As filed with the Securities and Exchange Commission on June 30, 2005

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

---

FORM 20-F

|(  ) |  | REGISTRATION
        STATEMENT PURSUANT TO SECTION 12 (b) OR 12 (g) OF THE SECURITIES EXCHANGE
        ACT OF 1934
|---- |  | ------------------------------------------------------------------------------------------------------------------
|     |  | or                                                                                                                
|(X)  |  | ANNUAL
          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934          
|     |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004                                                                       
|     |  | or                                                                                                                
|(  ) |  | TRANSITION
          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934      
|     |  | FOR TRANSITION PERIOD
    FROM N/A TO N/A                                                                         
|     |  |                                                                                                                   
|     |  | Commission file number:
    333-13576                                                                             
|     |  |                                                                                                                   

---

|                                                             |                                 |                                
|------------------------------------------------------------ | ------------------------------- | -------------------------------
|                                                             |                                 |                                
|Holmes Financing
      (No. 4) 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 6302/4/5                              | (011-44-20)
      7756 6302/4/5 | (011-44-20)
      7756 6302/4/5
|(Address
      of Principal Executive Offices)              
|                                                             |                                 |                                
|                                                             |                                 |                                

Securities
  registered or to be registered pursuant to Section 12(b) of the Act: NoneSecurities
  registered or to be registered pursuant to Section 12(g) o f 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
|------------------------------------------------------------------------- | ------------------------------------------------------
|$410,000,000
      Series 3 Class A2 Asset Backed Floating Rate Notes (1) | None                                                  
|$34,500,000
      Series 3 Class B Asset Backed Floating Rate Notes (1)   | None                                                  
|$49,500,000
      Series 3 Class C Asset Backed Floating Rate Notes (1)   | None                                                  
|£850,000,000
    Series 3A2 Term AAA Advance (2)                          | None                                                  
|£25,000,000
    Series 3 Term AA Advance (2)                              | None                                                  
|£36,000,000
    Series 3 Term BBB Advance (2)                             | None                                                  
|Funding Interest in the Mortgages Trust (3)                               | None                                                  
|                                                                          |                                                       

|(1) | Holmes Financing(No. 4) PLC is the registrant for the Series 3 Issuer Notes.                                                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Holmes Funding
       Limited is the registrant for the Term Advances, and has issued those
       term advances to Holmes Financing (No. 4)   PLC.
       The Term Advances are the primary source of payments on the Series 3 Issuer
       Notes.
|(3) | Holmes Trustees Limited is the registrant for the FundingInterest in the Mortgages Trust and is holding the Funding Interest on behalf of Holmes Funding Limited.                                                                                   

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 which financial statement item the registrant has elected to follow.

Item 17Item
18Financial statements
attached as Exhibits

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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 Advisors                      | 3   
|Item 2.      | Offer Statistics and Expected Timetable                                    | 3   
|Item 3.      | Key Information                                                            | 3   
|Item 4.      | Information on the Company                                                 | 30  
|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                          | 33  
|Item 8.      | Financial Information                                                      | 34  
|Item 9.      | The Listing                                                                | 34  
|Item 10.     | Additional Information                                                     | 34  
|Item 11.     | Quantitative and Qualitative Disclosures About Market Risk                 | 40  
|Item 12.     | Description of Securities Other Than Equity Securities                     | 40  
|             |                                                                           
|PART
    II  |                                                                           
|Item 13.     | Defaults,
    Dividend Arrearages and Delinquencies                        | 40  
|Item 14.     | Material Modifications to the Rights of Security Holders                   | 40  
|Item 15.     | Controls and Procedures                                                    | 40  
|Item 16A     | Audit Committee
    Financial Expert                                       | 40  
|Item 16B.    | Code of Ethics                                                             | 40  
|Item 16C.    | Principal Accountant Fees and Services                                     | 41  
|Item 16D.    | Exemptions from the Listing Standards for Audit Committees                 | 41  
|Item 16E.    | Purchases
    of Equity Securities by the Issuer and Affiliated Purchasers | 41  
|Item 17.     | Financial Statements                                                       | 41  
|Item 18.     | Financial Statements                                                       | 41  
|             |                                                                           
|PART
    III |                                                                           
|Item 19.     | Exhibits                                                                   | 41  

