge the issuer's exposure against the possible variance between
the foregoing interest rates, the issuer has entered into a basis rate swap
with a basis rate swap provider (see "The swap agreements - The basis rate
swap" in the prospectus relating to the notes).

        If a basis rate swap is terminated, the issuer may be obliged to pay a
termination payment to the basis rate swap provider. The amount of the
termination payment will be based on the cost of entering into a replacement
basis rate swap. Under the intercompany loan agreement, Funding will be
required to pay the issuer an amount equal to any termination payment due by
the issuer to the basis swap provider. Funding will also be obliged to pay the
issuer any extra amounts which the issuer may be required to pay to enter into
a replacement swap.

        The issuer cannot give you any assurance that Funding will have the
funds available to make that payment or that the issuer will have sufficient
funds available to make any termination payment under a swap or to make
subsequent payments to you in respect of the relevant series and class of
notes. Nor can the issuer give you any assurance that it will be able to enter
into a replacement swap, or if one is entered into, that the credit rating of
the replacement basis rate swap provider will be sufficiently high to prevent
a downgrading by the rating agencies of the then-current ratings of the notes.

        Except where the basis rate swap provider has caused the basis rate
swap to terminate by its own default, any termination payment due by the
issuer will rank equally with payments due on the notes. Any additional
amounts required to be paid by the issuer following termination of the basis
rate swap (including any extra costs incurred (for example, from entering into
"spot" interest rate swaps) if


                                      17
<PAGE>


the issuer cannot immediately enter into a basis rate swap), will also rank
equally with payments due on the notes.

        Therefore, if the issuer is obliged to make a termination payment to a
basis rate swap provider or to pay any other additional amount as a result of
the termination of the swap, this may affect the funds which that issuer has
available to make payments on any class and any series of notes.

        RATINGS ASSIGNED TO THE NOTES MAY BE LOWERED OR WITHDRAWN AFTER YOU
PURCHASE THE NOTES, WHICH MAY LOWER THE MARKET VALUE OF THE NOTES OR THE
LIKELIHOOD OF THEIR REPAYMENT

        The ratings assigned to each class of notes address the likelihood of
full and timely payment to you of all payments of interest on each payment
date under those classes of notes. The ratings also address the likelihood of
ultimate payment of principal on the final maturity date of each class of
notes. Any rating agency may lower its rating or withdraw its rating if, in
the sole judgement of the rating agency, the credit quality of the notes has
declined or is in question. If any rating assigned to the notes is lowered or
withdrawn, the market value of the notes may be reduced.

        SUBORDINATION OF OTHER NOTE CLASSES MAY NOT PROTECT YOU FROM ALL RISK
OF LOSS

        In respect of each of the class B notes and class C notes, each of the
class B notes of each series and the class C notes of each series are
subordinated in right of payment of interest to the class A notes of each
series. Each of the class C notes of each series are subordinated in right of
payment of interest to the class B notes of each series.

        In respect of each of the class A notes, class B notes and class C
notes, within each series of notes, the class B notes and the class C notes
are subordinated in right of payment of principal to the class A notes. The
class C notes are subordinated in right of payment of principal to the class B
notes.

        However, the controlled amortization amount payable in respect of each
class of notes is determined by a schedule that indicates the target balance
for that class of notes on the relevant payment date. You should be aware that
not all classes of notes are scheduled to receive payments of principal on
each payment date. The controlled amoritization amount payable on some classes
of notes is zero, which means that, despite the principal priority of payments
described above, lower ranking classes of notes may nevertheless be repaid
principal before higher ranking classes of notes. Payments of principal are
expected to be made to each class of notes in scheduled amounts up to the
amounts set forth in the schedule in the prospectus relating to the notes.

        In respect of each of the class A notes, class B notes and class C
notes, there is no assurance that these subordination rules will protect the
class A noteholders from all risk of loss or the class B noteholders from all
risk of loss. If the losses allocated to the relevant class C notes and the
class B notes, as evidenced on each of the class C and class B principal
deficiency sub-ledgers, respectively, plus any other debits to each of the
class C and class B principal deficiency sub-ledgers, as the case may be, are
in an aggregate amount equal to the aggregate outstanding principal balances
of the class C notes and the class B notes, then losses on the mortgage loans
will thereafter be allocated to the class A notes at which point there will be
an asset trigger event. Similarly, if the losses allocated to the class C
notes as evidenced on the relevant class C principal deficiency sub-ledger
plus any other debits to the class C principal deficiency sub-ledger are in an
aggregate amount equal to the aggregate outstanding principal balance of the
relevant class C notes, then losses on the mortgage loans will thereafter be
allocated to the class B notes.

        PRINCIPAL PAYMENTS ON THE CLASS B NOTES AND THE CLASS C NOTES WILL BE
DEFERRED IN CERTAIN CIRCUMSTANCES

        On any payment date, the issuer's obligation to pay principal on the
class B notes and the class C notes will be subject to the satisfaction as of
the related determination date of the issuer


                                      18
<PAGE>


arrears test, the issuer reserve requirement and the subordinated principal
test to the extent that any class A notes are outstanding on that date.

        If class A notes are outstanding on that date and any of the above
conditions is not satisfied on a payment date then payments of principal which
would otherwise have been made to the class B notes and/or the class C notes
will not be payable by the issuer on that payment date.

        YOU MAY NOT BE ABLE TO SELL THE NOTES

        There currently is no secondary market for the notes. The underwriter
that underwrote the notes expects, but is not obliged, to make a market in
those notes. If no secondary market develops, you may not be able to sell the
notes prior to maturity. The issuer cannot offer any assurance that a
secondary market will develop or, if one does develop, that it will continue.

        YOU MAY BE SUBJECT TO EXCHANGE RATE AND INTEREST RATE RISKS

        Repayments of principal and payments of interest on the series 1 notes
will be made in US dollars, but the intercompany loan made by the issuer to
Funding and repayments of principal and payments of interest by Funding to the
issuer under the intercompany loan will be in sterling.

        To hedge the issuer's currency exchange rate exposure, including any
interest rate exposure connected with that currency exposure, the issuer has
entered into the dollar currency swaps for the series 1 notes with the
applicable dollar currency swap provider (see "The swap agreements - The
dollar currency swaps" in the prospectus relating to the notes).

        If the issuer fails to make timely payments of amounts due under a
dollar currency swap, then the issuer will have defaulted under that currency
swap. A dollar currency swap provider is obliged only to make payments under a
dollar currency swap as long as the issuer makes payments under it. If the
dollar currency swap provider is not obliged to make payments of, or if it
defaults in its obligations to make payments of, amounts in US dollars equal
to the full amount to be paid to the issuer on the payment dates under the
dollar currency swap (which are the same dates as the payment dates), the
issuer will be exposed to changes in US dollar/sterling currency exchange
rates and in the associated interest rates on these currencies. Unless a
replacement dollar currency swap is entered into, the issuer may have
insufficient funds to make payments due on the notes of any class and any
series.

        In addition, some of the mortgage loans carry variable rates of
interest, some of the mortgage loans pay interest at a fixed rate or rates of
interest and some of the flexible mortgage loans pay interest at variable
rates of interest no higher than the rate offered by a basket of UK mortgage
lenders or pay interest at a rate which tracks the Bank of England base rate.
However, these interest rates on the mortgage loans which will fund the
interest payable under the intercompany loan will not necessarily match the
floating and/or fixed rates on the notes. If the basis rate swap provider
defaults in its obligation to make payments under the basis rate swap, we will
be exposed to the variance between the rates of interest payable on the
mortgage loans and the rate of interest payable on the notes. Unless a
replacement basis rate swap is entered into, we may have insufficient funds to
make payments due on the notes of any class and any series.

        TERMINATION PAYMENTS ON THE DOLLAR CURRENCY SWAPS AND THE EURO
CURRENCY SWAPS MAY ADVERSELY AFFECT THE FUNDS AVAILABLE TO MAKE PAYMENTS ON
THE NOTES

        If any of the currency swaps entered into by the issuer terminate,
that issuer may be obliged to pay a termination payment to the relevant
currency swap provider. The amount of the termination payment will be based on
the cost of entering into a replacement currency swap. Under the intercompany
loan agreement, Funding is required to pay the issuer an amount equal to any
termination payment due by the issuer to the relevant currency swap provider.
Funding will also be


                                      19
<PAGE>


obliged to pay the issuer any extra amounts which that issuer may be required
to pay to enter into a replacement swap.

        The issuer cannot give you any assurance that Funding will have the
funds available to make that payment or that the issuer will have sufficient
funds available to make any termination payment under any of the swaps entered
into by the issuer or to make subsequent payments to you in respect of the
relevant series and class of notes. Nor can the issuer give you any assurance
that the issuer will be able to enter into a replacement swap, or if one is
entered into, that the credit rating of the replacement dollar currency swap
provider will be sufficiently high to prevent a downgrading of the
then-current ratings by the rating agencies of the notes.

        Except where the relevant currency swap provider has caused the
relevant currency swap to terminate by its own default, any termination
payment due by the issuer will rank equally with payments due on the notes.
Any additional amounts required to be paid by the issuer following termination
of the relevant currency swap entered into by the issuer (including any extra
costs incurred (for example, from entering into "spot" currency or interest
rate swaps) if the issuer cannot immediately enter into a replacement currency
swap), will also rank equally with payments due on the notes.

        Therefore, if the issuer is obliged to make a termination payment to
the relevant currency rate swap provider or to pay any other additional amount
as a result of the termination of the relevant currency swap entered into by
the issuer, this may affect the funds which the issuer has available to make
payments on the notes of any class and any series.

        IF THE BANK OF ENGLAND BASE RATE FALLS BELOW A CERTAIN LEVEL, THE
ISSUER COULD SUFFER A REVENUE SHORTFALL WHICH COULD ADVERSELY AFFECT THE
ISSUER'S PAYMENTS ON THE NOTES

        The seller guarantees that for variable rate mortgage loans that are
eligible to be charged at the seller's standard variable rate (including fixed
rate mortgages which become variable after the fixed period), during the
period in which the seller may impose an early repayment charge, the actual
gross interest rate that the seller charges will be the lower of:

        (a) the seller's standard variable rate; or

        (b) the Bank of England base rate plus a margin, which is determined
            by Northern Rock.

        If the Bank of England base rate plus the appropriate margin (as
described above) falls to a level below the seller's standard variable rate it
is possible that there would be a shortfall of income on the mortgage loans
and that, as a result, Funding and/or the issuer would suffer a revenue
shortfall.

        IF BORROWERS BECOME ENTITLED TO THE LOYALTY DISCOUNT OFFERED BY THE
SELLER, THE ISSUER COULD SUFFER A REVENUE SHORTFALL WHICH COULD ADVERSELY
AFFECT THE ISSUER'S PAYMENTS ON THE NOTES

        The seller currently offers a loyalty discount on each mortgage loan
(other than a Together mortgage loan, a Together Connections mortgage loan and
a CAT standard mortgage loan) which currently provides for a reduction of
0.25% (although the seller may in the future allow for a discount of between
0.25% and 0.75%) of the applicable interest rate on that mortgage loan once
the borrower has held that mortgage loan for at least seven years, subject to
certain conditions. If the loyalty discount becomes applicable to a
significant number of borrowers it is possible that there would be a shortfall
of income on the mortgage loans and that, as a result, Funding and/or the
issuer would suffer a revenue shortfall.

        THE ISSUER RELIES ON THIRD PARTIES AND YOU MAY BE ADVERSELY AFFECTED
IF THEY FAIL TO PERFORM THEIR OBLIGATIONS


                                      20
<PAGE>


        The issuer is a party to contracts with a number of other third
parties that have agreed to perform services in relation to the notes. For
example, the dollar currency swap provider and the euro currency swap provider
have agreed to provide their respective swaps, the corporate services provider
has agreed to provide corporate services and the paying agents and the agent
bank have agreed to provide payment and calculation services in connection
with the notes. In the event that any relevant third party was to fail to
perform its obligations under the respective agreements to which it is a
party, you may be adversely affected.

        PAYMENTS BY FUNDING TO THIRD PARTIES IN RELATION TO THE PREVIOUS
ISSUERS MAY AFFECT PAYMENTS DUE TO US AND ACCORDINGLY OUR ABILITY TO MAKE
PAYMENTS ON THE NOTES

        Under the previous intercompany loan agreements, Funding is required
to make payments to each previous issuer in respect of that previous issuer's
obligations to make payments to the security trustee and its own note trustee,
agent bank, paying agents, cash manager, corporate services provider and
account bank and to other third parties to whom that previous issuer owes
money. These payments, in addition to the payments that we are required to
make to our third party creditors, rank in priority to amounts due by Funding
to us under the intercompany loan that we may use to make payments under the
notes. For further information regarding Funding's payment obligations, see
"Cashflows" in the prospectus relating to the notes.

        Funding's obligations to make the third-party payments described above
to the previous issuers may affect Funding's ability to make payments to the
issuer under the intercompany loan. This in turn may affect the issuer's
ability to make payments on the notes.

        EXCESS REVENUE RECEIPTS MAY NOT BE SUFFICIENT TO REPLENISH PRINCIPAL
THAT HAS BEEN USED TO PAY INTEREST, WHICH MAY RESULT IN THE NOTES NOT BEING
REPAID IN FULL

        If, on any payment date, revenue receipts available to the issuer are
insufficient to enable the issuer to pay interest on the notes and the
issuer's other expenses ranking in priority to interest due on the notes (the
"senior expenses"), then the issuer may use principal receipts from the
intercompany loan to make up that revenue shortfall.

        During the term of the relevant transaction, however, it is expected
that these principal deficiencies will be recouped from subsequent excess
issuer available revenue receipts in respect of the issuer. However, if
subsequent excess issuer available revenue receipts in respect of the issuer
are insufficient to recoup those principal deficiencies, then you may receive
later than anticipated, or you may not receive in full, repayment of the
principal amount outstanding on the notes.

        For more information on principal deficiencies, see "Credit structure
- Issuer principal deficiency ledger" in the prospectus relating to the notes.

        THE SELLER SHARE OF THE TRUST PROPERTY DOES NOT PROVIDE CREDIT
ENHANCEMENT FOR THE NOTES

        Subject to certain exceptions as described under "The mortgages trust
- Adjustments to trust property" in the prospectus relating to the notes, any
losses from mortgage loans included in the trust property will be allocated to
Funding and the seller on each distribution date in proportion to the
then-current Funding share percentage and the then-current seller share
percentage of the trust property.

        The seller share of the trust property does not provide credit
enhancement for the Funding share of the trust property. Losses on the
mortgage loans in the trust property are generally allocated proportionately
between the seller and Funding depending on their respective percentage shares
(or, in certain circumstances, their weighted average percentage shares) of
the trust property.


                                      21
<PAGE>


        THE ISSUER WILL ONLY HAVE RECOURSE TO THE SELLER IF THERE IS A BREACH
OF WARRANTY BY THE SELLER, AND OTHERWISE THE SELLER'S ASSETS WILL NOT BE
AVAILABLE TO THE ISSUER AS A SOURCE OF FUNDS TO MAKE PAYMENTS ON THE NOTES

        After an intercompany loan enforcement notice under the intercompany
loan, any previous intercompany loan or any new intercompany loan is given (as
described in "Security for Funding's obligations" in the prospectus relating
to the notes), the security trustee may sell the Funding share of the trust
property. There is no assurance that a buyer would be found or that such a
sale would realize enough money to repay amounts due and payable under the
intercompany loan agreement, the previous intercompany loan agreements and any
new intercompany loan agreements.

        The issuer will not, and Funding and the mortgages trustee will not,
have any recourse to the seller of the mortgage loans, other than in respect
of a breach of warranty under the mortgage sale agreement.

        The issuer will not, and the mortgages trustee, Funding and the
security trustee will not, undertake any investigations, searches or other
actions on any mortgage loan or its related security and the issuer and each
of them will rely instead on the warranties given in the mortgage sale
agreement by the seller.

