As
  filed with the Securities and Exchange Commission on June 27, 2006

UNITED
  STATES
  SECURITIES AND EXCHANGE COMMISSION 
  WASHINGTON, D.C. 20549FORM
  20-F

| | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES
      EXCHANGE ACT OF 1934
| | ------------------------------------------------------------------------------------------------------
| | OR                                                                                                    
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934            
| | For the fiscal year ended: December 31, 2005                                                          
| | OR                                                                                                    
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934        
| | For the transition period from N/Ato N/A                                                              
| | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934     
| | Date
      of event requiring this shell company report . . . . . . . . . . . . . .
      . . . . .   

|                                         |                                                              |                              
|---------------------------------------- | ------------------------------------------------------------ | -----------------------------
|Commission
      file number: 333-117381 |                                                              |                              
|Holmes
      Financing (No. 9) PLC       | Holmes Funding Limited                                       | Holmes Trustees Limited      
|                                         | (Exact
      name of Registrant as Specified in its Charter) |                              
|United
      Kingdom                     | United
      Kingdom                                         | United
      Kingdom         
|                                         | (Jurisdiction
      of Incorporation or Organization)        |                              
|Abbey
      National House               | Abbey
      National House                                   | Abbey
      National House   
|2
      Triton Square                    | 2
      Triton Square                                        | 2
      Triton Square        
|Regents
      Place                     | Regents
      Place                                         | Regents
      Place         
|London
      NW1 3AN                     | London
      NW1 3AN                                         | London
      NW1 3AN         
|United
      Kingdom                     | United
      Kingdom                                         | United
      Kingdom         
|(011-44-20)
      7756 6302/5            | (011-44-20)
      7756 6302/5                                | (011-44-20)
      7756 6302/5
|                                         | (Address
      of 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:
  NoneSecurities for which there is a reporting obligation pursuant to Section
  15(d) of the Act:

|Title
      of each class                                                  | Name of
      each exchange on which registered
|-------------------------------------------------------------------------- | -----------------------------------------------
|                                                                           |                                                
|$1,740,000,000
      Series 1 Class A Asset Backed Floating Rate Notes (1) | None                                           
|                                                                           |                                                
|$2,175,000,000
      Series 2 Class A Asset Backed Floating Rate Notes (1) | None                                           
|                                                                           |                                                
|£1,017,901,000
      Series 1 Term AAA Advance (2)                         | None                                           
|                                                                           |                                                
|£1,272,376,000
      Series 2 Term AAA Advance (2)                         | None                                           
|                                                                           |                                                
|Funding
      Interest in the Mortgages Trust (3)                          | None                                           

|    |                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Holmes Financing
      (No. 9) PLC is the registrant for the Series 1 Issuer Notes and the Series
      2 Issuer Notes.                                                                                                                                               
|(2) | Holmes Funding Limited
      is the registrant for the Term Advances, and has issued those term advances
      to Holmes Financing (No. 9) PLC. The Term Advances are the primary source
      of payments on the Series 1 Issuer Notes and the Series 2 Issuer Notes.
|(3) | Holmes Trustees Limited
      is the registrant for the Funding Interest in the Mortgages Trust and is
      holding the Funding Interest on behalf of Holmes Funding Limited.                                                                                        

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


Yes       No

If this report is an annual or
    transition report, indicate by check mark if the registrant is not required
    to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934.


Yes       No

Indicate by check mark
    whether the registrant (1) has filed all reports required to be filed by Section
    13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
    months (or for such shorter period that the registrant was required to file
    such reports), and (2) has been subject to such filing requirements for the
    past 90 days.


Yes       No

Indicate by check mark
    whether the registrant is a large accelerated filer, an accelerated filer,
    or a non-accelerated filer. See definition of accelerated filer and
    large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):


|Large
      accelerated filer | Accelerated filer | Non-accelerated filer
|----------------------------- | ----------------- | ---------------------

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


|Item
      17 | Item 18 | Financial statements attached as Exhibits
|------------- | ------- | -----------------------------------------

If this is an annual
    report, indicate by check mark whether the registrant is a shell company (as
    defined in Rule 12b-2 of the Exchange Act).




Yes       No


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TABLE OF CONTENTS

|                                                |                                                                        | Page
|----------------------------------------------- | ---------------------------------------------------------------------- | ----
|                                                |                                                                       
|Presentation of Information                     | 1                                                                     
|Forward-Looking Statements                      | 2                                                                     
|Incorporation of Certain Documents by Reference | 2                                                                     
|PART I                                         
|                                                |                                                                        |     
|Item  1.                                        | Identity of Directors, Senior Management and Advisers                  | 3   
|Item  2.                                        | Offer Statistics and Expected Timetable                                | 3   
|Item  3.                                        | Key Information                                                        | 3   
|Item  4.                                        | Information on the Company                                             | 31  
|Item  5.                                        | Operating and Financial Review and Prospects                           | 31  
|Item  6.                                        | Directors, Senior Management and Employees                             | 32  
|Item  7.                                        | Major Shareholders and Related Party Transactions                      | 34  
|Item  8.                                        | Financial Information                                                  | 34  
|Item  9.                                        | The Listing                                                            | 34  
|Item  10.                                       | Additional Information                                                 | 35  
|Item  11.                                       | Quantitative and Qualitative Disclosures About Market Risk             | 41  
|Item  12.                                       | Description of Securities Other than Equity Securities                 | 41  
|                                               
|PART II                                        
|                                                |                                                                        |     
|Item  13.                                       | Defaults, Dividend Arrearages and Delinquencies                        | 41  
|Item  14.                                       | Material Modifications to the Rights of Security Holders               | 41  
|Item  15.                                       | Controls and Procedures                                                | 41  
|Item  16 A.                                     | Audit Committee Financial Expert                                       | 41  
|Item  16 B.                                     | Code of Ethics                                                         | 41  
|Item  16 C.                                     | Principal Accountant Fees and Services                                 | 41  
|Item  16 D.                                     | Exemptions from the Listing Standards for Audit Committees             | 41  
|Item  16 E.                                     | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 41  
|                                               
|PART III                                       
|                                                |                                                                        |     
|Item  17.                                       | Financial Statements                                                   | 42  
|Item  18.                                       | Financial Statements                                                   | 42  
|Item  19.                                       | Exhibits                                                               | 42  

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PRESENTATION
  OF INFORMATION

This Annual Report on
    Form 20-F relates to Holmes Financing (No. 9) PLC (the Issuer)
    and the following securities (the Issuer Notes), which were issued
    pursuant to a trust deed dated December 8, 2005 (the Issuer Trust Deed),
    between the Issuer and The Bank of New York, London Branch, as note trustee
    (the Note Trustee):


| | • | $1,740,000,000
      Series 1 Class A Asset Backed Floating Rate Notes Due December 2006
| | - | ----------------------------------------------------------------------------------------
| | • | $2,175,000,000
      Series 2 Class A Asset Backed Floating Rate Notes Due July 2013    

This Annual Report on
    Form 20-F also relates to the following advances made pursuant to the loan
    confirmation intercompany loan agreement dated December 8, 2005 (the Intercompany
    Loan Agreement), between the Issuer, Holmes Funding Limited (Funding),
    and JPMorgan Chase Bank, London Branch, as security trustee and agent bank:


| | • | £1,017,901,000
      Series 1 Term AAA Advance
| | - | ----------------------------------------------
| | • | £1,272,376,000
      Series 2 Term AAA Advance

This Annual Report on
    Form 20-F further relates to the funding interest in the mortgage trust, the
    property of which includes the loans in the portfolio at the closing date
    or which have subsequently been assigned to Holmes Trustees Limited (Trustees)
    thereafter (including any new drawings under flexible loans) and their related
    security and any income generated by the loans or their related security.
    The composition of the trust property will fluctuate as drawings under flexible
    loans and new loans are added and as the loans that were previously part of
    the trust property are repaid, mature, default or are repurchased by Abbey
    National plc (the seller). The trust property also includes any
    money in the mortgages trustee guaranteed investment contract (or GIC) account
    and in any other bank account or bank accounts held by Trustees (as agreed
    by Trustees, Funding, the seller and the security trustee) from time to time,
    called the alternative accounts. The mortgages trustee GIC account is the
    bank account in which Trustees holds any cash that is part of the trust property
    until it is distributed to the beneficiaries. The alternative accounts are
    accounts into which payments by some mortgage borrowers are paid initially.


Capitalized 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
    333-117381).


The information required
    for some items in Form 20-F is not applicable to the Issuer, Funding or Trustees.
    As used in this Annual Report filed on Form 20-F, not applicable
    or Not Applicable means that 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 U.S. Securities and Exchange Commission 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.


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FORWARD-LOOKING
  STATEMENTS

This annual report may contain
    forward-looking statements. All statements regarding our future financial
    condition, results of operations and business strategy, plans and objectives
    are forward-looking. Statements containing the words believes,
    intends, expects and words of similar meaning are
    also forward-looking. In particular, the following are forward-looking in
    nature: statements with regard to strategy and management objectives; product
    development efforts; the effects of changes or prospective changes in regulation;
    and trends in results, operations and overall market trends.


These forward-looking statements
    involve risks, uncertainties and other factors, some of which are beyond our
    control, that may cause our results, performance or achievements or conditions
    in the markets in which we operate to differ from those expressed or implied
    in these forward-looking statements. We caution you not to place undue reliance
    on these forward-looking statements, which reflect our managements view
    only as of the date of this annual report, and we do not undertake to update
    or revise any of them, whether as a result of new information, future events
    or otherwise.


INCORPORATION
    OF CERTAIN DOCUMENTS BY REFERENCE Each of the Issuer, Funding and
    Trustees 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 Issuer Notes.


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PART I

|Item
      1. | Identity
      of Directors, Senior Management and Advisers
|------------- | -----------------------------------------------------------
|              |                                                            
|              | Not applicable
      to annual reports on Form 20-F.       
|              |                                                            
|Item
      2. | Offer
      Statistics and Expected Timetable              
|              |                                                            
|              | Not applicable
      to annual reports on Form 20-F.       
|              |                                                            
|Item
      3. | Key
      Information                                      
|              |                                                            
|              | A.                                                         

Each of the Issuer, Funding and
    Trustees 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 Issuer Notes:


| |  | •                                                                                              | Periodic
      Report for the period from December 9, 2005 to January 9, 2006.                                   
| |  | ---------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------
| |  |                                                                                                |                                                                                                                  
| |  | The following document is also incorporated by reference from reports filed
      on Form 6-K:
| |  |                                                                                                |                                                                                                                  
| |  | •                                                                                              | Certificate
      Relating to Financial Information pursuant to the Issuer Trust Deed dated
      April 30, 2006.
| |  |                                                                                                |                                                                                                                  
| |  | The following documents are filed as exhibits to this Annual Report on Form
      20-F:       
| |  |                                                                                                |                                                                                                                  
| |  | •                                                                                              | Report
      and Accounts for Holmes Financing (No. 9) PLC for the year ended December
      31, 2005.           
| |  |                                                                                                |                                                                                                                  
| |  | •                                                                                              | Report
      and Accounts for Holmes Funding Limited for the year ended December 31,
      2005.                 
| |  |                                                                                                |                                                                                                                  
| |  | •                                                                                              | Report
      and Accounts for Holmes Trustees Limited for the year ended December 31,
      2005.                
| |  |                                                                                                |                                                                                                                  
| |  | B.                                                                                             | Capitalization and Indebtedness                                                                                  
| |  |                                                                                                |                                                                                                                  
| |  | Not applicable to annual reports on Form 20-F.                                                
| |  |                                                                                                |                                                                                                                  
| |  | C.                                                                                             | Reasons for the Offer and Use of Proceeds                                                                        
| |  |                                                                                                |                                                                                                                  
| |  | Not applicable to annual reports on Form 20-F.                                                
| |  |                                                                                                |                                                                                                                  
| |  | D.                                                                                             | Risk Factors                                                                                                     

The
  Issuer Notes do not represent an obligation and are not the responsibility of
  any person other than the Issuer

The Issuer Notes do not represent
    an obligation and are not the responsibility of any of Abbey National plc
    or any of its affiliates, Deutsche Bank Securities Inc., Lehman Brothers Inc.,
    or Morgan Stanley & Co. International Limited, or any of their respective
    affiliates, the other issuers, Trustees, the Note Trustee or any other party
    to the transaction other than the Issuer.


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The Issuer has
  a limited set of resources available to it to make payments on the Issuer Notes

The Issuers ability
    to make payments of principal and interest on the Issuer Notes and to pay
    its operating and administrative expenses will depend primarily on the funds
    being received under the issuer intercompany loan. In addition, the Issuer
    will rely on the issuer dollar currency swaps and the issuer euro currency
    swaps to hedge the currency exposure with respect to the Issuer Notes.


If Funding is unable
    to pay in full on any interest payment date (a) the interest on any term advance,
    (b) the operating and administrative expenses and/or (c) the principal payments
    in respect of the Funding liquidity reserve fund term advances, and in the
    event that the seller suffers a certain ratings downgrade, Funding may draw
    money from the Funding liquidity reserve fund.


The Issuer does not
    have any other significant sources of funds available to meet its obligations
    under the Issuer Notes and/or any other payments ranking in priority to the
    Issuer Notes.


Funding is not
  obliged to make payments on the issuer term advances if it does not have enough
  money to do so, which could adversely affect payments on the Issuer Notes

Fundings ability
    to pay amounts due on the issuer term advances will depend upon:


| | • | Funding receiving
      enough funds from the Funding share percentage of the revenue and principal
      receipts on the loans
      included in the mortgages trust on or before each interest payment date;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                               
| | • | Funding receiving
      the required funds from the Funding swap provider;                                                                                                                                    
| |   |                                                                                                                                                                                                               
| | • | the amount of funds
      credited to the reserve funds; and                                                                                                                                                  
| |   |                                                                                                                                                                                                               
| | • | the allocation of
      funds between the other term advances, the issuer term advances and any
      new term advances.                                                                                      

According to the terms
    of the mortgages trust deed, Trustees is obliged to pay to Funding the Funding
    share percentage of revenue receipts on the loans by crediting such amounts
    to the Funding GIC account on each distribution date. Trustees is obliged
    to pay Funding principal receipts on the loans by crediting such amounts to
    the Funding GIC account as and when required pursuant to the terms of the
    mortgages trust deed.


Funding will be obliged
    to pay revenue receipts due to the Issuer under the issuer intercompany loan
    only to the extent that it has revenue receipts left over after making payments
    ranking in priority to the Issuer, such as payments of certain fees and expenses
    of Funding and payments on certain higher ranking term advances under the
    other intercompany loans.


Funding will be obliged
    to pay principal receipts due to the Issuer under the issuer intercompany
    loan only to the extent that it has principal receipts available for that
    purpose after repaying amounts ranking in priority to the Issuer (including
    repaying certain higher ranking previous term advances under the other intercompany
    loans).


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 Issuer Notes,
    noteholders may, depending on what other sources of funds are available to
    the Issuer and to Funding, not receive the full amount of interest and/or
    principal which would otherwise be due and payable on the Issuer Notes.


Failure by Funding
  to meet its obligations under the Intercompany Loan Agreement would adversely
  affect payments on the Issuer Notes

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If Funding does not make
    payments due and payable on the issuer intercompany loan, then the Issuer
    may not have enough money to make payments on the Issuer Notes. In addition
    the Issuer will have only limited recourse to the assets of Funding. If Funding
    does not pay amounts under the issuer intercompany loan because it does not
    have enough money available, such amounts will be deemed not to be due and
    payable, so there will not be an event of default under the issuer intercompany
    loan, and the Issuer will not have recourse to the assets of Funding in that
    instance.