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PRESENTATION OF INFORMATION

This Annual Report on
  Form 20-F relates to Holmes Financing (No. 4) PLC (the Issuer) and
  the following securities (the Issuer Notes), which were issued pursuant
  to a trust deed dated July 5, 2001 (the Issuer Trust Deed), between
  the Issuer and The Chase Manhattan Bank, London Branch, as note trustee (the
  Note Trustee):

|• | $410,000,000 Series 3
      Class A2 AssetBacked Floating Rate Notes Due July 2040
|- | ----------------------------------------------------------------------------------
|• | $34,500,000 Series 3
      Class B Asset Backed Floating Rate Notes Due July 2040 
|• | $49,500,000 Series 3
      Class C Asset Backed Floating Rate Notes Due July 2040 

This Annual Report on
  Form 20-F also relates to the following advances made pursuant to the loan confirmation
  intercompany loan agreement dated July 5, 2001 (the Intercompany Loan
  Agreement), between the Issuer, Holmes Funding Limited (Funding),
  and The Chase Manhattan Bank, London Branch, as security trustee and agent bank:

|• | £850,000,000 Series
      3A2 Term AAA Advance
|- | ----------------------------------------------
|• | £25,000,000 Series
      3 Term AA Advance    
|• | £36,000,000 Series
      3 Term BBB 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 benefic iaries. 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 333-13576).

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. SELECTED
  FINANCIAL INFORMATION

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, 2003 to January 8, 2004.          
|- | --------------------------------------------------------------------------------------
|  |                                                                                       
|• | Periodic Report for the period from January
    9, 2004 to February 9, 2004.          
|  |                                                                                       
|• | Periodic Report for the period from February
    10, 2004 to March 8, 2004.           
|  |                                                                                       
|• | Periodic Report for the period from March 9,
    2004 to April 8, 2004.               
|  |                                                                                       
|• | Periodic Report for the period from April 9,
    2004 to May 10, 2004.                
|  |                                                                                       
|• | Periodic Report for the period from May 11,
    2004 to June 8, 2004.                 
|  |                                                                                       
|• | Periodic Report for the period from June 9,
    2004 to July 8, 2004.                 
|  |                                                                                       
|• | Periodic Report for the period from July 9,
    2004 to August 9, 2004.               
|  |                                                                                       
|• | Periodic Report for the period from August
    10, 2004 to September 8, 2004.         
|  |                                                                                       
|• | Periodic Report for the period from September
    9, 2004 to October 8, 2004.         
|  |                                                                                       
|• | Periodic Report for the period from October
    9, 2004 to November 8, 2004.          
|  |                                                                                       
|• | Periodic Report for the period from November
    9, 2004 to December 8, 2004.         
|  |                                                                                       
|• | Periodic Report for the period from December
    9, 2004 to January 10, 2005.         
|  |                                                                                       
|• | Profit and Loss Accounts and Balance Sheets
    for the period ended January 15, 2004.
|  |                                                                                       
|• | Profit and Loss Accounts and Balance Sheets
    for the period ended April 15, 2004.  
|  |                                                                                       
|• | Profit and Loss Accounts and Balance Sheets
    for the period ended July 15, 2004.   
|  |                                                                                       
|• | Profit and Loss Accounts and Balance Sheets
    for the period ended October 15, 2004.

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|The following
      document is also incorporated by reference from reports filed on Form 6-K:
|----------------------------------------------------------------------------------------------
|                                                                                              
|•                                                                                             
|                                                                                              
|The following
      documents are filed as exhibits to this Annual Report on Form 20-F:       
|                                                                                              
|•                                                                                             
|                                                                                              
|•                                                                                             
|                                                                                              
|•                                                                                             

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, Salomon Smith Barney Inc., Credit Suisse First Boston
  Corporation, the other underwriters or any of their respective affiliates, Citibank,
  N.A., the other issuers, Trustees, the Note Trustee or any other party to the
  transaction other than the Issuer.

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 Swiss franc 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:

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|• | 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;                                                                                                                                                        
|  |                                                                                                                                                                                                               
|• | Funding making drawings as permitted under
    the Funding liquidity facility; 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 term advances under the other intercompany loans).