        If any of the warranties made by the seller is materially untrue on
the date on which the relevant mortgage loan is assigned to the mortgages
trustee, then, in the first instance, the seller will be required to remedy
the breach within 28 days of the seller becoming aware of the same or of
receipt by it of a notice from the mortgages trustee.

        If the seller fails to remedy the breach within 28 days, then the
seller will be required to repurchase the mortgage loan or mortgage loans and
their related security at their current balance as of the date of completion
of such repurchase together with all interest (whether due or accrued but not
due) and arrears of interest payable thereon to the date of repurchase. There
can be no assurance that the seller will have the financial resources to
repurchase the mortgage loan or mortgage loans and their related security.
However, if the seller does not repurchase those mortgage loans and their
related security when required, then the seller share of the trust property
will be deemed to be reduced by an amount equal to the principal amount
outstanding of those mortgage loans together with any arrears of interest and
accrued and unpaid interest and expenses.

        Other than as described here, none of the mortgages trustee, Funding,
you or the issuer, the holders of the previous notes or the previous issuers
will have any recourse to the assets of the seller.

        THERE CAN BE NO ASSURANCE THAT A BORROWER WILL REPAY PRINCIPAL AT THE
END OF THE TERM ON AN INTEREST-ONLY LOAN (WITH OR WITHOUT A CAPITAL REPAYMENT
VEHICLE) OR A COMBINATION LOAN

        Each mortgage loan in the mortgage portfolio is advanced on one of the
following bases:

        o   Repayment basis, with principal and interest repaid on a monthly
            basis through the mortgage term; or

        o   An interest-only basis with or without a capital repayment
            vehicle; or

        o   A combination basis, that is, a combination of the repayment and
            interest-only arrangements where only part of the principal will
            be repaid by way of monthly payments.

        Neither the interest-only mortgage loans nor the interest-only portion
of any combination mortgage loan includes scheduled amortization of principal.
Instead the principal must be repaid by the borrower in a lump sum at maturity
of the mortgage loan.


                                      22
<PAGE>


        For interest-only mortgage loans with a capital repayment vehicle or a
combination loan with a capital repayment vehicle the borrower is recommended
to put in place an investment plan or other repayment mechanism forecast to
provide sufficient funds to repay the principal due at the end of the term.

        The ability of a borrower to repay the principal on an interest-only
mortgage loan or the final payment of principal on a combination mortgage loan
at maturity depends on such borrower's responsibility to ensure that
sufficient funds are available from an investment plan or another source, such
as ISAs, pension policies, personal equity plans or endowment policies, as
well as the financial condition of the borrower, tax laws and general economic
conditions at the time. However, there can be no assurance that there will be
sufficient funds from any investment plan to repay the principal or (in the
case of a combination loan) the part of the principal that it is designed to
cover.

        The seller does not (and in certain circumstances cannot) take
security over investment plans. Consequently, in the case of a borrower in
poor financial condition the investment plan will be an asset available to
meet the claims of other creditors. The seller also recommends the borrower to
take out term life insurance cover in relation to the mortgage loan, although
the seller again does not take security over such policies.

        In the case of interest-only mortgage loans, there can be no assurance
that the borrower will have the funds required to repay the principal at the
end of the term. If a borrower cannot repay the mortgage loan and a loss
occurs on the mortgage loan, then this may affect payments on the notes if
that loss cannot be cured by the application of excess issuer available
revenue receipts.

        THERE MAY BE RISKS ASSOCIATED WITH THE FACT THAT THE MORTGAGES TRUSTEE
HAS NO LEGAL TITLE TO THE MORTGAGE LOANS AND THEIR RELATED SECURITY WHICH MAY
ADVERSELY AFFECT PAYMENTS ON THE NOTES

        The assignment by the seller to the mortgages trustee of the benefit
of the mortgage loans and their related security takes effect in equity only.
This means that legal title to the mortgage loans and their related security
in the trust property remains with the seller, but the mortgages trustee has
all the other rights and benefits relating to ownership of each mortgage loan
and its related security (which rights and benefits are subject to the trust
in favor of the beneficiaries). The mortgages trustee has the right to demand
the seller to give it legal title to the mortgage loans and the related
security in the circumstances described in "Assignment of the mortgage loans
and their related security - Transfer of legal title to the mortgages trustee"
in the prospectus relating to the notes and until then the mortgages trustee
will not apply to H.M. Land Registry or the H.M. Land Charges Registry to
register or record its equitable interest in the mortgages. In addition,
except in the limited circumstances set out in "Assignment of the mortgage
loans and related security - Transfer of legal title to the mortgages trustee"
in the prospectus relating to the notes, the seller will not give notice of
the assignment of the mortgage loans and related security to any borrower.

        At any time during which the mortgages trustee does not hold the legal
title to the mortgage loans and their related security or has not notified its
interest in the mortgage loans and their related security to the borrowers,
there are risks, as follows:

        o   firstly, if the seller wrongly sold to another person a mortgage
            loan and that mortgage loan has already been assigned to the
            mortgages trustee, and that person acted in good faith and did not
            have notice of the interests of the mortgages trustee or the
            beneficiaries in the mortgage loan and that person notified the
            borrower of that sale to it of the mortgage loan and its related
            security or registered its interest in that mortgage, then she or
            he might obtain good title to the mortgage loan, free from the
            interests of the mortgages trustee and the beneficiaries. If this
            occurred then the mortgages trustee would not have good title to
            the affected mortgage loan and its related security and it would
            not be entitled to payments by a borrower in respect of such a
            mortgage loan. This may affect the issuer's ability to repay the
            notes;


                                      23
<PAGE>


        o   secondly, the rights of the mortgages trustee and the
            beneficiaries may be subject to the rights of the borrowers
            against the seller, such as the rights of set-off (see in
            particular "- There are risks in relation to flexible mortgage
            loans which may adversely affect the funds available to pay the
            notes" in this Annual Report) which occur in relation to
            transactions or deposits made between certain borrowers and the
            seller and the rights of borrowers to redeem their mortgages by
            repaying the mortgage loan directly to the seller. If these rights
            were exercised, the mortgages trustee may receive less money than
            anticipated from the mortgage loans, which may affect the issuer's
            ability to repay the notes; and

        o   finally, the mortgages trustee would not be able to enforce any
            borrower's obligations under a mortgage loan or mortgage itself
            but would have to join the seller as a party to any legal
            proceedings.

        However, once notice has been given to a borrower of the transfer of
the related mortgage loan and its related security to the mortgages trustee,
any independent set-off rights which that borrower has against the seller will
crystallize, further rights of independent set-off would cease to accrue from
that date and no new rights of independent set-off could be asserted following
that notice. Set-off rights arising under transaction set-off (which are
set-off claims arising out of a transaction connected with the mortgage loan)
will not be affected by that notice.

        Additionally, if a borrower exercises any set-off rights then an
amount equal to the amount set off will reduce the total amount of the seller
share of the trust property only. For more information on the risks of
transaction set-off, see "- There are risks in relation to flexible mortgage
loans which may adversely affect the funds available to pay the notes" in this
Annual Report.

        THERE ARE RISKS IN RELATION TO FLEXIBLE MORTGAGE LOANS WHICH MAY
ADVERSELY AFFECT THE FUNDS AVAILABLE TO PAY THE NOTES

        As described in "- There may be risks associated with the fact that
the mortgages trustee has no legal title to the mortgage loans and their
related security, which may adversely affect payments on the notes" in this
Annual Report, the seller has made (in respect of the mortgage portfolio) and
will make (in respect of any new mortgage portfolio) an equitable assignment
of the relevant mortgage loans and mortgages to the mortgages trustee, with
legal title being retained by the seller. Therefore, the rights of the
mortgages trustee may be subject to the direct rights of the borrowers against
the seller, including rights of set-off existing prior to notification to the
borrowers of the assignment of the mortgage loans and the mortgages. Such
set-off rights may occur if the seller fails to advance a cash re-draw to a
borrower under a flexible mortgage loan when the borrower is entitled to such
cash re-draw.

        If the seller fails to advance the cash re-draw in accordance with the
relevant mortgage loan, then the relevant borrower may set off any damages
claim arising from the seller's breach of contract against the seller's (and,
as equitable assignee of the mortgage loans and the mortgages, the mortgages
trustee's) claim for payment of principal and/or interest under the mortgage
loan as and when it becomes due. Such set-off claims will constitute
transaction set-off as described in the immediately preceding risk factor.

        The amount of the claim in respect of a cash re-draw will, in many
cases, be the cost to the borrower of finding an alternative source of funds.
The borrower may obtain a mortgage loan elsewhere in which case the damages
would be equal to any difference in the borrowing costs together with any
consequential losses, namely the associated costs of obtaining alternative
funds (for example, legal fees and survey fees). If the borrower is unable to
obtain an alternative mortgage loan, he or she may have a claim in respect of
other losses arising from the seller's breach of contract where there are
special circumstances communicated by the borrower to the seller at the time
the borrower entered into the mortgage or which otherwise were reasonably
foreseeable.


                                      24
<PAGE>


        A borrower may also attempt to set off against his or her mortgage
payments an amount greater than the amount of his or her damages claim. In
that case, the administrator will be entitled to take enforcement proceedings
against the borrower although the period of non-payment by the borrower is
likely to continue until a judgement is obtained.

        The exercise of set-off rights by borrowers would reduce the incoming
cash flow to the mortgages trustee during such exercise. However, the amounts
set off will be applied to reduce the seller share of the trust property only.

        Further, there may be circumstances in which:

        o   a borrower may seek to argue that certain re-draws are
            unenforceable by virtue of non-compliance with the Consumer Credit
            Act 1974; or

        o   certain re-draws may rank behind liens created by a borrower after
            the date upon which the borrower entered into its mortgage with
            the seller.

        The minimum seller share has been sized in an amount expected to cover
these risks, although there is no assurance that it will. If the minimum
seller share is not sufficient in this respect then there is a risk that you
may not receive all amounts due on the notes or that payments may not be made
when due.

        In September 2002, the European Commission published a proposal for a
directive of the European Parliament and of the Council on the harmonisation
of the laws, regulations and administrative provisions of the member states
concerning credit for consumers and surety agreements entered into by
consumers. In its current form, the proposal requires specified requirements
to be met and restrictions observed in respect of certain mortgage loan
products, including flexible mortgage loans, repayment mortgages and further
advances. If the proposal comes into force in its current form, mortgage loans
which do not comply with these requirements and restrictions may be subject to
penalties, potentially including loss of interest and charges by the mortgagee
coupled with continuation of the right of repayment in installments by the
borrower. Significantly, the proposal provides that it does not apply
retrospectively (subject to certain exceptions including in respect of new
drawings or further advances made in respect of existing agreements) and does
not apply to residential mortgage loans except those which include an equity
release component. The proposal is unlikely to come into force before 2006 as
the co-decision procedure of the European Parliament and of the Commission,
from the publication of the proposal to the coming into force of the new
consumer credit directive is likely to take at least two years and member
states will then have a further two years in which to bring national
implementing legislation regulations and administrative provisions into force.
The Department of Trade and Industry is currently in consultation with
consumer and industry organizations in relation to this proposal. As a result,
the effect of the ultimately implemented directive on our ability to make
payments when due on the notes cannot be fully determined at this stage.

        IF THE ADMINISTRATOR IS REMOVED, THERE IS NO GUARANTEE THAT A
SUBSTITUTE ADMINISTRATOR WOULD BE FOUND, WHICH COULD DELAY COLLECTION OF
PAYMENTS ON THE MORTGAGE LOANS AND ULTIMATELY COULD ADVERSELY AFFECT PAYMENTS
ON THE NOTES

        The seller has been appointed by the mortgages trustee and the
beneficiaries as administrator to service the mortgage loans. If the
administrator breaches the terms of the administration agreement, then the
mortgages trustee, Funding and the security trustee will be entitled to
terminate the appointment of the administrator and to appoint a substitute
administrator.

        There can be no assurance that a substitute administrator would be
found who would be willing and able to service the mortgage loans on the terms
of the administration agreement. In addition, as described under the third
risk factor immediately succeeding this risk factor, any


                                      25
<PAGE>


substitute administrator may be required to be authorized under The Financial
Services and Markets Act 2000 once mortgage lending becomes a regulated
activity. The ability of a substitute administrator fully to perform the
required services would depend, among other things, on the information,
software and records available at the time of the appointment. Any delay or
inability to appoint a substitute administrator may affect payments on the
mortgage loans and hence the issuer's ability to make payments when due on the
notes.

        You should note that the administrator has no obligation itself to
advance payments that borrowers fail to make in a timely fashion.

        THE MORTGAGES TRUSTEE MAY NOT RECEIVE THE BENEFIT OF CLAIMS MADE ON
THE BUILDINGS INSURANCE WHICH COULD ADVERSELY AFFECT PAYMENTS ON THE NOTES

        The practice of the seller in relation to buildings insurance is
described under "The mortgage loans - Insurance policies" in the prospectus
relating to the notes. As described in that section, the issuer cannot provide
assurance that the mortgages trustee will always receive the benefit of any
claims made under any applicable insurance contracts or that the amount
received in the case of a successful claim will be sufficient to reinstate the
property. This could reduce the principal receipts received by Funding
according to the Funding share and could adversely affect the issuer's ability
to make payments on the notes. You should note that buildings insurance is
normally renewed annually.

        THE MORTGAGES TRUSTEE IS NOT REQUIRED TO MAINTAIN MORTGAGE INDEMNITY
INSURANCE WITH THE INSURER, AND THE SELLER IS NOT REQUIRED TO MAINTAIN THE
CURRENT LEVEL OF MORTGAGE INDEMNITY INSURANCE COVERAGE FOR NEW MORTGAGE LOANS
THAT IT ORIGINATES IN THE FUTURE, WHICH MAY ADVERSELY AFFECT THE FUNDS
AVAILABLE TO PAY THE NOTES

        The mortgages trustee is not required to maintain a mortgage indemnity
policy with the insurer. The mortgages trustee has the discretion to contract
for mortgage indemnity guarantee protection from any insurer then providing
mortgage indemnity insurance policies or not at all, subject to prior
agreement with the rating agencies and their confirmation that this will not
affect the then-current ratings of the notes.

        In addition, the seller is not required to maintain the same level of
coverage under mortgage indemnity insurance policies for mortgage loans that
it may originate in the future and assign to the mortgages trust. See "The
mortgage loans - Insurance Policies - MIG Policies" in the prospectus relating
to the notes.

        POSSIBLE REGULATORY CHANGES BY THE OFFICE OF FAIR TRADING AND THE
FINANCIAL SERVICES AUTHORITY MAY HAVE AN IMPACT ON THE SELLER, THE ISSUER
AND/OR THE MORTGAGE LOANS AND MAY ADVERSELY AFFECT THE ISSUER'S ABILITY TO
MAKE PAYMENTS WHEN DUE ON THE NOTES

        In the United Kingdom, the Office of Fair Trading (the "OFT") is
responsible for the issue of licenses under and the enforcement of the
Consumer Credit Act 1974, related consumer credit regulations and other
consumer protection legislation. The OFT may review businesses and operations,
provide guidelines to follow and take actions when necessary with regard to
the mortgage market in the United Kingdom.

        It is currently expected that mortgage lending in the United Kingdom
will become a regulated activity under The Financial Services and Markets Act
2000 ("FSMA"). Although the date for implementation of a scheme to regulate
mortgage related activities ("N3") had initially been August 2002,
announcements by H.M. Treasury in December 2001 that the Financial Services
Authority ("FSA") will also be responsible for the regulation of mortgage
sales (including advising and arranging mortgages) has delayed N3. Under a
revised timetable published by the FSA, N3 is now anticipated to be mid-2004.