Although enforcement
  of the Issuer security will be possible following the occurrence of an event
  of default in the Issuers obligations, the proceeds of that enforcement
  may not be enough to make all payments due on the Issuer Notes

The Issuer has no recourse
    to the assets of Funding unless Funding has also defaulted on its obligations
    under the issuer intercompany loan and the Funding security has been enforced.


If the security created
    as required by the Issuer deed of charge is enforced, the proceeds of enforcement
    may be insufficient to pay all principal and interest due on the Issuer Notes.
    The noteholders may still have an unsecured claim against the Issuer for the
    shortfall, but there is no guarantee that the Issuer will have sufficient
    (or any) funds to pay that shortfall.


There is no assurance
  that the subordination rules will protect the holders of class A Issuer notes
  from all risk of loss

The transaction has been
    structured in the expectation that each lower numbered series of Issuer Notes
    will be redeemed before a higher numbered series of Issuer Notes. This means,
    among other things, that the series 1 Issuer Notes will be redeemed in full
    prior to the redemption of the series 2 Issuer Notes.


However, there is no
    assurance that any lower numbered series of Issuer Notes will be redeemed
    before a higher numbered series of Issuer Notes. Redemption of the Issuer
    Notes is ultimately dependent on, among other things, repayment and redemptions
    on the loans and on the term advance rating of the issuer term advances. See
    The Issuer Notes do not benefit from the subordination of other note
    classes.


Holdings may establish
  another company, Funding 2, which may become an additional beneficiary under
  the mortgages trust

Holdings may establish
    a new entity, Funding 2, which may issue new notes from time to time and use
    the proceeds to make a payment to the seller to acquire an interest in the
    trust property rather than lending the proceeds to Funding, subject to the
    agreement of the seller and Funding, as existing beneficiaries of the mortgages
    trust. If Funding 2 becomes a beneficiary of the mortgages trust then the
    percentage shares of Funding and the seller in the trust property may decrease.
    The introduction of Funding 2 will not cause a reduction in the principal
    amount of assets backing the Issuer Notes. The security trustee will only
    be entitled to consent to any modifications to the transaction documents caused
    by the introduction of Funding 2, if it is satisfied that such modifications
    would not adversely affect the then current ratings of the notes.


If Funding 2 becomes
    a beneficiary of the mortgages trust then the seller, Funding and Funding
    2 would each have a joint and undivided interest in the trust property but
    their entitlement to the proceeds from the trust property would be in proportion
    to their respective shares of the trust property. On each distribution date
    Trustees would distribute interest and principal receipts to one, two or all
    three beneficiaries, depending on the terms of the mortgages trust.


It is anticipated that
    Funding 2 would issue notes directly to investors from time to time backed
    by its share of the trust property. Current noteholders would not have a direct
    or indirect interest in Funding 2s share of the trust property.


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Amendments would be made
    to a number of the issuer transaction documents as a result of the inclusion
    of Funding 2 as a beneficiary of the mortgages trust. In particular (but without
    limitation), amendments would be made to:


| | • | the mortgage sale
      agreement to enable the purchase by Funding 2 of interests in the trust
      property;                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                         
| | • | the mortgages trust
      deed (i) to establish Funding 2 as a beneficiary of the trust, (ii) to enable
      changes in Funding 2s
      share of the trust property from time to time and (iii) to regulate the
      distribution of interest
      and principal receipts in the trust property to Funding 2 and the other
      beneficiaries; and
| |   |                                                                                                                                                                                                                                                                                                                                                         
| | • | the cash management
      agreement to regulate the application of monies to Funding 2.                                                                                                                                                                                                                                                                 

There may be conflicts
    of interest between Funding and Funding 2, in which case it is expected that
    Trustees would follow the directions given by the relevant beneficiary that
    has the largest share of the trust property at that time. The interests of
    Funding may not prevail, which may adversely affect current noteholders
    interests.


If Funding enters
  into new intercompany loan agreements, then the new term advances may rank ahead
  of issuer term advances as to payment, and accordingly new notes may rank ahead
  of Issuer Notes as to payment

It is likely that Holdings
    will establish new issuers to issue new notes to investors. The proceeds of
    each new issue will be used by the new issuer to make a new intercompany loan
    to Funding. Funding will use the proceeds of the new intercompany loan either
    to:


| | • | pay the seller for
      new loans and their related security to be assigned to Trustees;                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                        
| | • | pay the seller for
      a part of the sellers share of the trust property to be assigned to
      Funding;                                                                                           
| |   |                                                                                                                                                                                                        
| | • | refinance an intercompany
      loan or intercompany loans outstanding at that time (and if the Issuers
      intercompany loan to Funding is refinanced, noteholders could be repaid
      early); or
| |   |                                                                                                                                                                                                        
| | • | deposit some of those
      proceeds in one or more of the reserve funds.                                                                                                                              

The order in which Funding
    pays principal and interest to the Issuer on the issuer term advances and
    to any new issuer on the new term advances will depend primarily on the designated
    ratings of those term advances. In general, the term advances with the highest
    term advance rating will be paid ahead of lower rated term advances, subject
    to their relative scheduled repayment dates. For example, Funding will pay
    interest due on the issuer term AAA advances proportionally and equally with
    the interest due on any new term AAA advances and ahead of payments of interest
    due on any term advance with a lower term advance rating than AAA. Similarly,
    Funding will, in general, repay principal amounts due on the issuer term advances
    and any new term advances in accordance with their respective term advance
    ratings, subject to their relative scheduled repayment dates. For example,
    principal repayments due on an issuer term AAA advance generally will be made
    before principal repayments due on a new term AA advance. This principle is
    subject to a number of exceptions, however, which are designed primarily to
    provide some protection that scheduled repayments of principal on the issuer
    term advances will not materially affect payments of principal on the previous
    term advances and in turn would not be materially affected by payments of
    principal on any new term advances.


The term advance ratings
    designated to the issuer term advances on the closing date will not change
    even if the ratings assigned to the corresponding classes of Issuer Notes
    change.


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The current payment and
    security priorities of the Issuer Notes relative to each other as set out
    in the Issuer deed of charge and the Issuer cash management agreement will
    not change as a result of an issue of new notes by a new issuer, because that
    new issue will be separately documented. However, Funding may be required
    to repay to a new issuer amounts owing under a new term advance ahead of or
    in the same order of priority as amounts owing to the Issuer on the issuer
    term advances, depending on the term advance rating, the scheduled repayment
    date of that new term advance and certain other rules regarding the repayment
    of principal by Funding. If this is the case, then the relevant new noteholders
    will be paid before the relevant current noteholders.


Funding has entered
  into other intercompany loan agreements with other issuers, and certain of the
  term advances in those other intercompany loans rank ahead of certain of the
  issuer term advances in the issuer intercompany loan as to payment, and accordingly
  some of the Issuer Notes issued by the other issuers rank ahead of certain of
  the Issuer Notes as to payment

The other issuers issued
    notes to investors, the proceeds of which were used by the other issuers to
    make other intercompany loans to Funding. Funding used the proceeds of the
    intercompany loan from the Issuer to pay the seller for loans and their related
    security assigned to Trustees which comprised its original share of the trust
    property. Funding used the proceeds of the other intercompany loans from certain
    other Holmes Financing issuers to pay the seller for the acquisition of additional
    parts of the sellers share of the trust property (resulting in a corresponding
    decrease in the sellers share of the trust property) and from certain
    other Holmes Financing issuers to pay the seller for loans and their related
    security assigned to Trustees which constituted an addition to Fundings
    already existing share of the trust property.


The order in which Funding
    pays principal and interest to the Issuer on the issuer term advances and
    to the other issuers on the term advances depends primarily on the designated
    ratings of those term advances. In general, term advances with the highest
    term advance rating will be paid ahead of lower rated term advances subject
    to their relative scheduled repayment dates. For example, Funding will pay
    interest due on the issuer term AAA advances proportionally and equally with
    the interest due on any previous term AAA advances and ahead of payments of
    interest due on any term advance with a lower term advance rating than AAA
    (including, for the avoidance of doubt, any term AA advance, term A advance,
    term BBB advance or term BB advance). Similarly, Funding will, in general,
    repay principal amounts due on the issuer term advances and the term advances
    in accordance with their respective term advance ratings. For example, principal
    repayments due on an issuer term AAA advance generally will be made before
    principal repayments due on a previous term AA advance. This principle is
    subject to a number of exceptions, however, which are designed primarily to
    provide some protection that scheduled repayments of principal on the issuer
    term advances will not materially affect payments of principal on the previous
    term advances and on new term advances and in turn would not be materially
    affected by payments of principal on the previous term advances and any new
    term advances.


The term advance ratings
    designated to the term advances on the previous closing dates will not change
    even if the ratings assigned to the corresponding classes of other notes change.


The current payment and
    security priorities of the Issuer Notes relative to each other as set out
    in the Issuer deed of charge and the Issuer cash management agreement are
    not affected as a result of the issues of previous notes by the other issuers,
    because the other issues were separately documented. However, Funding may
    be required to repay to the other issuers amounts which are owing under one
    or more other term advances ahead of or in the same order of priority as amounts
    owing to the Issuer on the issuer term advances, depending on the term advance
    rating, the scheduled repayment date of that other term advance and other
    rules regarding the repayment of principal by Funding.


New issuers and
  new start-up loan providers will share in the same security granted by Funding
  to the Issuer, and this may adversely affect payments on the Issuer Notes

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If Funding enters into
    a new intercompany loan agreement, then if required it will also enter into
    a new start-up loan agreement with a new start-up loan provider and the security
    trustee. If Funding is required by the rating agencies, Funding may use part
    of the proceeds of the new start-up loan to further fund one or more of the
    existing reserve funds.


Any new issuer and any
    new start-up loan provider will become party to the Funding deed of charge
    and will be entitled to share in the security granted by Funding for its benefit
    (and the benefit of the other Funding secured creditors) under the Funding
    deed of charge. In addition, the liabilities owed to the Funding liquidity
    facility provider and the Funding swap provider which are secured by the Funding
    deed of charge may increase each time that Funding enters into a new intercompany
    loan agreement. This could ultimately cause a reduction in the payments noteholders
    receive on their Issuer Notes.


The other issuers,
  the Funding swap provider and the other start-up loan providers already share
  in the security granted by Funding to the Issuer, which may adversely affect
  payments on the Issuer Notes

Funding has entered into
    the other intercompany loan agreements and it also entered into eight startup
    loan agreements with the start-up loan provider and the security trustee.
    Funding used part of the proceeds of these start-up loans to fund the first
    reserve fund.


The other issuers and
    the start-up loan provider are parties to the Funding deed of charge and are
    entitled to share in the security granted by Funding for the benefit of the
    Funding secured creditors (including the Issuer). In addition, the liabilities
    owed to the Funding liquidity facility provider and the Funding swap provider
    which are secured by the Funding deed of charge may increase each time that
    Funding enters into a new intercompany loan agreement. These factors could
    ultimately cause a reduction in the payments noteholders receive on their
    Issuer Notes.


There may be conflicts
  between the Issuer, the other issuers and any new issuers, and the Issuers
  interests may not prevail which may adversely affect payments on the Issuer
  Notes

The security trustee
    will exercise its rights under the Funding deed of charge only in accordance
    with directions given by the issuers (which could be one or more of the Issuer,
    the other issuers and, if Funding enters into new intercompany loans, any
    new issuer) that have the highest-ranking outstanding term advances, provided
    that the security trustee is indemnified to its satisfaction.


If the security trustee
    receives conflicting directions, it will follow the directions given by the
    relevant issuers representing the largest principal amount outstanding of
    relevant term advances. If the Issuer is not in the group representing that
    largest principal amount, then its interests may not prevail. This could ultimately
    cause a reduction in the payments noteholders receive on their Issuer Notes.
    For example, if the term advances with the highest designated term advance
    rating at the time of a direction are the term AAA advances, then, in the
    event of conflicting directions being given by issuers with outstanding term
    AAA advances, the security trustee will follow the direction given by those
    issuers owed the largest principal amount outstanding of term AAA advances.


As new loans are
  assigned to Trustees, the characteristics of the trust property may change from
  those existing at the closing date, and those changes may adversely affect payments
  on the Issuer Notes

There is no guarantee
    that any new loans assigned to Trustees will have the same characteristics
    as the loans in the portfolio as at the closing date. In particular, new loans
    may have different payment characteristics than the loans in the portfolio
    as at the closing date. The ultimate effect of this could be to delay or reduce
    the payments noteholders receive on the Issuer Notes. However, new loans will
    be required to meet certain criteria. These criteria may be modified after
    the closing date and noteholders


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consent to such modifications
  will not be obtained provided that the security trustee is satisfied that the
  then current ratings of the Issuer Notes will not be adversely affected by the
  proposed modifications.

The yield to maturity
  of the Issuer Notes may be adversely affected by prepayments or redemptions
  on the loans

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


No assurance can be given
    that Funding will accumulate sufficient funds during the cash accumulation
    periods or receive sufficient funds from its share in Trustees on a single
    interest payment date relating to the issuer term AAA advances to enable it
    to repay such issuer term advances to the Issuer so that the corresponding
    classes of the Issuer Notes will be redeemed in their entirety on their scheduled
    redemption dates.


The extent to which sufficient
    funds are saved by Funding during a cash accumulation period or a scheduled
    amortisation period or received by it from its share in the mortgages trust
    on a scheduled repayment date will depend on whether the actual principal
    prepayment rate of the loans is the same as the assumed principal prepayment
    rate. If Funding is not able to save enough money during a cash accumulation
    period or a scheduled amortisation period, or does not receive enough money
    from its share in the mortgages trust on a scheduled repayment date, to repay
    the relevant issuer term AAA advance (and if it is unable to make a drawing
    on the Funding liquidity facility or the first reserve fund to make good the
    shortfall) so that the Issuer can redeem the class A Issuer Notes of the corresponding
    series on their respective scheduled redemption date(s), then Funding will
    be required to pay to the Issuer on those scheduled redemption dates only
    the amount that it has actually saved or received. Any shortfall will be deferred
    and paid on subsequent interest payment dates when Funding has money available
    to make the payment. In these circumstances, unless the Issuer is able to
    make a drawing on the issuer liquidity facility, there will be a variation
    in the yield to maturity of the relevant class of Issuer Notes.


The Issuers
  ability to redeem the class A Issuer Notes in full on their scheduled redemption
  dates is affected by the rate of prepayment on the loans

The rate of prepayment
    of 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 loans may be due to borrowers refinancing
    their loans and sales of properties by borrowers (either voluntarily or as
    a result of enforcement action taken). In addition, if the seller is required
    to repurchase a loan or loans under a mortgage account and their related security
    because, for example, one of the loans does not comply with the loan warranties
    in the mortgage sale agreement, then the payment received by Trustees will
    have the same effect as a prepayment of all of the loans under the mortgage
    account. Because these factors are not within its control or the control of
    Funding or Trustees, the Issuer cannot give any assurances as to the level
    of prepayments that the portfolio may experience.