If there is a shortfall
  between the amounts payable by Funding to the Issuer under theIntercompany
  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

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.

On the final repayment
  date of the issuer intercompany loan any outstanding amounts in respect of the
  term AA advances and the term BBB advances will be extinguished, which would
  cause a loss on the class B notes and the class C notes

The transaction has been structured
  in the expectation that on the final repayment date of the intercompany loan
  in 2040, the interest and principal due and payable on the term AA advances
  and the term BBB advances should be an amount equal to the sum available to
  pay all outstanding interest and/or principal (including interest and/or principal
  deferred and unpaid) on the term AA advances and the term BBB advances (after
  paying amounts of a higher order of priority as required by the Funding priority
  of payments).

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If there is a shortfall between
  the amount available to pay such interest and/or principal and the amount required
  to pay all outstanding interest and/or principal on the term AA advances and
  the term BBB advances, then the shortfall will be deemed to be not due and payable
  under the Intercompany Loan Agreement and the Issuer will not have any claim
  against Funding for the shortfall.

If there is such a shortfall
  in interest and/or principal payments under the Intercompany Loan Agreement,
  noteholders may not receive the full amount of interest and/or principal which
  would otherwise be due and payable on the class B Issuer Notes or the class
  C Issuer Notes outstanding.

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.

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

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 3 Issuer Notes will be redeemed in full prior to the redemption
  of the series 4 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. Further, if on any interest
  payment date, amounts are due and payable in respect of an earlier alphabetised
  class of Issuer Notes of any series and amounts are payable in respect of one
  or more later alphabetised class of Issuer Notes of any series, then payments
  of principal will be made on the earlier alphabetised class of Issuer Notes
  in priority to payments of principal on the later alphabetised class or classes
  of Issuer Notes. See Subordination of other note classes may not protect
  noteholders from all risk of loss.

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

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distribution date Trustees
  would distribute interest and principal receipts to one, two or all three benefic
  iaries, 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.

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 (including, for the avoidance
  of doubt, any issuer term AA advance and any issuer term BBB advance). 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 principa
  l 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

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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.

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 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 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 under the other intercompany loans 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 subsequent 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 or term
  BBB advance). Similarly, Funding will, in general, repay principal amounts due
  on the issuer term advances and the term advances under the other intercompany
  loans 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 subsequent 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 under the other intercompany loans 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 further Issuer 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

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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

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 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.

The 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 start-up 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 party 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 under the Funding deed of charge). In addtion,
  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.

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

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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 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.

During any relevant cash accumulation
  period for any relevant term AAA advance, no repayments of principal will be
  made on the issuer term AA advances or the issuer term BBB advances. This means
  that there will be no corresponding repayments of principal on the class B Issuer
  Notes or the class C Issuer Notes.

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.

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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.

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 and Wales 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.

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 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 issuer term AA advances and 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 issuer term BBB advances and the other term BBB advances of each series
      proportionally and equally, until all of those term BBB term advances are
      fully repaid. 

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:

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| | first,
      the series 1 term AAA advance made by Holmes Financing (No. 8) PLC until
      that series 1 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advances made by Holmes Financing (No. 5) PLC until
      all of those term AAA advances are fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | then,
        the series 2 term AAA advance made by Holmes Financing (No. 3) PLC until
    that series 2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advance made by Holmes Financing (No. 1) PLC until
      that series 2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advance made by Holmes Financing (No. 7) PLC until
      that series 2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advance made by Holmes Financing (No. 8) PLC until
      that series 2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advance made by Holmes Financing (No. 6) PLC until
      that series 2 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the series 2 term AAA advance made by the Issuer 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 the Issuer, 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 4 term AAA advance made by Holmes Financing (No. 1) PLC until
      that series 4 term AAA advance is fully repaid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      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. 2) PLC until
      that series 2 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 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 the Holmes Financing
      (No. 2) PLC, the series 3 term AAA advance made by the Holmes Financing
      (No. 3) PLC, the series 3 term AAA advances made by the Issuer, 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;
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | then,
      the issuer term AA advances and 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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| | 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 issuer term BBB advances and 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 offers
  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 any loan outstanding is extended beyond 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 principalamount 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 applied.                                                                                                                                                            

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.