                                      26
<PAGE>


        The first draft of the Mortgage Sourcebook, which ultimately will set
specific rules for mortgage lending, was issued by the FSA in June 2001. The
consultation period for the Mortgage Sourcebook ended on September 14, 2001.
In August 2002, the FSA published its feedback on the Mortgage Sourcebook,
which includes its "near final" rules on mortgage lending and administration.
These rules cover start of contract disclosures, post-sale disclosures (annual
statements), rules on contract changes and arrears and repossessions.
Simultaneously, the FSA published its first consultative paper on the FSA's
approach to regulating mortgage sales, which sets out for comment key elements
of the FSA's proposals for regulating mortgage sales and variations (such as
further advances). The closing date for comments on this consultation was
November 11, 2002. In March 2003, the FSA published a consultation paper
covering the changes the FSA is proposing to make to the FSA Handbook relating
to the prudential and authorization requirements for regulated mortgage
activities. The deadline for response to this consultation was June 13, 2003.
The FSA is expected to consult further in the second quarter of 2003 on
conduct of business rules, with a view to publishing final rules in the second
half of 2003.

        In addition, H.M. Treasury published on February 28, 2002 a paper
seeking comments upon the implementation of the FSA regulation of mortgage
sale activities. The comment period for this paper ended on April 30, 2002. In
August 2002, H.M. Treasury published "final" versions of statutory instruments
amending, inter alia, the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001, the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2001 and the Financial Services and Markets Act 2000
(Misleading Statements and Practices) Order 2001 implementing the new
regulatory regime for mortgage related activities.

        When mortgage lending becomes a regulated activity after N3, persons
carrying on any specified mortgage-related activity by way of business will
ordinarily need to be authorized by the FSA under the FSMA. The specified
activities currently are (a) entering into a regulated mortgage contract as
lender, (b) administering a regulated mortgage contract (administrating in
this context means notifying borrowers of changes in mortgage payments and/or
collecting payments due under the mortgage loan) and (c) advising on and
arranging mortgage contracts. Agreeing to carry on any of these activities
will also be a regulated activity. If requirements as to lenders, relevant
brokers, advertising and the authorization of originators are not complied
with, that contract may be unenforceable in whole or in part against the
borrower.

        An unauthorized person who administers a regulated mortgage contract
entered into after N3 may commit an offense, although this will not render the
contract unenforceable against the borrower. An unauthorized person may
arrange for an authorized person to administer mortgage contracts but if that
arrangement comes to an end, that unauthorized person may commit an offense if
it administers the mortgage contracts for more than one month after the
arrangement comes to an end.

        The regime under the FSMA regulating financial promotion will cover
the content and manner of promotion of regulated mortgage products, and by
whom such promotion can be issued or approved.

        Authorized persons engaged in relevant specified activities relating
to regulated mortgage contracts will be obliged to comply with the rules
contained in the final Mortgage Sourcebook when it is published by the FSA.
The exact form of these is not yet certain but they are likely to include
detailed requirements as to the standardized disclosure of information to
customers (before selling a mortgage, on the issue of a mortgage offer and
throughout the term of a mortgage) and the manner in which regulated mortgage
contracts are promoted, originated and administered, including the sale,
transfer or securitization of mortgage contracts. They are also likely to
impose capital and/or credit rating requirements both on administrators of
regulated mortgage contracts and on any person on whose behalf any regulated
mortgage contract is administered. In addition, the new regulations could
affect the seller's ability to contribute or withdraw mortgage loans from the
mortgage portfolio.


                                      27
<PAGE>


        Currently in the United Kingdom, self-regulation of mortgage business
is under the Mortgage Code (the "CML Code") issued by the Council of Mortgage
Lenders (the "CML"). The seller currently subscribes to the CML Code.
Membership of the CML and compliance with the CML Code are voluntary. The CML
Code sets out a minimum standard of good mortgage business practice, from
marketing to lending procedures and dealing with borrowers experiencing
financial difficulties. Since April 30, 1998, lender-subscribers to the CML
Code may not accept mortgage business introduced by intermediaries who are not
registered with (before November 1, 2000) the Mortgage Code Register of
Intermediaries or (on and after November 1, 2000) the Mortgage Code Compliance
Board.

        In March, 2001, the European Commission published a Recommendation to
member states urging their lenders to subscribe to the code issued by the
European Mortgage Federation. On July 26, 2001 the CML decided to subscribe to
the code collectively on behalf of its members. Lenders had until September
30, 2002 to implement the code, an important element of which is provision to
consumers of a "European Standardised Information Sheet" (an "ESIS") similar
to the pre-application illustration proposed by the FSA. Following
postponement of the regulation by the FSA of mortgage business, UK lenders
generally cannot begin to provide ESISs to consumers until N3. The CML has
discussed this with the European Commission and the European Mortgage
Federation. While compliance with the code is voluntary, if the code is not
effective, the European Commission is likely to see further pressure from
consumer bodies to issue a Directive on mortgages.

        No assurance can be given that additional regulations from the OFT,
the FSA or any other regulatory authority will not arise with regard to the
mortgage market in the United Kingdom generally, the seller's particular
sector in that market or specifically in relation to the seller. Any such
action or developments, in particular, but not limited to, the cost of
compliance, may have a material adverse effect on the seller, the issuer
and/or the servicer and their respective businesses and operations. This may
adversely affect the issuer's ability to make payments in full when due on the
notes.

        REGULATIONS IN THE UNITED KINGDOM COULD LEAD TO SOME TERMS OF THE
MORTGAGE LOANS BEING UNENFORCEABLE, WHICH MAY ADVERSELY AFFECT PAYMENTS ON THE
NOTES

        In the United Kingdom, the Unfair Terms in Consumer Contracts
Regulations 1994 apply to all of the mortgage loans that were entered into
between July 1, 1995 and October 1, 1999, and the Unfair Terms in Consumer
Contracts Regulations 1999 ("UTCCR") apply to all of the mortgage loans that
have been entered into since October 1, 1999. These regulations generally
provide that:

        o   a borrower may challenge a term in an agreement on the basis that
            it is an "unfair" term within the regulations and therefore not
            binding on the borrower; and

        o   the Director General of Fair Trading (as head of the OFT) and any
            "qualifying body" (as defined in the regulations) may seek to
            prevent a business from relying on unfair terms.

        This will not generally affect "core terms" which set out the main
subject matter of the contract, such as the borrower's obligation to repay
principal. However, it may affect terms that are not considered to be core
terms, such as the right of the lender to vary the interest rate. For example,
if a term permitting a lender to vary the interest rate is found to be unfair,
the borrower will not be liable to pay the increased rate or, to the extent
that she or he has paid it, will be able, as against the lender or the
mortgages trustee, to claim repayment of the extra interest amounts paid or to
set off the amount of such claim against the amount owing by the borrower
under the mortgage loan. Any such non-recovery, claim or set-off ultimately
may adversely affect the issuer's ability to make payments on the notes such
that the payments on the notes could be reduced or delayed.

        On February 24, 2000, the OFT issued a guidance note on what the OFT
considers to be fair and unfair terms for interest variation in mortgage
contracts. Where the interest variation term does not provide for precise and
immediate tracking of an external rate outside the lender's control, and if


                                      28
<PAGE>


the borrower is locked-in by an early repayment charge that is considered to
be a penalty, the term is likely to be regarded as unfair under the UTCCR
unless the lender (i) notifies the borrower in writing at least 30 days before
the rate change and (ii) permits the borrower to repay the whole loan during
the next three months after the rate change, without paying the early
repayment charge. The seller has reviewed the guidance note and has concluded
that its compliance with it will have no material adverse effect on the
mortgage loans or its business. The guidance note has been withdrawn from the
OFT website and is currently under review by the OFT and the FSA, but there is
no indication as to when this review is likely to be conducted or what
changes, if any may arise from it. In August 2002 the Law Commission for
England and Wales and the Scottish Law Commission published a Joint
Consultation Paper proposing changes to the UTCCR, including harmonizing
provisions of the UTCCR and the Unfair Contract Terms Act 1977, applying the
UTCCR to business-to-business contracts and revising the UTCCR to make it
"clearer and more accessible". The closing date for comments on this
consultation was November 8, 2002 and a final report (together with a Bill) is
expected by 2004. No assurances can be given that changes to the UTCCR, if
implemented, will not have an adverse effect on the seller, the issuer and/or
the administrator.

        THE MORTGAGES TRUSTEE'S ENTITLEMENT TO BE INDEMNIFIED FOR LIABILITIES
UNDERTAKEN DURING THE ENFORCEMENT PROCESS MAY ADVERSELY AFFECT THE FUNDS
AVAILABLE TO FUNDING TO PAY AMOUNTS DUE UNDER THE INTERCOMPANY LOAN, WHICH MAY
IN TURN ADVERSELY AFFECT THE FUNDS AVAILABLE TO PAY THE NOTES

        In order to enforce a power of sale in respect of a mortgaged
property, the relevant mortgagee (which may be Northern Rock, the mortgages
trustee or any receiver appointed by the security trustee) must first obtain
possession of the mortgaged property unless the property is vacant. Possession
is usually obtained by way of a court order although this can be a lengthy
process and the mortgagee must assume certain risks. Each of the mortgages
trustee and the security trustee and any receiver appointed by it is entitled
to be indemnified to its satisfaction against personal liabilities which it
could incur if it were to become a mortgagee in possession before it is
obliged to seek possession, provided that it is always understood that the
security trustee is never obliged to enter into possession of the mortgaged
property.

        PROPOSALS FOR A NEW WITHHOLDING TAX DIRECTIVE IN THE EUROPEAN UNION
MAY, IF APPROVED, PREVENT YOU FROM RECEIVING INTEREST ON THE NOTES IN FULL

        On March 19, 2003, the EU Council of Economic and Finance Ministers
discussed the adoption of a new directive regarding the taxation of savings
income. It is proposed that Member States will be required to provide to the
tax authorities of another Member State details of payments of interest or
other similar income paid by a person within its jurisdiction to an individual
resident in that other Member State; however, Austria, Belgium and Luxembourg
will instead operate a withholding tax system for a transitional period in
relation to such payments (the ending of such transitional period being
dependent upon the conclusion of certain other agreements relating to
information exchange within certain other countries). Additionally, it was
agreed by the EU Council of Economic and Finance Ministers that the adoption
of the proposals by the European Union would require certain other non-member
state countries to adopt a similar system of withholding tax on such payments.
The proposed directive, which is proposed to come into force on 1 January
2005, is not yet final, and may be subject to further amendment and/or
clarification. If any Member State through which a payment of interest on the
notes is made or collected opts for a withholding system, this may prevent you
from receiving interest on the notes in full.

        TAX PAYABLE BY FUNDING AND THE ISSUER MAY ADVERSELY AFFECT THE
ISSUER'S ABILITY TO MAKE PAYMENTS ON THE NOTES

        As explained in "Material United Kingdom tax consequences", Funding
and the issuer will generally be subject to UK corporation tax, currently at a
rate of 30%, on the profit reflected in their


                                      29
<PAGE>


respective profit and loss accounts as increased by the amount of any expenses
or losses which are not deductible for the purposes of UK corporation tax. If
the tax payable by Funding or the issuer is greater than expected because, for
example, expenses or losses which are not so deductible are greater than
expected, the funds available to make payments on the notes could be
materially reduced and this could have a material adverse effect on the
issuer's ability to make payments on the notes.

        IF THE UNITED KINGDOM JOINS THE EUROPEAN MONETARY UNION PRIOR TO THE
MATURITY OF THE NOTES, THE ISSUER CANNOT ASSURE YOU THAT THIS WOULD NOT
ADVERSELY AFFECT PAYMENTS ON THE NOTES

        It is possible that prior to the maturity of the notes the United
Kingdom may become a participating member state in the European economic and
monetary union and the euro may become the lawful currency of the United
Kingdom. In that event, (a) all amounts payable in respect of any notes
denominated in pounds sterling may become payable in euro; (b) applicable
provisions of law may allow or require the issuer to re-denominate such notes
into euro and take additional measures in respect of such notes; and (c) the
introduction of the euro as the lawful currency of the United Kingdom may
result in the disappearance of published or displayed rates for deposits in
pounds sterling used to determine the rates of interest on such notes or
changes in the way those rates are calculated, quoted and published or
displayed. The introduction of the euro could also be accompanied by a
volatile interest rate environment which could adversely affect a borrower's
ability to repay its loan as well as adversely affect investors. It cannot be
said with certainty what effect, if any, adoption of the euro by the United
Kingdom will have on investors in the notes.

        CHANGES OF LAW MAY ADVERSELY AFFECT YOUR INTERESTS

        The structure of the issue of the notes and the ratings which are to
be assigned to them are based on English law in effect as at the date of the
prospectus relating to the notes. The issuer cannot provide assurance as to
the impact of any possible change to English law or administrative practice in
the United Kingdom after the date of this Annual Report. In particular, you
should note that significant changes to the English insolvency regime have
recently been enacted, although not all these provisions have yet been brought
into effect. This includes the Insolvency Act 2000, and in particular, the
exception of the moratorium provisions (as described below), which came into
force in January 2003. The Insolvency Act 2000 allows certain "small"
companies (which are defined by reference to certain tests relating to a
company's balance sheet, turnover and average number of employees) to seek
protection from their creditors for a period of 28 days for the purpose of
putting together a company voluntary arrangement with the option for the
creditors to extend the moratorium for a further two months. The position as
to whether or not a company is a "small" company may change from period to
period and consequently no assurance can be given that the issuer, the
mortgages trustee or Funding will, at any given time, be determined to be a
"small" company. The Secretary of State for Trade and Industry may by
regulation modify the eligibility requirements for "small" companies and can
make different provisions for different cases. In this respect, the Government
White Paper, "Modernising Company Law," issued on July 16, 2002, included a
proposal to increase the limits for the definition of a small company to the
EU maximum ((pound)2.8 million turnover, (pound)1.4 million balance sheet
total, 50 employees). No assurance can be given that any such modification or
different provisions will not be detrimental to the interests of investors.
The Government has published a Regulation (the Insolvency Act 1986 (Amendment)
(No.3) Regulations 2002) (the "Regulation") which excludes certain companies
from the optional moratorium provisions. A company will be excluded from the
optional moratorium provisions if (a) it is party to an agreement which is or
forms part of a capital market arrangement (as defined in the Regulation), it
incurs or is expected to incur a debt of at least (pound)10 million under the
arrangement and the arrangement involves the issue of a capital market
investment (as defined in the Regulation) or (b) it incurs a liability (which
is broadly defined) under an agreement of at least (pound)10 million.

        In addition, on November 7, 2002, the Enterprise Act (the "Act")
received Royal Assent. This legislation contains significant reforms of
personal and corporate insolvency law. These reforms, which we expect to be
brought into force in June or July 2003, will restrict the right of the holder
of a


                                      30
<PAGE>


floating charge to appoint an administrative receiver and instead give primacy
to collective insolvency procedures and in particular administration. The
Government's aim is that, rather than having primary regard to the interests
of secured creditors, any insolvency official should have regard to the
interests of all creditors, both secured and unsecured, and the primary
emphasis will be on rescuing the company. Presently, the holder of a floating
charge over the whole or substantially the whole of the assets of a company
has the ability to block the appointment of an administrator by appointing an
administrative receiver, who primarily acts in the interests of the floating
charge holder, though there are residual duties to the company and others
interested in the equity of redemption.

        The Act states that the holder of a valid and enforceable floating
charge over the whole or substantially the whole of a company's property will
be able to appoint an administrator of his choice, and that (if no winding-up
order had been made or provisional liquidator appointed) such appointment can
be made without going to court. However, the administrator will be acting for
the creditors generally and not just his appointor.

        Directors of companies will also be able to use the out of court route
to place the company in administration. There will be a notice period during
which the holder of the floating charge can either agree to the proposed
appointment by the directors or appoint an alternative administrator, although
the moratorium will take effect immediately after notice was given. If the
floating charge holder does not respond to the notice of intention to appoint,
the company's appointee will automatically take office after the notice period
has elapsed.

        The Act states that the purpose of administration will be to rescue
the company, or, where that is not reasonably practicable, to achieve a better
result for the company's creditors as a whole than would be likely if the
company were wound up, or, where neither of the above purposes are reasonably
practicable, to realize property in order to make a distribution to one or
more secured or preferential creditors. These purposes could conflict with the
wishes or interests of noteholders. Nevertheless, the Act makes it clear that
the administrators' statement of proposals cannot include an action that
affects the right of a secured creditor to enforce his security.