Variation in the rate
    of prepayments of principal on the loans may affect each class of Issuer Notes
    differently depending upon amounts already repaid by Funding to the Issuer
    under the issuer intercompany loan and whether a trigger event has occurred,
    or a loan is subject to a product switch or a further advance or the security
    granted by the Issuer under the Issuer deed of charge has been enforced. If
    prepayments on the loans occur less frequently than anticipated, then there
    may not be sufficient funds available to redeem the class A Issuer Notes in
    full on their respective scheduled redemption dates.


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The seller may
  change the lending criteria relating to loans which are subsequently assigned
  to Trustees which could affect the characteristics of the trust property and
  which may adversely affect payments on the Issuer Notes

Each of the loans was
    originated in accordance with the sellers lending criteria at the time
    of origination. 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 loans and new related security to
    Trustees, the seller will warrant that those new loans and new related security
    were originated in accordance with the sellers lending criteria 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 loan at the time of its origination may not be or have been
    the same as those when other loans were originated. If new loans that have
    been originated under revised lending criteria are assigned to Trustees, the
    characteristics of the trust property could change. This could lead to a delay
    or a reduction in the payments received on the Issuer Notes.


The seller has
  introduced new procedures relating to investigations and searches for remortgages
  which could affect the characteristics of the trust property and which may adversely
  affect payments on the Issuer Notes

The seller no longer
    requires a solicitor or licensed or qualified conveyancer to conduct a full
    investigation of the title to a property in all cases. Where the borrower
    is remortgaging there will be a more limited form of investigation of title
    for properties located in England, Wales and Scotland, in particular in the
    case of registered land in England and Wales (e.g.,
    confirming that the borrower is the registered proprietor of the property
    and the description of the property corresponds with the entries on the Land
    Registrys register) and confirming such other matters as are required
    by a reasonable, prudent mortgage lender. Properties which have undergone
    such a limited investigation may be subject to matters which would have been
    revealed by a full investigation of title and which may have been remedied
    or, if incapable of remedy, may have resulted in the properties not being
    accepted as security for a loan had such matters been revealed. The introduction
    of loans secured by such properties into the trust property could result in
    a change of the characteristics of the trust property. This could lead to
    a delay or a reduction in the payments received on the Issuer Notes.


The timing and
  amount of payments on the loans could be affected by various factors which may
  adversely affect payments on the Issuer Notes

The loans are affected
    by credit, liquidity and interest rate risks. Various factors influence mortgage
    delinquency rates, prepayment rates, repossession frequency and the ultimate
    payment of interest and principal, such as 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 individual, personal or financial circumstances
    may affect the ability of borrowers to repay 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 loans.


If a borrower fails to
    repay its loan and the related property is repossessed, the likelihood of
    there being a net loss on disposition of the property is adversely affected
    by a higher loan-to-value ratio. In addition, the ability of a borrower to
    sell a property given as security for a loan at a price sufficient to repay
    the amounts outstanding under the loan will depend upon a number of factors,
    including the availability of buyers for that property, the value of that
    property and property values in general at the time.


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The portfolio may also
    be subject to geographic concentration risks. To the extent that specific
    geographic regions within the United Kingdom have experienced or may experience
    in the future weaker regional economic conditions and housing markets than
    other regions, a concentration of the loans in such a region may be expected
    to exacerbate all risks relating to the loans described in this section. The
    economy of each geographic region within the United Kingdom is dependent on
    different mixtures of industries. Any downturn in a local economy or particular
    industry may adversely affect the regional employment levels and consequently
    the repayment ability of the borrowers in that region or the region that relies
    most heavily on that industry. Any natural disasters in a particular region
    may reduce the value of affected mortgaged properties. This may result in
    a loss being incurred upon sale of the mortgaged property. These circumstances
    could affect receipts on the loans and ultimately result in losses on the
    Issuer Notes.


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


The occurrence
  of trigger events and enforcement of the Issuer security may adversely affect
  the timing of the scheduled redemption of the class A Issuer Notes

If no trigger event has
    occurred and the Issuer security has not been enforced, then payments of principal
    will not occur on the class A Issuer Notes of each series before their respective
    scheduled redemption dates.


If a trigger event occurs
    or the Issuer security is enforced prior to the scheduled redemption dates
    for the class A Issuer Notes of each series, then the relevant classes of
    Issuer Notes outstanding will not be repaid on their scheduled redemption
    dates but will be repaid on each interest payment date from monies received
    from Funding on the issuer term AAA advances of the corresponding series as
    described in the following three risk factors.


If an asset trigger
  event occurs, the class A notes will not be repaid on their scheduled redemption
  dates

When an asset trigger
    event has occurred, Trustees will distribute principal receipts on the loans
    to Funding and the seller proportionally and equally based on their percentage
    shares of the trust property (that is, the Funding share percentage and the
    seller share percentage). When an asset trigger event has occurred, Funding
    will repay:


| | first,
      the issuer term AAA advances and the other term AAA advances of each series
      proportionally and equally, until all of those term AAA term advances are
      fully repaid;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                             
| | then,
      the other term AA advances of each series proportionally and equally, until
      all of those term AA term advances are fully repaid;                                          
| |                                                                                                                                                                                             
| | then,
      the other term A advances of each series proportionally and equally, until
      all of those term A term advances are fully repaid; and                                        
| |                                                                                                                                                                                             
| | then,
      the other term BBB advances of each series proportionally and equally, until
      all of those term BBB term advances are fully repaid.                                        

If an asset trigger event
    were to occur prior to the final maturity date of the issuer series 1 term
    AAA advance, as the final interest payment date for the issuer series 1 term
    AAA advance falls in December 2006 prior to the interest payment date for
    the other term AAA advances, the issuer series 1 term AAA


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advance may be repaid
  prior to the other term AAA advances whose repayments will be madepari
  passuon the next following interest payment date in
  January 2007.

This order of priority
    of payments may change if Funding enters into new intercompany loan agreements.
    If an asset trigger event occurs, certain class A Issuer Notes then outstanding
    may not be repaid on their scheduled redemption dates, and there is also a
    risk that they will not be repaid by their final maturity dates.


If a non-asset
  trigger event occurs, the class A Issuer Notes then outstanding will not be
  repaid on their scheduled redemption dates

If a non-asset trigger
    event has occurred, Trustees will distribute all principal receipts to Funding
    until the Funding share percentage of the trust property is zero. When a non-asset
    trigger event has occurred, Funding will repay:


| | first, the series 1 term AAA advance made by the Issuer until that series 1
      term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      2 term AAA advance made by Holmes Financing (No. 4) PLC until that series
      2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      3A1 term AAA advance made by Holmes Financing (No. 5) PLC until that series
      3A1 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, in no
      order of priority between them but in proportion to the respective amounts
      due, the series 3 term AAA advance and the series 4 term AAA advances made
      by Holmes Financing (No. 6) PLC and the series 4 term AAA advance made by
      Holmes Financing (No. 4) PLC, until all of those term AAA advances are fully
      repaid;                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      3 term AAA advances made by Holmes Financing (No. 1) PLC until those series
      3 term AAA advances are fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      2 term AAA advance made by Holmes Financing (No. 8) PLC until that series
      3 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, in nor
      order of priority between them but in proportion to the respective amounts
      due, the series 2 term AAA advance made by the Issuer and the series 4 term
      AAA advance made by Holmes Financing (No. 1) PLC until all of those term
      AAA advances are fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      4 term AAA advance made by the Issuer until that series 4 term AAA advance
      is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      3 term AAA advance made by Holmes Financing (No. 8) PLC until that series
      3 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      3 term AAA advance made by Holmes Financing (No. 7) PLC until that series
      3 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the
      series 3 term AAA advances made by the Issuer until those series 3 term
      AAA advances are fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, the series
      3 term AAA advance made by Holmes Financing (No. 2) PLC until that series
      3 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | then, in no
      order of priority between them but in proportion to the respective amounts
      due, the series 4 term AAA advance made by Holmes Financing (No. 2) PLC,
      the series 3 term AAA advance made by Holmes Financing (No. 3) PLC, the
      series 3 term AAA advances made by Holmes Financing (No. 4) PLC, the series
      3A2 term AAA advance made by Holmes Financing (No. 5) PLC, the series 5
      term AAA advance made by Holmes Financing (No. 6) PLC, the series 4 term
      AAA advances made by Holmes Financing (No. 7) PLC and the series 4 term
      AAA advances made by Holmes Financing (No. 8) PLC, until all of those term
      AAA advances are fully repaid;

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| | then,
      the other term AA advances, in no order of priority between them but in
      proportion to the respective amounts due, until all of those term AA advances
      are fully repaid;     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                     
| | then, the other
      term A advances in no order of priority between them but in proportion to
      the respective amounts due, until all of those term A advances are fully
      repaid; and    
| |                                                                                                                                                                                                     
| | finally, the
      other term BBB advances, in no order of priority between them but in proportion
      to the respective amounts due, until all of those term BBB advances are
      fully repaid.

This order of priority
    of payments will change if Funding enters into new intercompany loan agreements.
    If a non-asset trigger event occurs, the class A Issuer Notes of each series
    will not be repaid on their scheduled redemption dates.


If the issuer security
  is enforced, the class A Issuer Notes then outstanding will not be repaid on
  their scheduled redemption dates

If the Issuer security
    is enforced, then Trustees will distribute funds as required under the terms
    of the transaction agreements. In these circumstances, any class A Issuer
    Notes then outstanding will not be repaid on their scheduled redemption dates
    and there is also a risk that those class A Issuer Notes may not be repaid
    by their final maturity dates.


Loans subject to
  product switches and further advances will be repurchased by the seller from
  Trustees, which will affect the prepayment rate of the loans, and this may affect
  the yield to maturity of the Issuer Notes

If a loan is subject
    to a product switch or a further advance, then the seller will be required
    to repurchase the loan or loans under the relevant mortgage account and their
    related security from Trustees at a price equal to the outstanding principal
    balance of those loans together with any arrears of interest and accrued and
    unpaid interest and expenses to the date of purchase.


A loan will be subject
    to a product switch if the borrower and the seller agree on or the servicer
    issues an offer for, and the borrower accepts, a variation in the financial
    terms and conditions applicable to the relevant borrowers loan, other
    than:


| | • | any variation agreed
      with a borrower to control or manage arrears on the loan;                                                                                                                                                                                        
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                             
| | • | any variation in the
      maturity date of the loan unless, while the previous intercompany loan made
      by Holmes Financing
      (No. 1) PLC is outstanding, it is extended beyond July 2038;                                                                         
| |   |                                                                                                                                                                                                                                                                             
| | • | any variation imposed
      by statute;                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                             
| | • | any variation of the
      rate of interest payable in respect of the loan where that rate is offered
      to the borrowers
      of more than 10 per cent. by outstanding principal amount of loans comprised
      in the trust
      property in any interest period; or
| |   |                                                                                                                                                                                                                                                                             
| | • | any variation in the
      frequency with which the interest payable in respect of the loan is charged.                                                                                                                                                                     

A loan will be subject
    to a further advance if an existing borrower requests a further amount to
    be lent to him or her under the mortgage in circumstances where the seller
    has a discretion to, and does, grant that request. A drawing under a flexible
    loan will not constitute a further advance.


The yield to maturity
    of the Issuer Notes may be affected by the repurchase of loans subject to
    product switches and further advances.


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Ratings assigned
  to the Issuer Notes may be lowered or withdrawn after noteholders purchase the
  Issuer Notes, which may lower the market value of the Issuer Notes

The ratings assigned
    to each class of Issuer Notes address the likelihood of full and timely payment
    to noteholders of all payments of interest on each interest payment date under
    those classes of Issuer Notes. The ratings also address the likelihood of
    (in the case of Standard & Poors and Fitch) timely,
    or (in the case of Moodys) ultimate, payment of principal
    on the final maturity date of each class of Issuer Notes. Any rating agency
    may lower its rating or withdraw its rating if, in the sole judgment of the
    rating agency, the credit quality of the Issuer Notes has declined or is in
    question. If any rating assigned to the Issuer Notes is lowered or withdrawn,
    the market value of the Issuer Notes may be reduced.


A change to the ratings
    assigned to each class of Issuer Notes will not affect the term advance ratings
    assigned to each issuer term advance under the issuer intercompany loan.


The Issuer Notes
  do not benefit from the subordination of other note classes

The issuer has not issued
    any notes which will be subordinated to the Issuer Notes issued by the
    issuer.


If the loans comprising
    the trust property do not perform as expected, then the series 1 Issuer Notes
    and/or series 2 Issuer Notes may not be repaid in full; provided that, following
    the occurrence of a non-asset trigger event (but prior to enforcement), the
    Issuer Notes will be redeemed by reference to their final maturity date; and
    provided further that both following the occurrence of an asset trigger event
    (but prior to enforcement) and following enforcement of the Issuer security,
    the Issuer Notes of each series will be repaid according to their respective
    classes and pro rata within each class, following the occurrence of a non-asset
    trigger event (but prior to enforcement), the Issuer Notes will be redeemed
    by reference to their final maturity date; and provided further that both
    following the occurrence of an asset trigger event (but prior to enforcement)
    and following enforcement of the Issuer security, the Issuer Notes of each
    series will be repaid according to their respective classes and pro rata within
    each class.


Noteholders may
  be subject to risks relating to exchange rates on the Issuer Notes

Investors will pay for
    the series 1 Issuer Notes and series 2 Issuer Notes in US dollars, but the
    issuer term advances to be made by the Issuer to Funding and repayments of
    principal and payments of interest by Funding to the Issuer under the issuer
    intercompany loan will be in sterling.


To hedge its currency
    exchange rate exposure, including the interest rate exposure connected with
    that currency exposure, on the closing date the Issuer will enter into the
    issuer dollar currency swaps for the series 1 Issuer Notes and series 2 Issuer
    Notes with the issuer dollar currency swap providers.


If the Issuer fails to
    make timely payments of amounts due under an issuer dollar currency swap,
    then the Issuer will have defaulted under that issuer currency swap. The issuer
    dollar currency swap providers are obliged only to make payments under the
    issuer dollar currency swaps as long as the Issuer make payments under them.
    If the issuer dollar currency swap providers are not obliged to make payments,
    or if an issuer dollar currency swap provider defaults in its obligations
    to make payments, of amounts in US dollars equal to the full amount to be
    paid by that issuer dollar currency swap provider on the payment dates under
    the relevant issuer dollar currency swap (which are the same dates as the
    interest 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 issuer dollar currency swap is


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entered into, the Issuer
  may have insufficient funds to make payments due on the Issuer Notes of any
  class and any series that are then outstanding.

Termination payments
  on the issuer swaps may adversely affect the funds available to make payments
  on the Issuer Notes

If any of the issuer
    swaps terminates, the Issuer may as a result be obliged to pay a termination
    payment to the relevant issuer swap provider. The amount of the termination
    payment will be based on the cost of entering into a replacement issuer swap.
    Under the Intercompany Loan Agreement, Funding will be required to pay the
    Issuer an amount equal to any termination payment due from the Issuer to the
    relevant issuer 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 and Funding
    cannot give noteholders 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 its issuer swaps or to make payments
    to noteholders in respect of the relevant series and class of Issuer Notes.
    Nor can the Issuer give noteholders 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 issuer swap provider will be sufficiently high to
    prevent a downgrading of the then current ratings of the Issuer Notes by the
    rating agencies.