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

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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.

Subordination of
  other note classes may not protect noteholders from all risk of loss

The class B Issuer Notes and
  class C Issuer Notes are subordinated in right of payment of interest to the
  class A Issuer Notes. The class C Issuer Notes are subordinated in right of
  payment of interest to the class B Issuer Notes.

However, as described in 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, the transaction has been structured in the expectation that the
  series 3 Issuer Notes will be repaid in full prior to the redemption of the
  series 4 Issuer Notes.

There is no assurance that
  these subordination rules will protect the holders of class A Issuer Notes from
  all risk of loss or the holders of class B Issuer Notes from all risk of loss.

Principal payments
  on the class B Issuer Notes and the class C Issuer Notes will be deferred in
  some circumstances

Principal repayments on the
  issuer term AA advances and/or the issuer term BBB advances will be deferred
  in the following circumstances:

|• | if a principal loss has
      been recorded on the principaldeficiency ledger in respect of any term AA
      advances, any term A advances or any term BBB advances; or                                                                                                                                                                                                                  
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                           
|• | if the first reserve fund has been debited
        on or prior to the relevant interest payment date for the purposes of
        curing a principaldeficiency in respect of any term AA advances, any
        term A advances or any term BBB advances and the first reserve fund has
        not been replenished by a corresponding amount on the relevant interest
    payment date; or
|  |                                                                                                                                                                                                                                                                                                                                                                                           
|• | if, as at the relevant interest payment date,
        the total outstanding principal balance of loans in the mortgages trust,
        in respect of which the aggregate amount in arrear is more than three
        times the monthly payment then due, is more than five per cent. of the
    total outstanding principal balance of loans in the mortgages trust.                      

In these circumstances, the
  issuer term BBB advances and, as applicable, the issuer term AA advances will
  not be entitled to principal repayments: (i) until the relevant circumstance
  as described in this risk factor has been remedied (if ever); or (ii) during
  such times that there are any term AAA advances outstanding.

This means that payments of
  principal on the class C Issuer Notes of all series and, as applicable, the
  class B Issuer Notes of all series, will be deferred until the earlier of the
  time when the relevant

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circumstance described in
  this risk factor has been remedied (if ever), the date on which the term AAA
  advances are repaid in full and the maturity date of the relevant Issuer Notes.

Series 3 Issuer Notes
  may be subject to risk if the trust property deteriorates after repayment of
  the series 2 Issuer Notes

If the loans comprising the
  trust property do not perform as expected at any time after the repayment in
  full of the series 2 Issuer Notes, then the series 3 Issuer Notes may not be
  repaid in full.

If the Issuer fails
  to make timely payments of amounts due under an issuer dollar currency swap,
  then noteholders may be subject to exchange rate risks on some of the series
  3 Issuer Notes

Investors will pay for the
  series 3 class A2 Issuer Notes, the series 3 class B Issuer Notes and the series
  3 class C 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 3 class A2 Issuer Notes, the series 3 class B Issuer Notes
  and the series 3 class C 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 entered into, the Issuer may have insufficient
  funds to make payments due on the Issuer Notes of any class and any series.

If the mortgages trustee
  GIC provider or the Funding GIC provider ceases to satisfy certain criteria
  to provide the mortgages trustee GIC account or the Funding GIC account may
  need to be transferred to another entity which does satisfy that criteria

The mortgages trustee GIC
  provider and the Funding GIC provider are required to satisfy certain criteria
  (including certain criteria and/or permissions set or required by the Financial
  Services Authority from time to time) in order to continue to receive deposits
  in the mortgages trustee GIC account and the Funding GIC account respectively.
  If either the mortgages trustee GIC provider or the Funding GIC provider ceases
  to satisfy that criteria, then the relevant account may need to be transferred
  to another entity which does satisfy that criteria. In these circumstances the
  new GIC provider may not offer a GIC on terms as favourable as those provided
  by the mortgages trustee GIC provider or the Funding GIC provider.