        In a press notice issued by the Department of Trade and Industry on
November 9, 2001, the Secretary of State for Trade and Industry confirmed that
the Government's proposed abolition of administrative receivership would not
apply to corporate lending agreements pre-dating the commencement of the
relevant provisions, and that the current insolvency law provisions would
continue to apply to such lending agreements supported by a floating charge. A
"reassurance" was given that the Act would not apply retrospectively while the
Act was at the committee stage in the House of Commons. Therefore, if the
security granted by the issuer and Funding is created before the relevant
provisions of the Act come into force, the new provisions should not prevent
administrative receivers being appointed under the security.

        The Act also provides that the abolition of administrative
receivership will not extend to certain capital market arrangements. The
current wording of the relevant exemption provides that, in broad terms, to
fall within this exemption, the arrangement must involve a party incurring or
expecting to incur a debt of at least (pound)50 million (or, when the
agreement was entered into, it was expected to incur a debt of at least
(pound)50 million) and the issue of a capital market investment that is rated,
listed or traded or designed to be rated, listed or traded. The current
wording provides that an arrangement is a "capital market arrangement" if (a)
it involves a grant of security to a person holding it as a trustee for a
person who holds a capital market investment issued by a party to the
arrangement; or (b) at least one party guarantees the performance of
obligations of another party; or (c) at least one party provides security in
respect of the performance of obligations of another party; or (d) the
arrangement involves an investment of a kind described in articles 83 to 85 of
the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001
(options, futures and contracts for differences). The Secretary of State for
Trade and Industry is given the power to modify the exceptions by secondary
legislation and the Government has indicated that changes will be made to the
capital market exception before the Act comes into force.


                                      31
<PAGE>


        As the Government has indicated that the changes to be brought about
by the Act will not affect security created before the relevant provisions of
the Act come into force, the Act should not affect the ability of the security
trustee to enforce the security granted by each issuer and Funding and the
remedies available to it in enforcing the security, as such security was
created before the date the relevant provisions of the Act were brought into
force. However, as the Act does not expressly state that the existing
administrative receivership regime will be available in respect of security
created before the relevant provisions come into force, no assurance can be
given as to whether the Act could have a detrimental effect on the
transactions described in the prospectus relating to the notes or on the
interests of noteholders.

        YOUR INTERESTS MAY BE ADVERSELY AFFECTED BY A CHANGE OF LAW IN
RELATION TO UK WITHHOLDING TAX

        In the event that amounts due under the notes are subject to
withholding tax, the issuer will not be obliged to pay additional amounts in
relation thereto. The applicability of any UK withholding tax under current
English law is discussed under "Material United Kingdom tax consequences" in
the prospectus relating to the notes.

        PROPOSED CHANGES TO THE BASEL CAPITAL ACCORD AND THE RISK WEIGHTED
ASSET FRAMEWORK MAY RESULT IN CHANGES TO THE RISK-WEIGHTING OF THE NOTES

        The Basel Committee on Banking Supervision has issued proposals for
reform of the 1988 Capital Accord and has proposed a framework which places
enhanced emphasis on market discipline. The consultation period on the initial
proposals ended in March 2000 and the Committee published its second
consultation document, the "New Basel Capital Accord", on January 16, 2001.
The consultation period on the further proposals contained in the New Basel
Capital Accord ended on May 31, 2001. Although the Basel Committee had
announced previously that it would release a revised proposal in early 2002,
this has now been delayed pending the completion of a review assessing the
overall impact of the proposals on banks and the banking system. On October 1,
2002, the Basel Committee launched a comprehensive field test for banks of its
revised proposals known as the quantitative impact study, or QIS3, which is
focussed on the minimum capital requirements under pillar one of the New Basel
Capital Accord. The survey period ended on December 20, 2002. It is
anticipated that the revised proposals will be issued for public comment in
the second quarter of 2003. The Committee intends to finalize the New Basel
Capital Accord in the fourth quarter of 2003, allowing for implementation of
the new framework in each country at year end 2006. If adopted in their
current form, the proposals could affect risk weighting of the notes in
respect of certain investors if those investors are regulated in a manner
which will be affected by the proposals. Consequently, you should consult your
own advisers as to the consequences to and effect on you of the potential
application of the New Basel Capital Accord proposals. The issuer cannot
predict the precise effects of potential changes which might result if the
proposals were adopted in their current form.

        YOU WILL NOT RECEIVE PHYSICAL NOTES, WHICH MAY CAUSE DELAYS IN
DISTRIBUTIONS AND HAMPER YOUR ABILITY TO PLEDGE OR RESELL THE NOTES

        Unless the global note certificates are exchanged for individual note
certificates, which will only occur under a limited set of circumstances, your
beneficial ownership of the notes will only be registered in book-entry form
with DTC, Euroclear or Clearstream, Luxembourg. The lack of physical notes
could, among other things:

        o   result in payment delays on the notes because the issuer will be
            sending distributions on the notes to DTC instead of directly to
            you;

        o   make it difficult for you to pledge or otherwise grant security
            over the notes if physical notes are required by the party
            demanding the pledge or other security; and


                                      32
<PAGE>


        o   hinder your ability to resell the notes because some investors may
            be unwilling to buy notes that are not in physical form.

        IF YOU HAVE A CLAIM AGAINST THE ISSUER OF THE NOTES HELD BY YOU, IT
MAY BE NECESSARY FOR YOU TO BRING SUIT AGAINST THE ISSUER IN ENGLAND TO
ENFORCE YOUR RIGHTS

        The issuer has agreed to submit to the non-exclusive jurisdiction of
the courts of England, and it may be necessary for you to bring a suit in
England to enforce your rights against the issuer.

ITEM 4.  INFORMATION ON THE COMPANY

        A.      History and development of the company.

        The issuer
        ----------

        The issuer was incorporated in England and Wales as a public company
limited by shares under the Companies Act 1985 on July 11, 2002 with
registered number 4482804. The registered office of the issuer is at Fifth
Floor, 100 Wood Street, London EC2V 7EX, England. The issuer issued the notes
on September 23, 2002. Information concerning the notes can be found in the
various filings made by the issuer with the SEC on Form 6-K listed in Item 3,
Sub-part A above, which have been incorporated herein by reference and are
attached hereto as exhibits.

        Funding
        -------

        Funding was incorporated as a private limited company in Jersey,
Channel Islands on February 14, 2001 with registered number 79308. The
registered office of Funding is at 22 Grenville Street, St. Helier, Jersey JE4
8PX, Channel Islands. Funding has been registered, under Schedule 21A to the
Companies Act 1985, as having established a branch in England and Wales on
February 19, 2001. Its registered overseas company number is FC022999 and
branch number is BR005916. The branch address is at 4 Royal Mint Court, London
EC3N4HJ. Funding entered into the intercompany loan agreement with the issuer
on September 23, 2002.

        The mortgages trustee
        ---------------------

        The mortgages trustee was incorporated as a private limited company in
Jersey, Channel Islands on February 14, 2001 with registered number 79309. The
registered office of the mortgages trustee is at 22 Grenville Street, St.
Helier, Jersey JE4 8PX, Channel Islands.

        B.      Business overview.

        The issuer
        ----------

        The issuer is mostly passive. The issuer's activities principally
comprise the issue of the notes, the making of the intercompany loan to
Funding pursuant to the intercompany loan agreement, the entering into all
documents relating to such issue and such intercompany loan to which it is
expressed to be a party and the exercise of related rights and powers and
other activities referred to in the prospectus relating to the notes or
reasonably incidental to those activities.

        Funding
        -------

        Funding is mostly passive. Funding's activities principally comprise
the establishment of new issuers, the entering into the first issuer
intercompany loan agreement with the first issuer, the entering into the
second issuer intercompany loan agreement with the second issuer, the entering
into the third issuer intercompany loan agreement with the third issuer, the
entering into the intercompany


                                      33
<PAGE>


loan agreement with the issuer, the entering into an intercompany loan
agreement (the "fifth issuer intercompany loan agreement") with Granite
Mortgages 03-1 plc (the "fifth issuer"), the entering into an intercompany
loan agreement (the "sixth issuer intercompany loan agreement") with Granite
Mortgages 03-2 plc (the "sixth issuer"), the entering into new intercompany
loan agreements with any new issuers, the entering into all documents relating
to the establishment of new issuers and relating to the intercompany loans
made by the previous issuers, the issuer and any new issuer to which it is
expressed to be a party and the exercise of related rights and powers and
other activities referred to in the prospectus relating to the notes (such
prospectus contained in the Granite Mortgages 02-2 plc Registration Statement,
applying for a standard license under the Consumer Act 1974, applying for
registration under the Data Protection Acts 1984 and 1998 and other matters
which are incidental or ancillary to those activities.

        The mortgages trustee
        ---------------------

        The mortgages trustee is mostly passive. The mortgages trustee's
activities principally comprise those activities incidental to the settlement
of the trust property on the mortgages trustee, the holding of the trust
property on trust for the seller and Funding under the terms of the mortgages
trust deed, the authorization of the transaction documents to which it is a
party relating to the previous notes, the notes and the notes issued by the
fifth issuer and the sixth issuer, applying for a standard license under the
Consumer Credit Act 1974, filing a notification under the Data Protection Act
1998 and other matters which are incidental or ancillary to those activities.

        C.     Organizational structure.

        The issuer
        ----------

        The issuer is organized as a special purpose company and has no
subsidiaries. The issuer's authorized share capital comprises 50,000 ordinary
shares of (pound)1 each. The issuer's issued share capital comprises 50,000
ordinary shares of (pound)1 each, all of which are beneficially owned by
Funding. The seller does not own directly or indirectly any of the share
capital of the issuer.

        Funding
        -------

        Funding is organized as a special purpose company and has no
subsidiaries other than the previous issuers, the issuer, the fifth issuer and
the sixth issuer, although it is expected that, subject to certain conditions,
Funding will establish new issuers from time to time to issue new notes. Each
such new issuer will be a subsidiary of Funding. The authorized share capital
of Funding as at December 31, 2002 comprised 100,000 ordinary shares of
(pound)1 each. The issued share capital of Funding as at December 31, 2002
comprised 62,500 ordinary shares of (pound)1 each, all of which are
beneficially owned by Granite Finance Holdings Limited ("Holdings"). The
seller does not own directly or indirectly any share capital of Funding.

        The mortgages trustee
        ---------------------

        The mortgages trustee is organized as a special purpose company and
has no subsidiaries. The authorized share capital of the mortgages trustee as
at December 31, 2002 comprised 10,000 ordinary shares of (pound)1 each. The
issued share capital of the mortgages trustee as at December 31, 2002
comprised 10 ordinary shares of (pound)1 each, all of which are beneficially
owned by Holdings. The seller does not own directly or indirectly any share
capital of the mortgages trustee.

        D.      Property, plants and equipment.

        The issuer
        ----------


                                      34
<PAGE>


        The property of the issuer consists of its rights and claims in
respect of all security and other rights held on trust by the security trustee
pursuant to the Funding deed of charge, its right, title and interest and
benefit in the transaction documents to which it is a party, including the
intercompany loan agreement, the Funding deed of charge, and each of the
foregoing agreements to which the issuer is a party: the related swap
agreement, the related paying agent and agent bank agreement, the related
subscription agreement, the related underwriting agreement, the related
corporate services agreement, the issuer bank account agreement, the issuer
cash management agreement, the issuer trust deed, its right, title and
interest and benefit in the issuer transaction accounts and each other account
(if any) of the issuer, and all amounts standing to the credit of those
accounts (including all interest earned on such amounts) and its right, title,
interest and benefit in all authorized investments made by or on behalf of the
issuer, including all monies and income payable under those investments.

        Funding
        -------

        The property of Funding consists of its interest in the trust property
held by the mortgages trustee together with amounts available under the
Funding reserve fund and (in specified circumstances and for specified
purposes) the first issuer's reserve fund, the second issuer's reserve fund,
the third issuer's reserve fund, the issuer's reserve fund, the fifth issuer's
reserve fund, the sixth issuer's reserve fund, the first issuer's liquidity
reserve fund (if required to be established), the second issuer's liquidity
reserve fund (if required to be established), the third issuer's liquidity
reserve fund (if required to be established), the issuer's liquidity reserve
fund (if required to be established), the fifth issuer's liquidity reserve
fund (if required to be established) and the sixth issuer's liquidity reserve
fund (if required to be established) and its right to receive certain payments
of principal and interest from the trust property controlled by the mortgages
trustee.

        The mortgages trustee
        ---------------------

        The trust property includes the mortgage portfolios and the related
security that the seller has assigned to the mortgages trustee on March 26,
2001, September 28, 2001, March 20, 2002, September 23, 2002, January 27,
2003, April 14, 2003 and each interim assignment date, and will also include
each new mortgage portfolio and the related security that the seller assigns
to the mortgages trustee in the future, including any permitted replacement
mortgage loan in respect of any permitted product switch and any income
generated by the mortgage loans or their related security on or after the
relevant assignment date for the relevant mortgage portfolio (excluding third
party amounts and any early repayment charges which the mortgages trustee has
re-assigned to the seller). In addition, redraws made under flexible mortgage
loans assigned to the mortgages trustee also form part of the trust property.
The trust property also includes any contribution paid by either beneficiary
to the mortgages trustee (until the relevant funds are applied by the
mortgages trustee in accordance with the mortgages trust deed) and any money
in the mortgages trustee transaction account and the mortgages trustee
guaranteed investment contract, or GIC account. The mortgages trustee GIC
account is the bank account in which the mortgages trustee holds any cash that
is part of the trust property until it is distributed to the beneficiaries.
The composition of the trust property fluctuates as drawings under flexible
mortgage loans and new mortgage loans are added and as the mortgage loans that
were previously part of the trust property are repaid, mature, default or are
repurchased by the seller.

Item 5. Operating and Financial Review and Prospects

        A.      Operating results.

                Not Applicable

        B.      Liquidity and capital resources.

                Not Applicable


                                      35
<PAGE>


        C.      Research and development, patents and licenses, etc.

                Not Applicable

        D.      Trend information.

                Not Applicable

Item 6.  Directors, Senior Management and Employees

        A.      Directors and senior Management.

        The following sets out the names, business addresses and business
occupations of the directors of the issuer, Funding and the mortgages trustee.
Because each of the issuer, Funding and the mortgages trustee is organized as
a special purpose company and are largely passive, it is expected that the
directors of each entity in that capacity will manage its operations to the
extent necessary.

        The issuer
        ----------

        The directors of the issuer and their respective business addresses
and principal activities or business occupations are:

<TABLE>
<CAPTION>

                                                                        Principal Activities/Business
Name                              Business Address                      Occupation
---------------------             -------------------------------       ------------------------------
<S>                               <C>                                   <C>
Keith McCallum Currie             Northern Rock House                   Treasury Director of
                                  Gosforth                              Northern Rock plc
                                  Newcastle upon Tune
                                  NE3 4PL


L.D.C. Securitisation             Fifth Floor                           Acting as corporate
Director No. 1 Limited            100 Wood Street                       directors of special
                                  London                                purposes companies
                                  EC2V 7EX

L.D.C. Securitisation             Fifth Floor                           Acting as corporate
Director No. 2 Limited            100 Wood Street                       directors of special
                                  London                                purposes companies
                                  EC2V 7EX
</TABLE>


        Keith McCallum Currie is an employee of the seller.