Except where the relevant
    issuer swap provider has caused the relevant issuer swap to terminate by its
    own default or following a downgrade termination event, any termination payment
    due from the Issuer will rank equally not only with payments due to the holders
    of the series and class of Issuer Notes to which the relevant swap relates
    but also with payments due to the holders of any other series and class of
    Issuer Notes which rank equally with the series and class of Issuer Notes
    to which the relevant swap relates. Any additional amounts required to be
    paid by the Issuer following termination of the relevant issuer swap (including
    any extra costs incurred if the Issuer cannot immediately enter into a replacement
    swap) will also rank equally not only with payments due to the holders of
    the series and class of Issuer Notes to which the relevant issuer swap relates
    but also with payments due to the holder of any other series and class of
    Issuer Notes which rank equally with the series and class of Issuer Notes
    to which the relevant issuer swap relates. Furthermore, any termination payment
    or additional payment or additional amounts required to be paid by the Issuer
    following termination of an issuer swap will rank ahead of payments due to
    the holders of any series and class of Issuer Notes which ranks below the
    series and class of Issuer Notes to which the relevant issuer swap relates.
    Therefore, if the Issuer is obliged to make a termination payment to the relevant
    issuer swap provider, or to pay any other additional amount as a result of
    the termination of the relevant issuer swap, this may affect the funds which
    the Issuer has available to make payments on the Issuer Notes of any class
    and any series.


Payments by Funding
  to third parties in relation to the other issuers may affect payments due to
  the Issuer and accordingly its ability to make payments on the Issuer Notes

Under the other intercompany
    loan agreements, Funding is required to make payments to the other issuers
    in respect of the other issuers obligations to make payments to their
    respective own security trustee, note trustee, agent bank, paying agents,
    liquidity facility provider, cash manager, corporate services provider and
    account bank and to other third parties to whom the other issuers owe money.
    These payments rank in priority to amounts due by Funding to the Issuer on
    the issuer term advances.


Fundings obligations
    to make the payments described above to the other issuers may affect Fundings
    ability to make payments to the Issuer under the issuer intercompany loan.
    This in turn may affect its ability to make payments on the Issuer Notes.


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The Issuer relies
  on third parties to perform services in relation to the Issuer Notes, and noteholders
  may be adversely affected if they fail to perform their obligations

The Issuer is a party
    to contracts with a number of other third parties that have agreed to perform
    services in relation to the Issuer Notes. For example, the issuer liquidity
    facility provider has agreed to provide it with the issuer liquidity facility
    and the issuer dollar currency swap providers and the issuer euro currency
    swap provider have agreed to provide their 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 Issuer Notes. In the event that any of these parties were to fail
    to perform their obligations under the respective agreements to which they
    are a party, noteholders may be adversely affected.


The Issuer may
  be unable to pay, in full or at all, interest due on the Issuer Notes if there
  is an income or principal deficiency

If, on any interest payment
    date, revenue receipts available to Funding (including the reserve funds)
    are insufficient to enable Funding to pay interest on any of the other term
    advances, issuer term advances and any new term advances and other expenses
    of Funding ranking higher in seniority to interest due on such term advances,
    then Funding may use principal receipts on the loans received by it in the
    mortgages trust to make up the shortfall.


Funding will use principal
    receipts that would have been applied to repay the term advances with the
    lowest term advance rating to pay interest on those other term advances and
    senior expenses described in the preceding paragraph where there is a shortfall
    of monies to pay those amounts. Funding will be obliged to keep a ledger that
    records any principal applied to pay interest and senior expenses. During
    the term of the transaction, however, it is expected that any principal deficiencies
    of this sort will be recouped from subsequent excess revenue receipts and
    amounts standing to the credit of the first reserve fund.


The revenue receipts
    and the first reserve fund monies will be applied first to cover any principal
    deficiency in respect of the term advances with the highest term advance rating
    (at the closing date, these include the issuer term AAA advances), and then
    the term advances with the next highest-ranking term advance rating, and so
    on down to the term advances with the lowest term advance rating.


If there are insufficient
    funds available because of income or principal deficiencies, then the Issuer
    may be unable to pay, in full or at all, interest or principal due on the
    issuer notes.


The seller share
  of the trust property does not provide credit enhancement for the Issuer Notes

Any losses from loans
    included in the trust property will be allocated proportionately between Funding
    and the seller on each distribution date depending on their respective shares
    of the trust property. The sellers share of the trust property therefore
    does not provide credit enhancement for the Funding share of the trust property
    or the Issuer Notes.


The Issuer will
  only have recourse to the seller if there is a breach of warranty by the seller,
  but otherwise the sellers assets will not be available to the Issuer as
  a source of funds to make payments on the Issuer Notes

After an issuer intercompany
    loan enforcement notice under the issuer intercompany loan is given, 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 Issuer, Funding and
    Trustees will not have any recourse to the seller of the loans, other than
    in respect of a breach of warranty or other obligation under the mortgage
    sale agreement. The Issuer,


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Trustees, Funding and
  the security trustee will not undertake any investigations, searches or other
  actions on any 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 (i) in the case of each loan in the portfolio, was materially
    untrue on the date such loan was assigned to Trustees or (ii) in the case
    of each new loan, is materially untrue on the date such new loan is assigned
    to Trustees, then the seller may be required by Trustees to remedy the breach
    within twenty days of the seller becoming aware of the same or of receipt
    by it of a notice from Trustees.


If the seller fails to
    remedy the breach within twenty days, then Trustees may require the seller
    to repurchase the loan or loans under the relevant mortgage account and their
    related security together with any arrears of interest and accrued and unpaid
    interest and expenses. There can be no assurance that the seller will have
    the financial resources to repurchase the loan or loans under the relevant
    mortgage account and their related security. However, if the seller does not
    repurchase those loans and their related security when required, then the
    sellers share of the trust property will be deemed to be reduced by
    an amount equal to the principal amount outstanding of those loans together
    with any arrears of interest and accrued and unpaid interest and expenses.


Other than as described
    here, neither noteholders nor the Issuer 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, which may adversely affect repayments on the Issuer Notes

Each loan in the current
    portfolio is repayable either on a principal repayment basis or an interest
    only basis. Of the loans in the portfolio as at May 8, 2006, approximately
    36 per cent were interest-only loans. For interest-only loans, because the
    principal is repaid in a lump sum at the maturity of the loan, the borrower
    is recommended to have some repayment mechanism such as an investment plan
    in place to ensure that funds will be available to repay the principal at
    the end of the term. However, the seller does not take security over such
    repayment mechanisms. The borrower is also recommended to take out a life
    insurance policy in relation to the loan but, as with repayment mechanisms,
    the seller does not take security over such life policies.


The ability of a borrower
    to repay the principal on an interest-only 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. 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 loan
    and a loss occurs on the loan, then this may affect repayments of principal
    on the Issuer Notes if that loss cannot be cured by amounts standing to the
    credit of the first reserve fund or the application of excess Funding available
    revenue receipts.


There may be risks
  associated with the fact that Trustees has no legal title to the mortgages which
  may adversely affect payments on the Issuer Notes



The sale by the seller
  to Trustees of the mortgages has taken effect, and any such sale in the future
  will take effect, in equity only. The sale by the seller to the mortgages trustee
  of the Scottish mortgages has taken effect by declarations of trust by the seller
  (and any sale of Scottish mortgages in the future will be given effect by further
  declarations of trust) by which the beneficial interest in the Scottish mortgages
  is transferred to the mortgages trustee. In each case, this means that legal
  title to the loans in the trust property remains with the seller, but Trustees
  has all the other rights and benefits relating to ownership of each loan and
  its related security (which rights and benefits are subject to the trust in
  favour


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of the beneficiaries).
  Trustees has the right to demand the seller to give it legal title to the loans
  and the related security in certain circumstances and until then Trustees will
  not apply to the Land Registry or the Central Land Charges Registry to register
  or record its equitable interest in the mortgages.

Because Trustees has
    not obtained legal title to the loans or their related security, there are
    risks, as follows:


| | • | firstly, if the seller
      wrongly sold a loan to another person which has already been assigned to
      Trustees, and that person
      acted in good faith and did not have notice of the interests of Trustees
      or the beneficiaries
      in the loan, then she or he might obtain good title to the loan, free from
      the interests
      of Trustees and the beneficiaries. If this occurred then Trustees would
      not have good title
      to the affected loan and its related security and it would not be entitled
      to payments by a borrower
      in respect of such a loan. This may affect the ability of the Issuer to
      repay the Issuer Notes;
      and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | • | secondly, the rights
      of Trustees and the beneficiaries may be subject to the rights of the
      borrowers against the
      seller, such as the rights of set-off 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 loan directly to the seller. If these rights were exercised,
      Trustees may receive
      less money than anticipated from the loans, which may affect the ability
      of the Issuer
      to repay the Issuer Notes.                                                                                               

However, 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, and
    the minimum seller share has been sized in an amount expected to cover this
    risk (although there is no assurance that it will).


Once notice has been
    given to borrowers of the transfer of the loans and their related security
    to Trustees, independent set-off rights which a borrower has against the seller
    will crystallize and 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 such notice. Set-off rights arising under transaction set-off (which
    are set-off claims arising out of a transaction connected with the loan (for
    example, a savings account maintained by a borrower pursuant to the terms
    of a flexible plus loan)) will not be affected by such notice.


Set-off risks in
  relation to flexible loans, delayed cashbacks and reward cashbacks may adversely
  affect the funds available to the Issuer to repay the Issuer Notes

As described under There
    may be risks associated with the fact that Trustees has no legal title to
    the mortgages which may adversely affect payments on the Issuer Notes,
    the seller has made, and in the future may make, an equitable assignment of
    the mortgages, or in the case of the Scottish mortgages transfer of the beneficial
    interest in the Scottish mortgages, to Trustees, with legal title being retained
    by the seller. Therefore, the rights of Trustees 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 mortgages.
    Such set-off rights may occur if the seller fails to advance to a borrower
    a drawing under a flexible loan when the borrower is entitled to draw additional
    amounts under a flexible loan or if the seller fails to pay to a borrower
    any delayed cashback or reward cashback which the seller had agreed to pay
    to that borrower after completion of the relevant loan.


If the seller fails to
    advance the drawing or pay the delayed cashback or reward cashback, then the
    relevant borrower may set off any damages claim (or analagous right in Scotland)
    arising from the sellers breach of contract against the sellers
    (and, as assignee of the mortgages, Trusteess) claim for payment of
    principal and/or interest under the loan as and when it becomes due. Such
    set-off claims will constitute transaction set-off as described in the risk
    factor entitled Independent set-off risks which a borrower has against
    the seller may adversely affect the funds available to the Issuer to repay
    the Issuer Notes.


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The amount of the claim
    in respect of a drawing will, in many cases, be the cost to the borrower of
    finding an alternative source of finance (although, in the case of flexible
    loan drawing, a delayed cashback or reward cashback in respect of a Scottish
    loan, it is possible, though regarded as unlikely, that the borrower's right
    of set-off could extend to the whole amount of the additional drawing). The
    borrower may obtain a 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
    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 mortgage was taken out.


In respect of a delayed
    cashback or reward cashback, the claim is likely to be in an amount equal
    to the amount due under the delayed cashback or reward cashback together with
    interest and expenses and consequential losses (if any). 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 (or analagous claim in Scotland).
      In that case, the servicer 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 judgment is obtained.
 The exercise of set-off
      rights by borrowers would reduce the incoming cashflow to Trustees during
      such exercise. However, the amounts set off will be applied to reduce the
      seller share of the trust property only. The minimum seller share has been
      sized in an amount expected to cover this risk, although there is no assurance
      that it will. If the minimum seller share is not sufficient in this respect
      then noteholders may not receive all amounts due on the Issuer Notes.


Independent set-off
  risks which a borrower has against the seller may adversely affect the funds
  available to the Issuer to repay the Issuer Notes

Once notice has been
    given to borrowers of the transfer of the loans and their related security
    to the mortgages trustee, independent set-off rights which a borrower has
    against the seller will crystallise and 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 loan (for example, a savings account maintained by a borrower pursuant
    to the terms of a flexible plus loan)) will not be affected by that notice.


If the servicer
  is removed, there is no guarantee that a substitute servicer would be found,
  which could delay collection of payments on the loans and ultimately could adversely
  affect payments on the Issuer Notes

The seller has been appointed
    by Trustees and the beneficiaries as servicer to service the loans. If the
    servicer breaches the terms of the servicing agreement, then Trustees and
    the beneficiaries will be entitled to terminate the appointment of the servicer
    and appoint a new servicer in its place.


There can be no assurance
    that a substitute servicer would be found who would be willing and able to
    service the loans on the terms of the servicing agreement. The ability of
    a substitute servicer 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
    servicer may affect payments on the loans and hence its ability to make payments
    when due on the Issuer Notes.


The servicer has no obligation
    itself to advance payments that borrowers fail to make in a timely fashion.


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Neither the security
    trustee nor the note trustee is obliged in any circumstances to act as a servicer
    or to monitor the performance by the servicer of its obligations.


Funding may not
  receive the benefit of any claims made on the buildings insurance which could
  adversely affect payments on the Issuer Notes

No assurance can be given
    that Funding will always receive the benefit of any claims made under any
    applicable insurance contracts. This could reduce the principal receipts received
    by Funding according to the Funding share percentage and could adversely affect
    its ability to redeem the Issuer Notes. Buildings insurance is renewed annually.


Possible regulatory
  changes by the Office of Fair Trading, the Financial Services Authority and
  any other regulatory authority may have an impact on the seller, the Issuer,
  the servicer, and/or the loans and may adversely affect our ability to make
  payments when due on the Issuer Notes

Mortgage Regulation

The U.K. Financial Services
    Authority (the FSA) regulates persons who carry on regulated
    activities in the United Kingdom under the Financial Services and Markets
    Act 2000 (the FSMA). This includes institutions which accept deposits
    by way of business within the meaning of the FSMA and persons who carry on
    certain mortgage business. There are five principal mortgage-related regulated
    activities: (i) entering into; (ii) administering; (iii) arranging; (iv) advising
    on regulated mortgage contracts; and (v) agreeing to do any of
    these things (subject to certain exceptions) which are broadly loans entered
    into or treated as entered into on or after 31 October 2004 that are secured
    by way of first legal mortgage over U.K. residential property at least 40%
    of which is used or intended to be used as, or in connection with, a dwelling
    by the borrower or a related person.


All authorised persons
    (within the meaning of the FSMA) who are regulated by the FSA are subject
    to the FSAs Handbook of rules and guidance which regulate a range of
    matters including senior management arrangements, systems and controls, conduct
    of business and training and competence.


The FSA is broadly empowered
    to obtain information from and give directions to authorised persons and also
    sets out standards that serve as guidelines for authorised persons under its
    supervision. These authorised persons are subject to various reporting obligations
    (including submitting regular reports to the FSA) to enable the FSA to perform
    its supervisory role. The approach adopted by the FSA in supervising banks
    is risk-based with the objectives of: (i) systematic assessment of whether
    a bank meets the FSMA authorisation criteria; (ii) understanding the quality
    of the management and the risks banks face; (iii) using appropriate supervisory
    tools such as skilled persons reports on internal controls to identify
    risks and (iv) allocating resources proportionate to risk by focusing on banks
    with a high risk profile.