        The company secretary of the issuer is:

Name                            Business Address
-------------------------       -----------------------------------------------
Law Debenture Corporate         Fifth Floor, 100 Wood Street, London EC2V 7EX
Services Limited


        The directors of L.D.C. Securitisation Director No. 1 Limited and
L.D.C. Securitisation Director No. 2 Limited and their principal activities or
business occupations are:

<TABLE>
<CAPTION>

                                                                        Principal Activities/Business
Name                              Business Address                      Occupation
---------------------             -------------------------------       ------------------------------
<S>                               <C>                                   <C>
Law Debenture                     Fifth Floor, 100 Wood Street,         Provision of directors for special


                                      36
<PAGE>


Securitisation Services           London EC2V 7EX                        purpose vehicles
Limited
</TABLE>


        The affairs of L.D.C. Securitisation Director No. 1 Limited., L.D.C.
Securitisation Director No. 2 Limited and Law Debenture Securitisation
Services Limited are represented by, among others, Denyse Monique Anderson,
Julian Robert Mason-Jebb, David Frank Norris and Robert James Williams each of
whose business address is at Fifth Floor, 100 Wood Street, London EC2V 7EX and
(other than Robert James Williams) each of whose principal activities are as
director of The Law Debenture Trust Corporation p.l.c. The principal activity
of Robert James Williams is director of The Law Debenture Corporation p.l.c.


                                      37
<PAGE>


        Funding
        -------

        The directors of Funding and their respective business addresses and
principal activities or business occupations are:

<TABLE>
<CAPTION>

                                                                        Principal Activities/Business
Name                              Business Address                      Occupation
---------------------             -------------------------------       ------------------------------
<S>                               <C>                                   <C>
Keith McCallum Currie             Northern Rock House                   Treasury Director of
                                  Gosforth                              Northern Rock plc
                                  Newcastle upon Tune
                                  NE3 4PL

Nigel Charles Bradley             4 Royal Mint Court                    Director
                                  London
                                  EC3N 4HJ

Jonathan David Rigby              4 Royal Mint Court                    Advocate
                                  London
                                  EC3N 4HJ
</TABLE>


        Keith McCallum Currie is an employee of the seller.

        The company secretary of Funding is:

Name                              Business Address
----------------------------      ---------------------------------------------
Mourant & Co. Capital             4 Royal Mint Court
Secretaries Limited               London
                                  EC3N 4HJ


        The mortgages trustee
        ---------------------

        The directors of the mortgages trustee and their respective business
addresses and principal activities or business occupations are:

<TABLE>
<CAPTION>

                                                                        Principal Activities/Business
Name                              Business Address                      Occupation
---------------------             -------------------------------       ------------------------------
<S>                               <C>                                   <C>
Nicola Claire Davies              22 Grenville Street,                  Advocate
                                  St. Helier
                                  Jersey JE4 8PX
                                  Channel Islands

Julia Anne Jennifer Chapman       22 Grenville Street,                  Solicitor
                                  St. Helier
                                  Jersey JE4 8PX
                                  Channel Islands

Richard Gough                     22 Grenville Street,                  Corporate Services Manager
                                  St. Helier
                                  Jersey JE4 8PX
                                  Channel Islands

Daniel Le Blancq                  22 Grenville Street,                  Business Manager
                                  St. Helier
                                  Jersey JE4 8PX
                                  Channel Islands
</TABLE>


                                      38
<PAGE>



       The company secretary of the mortgages trustee is:


Name                              Business Address
-----------------------------     ---------------------------------------------
Mourant & Co. Secretaries         22 Grenville Street,
Limited                           St. Helier
                                  Jersey JE4 8PX
                                  Channel Islands
        B.     Compensation.

        The issuer
        ----------

        In accordance with each corporate services agreement entered into
between the issuer, the seller and Law Debenture Securitization Services
Limited, the seller and Law Debenture Securitization Services Limited will
each provide directors and other corporate services for the issuer in
consideration for the payment of a separate annual fee payable by the issuer
to Law Debenture Securitization Services Limited. No other remuneration is
paid to any director or officer in connection with such director's or
officer's activities on behalf of the issuer.

        Funding
        -------

        Jonathan Rigby is an associate of Mourant du Feu & Jeune, the legal
adviser to Funding as to matters of Jersey law. Nigel Bradley and Jonathan
Rigby are employees of the Mourant Group, which is the ultimate owner of
Mourant & Co. Capital Secretaries Limited, to which fees are payable for
providing corporate administration services to Funding, including the
provision of a secretary through its subsidiary company, Mourant & Co. Capital
Secretaries Limited, and Nigel Bradley is a director of both Mourant & Co.
Capital (SPV) Limited and Mourant & Co. Capital Secretaries Limited. No other
remuneration is paid to any director or officer in connection with such
director's or officer's activities on behalf of Funding.

        The mortgages trustee
        ---------------------

        Each of Nicola Davies and Julia Chapman is a partner of Mourant du Feu
& Jeune, the legal adviser to the mortgages trustee as to matters of Jersey
law, and each is a partner of the Mourant Group, the ultimate owner of Mourant
& Co. Limited, to which fees are payable for providing corporate
administration services to the mortgages trustee, including the provision of a
secretary through its subsidiary company, Mourant & Co. Secretaries Limited.
Each of Nicola Davies and Julia Chapman is a director of Mourant & Co. Limited
and Mourant & Co. Secretaries Limited. Each of Richard Gough and Daniel Le
Blancq is an employee of the Mourant Group and Richard Gough is an associate
director of Mourant & Co. Limited, the parent company of Mourant & Co.
Secretaries Limited. No other remuneration is paid to any director or officer
in connection with such director's or officer's activities on behalf of the
mortgages trustee.

        C.     Board practices.

               Not Applicable

        D.     Employees.

               None of the issuer, Funding or the mortgages trustee has any
employees.

        E.     Share ownership.


                                      39
<PAGE>


               Not Applicable

Item 7.  Major Shareholders and Related Party Transactions

        A.     Major shareholders.

        The issuer
        ----------

        The issuer is wholly owned by Funding.

        Funding
        -------

        Funding is wholly owned by Holdings.

        The mortgages trustee
        ---------------------

        The mortgages trustee is wholly owned by Holdings.

        B.      Related party transactions.

        Parties are considered to be related if one party has the ability to
control the other party or exercise significant influence over the other party
in making financial or operational decisions. The issuer is a subsidiary of
Funding and therefore is a related party. The issuer has made an intercompany
loan to Funding. The proceeds of the intercompany loan were used by Funding to
purchase additional beneficial interests in the trust property held on trust
by the mortgages trustee for the benefit of the beneficiaries. The
intercompany loan is repaid by Funding from amounts received by Funding from
its beneficial interest in the trust property. Amounts received by the issuer
from Funding under the intercompany loan are used by the issuer to make
payments of interest and principal under the notes.

        The issuer
        ----------

        The issuer is a special purpose company and is controlled by its board
of directors, which consists of three directors. Two of the issuer's three
directors are provided by Law Debenture Corporate Services Limited, the
principal activity of which is providing directors and corporate management
for special purpose companies. The third director of the issuer is an employee
of Northern Rock plc. The issuer pays a separate corporate services fee to Law
Debenture Corporate Services Limited in connection with its provision of
corporate management services pursuant to separate corporate services
agreements entered into by the issuer and the corporate services provider. The
fees payable to these directors for providing their services are immaterial in
the context of this Annual Report.

        The total amount paid by the issuer to Northern Rock plc as cash
management fees from September 23, 2002 through December 31, 2002 was
(pound)0. Although one of the three directors of the issuer is an employee of
Northern Rock plc, Northern Rock plc does not own any share capital of the
issuer.

        Funding
        -------

        Funding, which is a special purpose company, is controlled by its
board of directors, which consists of three directors. Two of Funding's three
directors are provided by Mourant & Co. Capital (SPV) Limited, the principal
activity of which is providing directors and corporate management for special
purpose companies. The third director of Funding is an employee of Northern
Rock plc. Funding pays a corporate services fee pursuant to a corporate
services agreement to Mourant & Co. Capital (SPV) Limited in connection with
its provision of corporate management services. The fees


                                      40
<PAGE>


payable to these directors for providing their services are immaterial in the
context of this Annual Report.

        The total amount paid by Funding to Northern Rock plc as cash
management fees from March 20, 2002 through December 31, 2002 was
(pound)74,795 (or approximately $44,7614). Although one of the three directors
of Funding is an employee of Northern Rock plc, Northern Rock plc does not own
any share capital of Funding.

        Northern Rock plc provides the interest rate swaps in connection with
the notes. Northern Rock plc is one of a number of counterparties used by the
issuer in the normal course of their business. Any transaction undertaken by a
counterparty is carried out at arms length and on commercial terms and
conditions. Northern Rock plc does not hold any share capital of Funding.

        The mortgages trustee
        ---------------------

        The mortgages trustee, which is a special purpose company, is
controlled by its board of directors, which consists of four directors. Two of
the mortgages trustee's four directors are partners of Mourant du Feu & Jeune,
the legal adviser to the mortgages trustee as to matters of Jersey law, and
are partners of the Mourant Group, the ultimate owner of Mourant & Co. Limited
to which fees are payable for providing corporate administration services to
the mortgages trustee, including the provision of a secretary through its
subsidiary company, Mourant & Co. Secretaries Limited. These same two
directors also serve as directors for both Mourant & Co. Limited and Mourant &
Co. Secretaries Limited. The other two directors are employees of the Mourant
Group and one of the other two directors is an associate director of Mourant &
Co. Limited, the parent company of Mourant & Co. Secretaries Limited. The fees
payable to these directors for providing their services are immaterial in the
context of this Annual Report.

        The total amount paid by the mortgages trustee to Northern Rock plc as
fees for administering the mortgage portfolio from March 20, 2002 through
December 31, 2002 was (pound)5,168,786 (or approximately $3,093,229(4)).
Northern Rock plc does not own any share capital of the mortgages trustee.

        C.      Interests of experts and counsel.

        Not Applicable to Annual Reports Filed on Form 20-F

Item 8.  Financial Information

        Not Applicable.

        In addition, each of regular quarterly noteholder reports listed in
Item 3, Sub-part D above sets forth for the prior quarter, as well as
cumulatively, all of the relevant financial information required by the issuer
trust deed to be reported to noteholders.

Item 9.  The Offer and Listing.

        A.      Offer and listing details.

        Not Applicable

        B.      Plan of distribution.



-------------------------
(4) This translation of pounds sterling into US dollars was made at a rate of
(pound)0.5984 = $1.00 which was the sterling/dollar exchange rate as reported
in the Financial Times as of June 25, 2003.


                                      41
<PAGE>


        Not Applicable to Annual Reports Filed on Form 20-F

        C.      Markets.

        The principal trading market for each class of notes is the London
Stock Exchange. The notes have been listed on the London Stock Exchange since
September 23, 2002.

        D.      Selling shareholders.

        Not Applicable to Annual Reports Filed on Form 20-F

        E.      Dilution.

        Not Applicable to Annual Reports Filed on Form 20-F

        F.      Expenses of the issue.

        Not Applicable to Annual Reports Filed on Form 20-F

Item 10.  Additional Information

        A.      Share capital.

        Not Applicable to Annual Reports Filed on Form 20-F

        B.      Memorandum and articles of association.

        The memorandum and articles of association for each of the issuer,
Funding and the mortgages trustee are incorporated by reference from the
Granite Mortgages 02-2 Registration Statement. Please also see the description
of the issuer, Funding and the mortgages trustee set forth in the Granite
Mortgages 02-2 Registration Statement.

        C.      Material contracts

        Not applicable other than with respect to contracts relating to the
notes, which were described in the Granite Mortgages 02-2 Registration
Statement.

        D.      Exchange controls.

        None

        E.      Taxation.

        United Kingdom Taxation
        -----------------------

        The following section summarizes the material UK tax consequences of
the purchase, ownership and disposition of the notes based on current law and
practice in the UK. Sidley Austin Brown & Wood, UK tax advisers to the issuer
("UK tax counsel"), has prepared and reviewed this summary and the opinions of
UK tax counsel are contained in this summary. The summary assumes that the
representations made by each of Funding, the issuer to UK tax counsel that the
profit in Funding's profit and loss account will not exceed 0.01% of the
Funding available revenue receipts, that the profit in the issuer's profit and
loss account will not exceed 0.01% of the interest on the intercompany loan
are correct. It further assumes that all payments made pursuant to the final
documentation in relation to the issuance of the notes are calculated on arms'
length terms. The summary does not purport to be a complete analysis of all
tax considerations of the purchase, ownership and disposition of the notes. It
relates to the position of persons who are the absolute


                                      42
<PAGE>


beneficial owners of notes such as individuals, partnerships and non-financial
trade corporate entities, and may not apply to certain classes of persons such
as financial trade corporate entities (such as banks, securities dealers and
securities brokers), investment managers, insurance companies, pension funds
and UK unit investment trusts. UK tax counsel suggests that you consider
consulting your own tax adviser if you are uncertain of your current tax
position.

        Taxation of US residents

        As discussed in more detail under "Withholding tax" below, UK tax
counsel is of the opinion that a noteholder who is resident in the US for US
tax purposes may obtain payment of interest on his notes without deduction of
UK tax if and for so long as the notes are listed on a "recognised stock
exchange". If the notes cease to be listed on a recognised stock exchange, an
amount must be withheld on account of UK income tax at the lower rate
(currently 20%), subject to any direction to the contrary from the Inland
Revenue in respect of such relief as may be available pursuant to the
provisions of an applicable double taxation treaty.

        Residents of the US are generally not subject to tax in the UK on
payments on the notes under the double taxation treaty between the US and the
UK currently in force, subject to completion of administrative formalities,
except where the notes are effectively connected with a permanent
establishment or a fixed base of the noteholder situated in the UK or the
noteholder is exempt from tax in respect of income on the notes in the US and
the noteholder sells or makes a contract to sell the holding from which such
income is derived within three months of the date on which the noteholder
acquired the holding.

        A new double taxation treaty has been negotiated between the UK and
the US, the relevant provisions of which will apply to payments on the notes
made on or after the first day of the second month next following the date on
which the new treaty enters into force. The new double taxation treaty must be
ratified by both the UK Parliament and the US Senate before it can enter into
force and it is not known when these procedures will be completed. The new
double taxation treaty does not contain the specific exception referred to in
the previous paragraph in respect of a noteholder that is exempt from tax.
However, the benefit of the new double taxation treaty is excluded in respect
of any interest paid under, or as part of, a conduit arrangement and is also
subject to comprehensive limitation on benefits provisions.

        In addition, UK tax counsel is of the opinion that, as discussed in
more detail under "- Direct assessment of non-UK resident holders of notes to
UK tax on interest" below, a noteholder who is resident in the US for US tax
purposes and who is not resident in the UK for UK tax purposes will not be
subject to UK tax (other than any withholding tax, as regards which see above)
in respect of any payments on the notes unless they are held by or for a
trade, profession or vocation carried on by him through a branch or agency
(or, if the draft legislative proposals referred to below are enacted, through
a permanent establishment) in the UK.

        It is the opinion of UK tax counsel that US resident noteholders will
not be liable to UK tax in respect of a disposal of the notes provided they
are not within the charge to UK corporation tax and (i) are not resident or
ordinarily resident in the UK, or (ii) do not carry on a trade, profession or
vocation in the UK through a branch or agency in connection with which
interest is received or to which the notes are attributable.

        It is the opinion of UK tax counsel that, as discussed in more detail
below under "UK taxation of Funding and the issuer", each of Funding, the
issuer will generally be subject to UK corporation tax, currently at a rate of
30%, on the profit reflected in their respective profit and loss accounts as
increased by the amounts of any non-deductible expenses or losses.

        It is the opinion of UK tax counsel that, as discussed in more detail
below under "UK taxation of the mortgages trustee", the mortgages trustee will
have no liability to UK tax in relation


                                      43
<PAGE>


to amounts which it receives on behalf of Funding or the seller under the
mortgages trust.

        Except as described in the preceding paragraphs (and as further
developed in the corresponding opinions below), UK tax counsel will render no
opinions relating to the notes, the parties to the transaction, or any aspects
of the transaction.

        Withholding tax

        For so long as the notes are and continue to be listed on a
"recognised stock exchange" within the meaning of section 841 of the Income
and Corporation Taxes Act 1988 (the London Stock Exchange plc is such a
recognised stock exchange for this purpose) interest payments on each of the
notes will be treated as a "payment of interest on a quoted Eurobond" within
the meaning of section 349 of the Income and Corporation Taxes Act 1988. Under
an Inland Revenue interpretation, securities will be regarded as listed on a
recognised stock exchange if they are listed by a competent authority in a
country which is a member state of the European Union or which is part of the
European Economic Area and are admitted to trading on a recognised stock
exchange in that country. In these circumstances, payments of interest on the
notes may be made without withholding or deduction for or on account of UK
income tax irrespective of whether the notes are in global form or in
definitive form.