If mortgage lenders and
    brokers are not authorised as required by the FSMA, a regulated mortgage contract
    is unenforceable against the borrower except with the approval of a court.
    Generally, each qualifying credit promotion (in broad terms an advertisement
    or marketing activity) relating to a regulated mortgage contract (or any other
    credit agreement secured by a mortgage on land, where the lender carries on
    a regulated mortgage contract lending business) has to be issued or approved
    by a person holding authorisation and permission from the FSA. If such requirements
    as to qualifying credit promotions are not complied with, the regulated mortgage
    contract (or other credit agreement) is unenforceable against the borrower
    except with the approval of a court. In addition, a court order is in any
    event necessary to enforce a mortgage securing a regulated mortgage contract
    that would (if it were not a regulated mortgage contract) be, or be treated
    as, regulated by the Consumer Credit Act 1974 (the CCA). 20


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Under the terms of the
    regulatory regime under the UK Financial Services and Markets Act 2000, the
    Issuer and mortgages trustee will not carry on any regulated activity in relation
    to regulated mortgage contracts that are administered pursuant to an administration
    agreement by an entity having the required authorisation and permission. If
    such administration agreement terminates, however, the Issuer and mortgages
    trustee will have a period of not more than one month in which to arrange
    for mortgage administration to be carried out by a replacement administrator
    having the required authorisation and permission.


In addition, from 31stOctober 2004 no variations have been or will be made to the loans and no further
    advances or product switches have been or will be made under the loans where
    it would result in Funding and/or the mortgages trustee arranging or advising
    in respect of administering or entering into a regulated mortgage contract
    (or agreeing to do any of these things) if the Issuer, Funding and/or the
    mortgages trustee would be required to be authorised under FSMA to do so.


All authorised persons
    (within the meaning of the FSMA) who are regulated by the FSA are subject
    to the FSAs Handbook of rules and guidance which regulate a range of
    matters including senior management arrangements, systems and controls, conduct
    of business and training and competence.The FSA Handbook of Rules
    means the rules promulgated by the FSA under FSMA and set out in the FSAs
    Handbook of Rules and Guidance, as updated, amended or replaced from time
    to time.


A borrower who is a private
    person is entitled to claim damages for loss suffered as a result of any contravention
    by an authorised person of an FSA rule, and may set off the amount of the
    claim against the amount owing by the borrower under the loan or any other
    loan that the borrower has taken (or exercise analogous rights in Scotland).
    Any such set-off may adversely affect our ability to make payments in full
    on the Issuer Notes when due.


Consumer Credit
  Regulation and the UK Consumer Credit Act 2006

In the United Kingdom,
    the Office of Fair Trading (the OFT) is responsible for the issue
    of licences under, and the superintendence of the working and the enforcement
    of, the CCA, related consumer credit regulations and other consumer protection
    legislation. The OFT may review business and operations, provide guidelines
    to follow and take actions when necessary with regard to the consumer credit
    and mortgage markets in the United Kingdom.


Currently, a credit agreement
    is regulated by the CCA where: (i) the borrower is or includes an individual;
    (ii) the amount of credit as defined in the CCA does not exceed
    the financial limit, which is £25,000 for credit agreements made on or
    after 1 May 1998, or lower amounts for credit agreements made before that
    date; and (iii) the credit agreement is not an exempt agreement as defined
    in the CCA (for example it is intended that a regulated mortgage contract
    under the FSMA is an exempt agreement under the CCA.


The CCA does not apply
    to loans and mortgages which are regulated mortgage contracts, as described
    above (although in certain circumstances it may be necessary to obtain a court
    order under section 126 CCA to enforce a regulated mortgage contract). The
    CCA does apply to loans and mortgages which are not regulated mortgage contracts,
    but which fall within the criteria for regulation by the CCA as described
    above. Loans and mortgages which will not be regulated mortgage contracts
    and which therefore may be regulated by the CCA if they fall within such criteria
    include loans secured by second or subsequent charges and any buy-to-let mortgage
    which is secured on land which is not used or intended to be used as to at
    least 40% or in connection with a dwelling by the borrower or a related person.


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Any credit agreement
    that is wholly or partly regulated by the CCA or is to be treated as such
    has to comply with the requirements under the CCA as to licensing of lenders
    and brokers, documentation and procedures of credit agreements, and (in so
    far as will be applicable) pre-contract disclosure. If it does not comply
    with those requirements, then to the extent that the credit agreement is regulated
    by the CCA or to be treated as such, it is unenforceable against the borrower:
    (a) without an order of the OFT, if requirements as to licensing of lenders
    and brokers are not met; (b) totally, if the form to be signed by the borrower
    is not signed by the borrower personally or omits or mis-states a prescribed
    term; or (c) without a court order in other cases and, in exercising
    its discretion whether to make the order, the court would take into account
    any prejudice suffered by the borrower and any culpability by the lender.


Any credit agreement
    intended to be a regulated mortgage contract under the FSMA or unregulated
    under the FSMA might instead be wholly or partly regulated by the CCA or to
    be treated as such because of technical rules on:


| | (a) | determining
      whether any credit under the CCA arises, or whether the financial limit
      of the CCA is exceeded;                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) | determining
      whether the credit agreement is an exempt agreement under the CCA (for example,
      certain types of credit agreement to finance the purchase of, or alteration
      to, homes or business premises, or a regulated mortgage contract under the
      FSMA); or
|
| | (c) | changes
      to credit agreements.                                                                                                                                                                                                                                                 

A court order under Section
    126 of the CCA is necessary to enforce a mortgage securing a loan, further
    advance or credit agreement to the extent that it is regulated by the CCA
    or to be treated as such. In dealing with such application, the court has
    the power, if it appears to do so, to amend a loan, further advance or credit
    agreement or to impose conditions upon its performance or to make a time order
    (for example, giving extra time for arrears to be cleared).


The Consumer Credit Act
    2006 (the CCA 2006) received the Royal Assent on 30thMarch 2006. Once implemented the new Act will update
    and augment the CCA.


It is currently expected
    that from April 2007 the extortionate credit regime will be replaced by the
    unfair relationship test. In applying the new unfair relationship test the
    courts will be able to consider a wider range of circumstances surrounding
    the transaction including the creditors conduct before and after making
    the agreement. There is no statutory definition of the word unfair
    as the intention is for the test to be flexible and subject to judicial discretion.
    However the word unfair is not an unfamiliar term in UK law due
    to the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts
    Regulations 1999 (SI 1999/2083). The courts may look to the above legislation
    for guidance. The FSA Principles are also relevant and apply to the way contract
    terms are used in practice and not just the way they are drafted. The test
    has retrospective application after a transitional period. Once the debtor
    alleges that an unfair relationship exists, it is up to the creditor to prove
    the contrary, altering the burden of proof.


An alternative dispute
    resolution (ADR) scheme for consumer credit matters is to be run by the Financial
    Ombudsman Service (FOS). It is currently expected that from April 2007 the
    scheme will be mandatory for all businesses licensed under the CCA. The CCA
    2006 also introduces an Independent Consumer Appeals Tribunal.


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It
  is currently expected that from April 2008 the statutory upper financial limit
  of £25,000 for CCA regulation will be removed .


The OFT are to be given
    far broader powers under the CCA 2006 for instance they can apply intermediate
    sanctions, have far greater powers of investigation and can issue indefinite
    standard licences. The CCA 2006 obliges creditors to comply with more stringent
    information requirements. It is currently expected that from 2008 lenders
    will be obliged to give customers clearer and more regular information on
    the state of their credit accounts for example by running account and fixed
    sum statements; OFT information sheets and arrears notices.


The seller has interpreted
    certain technical rules under the CCA in a way common with many other lenders
    in the mortgage market. If such interpretation were held to be incorrect by
    a court or the Ombudsman, then a credit agreement, to the extent that it is
    regulated by the CCA or treated as such, would be unenforceable as described
    above. If such interpretation were challenged by a significant number of borrowers,
    then this could lead to significant disruption and shortfall in the income
    of the mortgages trustee. Court decisions have been made on technical rules
    under the CCA against certain mortgage lenders, but such decisions are very
    few and are generally county court decisions which are not binding on other
    courts.


The seller has given
    or, as applicable, will give warranties to the mortgages trustee in the mortgage
    sale agreement that, among other things, each loan and its related security
    is enforceable (subject to certain exceptions). If a loan or its related security
    does not comply with these warranties, and if the default cannot be or is
    not cured within 20 days, then the seller will be required to repurchase the
    loans under the relevant mortgage account and their related security from
    the mortgages trustee.


No assurance can be given
    that additional regulations from the Office of Fair Trading, the Financial
    Services Authority 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 may have a material adverse effect on the
    loans, the seller, the Issuer and/or the servicer and their respective businesses
    and operations. This may adversely affect our ability to make payments in
    full on the Issuer Notes when due.


Distance Marketing

In the United Kingdom,
    the Financial (Distance Marketing) Regulations 2004 apply to,inter
    alia, credit agreements entered into on or after 31
    October 2004 by means of distance communication (i.e. without any substantive
    simultaneous physical presence of the originator and the borrower). A regulated
    mortgage contract under the FSMA, if originated by a UK lender from an establishment
    in the UK, will not be cancellable under these regulations. Any other credit
    agreement will be cancellable under these regulations, if the borrower does
    not receive prescribed information at the prescribed time, or in any event
    for certain unsecured lending. The borrower may send notice of cancellation
    under these regulations at any time before the end of the fourteenth day after
    the day on which the cancellable agreement is made or, if later, the borrower
    receives the last of prescribed information.


If the borrower cancels
    the credit agreement under these regulations, then: (a) the borrower is liable
    to repay the principal and any other sums paid by the originator to the borrower
    under or in relation to the cancelled agreement, within 30 days beginning
    with the day of the borrower sending notice of cancellation or, if later,
    the originator receiving notice of cancellation; (b) the borrower is liable
    to pay interest, or any early repayment charge or other charge for credit
    under the cancelled agreement, only if the borrower received certain prescribed
    information at the prescribed time and if other conditions are met; and (c)
    any security is to be treated as never having had effect for the cancelled
    agreement.


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Proposed EU Consumer
  Credit Directive

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. Under the original proposed draft, the
    directive required specific requirements to be met in respect of certain mortgage
    loan products (including new credit agreements for further drawings under
    certain flexible mortgages and for further advances and amortisation tables
    for repayment mortgages). Mortgage loans not complying with these requirements
    were potentially unenforceable. Significantly, in its original form, the proposal
    provided that it does not apply retrospectively (subject to certain exceptions
    including in respect of new drawings made in respect of existing agreements)
    and does not apply to residential mortgage loans except those which include
    an equity release component.


There has been significant
    opposition from the European Parliament to the original form of the proposed
    directive. On 13 February 2004, the Committee of Legal Affairs and the Internal
    Market published the European Parliaments amendments to the proposed
    draft. These amendments included excluding any credit agreement secured by
    a mortgage on land. On 20 April 2004 the European parliament voted on its
    first reading on the proposed directive. The European Commission published
    on 28 October 2004 a revised proposal, which comprised a list of intended
    revisions to the draft directive based on the amendments that the European
    Commission felt either able or unable to accept rather than a full redraft.
    In this amended form die proposed directive will apply to any loan secured
    by a mortgage over land if the loan includes an equity release element and
    is not over 100,000, but it is unclear whether it will apply to further
    drawings and further advances made in relation to agreements existing before
    national implementing legislation conies into effect.


The DTI published in
    February 2005 a consultation paper on the European Commissions amended
    form of the proposed Directive, and in June 2005 a summary of responses to
    this consultation. In July 2005, the European Commission published a Green
    Paper on mortgage credit, in which it announced its intention that loans secured
    by a land mortgage will be excluded from the proposed Directive but will be
    covered by any initiatives resulting from the Green Paper process. In October
    2005, the European Commission published a further amended form of the proposed
    Directive, which provides that (subject to certain exceptions) loans not exceeding
    50,000 will be regulated, but that loans secured by a land mortgage
    will be excluded from the proposed Directive. The proposed Directive, which
    may be further substantially amended before it is brought into effect, is
    unlikely to come into force before mid-2006, and member states will then have
    a further two years in which to bring national implementing legislation into
    force. In March 2006 the DTI released a further consultation paper, the deadline
    for responses was 10 May 2006.


Until the final text
    of the Directive and of any initiatives resulting from the Green Paper process
    are decided and the details of the United Kingdom implementing legislation
    are published, it is not certain what effect the adoption and implementation
    of the Directive or initiatives would have on our ability to make payments
    in full on the Issuer Notes when due. 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 or compliance costs may have
    a material adverse effect on the loans, the seller, the Issuer and/or the
    servicer and their respective business and operations. This may adversely
    affect our ability to make payments in full on the Issuer Notes when due.


Regulations in
  the United Kingdom could lead to some terms of the loans being unenforceable,
  which may adversely affect payments on the Issuer Notes

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In the United Kingdom,
    the Unfair Terms in Consumer Contracts Regulations 1999, and (in so far as
    applicable) the Unfair Terms in Consumer Contracts Regulations 1994 (together,
    the regulations) apply to agreements entered into on or after
    July 1, 1995 and affect all of the loans. The regulations provide that:


| | • | 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                                                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                              
| | • | the Office of Fair
      Trading, the Financial Services Authority and any other qualifying
      body (as
      defined in the regulations) may seek to prevent a business from using or
      recommending the
      use of unfair terms.

The regulations will
    not generally affect individually negotiated or core terms which
    set out the main subject-matter of the contract, such as the borrowers
    obligation to repay the principal. However, they 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 (as the seller is permitted
    to do) 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 any assignee such as Trustees, to claim repayment of the extra
    interest amounts paid or to set-off the amount of the claim against the amount
    owing by the borrower under the loan or under any other loan that the borrower
    has taken. Any such non-recovery, claim or set-off ultimately may adversely
    affect our ability to make payments on the Issuer Notes.


The FSA has agreed with
    the OFT to take responsibility for the enforcement of the UTCCR in mortgage
    agreements. In May 2005, the FSA issued a statement of good practice on fairness
    of terms in consumer contracts, which is relevant to firms authorised and
    regulated by the FSA in relation to products and services within the FSAs
    regulatory scope. This statement considers, among other things, borrowers
    who are locked in, for example, by an early repayment charge that is considered
    to be a penalty. This statement provides that, for locked-in borrowers, a
    firm may consider drafting the contract to permit a change in the contract
    to be made only where any lock-in clause is not exercised.


In August 2002, the Law
    Commission for England and Wales and the Scottish Law Commission issued a
    joint consultation LCCP No. 166/SLCDP 119 on proposals to rationalise the
    Unfair Contract Terms Act 1977 and the regulations into a single piece of
    legislation and a final report (incorporating a proposed Bill on unfair terms),
    which was expected early in 2004 but at the date of this annual report, has
    not yet been published. The Law Commissions have a duty under section 3 of
    the Law Commissions Act 1965 to keep the law under review for a number of
    purposes, including its simplification. The proposals are primarily to simplify
    the legislation on unfair terms. It is not proposed that there should be any
    significant increase in the extent of controls over terms in consumer contracts.
    Some changes are proposed, however, such as that the legislation should not
    affect core terms in so far as they are not substantially different from what
    the borrower should reasonably expect and are transparent. However, it is
    not obligatory for any of the Law Commissions reports to be considered
    for enactment as legislation by the UK government. It is therefore too early
    to tell how the proposals, if enacted, would affect the loans.


Decisions of the
  Ombudsman could lead to terms of the loans being considered unfair and such
  terms being varied, which may adversely affect payments on the Issuer Notes

Under the UK Financial
    Services and Markets Act 2000, the Financial Ombudsman Service is empowered
    to make decisions on, among other things, complaints relating to the terms
    in agreements for


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the provision of financial
  services, including loans, on the basis of what, in the Ombudsmans opinion,
  would be fair and reasonable in all circumstances of the case, taking into account,
  among other things, law and guidance. Such complaints are generally decided
  on a case by case basis by the Financial Ombudsman Service, with reference to
  the particular facts of any individual case. Each case is first adjudicated
  by an adjudicator. Either party to the case may appeal against the adjudication.
  In the event of an appeal, the case proceeds to a final decision by the Ombudsman.

No Financial Ombudsman
    Service decision against the seller has had a material adverse effect on the
    Issuers ability to make payments on the Issuer Notes. However, given
    the Financial Ombudsman Services wide jurisdiction in respect of fairness
    in the provision of financial services, it cannot be said with certainty what
    effect, if any, any future decision of the Financial Ombudsman Service may
    have on the Issuers ability to make payments on the Issuer Notes.


Tax payable by
  Funding or the Issuer may adversely affect the Issuers ability to make
  payments on the Issuer Notes

As explained in Item
    10.E.  Taxation  United Kingdom Taxation, Funding and the
    Issuer will generally be subject to UK corporation tax, currently at a rate
    of 30 per cent., on the profit reflected in their respective profit and loss
    accounts as increased by the amount of any non-deductible expenses or losses.
    If the tax payable by Funding or the Issuer is greater than expected because,
    for example, non-deductible expenses or losses are greater than expected,
    the funds available to make payments on the Issuer Notes will be reduced and
    this may adversely affect the Issuers ability to make payments on the
    Issuer Notes.


The UK corporation tax
    position of the Issuer and Funding, however, also depends to a significant
    extent on the accounting treatment applicable to it. From 1st January, 2005,
    the accounts of the Issuer are required to comply with International Financial
    Reporting Standards (IFRS) or with new UK Financial Reporting
    Standards reflecting IFRS (new UK GAAP). Funding has chosen to
    comply with IFRS. There is a concern that companies such as the Issuer and
    Funding might, under either IFRS or new UK GAAP, suffer timing differences
    that could result in profits or losses for accounting purposes, and accordingly
    for tax purposes (unless tax legislation provides otherwise), which bear little
    or no relationship to the companys cash position. However, the Finance
    Act 2005 (which received royal assent on 7th April, 2005) requires securitisation
    companies to prepare tax computations for accounting periods beginning
    on or after 1st January, 2005 and ending before 1st January, 2007 on the basis
    of UK GAAP as applicable up to 31st December, 2004, notwithstanding the requirement
    to prepare statutory accounts under IFRS or new UK GAAP. The Finance Bill
    2006 provides that this temporary tax basis available to securitisation
    companies is to be extended for a further year (i.e. to periods of account
    ending on or before 31st December, 2007). On the basis of the definition of
    securitisation company as currently drafted for these purposes,
    the Issuer and Funding will each qualify as such a company.


The stated policy of
    H.M. Revenue & Customs is that the tax neutrality of securitisation special
    purpose companies in general should not be disrupted as a result of the transition
    to IFRS or new UK GAAP and that they are working with participants in the
    securitisation industry to identify appropriate means of preventing any such
    disruption through a permanent regime. The Finance Act 2005 enables regulations
    to be made to establish such a regime. It is not clear what the provisions
    of such a regime will entail, although current indications from H.M. Revenue
    & Customs are that a securitisation company will have to satisfy various
    conditions in order to be able to benefit from the regime. If, however (for
    whatever reason), measures are not introduced to deal with the corporate tax
    position of such companies in respect of accounting periods ending on or after
    1st January, 2008, then profits or losses could arise in the Issuer and/or
    Funding as a result of the application of IFRS or new UK GAAP which could
    have tax effects not contemplated in the cashflows for the transaction and
    as such adversely affect the Issuer and/or Funding and consequently payments
    on the Issuer Notes.


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European Directive
  2003/48/EC on the Taxation of Savings Income may adversely affect noteholders
  interests

On 1 July 2005 a European
    Union Directive (2003/48/EC) regarding the taxation of savings income came
    into force. Under the Directive, member states are required to provide to
    the tax authorities of other member states details of payments of interest
    and other similar income paid by a person within a member state's jurisdiction
    to an individual in another member state, except that Austria, Belgium and
    Luxembourg will instead impose a withholding system for a transitional period,
    unless during such period they elect otherwise (the ending of such transitional
    period being dependent upon the conclusion of certain other agreements relating
    to information exchange with certain other countries).


Payments of interest
    on the Issuer Notes which are made or collected through a member state or
    any other relevant country may be subject to withholding tax which would prevent
    holders of the Issuer Notes from receiving interest on their Issuer Notes
    in full.


Noteholders
  interests may be adversely affected if the United Kingdom joins the European
  Monetary Union

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 the Issuer Notes denominated in pounds sterling may
    become payable in euro, (b) applicable provisions of law may require or allow
    us to redenominate such Issuer Notes into euro and take additional measures
    in respect of such Issuer 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 sterling used to determine the rates of
    interest on such Issuer 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 investors. It cannot be said with certainty what effect, if any, adoption
    of the euro by the United Kingdom will have on investors on the Issuer Notes.


Changes of law may
  adversely affect noteholders interests

The structure of the
    issue of the Issuer Notes and the ratings which are to be assigned to them
    are based on English law and Scottish law in relation to Scottish loans in
    effect as at the date of this annual report. No assurance can be given as
    to the impact of any possible change to English or Scottish law or administrative
    practice in the United Kingdom after the date of this annual report.


Insolvency Act 2000

Significant changes to
    the insolvency regime in England and Wales and Scotland have recently been
    enacted, including the Insolvency Act 2000. The Insolvency Act 2000 allows
    certain small companies to seek protection from their creditors
    for a period of 28 days, for the purposes of putting together a company voluntary
    arrangement, with the option for creditors to extend the moratorium for a
    further two months. A small company is defined as one which satisfies,
    in any financial year, two or more of the following criteria: (i) its turnover
    is not more than £5.6 million, (ii) its balance sheet total is not more
    than £2.8 million and (iii) the number of employees is not more than
    50. 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,
    Trustees or Funding will not, 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 has the power
    to make different provisions for different cases. No assurance can be given
    that any such modification or different provisions will not be detrimental
    to the interests of noteholders.


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Secondary legislation
    has now been enacted which excludes certain special purpose companies in relation
    to capital markets transactions from the optional moratorium provisions. Such
    exceptions include (amongst other matters): (i) a company which is a party
    to an agreement which is or forms part of a capital market arrangement (as
    defined in the secondary legislation) under which (a) a party has incurred
    or when the agreement was entered into was expected to incur a debt of at
    least £10 million under the arrangement and (b) the arrangement involves
    the issue of a capital market investment (also defined, but generally, a rated,
    listed or traded bond) and (ii) a company which has incurred a liability (including
    a present, future or contingent liability) of at least £10 million. While
    the Issuer, Trustees and Funding should fall within the exceptions, there
    is no guidance as to how the legislation will be interpreted by a court and
    the Secretary of State for Trade and Industry may by regulation modify the
    exception. No assurance may be given that any modification of the eligibility
    requirements for small companies and/or the exceptions will not
    be detrimental to the interests of noteholders.


If the Issuer and/or
    Trustees and/or Funding is determined to be a small company and
    determined not to fall within one of the exceptions (by reason of modification
    of the exceptions or otherwise), then the enforcement of the Issuer security
    by the security trustee may, for a period, be prohibited by the imposition
    of a moratorium.


Enterprise Act 2002

On September 15, 2003,
    the corporate insolvency provisions of the Enterprise Act 2002 (the Enterprise
    Act) came into force, amending certain provisions of the Insolvency
    Act 1986 as amended (the Insolvency Act). These provisions introduced
    significant reforms to corporate insolvency law. In particular the reforms
    restrict the right of the holder of a floating charge created after 15th September,
    2003 to appoint an administrative receiver (unless an exception applies) and
    instead gives primacy to collective insolvency procedures (in particular,
    administration).


The holder of a floating
    charge created before September 15, 2003 over the whole or substantially the
    whole of the assets of a company (such as the security trustee under the Funding
    deed of charge) retains the ability to block the appointment of an administrator
    by appointing an administrative receiver, who has a duty to primarily act
    in the interests of the floating charge holder.


The Insolvency Act contains
    provisions which continue to allow for the appointment of an administrative
    receiver in relation to certain transactions in the capital markets. The right
    to appoint an administrative receiver is retained for certain types of security
    (such as the Issuer security) that form part of a capital markets arrangement
    (as defined in the Insolvency Act) that involves (i) indebtedness of at least
    £50,000,000 (or, when the relevant security document was entered into
    (being in respect of the transactions described in this annual report, the
    Issuer deed of charge), a party to the relevant transaction (such as the Issuer)
    was expected to incur a debt of at least £50,000,000) and (ii) the issue
    of a capital markets investment (also defined but generally a rated, listed
    or traded bond). The Secretary of State for Trade and Industry may, by secondary
    legislation, modify this exception and/or provide that the exception shall
    cease to have effect. No assurance can be given that any such modification
    or provision in respect of the capital market exception, or its ceasing to
    be applicable to the transactions described in this document will not adversely
    affect payments on the Issuer Notes. While the Issuer security should fall
    within the relevant exception, as the provisions of the Enterprise Act have
    never been considered judicially, no assurance can be given as to whether
    the Enterprise Act could have a detrimental effect on the transaction described
    in this annual report or on the interests of noteholders.


The Insolvency Act also
    contains a new out-of-court route into administration for a qualifying floating
    charge holder, the directors or the company itself. The relevant provisions
    provide for a notice period during which the holder of the floating charge
    can either agree to the administrator proposed by the directors of the company
    or appoint an alternative administrator, although the moratorium will take
    effect immediately after notice is given. If the qualifying floating charge
    holder does not respond to the directors notice of intention to appoint,
    the directors, or as the case may be, the companys appointee


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will automatically take
  office after the notice period has elapsed. Where the holder of a qualifying
  floating charge within the context of a capital market transaction retains the
  power to appoint an administrative receiver, such holder may prevent the appointment
  of an administrator (either by the new out-of-court route or by the court based
  procedure), by appointing an administrative receiver prior to the appointment
  of the administrator being completed.

The new provisions of
    the Insolvency Act give primary emphasis to the rescue of the company as a
    going concern. The purpose of realising property to make a distribution to
    one or more secured creditors is subordinated to the primary purposes of rescuing
    the company as a going concern or achieving a better result for the creditors
    as a whole than would be likely if the company were wound up. No assurance
    can be given that the primary purposes of the new provisions will not conflict
    with the interests of noteholders were the Issuer ever subject to administration.


In addition to the introduction
    of a prohibition on the appointment of an administrative receiver as set out
    above, section 176A of the Insolvency Act provides that in relation to floating
    charges created after September 15, 2003 any receiver (including an administrative
    receiver), liquidator or administrator of a company is required to make a
    prescribed part of the companys net property
    available for the satisfaction of unsecured debts in priority to the claims
    of the floating charge holder. The companys net property
    is defined as the amount of the chargors property which would be available
    for satisfaction of debts due to the holder(s) of any debentures secured by
    a floating charge and so refers to any floating charge realisations less any
    amounts payable to the preferential creditors or in respect of the fees or
    expenses of administration. The prescribed part is defined in
    The Insolvency Act 1986 (Prescribed Part) Order 2003 (SI 2003/2097) to be
    an amount equal to 50 per cent. of the first £10,000 of floating charge
    realisations plus 20 per cent. of the floating charge realisations thereafter,
    provided that such amount may not exceed £600,000.


This
  obligation does not apply if the net property is less than a prescribed minimum
  and the relevant officeholder is of the view that the cost of making a distribution
  to unsecured creditors would be disproportionate to the benefits. The relevant
  officeholder may also apply to court for an order that the provisions of section
  176A of the Insolvency Act should not apply on the basis that the cost of making
  a distribution would be disproportionate to the benefits.

Floating charge realisations
    upon the enforcement of the Issuer security may be reduced by the operation
    of the ring fencing provisions described above.


Capital Adequacy

An authorised person
    with permission from the FSA to accept deposits by way of business (in other
    words, a bank) is subject tointer
    aliathe part of the Handbook known as the Interim Prudential Sourcebook
    for Banks. The Interim Prudential Sourcebook for Banks will be replaced
    in stages between 2004 and (probably) 2007 as parts of the Integrated Prudential
    Sourcebook come into force; the Integrated Prudential Sourcebook in relation
    to mortgage firms (other than banks and building societies) is already in
    force.


The development of the
    Integrated Prudential Sourcebook is to take into account the implementation
    of a range of European directives and international agreements, in particular
    the New Basel Capital Accord (Basel II) and the related European Capital Requirements
    Directive (which implements, and indeed goes further than, the New Basel Capital
    Accord).


Implementation
  of the New Basel Capital Accord and the risk-weighted asset framework may result
  in changes to the risk-weighting of the Issuer Notes

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On November 14, 2005,
    the Basel Committee on Banking Supervision published an updated version of
    the text of new capital adequacy standards for international banks, under
    the title Basel II: International Convergence of Capital Measurement
    and Capital Standards: a Revised Framework. This new framework (the
    Basel II Framework) substantially revises and expands the existing
    Basel I Capital Accord first issued in 1988, includes more sophisticated approaches
    to applying capital requirements based on risk, addresses more types of risk
    including operational risk, and places enhanced emphasis on market discipline
    and banks internal systems and controls. The Basel II framework is not
    self-implementing, but rather forms the basis for national rule-making and
    approval processes in participating countries. The Basel Committee has released
    numerous discussion papers, impact studies and guidance for banking organisations
    in their preparations for implementing the revised capital standards. The
    Committee has also formed an Accord Implementation Group of bank supervisors
    to share information and to promote consistency as participating countries
    move forward with implementation of Basel II.


Within the European Union
    and the European Economic Area, the Basel II Framework will be implemented
    through the EU Capital Requirements Directive, which makes some modifications
    to the Framework. It is currently intended that the various approaches under
    the Basel II Framework and the EU Capital Requirements Directive will be implemented
    in stages, some from year-end 2006, the most advanced at year-end 2007.


In the United States,
    the federal banking regulators have proposed to require about the 20 largest
    US banking organisations to use the most advanced approaches of Basel II;
    other US banks with sophisticated systems may voluntarily elect to adopt Basel
    II advanced approaches subject to regulatory approval. Most US banks initially
    would not be subject to Basel II and would continue to follow existing US
    risk-based capital rules with certain modifications to be determined (a proposal
    known as Basel I-A.). The US is not adopting Basel IIs simpler
    approaches, as the existing US framework based on Basel I is not equivalent
    to Basel II. Implementation of Basel II in the United States is also targeted
    to begin on January 1, 2009, one year later than in Europe. This one year
    gap and other differences in the application or interpretation
    between the US, the EU and other jurisdictions in which the Abbey group has
    operations could represent challenges for the bank in implementing Basel II.


As and when implemented,
    the Basel II Framework could affect the risk-based capital treatment of the
    Financing notes for investors who are subject to bank capital adequacy requirements
    that follow the Framework. Consequently, investors should consult their own
    advisers as to the consequences to and effect on them of the proposed implementation
    of the Basel II Framework. Proposals and guidelines for implementing Basel
    II in participating jurisdictions are still in development, and no predictions
    can be made as to the precise effects of potential changes on the Abbey group,
    the Financing notes or any investor.