        If the notes cease to be listed on a recognised stock exchange, an
amount must be withheld on account of UK income tax at the lower rate
(currently 20%) from interest paid on them, subject to any direction to the
contrary from the Inland Revenue in respect of such relief as may be available
pursuant to the provisions of an applicable double taxation treaty or to the
interest being paid to the persons (including companies within the charge to
UK corporation tax) and in the circumstances specified in sections 349A to
349D of the Income and Corporation Taxes Act 1988.

        On March 19, 2003, the EU Council of Economic and Finance Ministers
discussed the adoption of a new directive regarding the taxation of savings
income. It is proposed that Member States will be required to provide to the
tax authorities of another Member State details of payments of interest or
other similar income paid by a person within its jurisdiction to an individual
resident in that other Member State; however, Austria, Belgium and Luxembourg
will instead apply a withholding system for a transitional period in relation
to such payments. The proposed directive, which is proposed to come into force
on 1 January 2005, is not yet final, and may be subject to further amendment
and/or clarification.

        Payments of interest and principal with respect to the notes will be
subject to any applicable withholding taxes and the issuer will not be obliged
to pay additional amounts in relation thereto.

        Direct assessment of non-UK resident holders of notes to UK tax on
interest

        Interest on the notes constitutes UK source income and, as such, may
be subject to income tax by direct assessment even where paid without
withholding, subject to any direction to the contrary from the Inland Revenue
in respect of such relief as may be available pursuant to the provisions of an
applicable double taxation treaty.

        However, interest with a UK source received without deduction or
withholding on account of UK tax will not be chargeable to UK tax in the hands
of a noteholder (other than certain trustees) who is not resident for tax
purposes in the UK unless that noteholder carries on a trade, profession or
vocation in the UK through a branch or agency in connection with which the
interest is received or to which the notes are attributable. (The Inland
Revenue has published draft legislative proposals, for introduction in the
Finance Bill 2003, which broadly replace references in the Tax Acts (as
defined in section 831 of the Income and Corporation Taxes Act 1988) to
"branch or agency" in respect of companies with references to "permanent
establishment" for accounting periods beginning on or after January 1, 2003;
in the event that these draft legislative proposals are enacted, references to
"branch


                                      44
<PAGE>


or agency" in the preceding sentence may need to be read as references to
"permanent establishment".) There are exemptions for interest received by
certain categories of agent (such as some brokers and investment managers).

        Where interest has been paid under deduction of UK income tax,
noteholders who are not resident in the UK may be able to recover all or part
of the tax deducted if there is an appropriate provision under an applicable
double taxation treaty.

        Taxation of returns: companies within the charge to UK corporation tax

        In general, noteholders which are within the charge to UK corporation
tax in respect of notes will be charged to tax and obtain relief as income on
all returns on and fluctuations in value of the notes (whether attributable to
currency fluctuations or otherwise) broadly in accordance with their statutory
accounting treatment.

        Taxation of returns: other noteholders

        Noteholders who are not within the charge to UK corporation tax and
who are resident or ordinarily resident in the UK for tax purposes or who
carry on a trade, profession or vocation in the UK through a branch or agency
in connection with which interest on the notes is received or to which the
notes are attributable will generally be liable to UK tax on the amount of any
interest received in respect of the notes.

        As the series 1 notes are denominated in US dollars and the series 2
notes are denominated in euro, such notes will not be regarded by the Inland
Revenue as constituting "qualifying corporate bonds" within the meaning of
Section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a
disposal of any of these notes may give rise to a chargeable gain or an
allowable loss for the purposes of the UK taxation of chargeable gains.

        It is expected that the series 3 notes will be regarded by the Inland
Revenue as constituting "qualifying corporate bonds" within the meaning of
Section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a
disposal of any of these notes is not expected to give rise to a chargeable
gain or an allowable loss for the purposes of the UK taxation of chargeable
gains.

        There are provisions to prevent any particular gain (or loss) from
being charged (or relieved) at the same time under these provisions and also
under the provisions of the "accrued income scheme" described below.

        Accrued income scheme

        On a disposal of notes by a noteholder, any interest which has accrued
since the last payment date may be chargeable to tax as income under the rules
of the "accrued income scheme" if that noteholder is resident or ordinarily
resident in the UK or carries on a trade in the UK through a branch or agency
to which the notes are attributable.

        Stamp duty and stamp duty reserve tax

        No UK stamp duty or stamp duty reserve tax is payable on the issue or
transfer of the offered notes, whether such offered note is in global or
definitive form.

        UK taxation of Funding and the issuer

        It is the opinion of UK tax counsel that each of Funding, the issuer
will generally be subject to UK corporation tax, currently at a rate of 30%,
on the profit reflected in their respective profit and loss accounts as
increased by the amounts of any non-deductible expenses or losses. Examples of
non-


                                      45
<PAGE>


deductible expenses and losses include general provisions for bad debts. In
respect of Funding, the profit in the profit and loss account will not exceed
0.01% of the Funding available revenue receipts. The profit in the profit and
loss account will not exceed 0.01% of the interest on the intercompany loan.
Any liability to UK corporation tax will be paid out of the available revenue
receipts of Funding, the issuer.

        UK taxation of the mortgages trustee

        It is the opinion of UK tax counsel that the mortgages trustee will
have no liability to UK tax in respect of any income, profit or gain arising
under these arrangements. Accordingly, the mortgages trustee will have no
liability to UK tax in relation to amounts which it receives on behalf of
Funding or the seller under the mortgages trust.

        United States Taxation
        ----------------------

        The following section summarizes the material federal income tax
consequences of the purchase, ownership and disposition of the series 1 notes
(collectively, the "US notes") that may be relevant to a noteholder that is a
"United States person" (as defined later in this section) or that otherwise is
subject to US federal income taxation on a net income basis in respect of a US
note (any such United States person or holder, a "US holder"). In general, the
summary assumes that a holder acquires a US note at original issuance and
holds such note as a capital asset. It does not purport to be a comprehensive
description of all the tax considerations that may be relevant to a decision
to purchase the US notes. In particular, it does not discuss special tax
considerations that may apply to certain types of taxpayers, including dealers
in stocks, securities or notional principal contracts; traders in securities
electing to mark to market; banks, savings and loan associations and similar
financial institutions; taxpayers whose functional currency is other than the
US dollar; taxpayers that hold a US note as part of a hedge or straddle or a
conversion transaction, within the meaning of section 1258 of the US Internal
Revenue Code of 1986, as amended (the "Code"); and subsequent purchasers of US
notes. In addition, this summary does not describe any tax consequences
arising under the laws of any taxing jurisdiction other than the US federal
government.

        This summary is based on the US tax laws, regulations, rulings and
decisions in effect or available on the effective date of this Annual Report.
All of the foregoing are subject to change, and any change may apply
retroactively and could affect the continued validity of this summary.

        Sidley Austin Brown & Wood LLP, US tax advisers to the issuer ("US tax
counsel") has prepared and reviewed this summary of material US federal income
tax consequences. As described under "- Tax status of the issuer, Funding,
mortgages trustee and mortgages trust", US tax counsel is of the opinion that
the mortgages trustee acting as trustee of the mortgages trust, Funding, the
issuer will not be subject to US federal income tax as a result of their
contemplated activities. As described further under "- Characterization of the
US notes", US tax counsel is also of the opinion that, although there is no
authority on the treatment of instruments substantially similar to the US
notes, the US notes will be treated as debt for US federal income tax
purposes. Except as described in the two preceding sentences (and set forth in
the corresponding opinions), US tax counsel will render no opinions relating
to the notes or the parties to the transaction.

        An opinion of US tax counsel is not binding on the US Internal Revenue
Service (the "IRS") or the courts, and no rulings will be sought from the IRS
on any of the issues discussed in this section. Accordingly, the issuer
suggests that persons considering the purchase of US notes consult their own
tax advisors as to the US federal income tax consequences of the purchase,
ownership and disposition of the US notes, including the possible application
of state, local, non-US or other tax laws, and other US tax issues affecting
the transaction.

        As used in this section the term "United States person" means an
individual who is a citizen or resident of the United States, an entity
treated as a corporation or partnership for United States


                                      46
<PAGE>


federal income tax purposes that is organized or created under the law of the
United States, a State thereof, or the District of Columbia, and any estate or
trust the income of which is subject to taxation in the United States
regardless of source, and any trust if a court within the United States is
able to exercise primary supervision over its administration and one or more
United States persons have the authority to control all substantial decisions
of the trust, or the trust was in existence on August 20, 1996 and is eligible
to elect, and has made a valid election, to be treated as a United States
person despite not meeting those requirements.

        Tax status of the issuers, Funding, mortgages trustee and mortgages
trust

        Under the transaction documents relating to the issuance of the notes,
each of the issuer, Funding, and the mortgages trustee acting in its capacity
as trustee of the mortgages trust covenants not to engage in any activities in
the United States (directly or through agents), not to derive any income from
sources within the United States as determined under US federal income tax
principles, and not to hold any mortgaged property if doing so would cause it
to be engaged or deemed to be engaged in a trade or business within the United
States as determined under US federal income tax principles. US tax counsel is
of the opinion that, assuming compliance with the transaction documents, none
of the issuer, Funding or the mortgages trustee acting in its capacity as
trustee of the mortgages trust will be subject to US federal income tax. No
elections will be made to treat the issuer, Funding, or the mortgages trustee
or any of their assets as a REMIC or a FASIT (two types of securitization
vehicles having a special tax status under the Code).

        Characterization of the US notes

        Although there is no authority regarding the treatment of instruments
that are substantially similar to the US notes, it is the opinion of US tax
counsel that each of the US notes will be treated as debt for US federal
income tax purposes. The issuer intends to treat the US notes as indebtedness
of the issuer for all purposes, including US tax purposes. The discussion in
the next section assumes this result.

        The US notes will not be qualifying real property mortgage loans in
the hands of domestic savings and loan associations, real estate investment
trusts, or REMICs under sections 7701(a)(19)(C), 856(c) or 860G(a)(3) of the
Code, respectively.

        Taxation of US holders of the US notes

        Qualified Stated Interest and Original Issue Discount. The issuer
intends to treat interest on the US notes as "qualified stated interest" under
United States Treasury regulations relating to original issue discount
(hereafter the "OID regulations"). As a consequence, discount on the US notes
arising from an issuance at less than par will only be required to be accrued
under the OID regulations if such discount exceeds a statutorily defined de
minimis amount. Qualified stated interest, which generally must be
unconditionally payable at least annually, is taxed under a holder's normal
method of accounting. With respect to the US notes, de minimis OID is included
in income on a pro rata basis as principal payments are made on such US notes.

        With respect to each of the US notes, it is possible that interest on
such US notes could be treated as OID because such interest is subject to
deferral in certain limited circumstances. A US holder of a US note issued
with OID must include OID in income over the term of the US note under a
constant yield method that takes into account the compounding of interest.
Under the Code, OID is calculated and accrued using prepayment assumptions
where payments on a debt instrument may be accelerated by reason of
prepayments of other obligations securing such debt instrument. Moreover, the
legislative history to the provisions provides that the same prepayment
assumptions used to price a debt instrument be used to calculate OID, as well
as to accrue market discount and amortize premium. With respect to each of the
US notes, prepayment of the mortgage loans is not expected to alter the
scheduled principal payments on the US notes and, accordingly, the issuer
intends to assume that the


                                      47
<PAGE>


US notes will have their principal repaid according to the relevant schedule
for purposes of accruing any OID. No representation is made that the mortgage
loans will pay on the basis of such prepayment assumption or in accordance
with any other prepayment scenario.

        As an alternative to the above treatments, US holders may elect to
include in gross income all interest with respect to the US notes, including
stated interest, acquisition discount, OID, de minimis OID, market discount,
de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium, using the constant yield
method described above.

        Sales and Retirement. In general, with respect to the US notes, a US
holder of a US note will have a basis in such note equal to the cost of the
note to such holder, and reduced by any payments thereon other than payments
of stated interest. Upon a sale or exchange of a US note, a US holder will
generally recognize gain or loss equal to the difference between the amount
realized (less any accrued interest, which would be taxable as such) and the
holder's tax basis in such note. Such gain or loss will be long-term capital
gain or loss if the US holder has held the note for more than one year at the
time of disposition. In certain circumstances, US holders that are individuals
may be entitled to preferential treatment for net long-term capital gains. The
ability of US holders to offset capital losses against ordinary income is
limited.

        Alternative Characterization of the US Notes. The proper
characterization of the arrangement involving (A) the issuer and the US notes,
and (B) the holders of such series 1 notes is not clear because there is no
authority on transactions comparable to that contemplated herein. The issuer
intends to treat the US notes as debt for all US federal income tax purposes.
Prospective investors should consult their own tax advisors with respect to
the potential impact of an alternative characterization of the series 1 notes
for US tax purposes.

        One possible alternative characterization is that the IRS could assert
that any class of US notes should be treated as equity in the issuer for US
federal income tax purposes. If any class of US notes were treated as equity,
US holders of such notes would be treated as owning equity in a passive
foreign investment company (which, depending on the level of ownership of such
US holder and certain other factors, might also constitute an interest in a
controlled foreign corporation for such US holder). This would have certain
timing and character consequences for US holders and could require certain
elections and disclosures that would need to be made shortly after acquisition
to avoid potentially adverse US tax consequences.

        If the issuer was treated as a PFIC, unless a United States person
makes a "QEF election" or "mark to market election", such person will be
subject to a special tax regime (i) in respect of gains realized on the sale
or other disposition of its US notes, and (ii) in respect of distributions on
its US notes held for more than one taxable year to the extent those
distributions constitute "excess distributions". Although not free from doubt,
the PFIC rules should not apply to gain realized in respect of any US notes
disposed of during the same taxable year in which such US notes are acquired.
An excess distribution generally includes dividends or other distributions
received from a PFIC in any taxable year to the extent the amount of such
distributions exceeds 125% of the average distributions for the three
preceding years (or, if shorter, the investor's holding period). Because the
US notes pay interest at a floating rate, it is possible that a United States
person will receive "excess distributions" as a result of fluctuations in the
rate of three-month US dollar LIBOR over the term of the US notes. In general,
under the PFIC rules, a United States person will be required to allocate such
excess distributions and any gain realized on a sale of its US notes to each
day during the such person's holding period for the US notes, and will be
taxable at the highest rate of taxation applicable to the US notes for the
year to which the excess distribution or gain is allocable (without regard to
such person's other items of income and loss for such taxable year) (the
"deferred tax"). The deferred tax (other than the tax on amounts allocable to
the year of disposition or receipt of the distribution) will then be increased
by an interest charge computed by reference to the rate generally applicable
to underpayments of tax (which interest charge generally will be
non-deductible interest expense for individual taxpayers).


                                      48
<PAGE>


        Backup withholding

        Backup withholding of US Federal income tax may apply to payments made
in respect of the US notes to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as
the registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in
respect of the US notes to a United States person must be reported to the IRS,
unless such person is an exempt recipient or establishes an exemption. With
respect to non-United States persons investing in the US notes, to ensure they
qualify for an exemption, the paying agent will require such beneficial holder
to provide a statement from the individual or corporation that:

    o   is signed under penalties of perjury by the beneficial owner of the
        note,

    o   certifies that such owner is not a United States person, and

    o   provides the beneficial owner's name and address.

        Generally, this statement is made on an IRS Form W-8BEN ("W-8BEN"),
which is effective for the remainder of the year of signature plus three full
calendar years unless a change in circumstances makes any information on the
form incorrect. The noteholder must inform the relevant paying agent within 30
days of such change and furnish a new W-8BEN. A noteholder that is not an
individual or an entity treated as corporation for US federal income tax
purposes or that is not holding the notes on its own behalf may have
substantially increased reporting requirements. For example, a non-US
partnership or non-US trust generally must provide the certification from each
of its partners or beneficiaries along with certain additional information.
Certain securities clearing organizations, and other entities who are not
beneficial owners, may be able to provide a signed statement to the paying
agent. However, in such case, the signed statement may require a copy of the
beneficial owner's W-8BEN (or the substitute form).