Fixed charges subsequently
  re-characterised as floating charges may adversely affect payments on the Issuer
  Notes

Fixed charges over bank
    accounts may take effect under English law as floating charges. Under the
    terms of the Issuer deed of charge and the Funding deed of charge respectively,
    the Issuer and Funding will purport to grant, among other things, fixed charges
    in favour of the security trustee over, in the case of the Issuer, the Issuer's
    interest in the Issuer transaction account and, in the case of Funding, Funding's
    interest in the Funding transaction account.


The law in England and
    Wales relating to the re-characterisation of fixed charges is unsettled. The
    fixed charges purported to be granted by the Issuer and Funding (other than
    by way of assignment in security) will take effect under English law only
    as floating charges if it is determined that the security trustee does not
    exert sufficient control over the relevant account, or the proceeds thereof,
    for the security to be said to “fix over those assets. As the
    Issuer and Funding are signatories to the accounts, there is a risk that a
    court will consider that the security trustee does not exert a sufficient
    degree of control to ensure that the charges over those accounts are held
    to be fixed charges. If the charges take effect as


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floating charges instead
  of fixed charges, then certain matters, which are given priority over floating
  charges by law, will be given priority over the claims of the floating chargeholder.

In addition, if assets
    in respect of which the Issuer or Funding has granted a fixed charge are paid
    into a bank account the charge over which is subsequently re-characterised
    as a floating charge, the original fixed charge in relation to the assets
    may also be re-characterised as a floating charge.


|Item
      4. | Information
      on the Company
|------------- | --------------------------------

A. History
    and Development of the Company


Not applicable.


B. Business
    Overview


Not applicable.


C. Organizational
    Structure


Not applicable.


D. Property,
    Plant and Equipment


The property of the Issuer
    consists solely of its right to receive payments of interest and principal
    from Funding on the various Term Advances made under the Intercompany Loan
    Agreement. The property of Funding consists of its interest in the trust property
    held by Trustees together with amounts available under two reserve funds and
    its right to receive certain payments of principal and interest from the trust
    property controlled by Trustees. The trust property includes the loans in
    the portfolio at the closing date or which have subsequently been assigned
    to Trustees thereafter (including any new drawings under flexible loans) and
    their related security and any income generated by the loans or their related
    security. The composition of the trust property will fluctuate as drawings
    under flexible loans and new loans are added and as the loans that were previously
    part of the trust property are repaid, mature, default or are repurchased
    by the seller. The trust property also includes any money in the mortgages
    trustee guaranteed investment contract (or GIC) account and in any other bank
    account or bank accounts held by Trustees (as agreed by Trustees, Funding,
    the seller and the security trustee) from time to time, called the alternative
    accounts. The mortgages trustee GIC account is the bank account in which Trustees
    holds any cash that is part of the trust property until it is distributed
    to the beneficiaries. The alternative accounts are accounts into which payments
    by some mortgage borrowers are paid initially.


The officers certificate
    of compliance of the Issuer, executed by two directors of the Issuer is filed
    as Exhibit 10.2 to this Annual Report on Form 20-F. The certificate of compliance
    contains a statement that during the period from December 8, 2005 to April
    30, 2006, to the best of the knowledge and belief of the signatories, the
    Issuer has complied with all its obligations contained in the Issuer Trust
    Deed and each of the Transaction Documents (as defined in the Issuer Trust
    Deed) to which it is a party. It also contains a statement that as at April
    30, 2006, there did not exist and had not existed since December 8, 2005,
    any Note Event of Default (as defined in the Issuer Trust Deed).


|Item
      5. | Operating and
      Financial Review and Prospects
|------------- | --------------------------------------------------

A. Operating
    Results


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Not applicable.


B. Liquidity
    and Capital Resources


Not applicable.


C. Research
    and Development, Patents and Licenses, etc.


Not applicable.


D. Trend Information


Not applicable.


E. Off-Balance
    Sheet Arrangements


Not applicable.


F. Tabular
    Disclosure of Contractual Obligations


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 Trustees. Because each of the Issuer, Funding and
    Trustees is organized as a special purpose company and will be largely passive,
    it is expected that the directors of each entity in that capacity will manage
    its operations to the extent necessary.




|Issuer                       |  |                              |  |                                    
|---------------------------- |  | ---------------------------- |  | -----------------------------------
|                             |  |                              |  |                                    
|Name                         |  | Business Address             |  | Business
      Occupation          
|                             |  |                              |  |                                    
|Martin McDermott             |  | Wilmington Trust SP Services |  | Executive
      Director of        
|                             |  | (London)
      Limited       |  | Wilmington
      Trust SP Services 
|                             |  | Tower 42                     |  | (London) Limited                   
|                             |  | 25 Old Broad Street          |  |                                    
|                             |  | London EC2N 1HQ              |  |                                    
|                             |  |                              |  |                                    
|Wilmington Trust SP Services |  | Wilmington Trust SP Services |  | Management
      of special purpose
|(London) Limited             |  | (London)
      Limited       |  | companies                          
|                             |  | Tower 42                     |  |                                    
|                             |  | 25 Old Broad Street          |  |                                    
|                             |  | London EC2N 1HQ              |  |                                    
|                             |  |                              |  |                                    
|David Green                  |  | Abbey National House         |  | Finance
      Director, Banking,   
|                             |  | 2 Triton Square              |  | Abbey
      National plc           
|                             |  | Regents Place               |  |                                    
|                             |  | London NW1 3AN               |  |                                    

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|Funding                      |  |                              |  |                                    
|---------------------------- |  | ---------------------------- |  | -----------------------------------
|                             |  |                              |  |                                    
|Name                         |  | Business Address             |  | Business
      Occupation          
|                             |  |                              |  |                                    
|Martin McDermott             |  | Wilmington Trust SP Services |  | Executive
      Director of        
|                             |  | (London)
      Limited       |  | Wilmington
      Trust SP Services 
|                             |  | Tower 42                     |  | (London) Limited                   
|                             |  | 25 Old Broad Street          |  |                                    
|                             |  | London EC2N 1HQ              |  |                                    
|                             |  |                              |  |                                    
|Wilmington Trust SP Services |  | Wilmington Trust SP Services |  | Management
      of special purpose
|(London) Limited             |  | (London)
      Limited       |  | companies                          
|                             |  | Tower 42                     |  |                                    
|                             |  | 25 Old Broad Street          |  |                                    
|                             |  | London EC2N 1HQ              |  |                                    
|                             |  |                              |  |                                    
|David Green                  |  | Abbey National House         |  | Finance
      Director, Banking,   
|                             |  | 2 Triton Square              |  | Abbey
      National plc           
|                             |  | Regents Place               |  |                                    
|                             |  | London NW1 3AN               |  |                                    
|                             |  |                              |  |                                    
|Trustees                     |  |                              |  |                                    
|                             |  |                              |  |                                    



|Name                         |  | Business Address             |  | Business Occupation          
|---------------------------- |  | ---------------------------- |  | -----------------------------
|                             |  |                              |  |                              
|Martin McDermott             |  | Wilmington Trust SP Services |  | Executive Director of        
|                             |  | (London)
      Limited       |  | Wilmington Trust SP Services 
|                             |  | Tower 42                     |  | (London)
      Limited       
|                             |  | 25 Old Broad Street          |  |                              
|                             |  | London EC2N 1HQ              |  |                              
|                             |  |                              |  |                              
|Wilmington Trust SP Services |  | Wilmington Trust SP Services |  | Management of special purpose
|(London) Limited             |  | (London)
      Limited       |  | companies                    
|                             |  | Tower 42                     |  |                              
|                             |  | 25 Old Broad Street          |  |                              
|                             |  | London EC2N 1HQ              |  |                              
|                             |  |                              |  |                              
|David Green                  |  | Abbey National House         |  | Finance Director, Banking,   
|                             |  | 2 Triton Square              |  | Abbey National plc           
|                             |  | Regents Place               |  |                              
|                             |  | London NW1 3AN               |  |                              

David Green is an employee
    of Abbey National plc, the seller.


B. Compensation


None of the Issuer, Funding
    or Trustees pays remuneration directly to any director.


C. Board Practices


Not applicable.


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| | D. Employees            
| | ------------------------
| |                         
| | Not applicable.         
| |                         
| | E. Share
      Ownership
| |                         
| | Not applicable.         
| |                         

|Item
      7. | Major Shareholders
      and Related Party Transactions
|------------- | -------------------------------------------------------
|              |                                                        

| | A. Major
      Shareholders
| | ---------------------------

Each of the Issuer, Funding
    and Trustees is wholly owned by Holmes Holdings Limited, a private limited
    company incorporated under the laws of England and Wales. Wilmington Trust
    SP Services (London) Limited holds all of the beneficial interest in the issued
    shares of Holmes Holdings Limited on a discretionary trust for persons employed
    as nurses in the United Kingdom and for charitable purposes. Wilmington Trust
    SP Services (London) Limited is not affiliated with Abbey National plc.


| | B. Related
      Party Transactions
| | -----------------------------------

None, other than with
    respect to the making of payments in respect to the securities as described
    in the Registration Statement and Item 3.D.  Risk Factors.


| | C. Interests
      of Experts and Counsel           
| | ----------------------------------------------------
| |                                                     
| | Not applicable to
      annual reports on Form 20-F.
| |                                                     

|Item
      8. | Financial Information
|------------- | ---------------------

For a discussion of the
    available financial information, see Item 3.A.  Selected Financial
    Information.


Litigation.
    The Issuer knows of no material legal proceedings involving the Issuer. Funding
    knows of no material legal proceedings involving Funding. Trustees knows of
    no material legal proceedings involving Trustees or the trust.


|Item
      9. | The Listing
|------------- | -----------
|              |            

| | A. Listing
      Details                            
| | ----------------------------------------------------
| |                                                     
| | Not applicable.                                     
| |                                                     
| | B. Plan
      of Distribution                       
| |                                                     
| | Not applicable to
      annual reports on Form 20-F.
| |                                                     
| | C. Markets                                          

The principal trading
    market for each class of Issuer Notes is the London Stock Exchange. The Issuer
    Notes have been listed on the London Stock Exchange since December 8, 2005.




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|                                       | D. Selling
      Shareholders                       
|-------------------------------------- | ----------------------------------------------------
|                                       |                                                     
|                                       | Not applicable to
      annual reports on Form 20-F.
|                                       |                                                     
|                                       | E. Dilution                                         
|                                       |                                                     
|                                       | Not applicable to
      annual reports on Form 20-F.
|                                       |                                                     
|                                       | F. Expenses
      of the Issue                      
|                                       |                                                     
|                                       | Not applicable to
      annual reports on Form 20-F.
|                                       |                                                     
|Item
      10.  Additional Information
|                                       |                                                     
|                                       | A. Share
      Capital                              
|                                       |                                                     
|                                       | Not applicable to
      annual reports on Form 20-F.
|                                       |                                                     
|                                       | B. Memorandum
      and Articles of Association     
|                                       |                                                     
|                                       | Not applicable.                                     
|                                       |                                                     
|                                       | C. Material
      Contracts                         

Not applicable other
    than with respect to contracts relating to the securities, which were described
    in the Registration Statement on Form S-11 relating to the securities (file
    number 333-117381).


| | D. Exchange
      Controls
| | --------------------------
| |                           
| | None.                     
| |                           
| | E. Taxation               

United Kingdom
    Taxation


The following section
    summarises the material UK tax consequences of the purchase, ownership and
    disposition of the Issuer Notes based on current law and practice in the UK.
    The summary assumes that the representations made by the seller that the profit
    in Fundings profit and loss account will not exceed 0.01 per cent. of
    the Funding available revenue receipts and that the profit in the Issuers
    profit and loss account will not exceed 0.02 per cent. of the interest on
    the Issuer term advances under the issuer intercompany loan (subject to the
    effect of compliance with International Financial Reporting Standards (or
    UK Financial Reporting Standards reflecting them)) are correct. It further
    assumes that all payments made pursuant to the final documentation are calculated
    on arms length terms. The summary does not purport to be a complete
    analysis of all tax considerations of the purchase, ownership and disposition
    of the Issuer Notes. It relates to the position of persons who are the absolute
    beneficial owners of Issuer Notes and may not apply to certain classes of
    persons such as dealers or persons connected with the Issuer. Holders of Issuer
    Notes who are unsure as to their tax position should seek their own professional
    advice.


Taxation of US
    residents


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As discussed in more
    detail under Withholding
    tax below, no UK withholding tax will be required
    in relation to interest payments on the Issuer Notes provided that the Issuer
    Notes are and remain at all times listed on a recognised stock exchange, which
    includes the London Stock Exchange.


As discussed in more
    detail under Direct
    assessment of non-UK resident holders of Issuer 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
    by direct assessment unless such noteholder carries on a trade, profession
    or vocation through a branch or agency in the UK in connection with which
    payments on the Issuer Notes are received or to which the Issuer Notes are
    attributable and where that noteholder is a company, unless that noteholder
    carries on a trade in the UK through a permanent establishment in connection
    with which the payments on the Issuer Notes are received or to which the Issuer
    Notes are attributable.


Subject as set out in
    the rest of this paragraph, residents of the US who are not subject to UK
    tax by direct assessment are generally not subject to tax in the UK on payments
    on the Issuer Notes under the terms of the double tax treaty between the US
    and the UK (the Treaty) provided that the amounts paid on the
    Issuer Notes do not exceed the return on comparable debt instruments. To the
    extent that the amounts paid do exceed such a return, the UK may tax the excess
    in accordance with UK domestic law. In order for such US residents to avoid
    being subject to tax in the UK on such payments, they must satisfy the requirements
    of the Limitation on Benefits article of the Treaty and the necessary administrative
    formalities must be completed. Treaty relief will not be available where a
    payment on the Issuer Notes is attributable to a permanent establishment of
    the noteholder situated in the UK or if certain other exceptions apply.


Taxation of Funding,
    the Issuer and Trustees


As discussed in more
    detail below under UK
    taxation of Funding and the Issuer, Funding
    and the Issuer will generally be subject to UK corporation tax, currently
    at a rate of 30 per cent., on the profit reflected in their respective profit
    and loss accounts as increased by the amounts of any non-deductible expenses
    or losses.


As discussed in more
    detail below under UK
    taxation of the Trustees, Trustees 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.


Except as described in
    the preceding paragraphs (and as further developed in the corresponding sections
    below), no views are expressed as regards UK taxation in relation to the Issuer
    Notes, the parties to the transaction, or any aspects of the transaction.


Withholding tax


There will be no UK withholding
    tax in relation to interest payments on the Issuer Notes provided that, so
    far as concerns deduction by the Issuer or its paying agents, the Issuer Notes
    are listed (and remain so listed) on a recognised
    stock exchange, as defined in Section 841 of
    the Income and Corporation Taxes Act 1988 (ICTA).
    On the basis of H.M. Revenue & Customs published interpretation
    of the relevant legislation, securities which are to be listed on a stock
    exchange in the UK will satisfy this requirement if they are listed by a competent
    authority in the UK and are admitted to trading on a recognised stock exchange
    in the UK. The London Stock Exchange is currently a recognised stock exchange
    for this purpose. Noteholders should be aware that H.M. Revenue & Customs
    is able to obtain information about individual holders of the Issuer Notes
    to whom or, in certain circumstances, for whose benefit interest is paid.
    Information so obtained may, in certain circumstances, be exchanged by H.M.
    Revenue & Customs with the tax authorities of the jurisdiction in which
    the relevant noteholder is resident for tax purposes.