        In addition, upon the sale of a note to (or through) a broker, the
broker must report the sale and backup withholding on the entire purchase
price, unless (i) the broker determines that the seller is a corporation or
other exempt recipient, (ii) the seller certifies (as described above) that
such seller is a non-US holder and certain other conditions are met or (iii)
the broker has the taxpayer identification number of the recipient properly
certified as correct.

        Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's US federal income tax provided the required information is
furnished to the IRS.

        Prospective investors should consult their own tax advisors with
respect to the foregoing withholding tax requirements.

        THE US FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON AN OWNER'S
PARTICULAR SITUATION. HOLDERS OF US NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND
DISPOSITION OF US NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND
OTHER TAX LAWS.

        Material Jersey (Channel Islands) tax considerations
        ----------------------------------------------------

        Tax status of the mortgages trustee and the mortgages trust

        It is the opinion of Jersey (Channels Islands) tax counsel that the
mortgages trustee will be resident in Jersey for taxation purposes and will be
liable to income tax in Jersey at a rate of 20% in


                                      49
<PAGE>


respect of the profits it makes from acting as trustee of the mortgages trust.
The mortgages trustee will not be liable for any income tax in Jersey in
respect of any income it receives in its capacity as mortgages trustee on
behalf of the beneficiaries of the mortgages trust.

        Tax status of Funding

        Funding has "exempt company" status within the meaning of Article 123A
of the Income Tax (Jersey) Law, 1961, as amended, for the calendar year ending
December 31, 2003. Funding will be required to pay an annual exempt company
charge (currently (pound)600) in respect of each calendar year during which it
wishes to retain "exempt company" status. The retention of "exempt company"
status is conditional upon the exempt company charge being paid, Funding
disclosing its beneficial ownership within the required time limits and the
Comptroller of Income Tax in Jersey being satisfied that no Jersey resident
has a beneficial interest in Funding, except as permitted by concessions
granted by the Comptroller of Income Tax. As at the date of this Annual Report
no Jersey resident person has or is anticipated to have any beneficial
interest in Funding, and therefore such concessions are not expected to be
relied upon.

        As an "exempt company", Funding will not be liable to Jersey income
tax other than on Jersey source income (except bank deposit interest on Jersey
bank accounts). It is the opinion of Jersey (Channel Islands) tax counsel
that, for so long as Funding is an "exempt company", payments in respect of
the intercompany loan will not be subject to Jersey taxation and no
withholding in respect of taxation will be required on such payments to the
issuer under the intercompany loan.

        It is the opinion of Jersey (Channel Islands) tax counsel that the
income of Funding will not be Jersey source income insofar as the income of
Funding arises only from the mortgages trust property and that property is
either situated outside Jersey or is interest on bank or building society
deposits in Jersey.

        F.      Dividends and paying agents.

        Not Applicable to Annual Reports Filed on Form 20-F

        G.      Statement by experts.

        Not Applicable to Annual Reports Filed on Form 20-F

        H.      Documents on display.

        The issuer, Funding and the mortgages trustee are subject to the
information requirements of the U.S. Securities Exchange Act of 1934, as
amended, and are therefore required to file reports, including annual reports
on Form 20-F, and other information with the SEC. These materials, including
this Annual Report and the exhibits hereto, may be inspected and copied at the
SEC's public reference rooms in Washington, D.C., New York, NY and Chicago,
IL. Please call the SEC at +1-800-732-0330 for further information on the
public reference rooms. All filings made by the issuer, Funding or the
mortgages trustee electronically will be made available to the public over the
internet at the SEC's web site at http://www.sec.gov.

        I.      Subsidiary Information.

        Not Applicable to Annual Reports Filed on Form 20-F in the United
States

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

        The issuer has entered into a separate basis rate swap with Northern
Rock plc, in its capacity as the basis rate swap provider, and the note
trustee, and has also entered into separate dollar currency


                                      50
<PAGE>


swaps with the dollar currency swap provider and the note trustee, and into
separate euro currency swaps with the euro currency swap provider and the note
trustee, each as described in the Granite Mortgages 02-2 Registration
Statement. In general, the swaps are designed to do the following:

    o   basis rate swap: to protect the issuer against the possible variance
        between the seller's standard variable rate payable on the variable
        rate mortgage loans, the rates of interest payable on the flexible
        mortgage loans which pay variable rates of interest no higher than
        those rates offered by a basket of UK mortgage lenders or a rate which
        tracks the Bank of England base rate, and the fixed rates of interest
        payable on the fixed rate mortgage loans and a LIBOR based rate for
        three-month sterling deposits;

    o   dollar currency swaps: to protect the issuer against changes in the
        sterling to dollar exchange rate following the closing date and the
        possible variance between a LIBOR based rate for three-month sterling
        deposits and a LIBOR based rate for three-month dollar deposits
        applicable to the issuer's series 1 notes; and

    o   euro currency swaps: to protect the issuer against changes in the
        sterling to euro exchange rate following the closing date and the
        possible variance between a LIBOR based rate for three-month sterling
        deposits and a EURIBOR based rate for three-month euro deposits
        applicable to the series 2 notes.

        In addition to the foregoing, the issuer may from time to time enter
into additional swap arrangements or add additional features to the swap
arrangements described above in order to hedge against interest rate risks
that may arise in connection with new mortgage loan products that the seller
assigns into the mortgages trust at a later date.

        The basis rate swap

        Some of the mortgage loans in the mortgage portfolio pay a variable
rate of interest for a period of time which may either be linked to the
seller's standard variable rate or linked to an interest rate other than the
seller's standard variable rate, such as a variable rate offered by a basket
of UK mortgage lenders or a rate that tracks the Bank of England base rate.
Other mortgage loans pay a fixed rate of interest for a period of time.

        The amount of revenue receipts that Funding receives will fluctuate
according to the interest rates applicable to the mortgage loans in the
mortgages trust. The amount of interest payable by Funding to the issuer under
the intercompany loan from which the issuer funds, inter alia, its payment
obligations under the currency swaps and the notes, is in sterling. However,
(A) the issuer is required to pay interest on the series 1 notes in dollars,
based upon a LIBOR based rate for three-month dollar deposits and (B) the
issuer is required to pay interest on (1) the series 2 notes in euro based
upon a EURIBOR based rate for three-month euro deposits applicable to the
series 2 notes and (2) the series 3 notes in sterling, based upon a LIBOR
based rate for three-month sterling deposits.

         To provide a hedge against the possible variance between:

        (1) the seller's standard variable rate payable on the variable rate
            mortgage loans, the rates of interest payable on the flexible
            mortgage loans which pay variable rates of interest no higher than
            those rates offered by a basket of UK mortgage lenders or a rate
            which tracks the Bank of England base rate and the fixed rates of
            interest payable on the fixed rate mortgage loans; and

        (2) a margin over the LIBOR based rate for three-month sterling
            deposits,

        the issuer has entered into a separate basis rate swap with the basis
rate swap provider.


                                      51
<PAGE>


        Under the basis rate swap (which shall include a number of conditional
mini-swaps (the "basis rate mini-swaps")), the following amounts will be
calculated in respect of each calculation period:

    o   the amount (known as the "calculation period swap provider amount")
        produced by applying LIBOR for three-month sterling deposits plus a
        spread to the notional amount of the basis rate swap as defined later
        in this section; and

    o   the amount (known as the "calculation period issuer amount") produced
        by applying a rate equal to the weighted average of:

        (1) the average of the standard variable mortgage rates or their
            equivalent charged to existing borrowers on residential mortgage
            loans as published from time to time, after excluding the highest
            and the lowest rate, of Abbey National plc, Alliance & Leicester
            plc, Bradford & Bingley, HBOS plc, Lloyds TSB Bank plc, National
            Westminster Bank plc and Woolwich plc;

        (2) in respect only of any flexible residential mortgage loan (as
            described below) the difference between (a) the average of the
            standard variable mortgage rates or their equivalent charged to
            existing borrowers on residential mortgage loans as published from
            time to time, after excluding the highest and the lowest rate, of
            Abbey National plc, Alliance & Leicester plc, Bradford & Bingley,
            HBOS plc, Lloyds TSB Bank plc, National Westminster Bank plc and
            Woolwich plc, and (b) the weighted average of the discount to the
            average interest rate calculated in (a) above in respect of the
            flexible residential mortgage loans; and

        (3) the weighted average of the rates of interest payable on the fixed
            rate mortgage loans, other than fixed rate mortgage loans which
            have become re-fixed mortgage loans since the immediately
            preceding payment date,

        to the notional amount of the basis rate swap.

        For the purposes of (2) above, a "flexible residential mortgage loan"
is a mortgage loan secured by a residential mortgaged property which is
subject to a variable rate of interest, and which generally allows the
borrower certain flexible payment features, including the ability to make
larger repayments than are due on a given payment date, and which also may
allow the borrower to make underpayments, take payment holidays and make cash
re-draws of amounts previously overpaid.

        After these two amounts are calculated in relation to a payment date,
the following payments will be made on that payment date:

    o   if the calculation period swap provider amount is greater than the
        calculation period issuer amount, then the basis rate swap provider
        will pay the difference (after such difference is adjusted to take
        account of amounts payable by the basis rate swap provider and the
        issuer under the basis rate mini-swaps) to the issuer;

    o   if the calculation period issuer amount is greater than the
        calculation period swap provider amount, then the issuer will pay the
        difference (after such difference is adjusted to take account of
        amounts payable by the basis rate swap provider and the issuer under
        the basis rate mini-swaps) to the basis rate swap provider; and

    o   if the calculation period swap provider amount is equal to the
        calculation period issuer amount, neither party will make any payment
        to the other party.


                                      52
<PAGE>


        If a payment is to be made by the basis rate swap provider, once
received by the issuer that payment will be included in the issuer's available
revenue receipts and will be applied on the relevant payment date according to
the issuer priority of payments. If a payment is to be made by the issuer, it
will be made according to the issuer priority of payments.

        The "notional amount of the basis rate swap", in respect of any
payment date, will be an amount in sterling equal to the aggregate principal
amount outstanding of the notes on the closing date for the notes.

        The purpose of the basis rate mini-swaps is to allow the net payment
under the relevant basis rate swap to have the same effect as if the notional
amount of the basis rate swap were amortizing at the same rate as the notes.

        In the event that a basis rate swap is terminated prior to the service
of a note enforcement notice or the final redemption of any class of notes,
the issuer shall use its best efforts to enter into a replacement basis rate
swap on terms acceptable to the rating agencies and the note trustee and with
a swap provider whom the rating agencies have previously confirmed in writing
to the issuer and the note trustee will not cause the then-current ratings of
the notes to be downgraded, withdrawn or qualified.

        The dollar currency swaps

        The series 1 notes are denominated in US dollars and investors will
receive payments of interest and principal on those notes in US dollars.
However, the repayments of principal and payments of interest by Funding to
the issuer under the intercompany loan are made in sterling. In addition, the
series 1 notes bear interest at a rate based on three-month US dollar LIBOR
but the payment to be made by the basis rate swap provider to the issuer is
based on sterling LIBOR. To hedge the variance between the LIBOR rates and the
relevant three-month US dollar rates and its currency exchange rate exposure
in respect of these notes, the issuer has entered into separate dollar
currency swaps relating to the series 1 notes with the dollar currency swap
provider and the note trustee, as described in the Granite Mortgages 02-2
Registration Statement.

        Under each dollar currency swap (which shall include a number of
conditional mini swaps (the "dollar mini swaps")), the issuer will pay to the
dollar currency swap provider:

    o   on each payment date, an amount in sterling equal to the dollar amount
        of principal payments to be made on the relevant class of series 1
        notes on that payment date, such dollar amount to be converted into
        sterling at the relevant dollar currency swap rate; and

    o   on each payment date, an amount in sterling based on three-month
        sterling LIBOR, which the dollar currency swap provider will then
        exchange for an amount in US dollars based on three-month US dollar
        LIBOR with respect to the series 1 notes of the issuer in order to pay
        to the issuer on such payment date the interest amounts set forth
        below.

        Under each dollar currency swap, the dollar currency swap provider
will pay to the issuer:

    o   on each payment date, an amount in US dollars equal to the amount of
        principal payments to be made on the relevant class of series 1 notes
        on such payment date; and

    o   on each payment date, an amount in dollars equal to the interest to be
        paid in US dollars on the relevant class of series 1 notes on such
        payment date.

        As defined in this Annual Report, "dollar currency swap rate" means
the rate at which dollars are converted to sterling or, as the case may be,
sterling is converted to dollars, under the dollar currency swap.


                                      53
<PAGE>


        The purpose of the dollar mini swaps is to allow the dollar currency
swap entered into in respect of the notes to amortize by reference to the same
amount of notes.

        In the event that any dollar currency swap is terminated prior to the
service of a note enforcement notice or the final redemption of the class of
series 1 notes, the issuer shall use its best efforts to enter into a
replacement dollar currency swap in respect of the notes or that class of
notes to hedge against fluctuations in the exchange rate between dollars and
sterling and/or the possible variance between LIBOR for three-month sterling
deposits and LIBOR for three-month US dollar deposits. Any replacement dollar
currency swap must be entered into on terms acceptable to the rating agencies,
the issuer and the note trustee and with a replacement dollar currency swap
provider that the rating agencies have previously confirmed in writing to the
issuer and the note trustee will not cause the then-current ratings of the
notes to be downgraded, withdrawn or qualified.

        The euro currency swaps

        The series 2 notes are denominated in euro and investors receive
payments of interest and principal on those notes in euro. However, the
repayments of principal and payments of interest by Funding to the issuer
under the intercompany loan will be made in sterling. In addition, the series
2 notes bear interest at a rate based on EURIBOR, but the payment to be made
by the basis rate swap provider to the issuer will be based on sterling LIBOR.
To hedge the variance between the LIBOR rate and the relevant EURIBOR rate and
its currency exchange rate exposure in respect of these notes, the issuer has
entered into separate euro currency swaps relating to the series 2 notes with
the euro currency swap provider and the note trustee, as described in the
Granite Mortgages 02-2 Registration Statement.

        Under each euro currency swap (which shall include a number of
conditional mini swaps (the "euro mini swaps")), the issuer will pay to the
euro currency swap provider:

    o   on each payment date, an amount in sterling equal to the euro amount
        of principal payments to be made on the relevant class of the series 2
        notes on that payment date, such euro amount to be converted into
        sterling at the relevant euro currency swap rate; and

    o   on each payment date, an amount in sterling based on three-month
        sterling LIBOR, which the euro currency swap provider will then
        exchange for an amount in euro based on three-month EURIBOR with
        respect to the series 2 notes in order to pay to the issuer on such
        payment date the interest amounts set forth below.

        Under each euro currency swap, the euro currency swap provider will
pay to the issuer:

    o   on each payment date, an amount in euro equal to the amount of
        principal payments to be made on the relevant class of series 2 notes
        on such payment date; and

    o   on each payment date, an amount in euro equal to the interest to be
        paid in euro on the relevant class of series 2 notes on such payment
        date.

        As defined in this Annual Report, "euro currency swap rate" means the
rate at which euro are converted to sterling or, as the case may be, sterling
is converted to euro, under the relevant euro currency swap.

        The purpose of the euro mini swaps is to allow the euro currency swap
entered into in respect of the notes to amortize by reference to the same
amount of notes.

        In the event that any euro currency swap is terminated prior to the
service of a note enforcement notice or the final redemption of the relevant
class of series 2 notes, the issuer shall use its best efforts to enter into a
replacement euro currency swap in respect of the notes or that class of notes
to hedge against fluctuations in the exchange rate between euro and sterling
and/or the possible variance between LIBOR for three-month sterling deposits
and EURIBOR for three-month euro deposits with respect to the series 2 notes.
Any replacement euro currency swap must be entered into


                                      54
<PAGE>


on terms acceptable to the rating agencies, the issuer and the note trustee
and with a replacement euro currency swap provider that the rating agencies
have previously confirmed in writing to the issuer and the note trustee will
not cause the then current ratings of the notes to be downgraded, withdrawn or
qualified.