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If the Issuer 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 per cent.) from interest
    paid on them, subject to any direction to the contrary from H.M. Revenue &
    Customs 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 ICTA.


Under European Union
    Directive (2003/48/EC) regarding the taxation of savings income, member states
    are required, from July 1, 2005, to provide to the tax authorities of other
    member states details of payments of interest and other similar income paid
    by a person within its jurisdiction to an individual resident in another member
    state. However, for a transitional period, Austria, Belgium and Luxembourg
    will instead impose a withholding system in relation to such payments (the
    ending of such transitional period being dependent upon the conclusion of
    certain other agreements relating to information exchange with certain other
    countries). A number of non-EU countries and territories including Switzerland
    have agreed to adopt similar measures (a withholding system in the case of
    Switzerland) with effect from the same date.


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


The interest on the Issuer
    Notes has a UK source. Accordingly, payments on the Issuer Notes will in principle
    be within the charge to UK tax even if paid without withholding or deduction.
    However, such payments will not be chargeable to UK tax in the hands of a
    noteholder who is not resident for tax purposes in the UK unless such holder
    carries on a trade, profession or vocation in the UK through a UK branch or
    agency in connection with which the payments are received or to which the
    Issuer Notes are attributable (and where that noteholder is a company, unless
    that noteholder carries on a trade in the UK through a permanent establishment
    in connection with which the payments are received or to which the Issuer
    Notes are attributable), in which case (subject to exemptions for interest
    received by certain categories of agent such as some brokers and investment
    managers) tax may be levied on the UK branch, agency or permanent establishment
    as the case may be (unless the provisions of an applicable double tax treaty
    apply to allow relief from such tax).


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

Noteholders who are within
    the charge to UK corporation tax (other than authorised unit trusts) will
    normally be subject to tax on all profits and gains (whether attributable
    to currency fluctuations or otherwise), including interest arising on or in
    connection with the Issuer Notes under the loan relationship rules contained
    in the Finance Act 1996. Any such profits and gains will generally fall to
    be calculated in accordance with the statutory accounting treatment of the
    Issuer Notes in the hands of the relevant noteholder, and will generally be
    charged to tax as income in respect of each accounting period to which they
    are allocated, in accordance with that accounting treatment. Relief may be
    available in respect of losses (including any foreign exchange losses) or
    for related expenses on a similar basis.


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 UK 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 Issuer Notes is received or to which the Issuer Notes are
    attributable will generally be liable to UK tax on the amount of any interest
    received in respect of the Issuer Notes. The Issuer Notes will not be qualifying
    corporate bonds within the meaning of Section 117 of the Taxation of Chargeable
    Gains Act 1992, and therefore a disposal of such an Issuer Note by such a
    noteholder may give rise to a chargeable gain or an allowable loss for the
    purposes of UK capital gains tax.


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A disposal of Issuer
    Notes by a noteholder who is resident or ordinarily resident in the UK for
    UK tax purposes or who carries on a trade in the UK through a branch or agency
    to which the Issuer Notes are attributable may also give rise to a charge
    to tax on income in respect of an amount representing interest accrued on
    the Issuer Notes since the preceding payment date. For Issuer Notes which
    constitute variable rate securities, taxation in respect of such a disposal
    will be computed on the basis that such amount as H.M. Revenue & Customs
    considers to be just and reasonable will be treated as accrued income. However,
    the transferee of a variable rate security will not be entitled to any relief
    on such amount. All of the Issuer Notes (except the series 1 class A Issuer
    Notes) will constitute variable rate Issuer Notes for this purpose.


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 global
    Issuer Notes or on the issue or transfer of an Issuer Note in definitive form.


UK taxation of
    Funding and the Issuer


Funding and the Issuer
    will generally be subject to UK corporation tax, currently at a rate of 30
    per cent., on the profit reflected in their respective applicable profit and
    loss accounts as increased by the amounts of any non-deductible expenses or
    losses. In respect of Funding, the seller has confirmed that the profit in
    the profit and loss account drawn in accordance with UK GAAP as applicable
    on December 31, 2004 will not exceed 0.01 per cent. of the Funding available
    revenue receipts. In respect of the Issuer, the seller has confirmed that
    the profit in the profit and loss account drawn in accordance with UK GAAP
    as applicable on December 31, 2004 will not exceed 0.02 per cent. of the interest
    on the issuer term advances under the issuer intercompany loan. The comments
    made in this paragraph are subject to those set out in the risk factor Tax
    payable by Funding or the Issuer may adversely affect the Issuers ability
    to make payments on the Issuer Notes, in particular
    the section dealing with the interim and new regimes that H.M. Revenue &
    Customs are proposing to establish for securitisation companies as a consequence
    of their compliance with International Financial Reporting Standards (IFRS)
    (or new UK Financial Reporting Standards which reflect IFRS).


UK taxation of
    Trustees


Trustees will have no
    liability to UK tax in respect of any income, profit or gain arising under
    these arrangements, apart from a liability to UK corporation tax on amounts,
    such as trustee fees and expenses, which are paid to Trustees for its own
    benefit. Accordingly, Trustees 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


General


The following section
    summarizes the material federal income tax consequences of the purchase, ownership
    and disposition of the series 1 Issuer Notes and the series 2 Issuer Notes
    (the US
    Issuer Notes) that may be relevant to a noteholder
    that is a US holder
    (as defined later in this section). In general, the summary assumes that a
    holder acquires a US Issuer 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 Issuer 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;
    and taxpayers that hold a US Issuer 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


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(the Code).
  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 the registration statement. All of the foregoing
    are subject to change, and any change may apply retroactively and could affect
    the continued validity of this summary.


The Issuer suggests that
    US holders consult their own tax advisors as to the US federal income tax
    consequences of the purchase, ownership and disposition of the US Issuer 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 US
    holder means a person who is a citizen or resident
    of the United States, a US domestic corporation or partnership, or any other
    person subject to US federal income tax on a net income basis in respect of
    a US Issuer Note.


Characterization
    of the US Issuer Notes


Although there is no
    authority regarding the treatment of instruments that are substantially similar
    to the US Issuer Notes, the Issuer believes that the US Issuer Notes will
    be treated as debt for US federal income tax purposes (either of the Issuer
    or of Funding). The Issuer intends to treat the US Issuer Notes as indebtedness
    of the Issuer for all purposes, including US tax purposes. The discussion
    in the next section assumes this result.


The US Issuer Notes will
    not be qualifying assets in the hands of domestic savings and loan associations,
    real estate investment trusts, or REMICs under sections 7701(a)(19)(C), 856(c)(5)(B)
    or 860G(a)(3) of the Code, respectively.


Taxation of US
    holders of the US Issuer Notes


Qualified Stated
    Interest.A US holder of a US Issuer Note will
    treat stated interest on such US Note as ordinary interest income when paid
    or accrued, in accordance with its tax method of accounting.


Sales and Retirement.In general, a US holder of a US Issuer Note will have a basis in such Note
    equal to the cost of the US Issuer Note to such holder, and reduced by any
    payments thereon other than payments of stated interest. Upon a sale or exchange
    of the US Issuer 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 the US
    Issuer Note. Such gain or loss will be long-term capital gain or loss if the
    US holder has held the US Issuer 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.


Market Discout
    and Bond Premium.If a US holder purchased US
    Issuer Notes for a price greater or less than their stated principal amount,
    such notes may be subject to special US tax rules relating to market discount
    or bond premium. US holders should consult their own advisors regarding the
    tax consequences of these rules.


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US Issuer Notes
    as debt of Funding


The US Internal Revenue
    Service could possibly seek to characterize the US Issuer Notes as ownership
    interests in the issuer series 1 term AAA advance and the issuer series 2
    term AAA advance, respectively, rather than as debt of the Issuer. If the
    US Internal Revenue Service were successful in such a characterization, a
    US holder of a US Issuer Note would be treated as owning (i) a pro rata share
    of the related issuer term advance between Funding and the Issuer (related
    advance), which will be treated as debt for
    US federal income tax purposes and (ii) an interest in the related issuer
    currency swap. Treasury regulations permit taxpayers meeting certain requirements
    to integrate a debt instrument and a related currency hedge and to treat them
    for most tax purposes as if they were a synthetic debt instrument having the
    terms of the debt instrument and hedge combined. Integrating the related advance
    and issuer currency swap would create a synthetic debt instrument having the
    characteristics of the US Issuer Notes and hence would produce largely the
    same result as if the US Issuer Notes were not recharacterized as debt of
    Funding.


The integration regulations
    apply only if a taxpayer creates a record identifying the debt instrument
    and hedge on or before the close of the date the hedge is entered into. The
    Issuer will create a record that is intended to provide such identification
    effective for each US holder as of the date of acquisition of a US Issuer
    Note. By its acquisition of a US Issuer Note, each US holder will be treated
    as having appointed the Issuer as its agent for this purpose. The US Internal
    Revenue Service could challenge the effectiveness of such an identification
    made on behalf of a group of taxpayers. The integration rules would not apply
    to a US holder that is related to the Issuer swap provider to the issuer currency
    swap.


If the issuer currency
    swap terminated before the US Issuer Notes were retired, and the integration
    regulations applied, then a US holder may be considered to recognize gain
    or loss as if the holder had sold for fair market value his interest in the
    related advance. Moreover, for periods following such termination, the integration
    rules would no longer apply to the related advance except in the discretion
    of the US Internal Revenue Service.


If the issuer currency
    swap were not integrated with the related advance, then a US holder would
    calculate separately income and deductions from the issuer currency swap and
    income from the related advance. For most holders, the tax consequences of
    treating the issuer currency swap and related advances separately would be
    similar to the treatment if they were combined, but there could be differences.
    For example, income from the issuer currency swap may be sourced differently
    from income from the related advance. Individual taxpayers may be allowed
    deductions for payments made under the issuer currency swap only as a miscellaneous
    itemized deduction (which is allowed for regular tax purposes only subject
    to limitations and is not allowed for alternative minimum tax purposes). US
    holders may wish to consult their own tax advisors regarding the possible
    treatment of US Issuer Notes as debt of Funding, application of the integration
    rules, and the consequences of an inability to integrate the issuer currency
    swap and the related advance.


F. Dividends
    and Paying Agents


Not applicable to annual
    reports on Form 20-F.


G. Statement
    by Experts


Not applicable to annual
    reports on Form 20-F.


H. Documents
    on Display


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The Issuer, Funding and
    Trustees 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 U.S.
    Securities and Exchange Commission. These materials, including this annual
    report and the exhibits thereto, may be inspected and copied at the Commissions
    public reference rooms in Washington, DC, New York, NY and Chicago, IL. Please
    call the Commission at +1-800-732-0330 for further information on the public
    reference rooms. Any filings we make electronically will be made available
    to the public over the Internet at the Commissions web site at http://www.sec.gov.


I. Subsidiary
    Information


Not applicable to annual
    reports on Form 20-F.


Item
  11. Quantitative and Qualitative Disclosures About Market Risk

See the Periodic Reports
    referred to in Item 3.A.  Selected Financial Information.


Item
  12. Description of Securities Other than Equity Securities

Not applicable to annual
    reports on Form 20-F. PART
    II


Item
  13. Defaults, Dividend Arrearages and Delinquencies

None.


Item
  14. Material Modifications to the Rights of Security Holders

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.


Item
  16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.


Item
  16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

41

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Not applicable.


PART
  III

Item
  17. Financial Statements

Not applicable.


Item
  18. Financial Statements

Not applicable.


Item
  19. Exhibits

The following documents
    are filed as part of the Annual Report on Form 20-F:


|• | Exhibit 1: a copy
      of the Memorandum and Articles of Association of each of the Issuer, Funding
      and Trustees is incorporated
      by reference from the previously filed Registration Statement on
      Form S-11 relating to
      the securities (file number 333-112028).
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 2: instruments
      defining the rights of the security holders are incorporated by reference
      from the previously
      filed Registration Statement on Form S-11 relating to the securities (file
      number 333-112028).                                              
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.1: Periodic
      Report for the period from December 9, 2005 to January 9, 2006 (incorporated
      by reference from the Form 6-K previously filed on January 17, 2006).                                                                                                    
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.2: Certificate
      Relating to Financial Information pursuant to the Issuer Trust Deed
      dated April 30, 2006
      (incorporated by reference from the Form 6-K previously filed on June 20,
      2006).                                                              
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.3: Report
      and Accounts for Holmes Financing (No.9) PLC for the year ended December
      31, 2005.                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.4: Report
      and Accounts for Holmes Funding Limited for the year ended December
      31, 2005.                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.5: Report
      and Accounts for Holmes Trustees Limited for the year ended December
      31, 2005.                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 12.1: Certificate
      pursuant to section 302 of the Sarbanes-Oxley Act 2002.                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 13.1: Certificate
      pursuant to section 906 of the Sarbanes-Oxley Act 2002.                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 15.1: Servicer
      compliance statement.                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 15.2: Attestation
      report of independent accountants.                                                                                                                                                                                                                       

42

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SIGNATURE

Pursuant to the requirements
  of Section 12 of the Securities Exchange Act of 1934, each of the registrant
  certifies that it meets all the requirements for filing on Form 20-F and has
  duly caused this Annual Report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

|HOLMES
      TRUSTEES LIMITED     
|----------------------------------
|                                  
|                                  
|By:                               
|                                  
|                                  
|                                  
|                                  
|HOLMES
      FUNDING LIMITED      
|                                  
|                                  
|By:                               
|                                  
|                                  
|                                  
|                                  
|HOLMES
      FINANCING (NO. 9) PLC
|                                  
|                                  
|By:                               
|                                  
|                                  
|                                  
|                                  
|                                  
|Dated:
      June 27, 2006        

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EXHIBIT
  INDEX

|• | Exhibit 1: a copy
      of the Memorandum and Articles of Association of each of the Issuer, Funding
      and Trustees is incorporated
      by reference from the previously filed Registration Statement on
      Form S-11 relating to
      the securities (file number 333-112028).
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 2: instruments
      defining the rights of the security holders are incorporated by reference
      from the previously
      filed Registration Statement on Form S-11 relating to the securities (file
      number 333-112028).                                              
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.1: Periodic
      Report for the period from December 9, 2005 to January 9, 2006 (incorporated
      by reference from the Form 6-K previously filed on January 17, 2006).                                                                                                    
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit 10.2: Certificate
      Relating to Financial Information pursuant to the Issuer Trust Deed
      dated April 30, 2006
      (incorporated by reference from the Form 6-K previously filed on June 20,
      2006).                                                              
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      10.3: Report and Accounts for Holmes Financing (No.9) PLC for the year ended
      December 31, 2005.                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      10.4: Report and Accounts for Holmes Funding Limited for the year ended
      December 31, 2005.                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      10.5: Report and Accounts for Holmes Trustees Limited for the year ended
      December 31, 2005.                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      12.1: Certificate pursuant to section 302 of the Sarbanes-Oxley Act 2002.                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      13.1: Certificate pursuant to section 906 of the Sarbanes-Oxley Act 2002.                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      15.1: Servicer compliance statement.                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                          
|• | Exhibit
      15.2: Attestation report of independent accountants.                                                                                                                                                                                                                       

---