        Ratings downgrade of swap providers for the issuer

        Under the terms of the issuer's basis rate swap, in the event that the
short-term, unsecured and unsubordinated credit rating of the basis swap
provider is downgraded below A-1 by Standard & Poor's or F1 by Fitch,
respectively, and as a result of such downgrade the then-current ratings of
the notes may, in the opinion of Standard & Poor's or Fitch, respectively, be
downgraded or placed under review for possible downgrade, then the basis rate
swap provider will, in accordance with the basis rate swap agreement, be
required to take certain remedial measures in order to ensure that the
then-current ratings of the notes are maintained, including providing
collateral for its obligations under the basis rate swap, arranging for its
obligations under the basis rate swap agreement to be transferred to an entity
with an A-1 or a F1 rating, respectively, procuring another entity to become
co-obligor in respect of its obligations under the basis rate swap, or taking
such other action as it may agree with Standard & Poor's or Fitch,
respectively, in order to maintain the ratings of the notes at their
then-current ratings.

        Under the terms of the issuer's basis rate swap, in the event that
either the short-term, unsecured and unsubordinated credit rating of the basis
swap provider is downgraded below P-1 or its long-term, unsecured and
unsubordinated credit rating is downgraded below A2 by Moody's, and as a
result of such downgrade the then-current ratings of the notes may, in the
opinion of Moody's, be downgraded or placed under review for possible
downgrade, then the basis rate swap provider will, in accordance with the
basis rate swap agreement, provide collateral for its obligations under the
basis rate swap until it is able to arrange for its obligations under the
basis rate swap agreement to be transferred to an entity with a short-term
rating of P-1 and a long-term rating of A1 by Moody's, procure another entity
to become co-obligor in respect of its obligations under the basis rate swap,
or take such other action as it may agree with Moody's in order to maintain
the ratings of the notes at their then-current ratings.

        In addition, in the event that either the short-term, unsecured and
unsubordinated credit rating of the basis rate swap provider is further
downgraded below P-2 or its long- term, unsecured and unsubordinated credit
rating of the basis rate swap provider is further downgraded below A3 by
Moody's and, as a result of such downgrade, the then- current ratings of the
notes may, in the opinion of Moody's, be downgraded or placed under review for
possible downgrade, then the basis rate swap provider will, in accordance with
the basis rate swap agreement, provide additional collateral for its
obligations under the basis rate swap and will arrange for its obligations
under the basis rate swap agreement to be transferred to an entity with a
short-term rating of P-1 and a long-term rating of A1 by Moody's, procure
another entity to become co-obligor in respect of its obligations under the
basis rate swap agreement, or take such other action as it may agree with
Moody's in order to maintain the ratings of the notes at their then- current
ratings.

        A failure to take such steps will allow the issuer to terminate the
basis rate swap agreement.

        Under the terms of the issuer's dollar currency swaps and the issuer's
euro currency swaps, in the event that the long-term, unsecured and
unsubordinated credit rating of the dollar currency swap provider, the euro
currency swap provider, or any provider of credit support, as the case may be,
is downgraded below AA- by Standard & Poor's or AA- by Fitch, respectively,
and, as a result of such downgrade, the then-current ratings of the relevant
notes may, in the opinion of Standard & Poor's or Fitch, respectively, be
downgraded or placed under review for possible downgrade, then the relevant
currency swap provider will, in accordance with the relevant currency swap
agreement, be required to take certain remedial measures in order to ensure
that the then-current ratings of the Notes are maintained, including providing
collateral for its obligations under the relevant currency swap,


                                      55
<PAGE>


arranging for its obligations under the relevant currency swap agreement to be
transferred to an entity with a long-term rating of AA- by Standard & Poor's
or Fitch, as the case may be, procuring another entity to become co-obligor in
respect of its obligations under the relevant currency swap, or taking such
other action as it may agree with Standard & Poor's or Fitch, respectively, in
order to maintain the ratings of the notes at their then-current ratings.

        Under the terms of the issuer's dollar currency swaps and the issuer's
euro currency swaps, in the event that either the long-term, unsecured and
unsubordinated credit rating of the dollar currency swap provider, the euro
currency swap provider, or any provider of credit support, as the case may be,
is downgraded below A1 or its short-term, unsecured and unsubordinated credit
rating is downgraded below P-1 by Moody's, and, as a result of such downgrade,
the then-current ratings of the relevant notes may, in the opinion of Moody's,
be downgraded or placed under review for possible downgrade, then the relevant
currency swap provider will, in accordance with the relevant currency swap
agreement, provide collateral for its obligations under the relevant currency
swap until it is able to arrange for its obligations under the relevant
currency swap agreement to be transferred to an entity with a long-term rating
of A1 and a short-term rating of P-1 by Moody's, procure another entity to
become co-obligor in respect of its obligations under the relevant currency
swap, or take such other action as it may agree with Moody's in order to
maintain the ratings of the notes at their then-current ratings.

        In addition, in the event that either the long-term, unsecured and
unsubordinated credit rating of the relevant currency swap provider or any
provider of credit support, is further downgraded below A3 or its short-term,
unsecured and unsubordinated credit rating, is further downgraded below P-2 by
Moody's, and, as a result of such downgrade, the then-current ratings of the
relevant notes may, in the opinion of Moody's be downgraded or placed under
review for possible downgrade, then the relevant currency swap provider will,
in accordance with the relevant currency swap agreement, provide additional
collateral for its obligations under the relevant currency swap and will
arrange for its obligations under the relevant currency swap agreement to be
transferred to an entity with a short-term rating of P-1 and a long-term
rating of A1 by Moody's, procure another entity to become co-obligor in
respect of its obligations under the relevant currency swap, or take such
other action as it may agree with Moody's in order to maintain the ratings of
the notes at their then-current ratings.

        A failure to take such steps will allow the issuer to terminate the
relevant currency swap agreement.

        Termination of the swaps

    o   The basis rate swap in respect of the issuer will terminate on the
        earlier of the payment date falling in January 2043 and the date on
        which all of the notes are redeemed in full;

    o   The dollar currency swap for the series 1 class A1 notes will
        terminate on the earlier of the payment date falling in January 2017
        and the date on which all of the series 1 class A1 notes are redeemed
        in full;

    o   The dollar currency swap for the series 1 class A2 notes will
        terminate on the earlier of the payment date falling in January 2043
        and the date on which all of the series 1 class A2 notes are redeemed
        in full;

    o   The dollar currency swap for the series 1 class B notes will terminate
        on the earlier of the payment date falling in January 2043 and the
        date on which all of the series 1 class B notes are redeemed in full;

    o   The dollar currency swap for the series 1 class C notes will terminate
        on the earlier of the payment date falling in January 2043 and the
        date on which all of the series 1 class C notes are redeemed in full;


                                      56
<PAGE>


    o   The euro currency swap for the series 2 class A notes will terminate
        on the earlier of the payment date falling in January 2043 and the
        date on which all of the series 2 class A notes are redeemed in full;

    o   The euro currency swap for the series 2 class B notes will terminate
        on the earlier of the payment date falling in January 2043 and the
        date on which all of the series 2 class B notes are redeemed in full;
        and

    o   The euro currency swap for the series 2 class C notes will terminate
        on the earlier of the payment date falling in January 2043 and the
        date on which all of the series 2 class C notes are redeemed in full.

        Any swap may also be terminated in the following circumstances, each
referred to as a "swap early termination event":

    o   at the option of one party to the swap, if there is a failure by the
        other party to pay any amounts due and payable in accordance with the
        terms of that swap. Certain amounts may be due but not payable in
        accordance with the terms of the swap as described below under
        "Limited recourse and swap payment obligation";

    o   if an event of default under the notes occurs and the note trustee
        serves a note enforcement notice;

    o   upon the occurrence of an insolvency of one of the parties or the
        merger of one of the parties without an assumption of the obligations
        under the swaps, or changes in law resulting in the obligations of one
        of the parties becoming illegal; and

    o   if the relevant swap provider is downgraded and fails to comply with
        the requirements of the ratings downgrade provision contained in the
        relevant swap agreement and described above under "-- Ratings
        downgrade of swap providers".

        Upon the occurrence of a swap early termination event, the issuer or
the relevant swap provider may be liable to make a termination payment to the
other. This termination payment will be calculated and made in sterling. The
amount of any termination payment will be based on the market value of the
terminated swap based on market quotations of the cost of entering into a swap
with the same terms and conditions that would have the effect of preserving
the respective full payment obligations of the parties (or based upon loss in
the event that market quotation cannot be determined). Any such termination
payment could be substantial.

        If any termination payment is due by the issuer to a swap provider,
then, pursuant to its obligations under the intercompany loan, Funding shall
pay to the issuer an amount equal to the termination payment due to the
relevant swap provider. Any such termination payment will be made by the
issuer to the swap provider only after paying interest amounts due on the
notes and after providing for any debit balance on the issuer principal
deficiency ledger to the extent that a default was caused by the swap
provider. However, if the issuer causes a default to occur that results in a
termination payment becoming due from the issuer to a swap provider, such
payment will be made by the issuer in the same priority as it pays the
relevant interest amounts due on the notes. The issuer shall apply amounts
received from Funding under the intercompany loan in respect of termination
payments in accordance with the relevant issuer pre-enforcement revenue
priority of payments, the relevant pre-enforcement principal priority of
payments, the relevant priority of payments following the occurrence of a
trigger event or, as the case may be, the relevant issuer post-enforcement
priority of payments. The application by the issuer of termination payments
due to a swap provider may affect the funds available to pay amounts due to
the holders of notes (see "Risk factors -- You may be subject to exchange rate
risks" in Item 3, Sub-part D herein).


                                      57
<PAGE>


        If the issuer receives a termination payment from the dollar currency
swap provider and/or the euro currency swap provider, then the issuer shall
use those funds towards meeting its costs in effecting currency exchanges at
the spot rate of exchange until a new dollar currency swap and/or a new euro
currency swap is entered into and/or to acquire a new dollar currency swap
and/or a new euro currency swap. You will not receive extra amounts (over and
above interest and principal payable on the notes) as a result of such issuer
receiving a termination payment.

        Taxation

        The issuer is not obliged under any of the swaps to gross up payments
made by it if withholding taxes are imposed on payments made under the swaps.

        A swap provider is always obliged to gross up payments made by it to
the issuer if withholding taxes are imposed on payments made under the swaps.

        Limited recourse and swap payment obligation

        On any payment date the issuer will only be obliged to pay an amount
to a swap provider to the extent that the issuer has received from Funding
sufficient funds under the intercompany loan to pay that amount to that swap
provider, subject to and in accordance with the issuer priority of payments.
On any payment date, the dollar currency swap provider will only be obliged to
pay to the issuer an amount that is proportionate to the amount of the payment
that it has received from the issuer on that payment date.

Item 12.  Description of Securities Other than Equity Securities.

        Not Applicable to Annual Reports Filed on Form 20-F


                                    PART II

Item 13.  Defaults, dividend Arrearages and Delinquencies.

        None

Item 14. Material modifications to the rights of Security Holders and use of
Proceeds.

        None

Item 15. Controls and Procedures.

Not Applicable

Item 16A Audit Committee Financial Expert.

Not Applicable

Item 16B Code of Ethics.

Not Applicable

Item 16C Principal Accountant Fees and Services.

Not Applicable


                                   PART III

Item 17. Financial Statements.

        Not applicable.

Item 18. Financial Statements.

        Not applicable

Item 19. Exhibits


                                      58
<PAGE>


        The following exhibits are filed as part of this Annual Report filed
on Form 20-F.

1.      Exhibit 3: The Memorandum and Articles of Association of each of the
        issuer, Funding and the mortgages trustee are incorporated by
        reference from the Granite Mortgages 02-2 Registration Statement.

2.      Exhibit 4: All instruments defining the rights of security holders as
        described in the Granite Mortgages 02-2 Registration Statement are
        incorporated by reference from the Granite Mortgages 02-2 Registration
        Statement.

3.      Exhibit 13.1: Investor's Monthly Report in respect of the issuer for
        October 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on December 2, 2002).

4.      Exhibit 13.2: Investor's Monthly Report in respect of the issuer for
        November 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on December 20, 2002).

5.      Exhibit 13.3: Investor's Monthly Report in respect of the issuer for
        December 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on February 18, 2003).

6.      Exhibit 13.4: Investor's Quarterly Report in respect of the issuer for
        the period from October 1, 2002 to December 31, 2002 (incorporated by
        reference from the Form 6-K previously filed with the SEC on February
        19, 2003).

7.      Exhibit 99.1: Administrator's Annual Statement of Compliance for year
        end December 31, 2002.


                                      59
<PAGE>


                                  SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form 20-F and has duly caused this
Annual Report on Form 20-F to be signed on its behalf by the undersigned,
thereunto duly authorized on June 30, 2003


                                       GRANITE MORTGAGES 02-2 PLC

                                       By:     /S/ Clive Rakestrow
                                               -------------------

                                       Title:  Representing LDC Securitisation
                                               Director No.1 Limited


                                       GRANITE FINANCE FUNDING LIMITED


                                       By:     /S/ Nigel Bradley
                                               ----------------

                                       Title:  Director


                                       GRANITE FINANCE TRUSTEES LIMITED


                                       By:     /S/ Daniel Le Blancq
                                               ---------------------

                                       Title:  Director



                                      A-1
<PAGE>


                                   EXHIBITS

1.      Exhibit 3: The Memorandum and Articles of Association of each of the
        issuer, Funding and the mortgages trustee are incorporated by
        reference from the Granite Mortgages 02-2 Registration Statement.

2.      Exhibit 4: All instruments defining the rights of security holders as
        described in the Granite Mortgages 02-2 Registration Statement are
        incorporated by reference from the Granite Mortgages 02-2 Registration
        Statement.

3.      Exhibit 13.1: Investor's Monthly Report in respect of the issuer for
        October 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on December 2, 2002).

4.      Exhibit 13.2: Investor's Monthly Report in respect of the issuer for
        November 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on December 20, 2002).

5.      Exhibit 13.3: Investor's Monthly Report in respect of the issuer for
        December 2002 (incorporated by reference from the Form 6-K previously
        filed with the SEC on February 18, 2003).

6.      Exhibit 13.4: Investor's Quarterly Report in respect of the issuer for
        the period from October 1, 2002 to December 31, 2002 (incorporated by
        reference from the Form 6-K previously filed with the SEC on February
        19, 2003).

7.      Exhibit 99.1: Administrator's Annual Statement of Compliance for year
        end December 31, 2002.


                                      A-2



<PAGE>


                          GRANITE MORTGAGES 02-2 PLC
                 Fifth Floor, 100 Wood Street, London EC2V 7EX
                                United Kingdom


I, Keith McCallum Currie, certify that:

1. I have reviewed this annual report on Form 20-F, and all reports on Form
6-K containing distribution or servicing reports filed in respect of periods
included the year covered by this annual report, of Granite Mortgages 02-2
plc;

2. Based on my knowledge, the information in these reports, taken as a whole,
does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
last day of the period covered by this annual report;

3. Based on my knowledge, the distribution or servicing information required
to be provided to the Mortgages Trustee by the Administrator under the
Administration Agreement, for inclusion in these reports, is included in these
reports;

4. Based on my knowledge and upon representations made to me by the
Administrator, and except as disclosed in the reports, the Administrator has
fulfilled its obligations under the Administration Agreement; and

5. The reports disclose all significant deficiencies relating to the
Administrator's compliance with the minimum servicing standards contained in
the Administration Agreement based upon representations made to me by the
Administrator.

In giving the certifications above, I have reasonably relied on information
provided to me by Northern Rock plc.

Date:  26 June 2003

/S/: Keith McCallum Currie

Keith McCallum Currie
Director