The criteria referred to above
  include a requirement that the short-term, unguaranteed and unsecured ratings
  ascribed to the mortgages trustee GIC provider or, as the case may be, the Funding
  GIC provider are at least A-1+ (or in the circumstances described below, A-1)
  by Standard & Poor's, F1+ by Fitch and P-1 by Moody's. If the relevant deposit
  amount is less than 30 per cent. of the amount of the Funding share of the trust
  property, then the short-term, unguaranteed and unsecured rating required to
  be ascribed

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by Standard & Poor's to
  the mortgages trustee GIC provider, or as the case may be the Funding GIC provider,
  shall be at least A-1.

The difference in timing
  between the Issuers obligations and the obligations of the series 2 class
  A issuer euro currency swap provider and the issuer Swiss franc currency swap
  provider could adversely affect payments on the Issuer Notes

On each interest payment date
  and to the extent that it has funds available, Funding will pay to the Issuer
  interest and, as applicable, principal due on the issuer series 2 term AAA advance
  and the issuer series 4 term AA advance. On each interest payment date in relation
  to the Issuers obligations under the issuer euro currency swap in respect
  of the series 2 class A Issuer Note and the issuer Swiss franc currency swap,
  the Issuer will pay a portion of the interest received from Funding to, as applicable,
  the series 2 class A issuer euro currency swap provider or the issuer Swiss
  franc currency swap provider. Each of these issuer currency swap providers will
  not be obliged to make any corresponding swap payments to the Issuer for up
  to twelve months, until amounts are due to the Issuer from the relevant issuer
  currency swap provider on the interest payment date in respect of the series
  2 class A Issuer Note or the series 4 class A Issuer Note, as applicable. These
  interest payment dates occur annually up to and including the earliest of (i)
  the interest payment date falling in July 2006, in the case of the 2 class A
  Issuer Note, or the interest payment date falling in October 2006, in the case
  of the series 4 class A Issuer Note, (ii) the occurrence of a trigger event
  or (iii) enforcement of the issuer security, and quarterly thereafter.

If the series 2 class A issuer
  euro currency swap provider and/or the issuer Swiss franc currency swap provider
  does not meet its payment obligations to the Issuer under the relevant issuer
  currency swap on any annual interest payment date and the relevant issuer currency
  swap provider does not make a termination payment that has become due from it
  to the Issuer, the Issuer may have a larger shortfall in funds with which to
  make interest payments on the Issuer Note than if its payment obligations were
  quarterly and therefore coincidental with the Issuers payment obligations
  under those issuer currency swaps. Hence, the difference in timing between the
  Issuers obligations and the obligations of the relevant issuer currency
  swap providers under the issuer euro currency swap in respect of the series
  2 class A Issuer Note and the issuer Swiss franc currency swap may affect the
  Issuers ability to make payments on the Issuer Note of any class and any
  series.

Termination payments
  on the issuer dollar currency swaps, the issuer Swiss franc currency swap or
  the issuer euro currency swap may adversely affect the funds available to make
  payments on the Issuer Notes

If any of the issuer dollar
  currency swaps, the issuer Swiss franc currency swap or the issuer euro currency
  swap terminates, the Issuer may as a result be obliged to pay a termination
  payment to the relevant issuer dollar currency swap provider, the issuer Swiss
  franc currency swap or the issuer euro currency swap provider, as the case may
  be. The amount of the termination payment will be based on the cost of entering
  into a replacement issuer dollar currency swap, the issuer Swiss franc currency
  swap or the issuer euro currency swap, as the case may be. 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 dollar currency
  swap provider, the issuer Swiss franc currency swap provider or the issuer euro
  currency swap provider, as the case may be. 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 currency 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

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will be able to enter into
  a replacement swap, or if one is entered into, that the credit rating of the
  replacement issuer dollar currency swap provider, the issuer Swiss franc currency
  swap provider or issuer euro currency swap provider, as the case may be, 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 dollar currency swap provider, the issuer Swiss franc currency swap provider
  or the issuer euro currency swap provider, as the case may be, has caused the
  relevant issuer dollar currency swap, the issuer Swiss franc currency swap or
  the relevant issuer euro currency swap, as applicable, 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 dollar currency swap, the
  issuer Swiss franc currency swap or the relevant issuer euro currency swap,
  as the case may be (including any extra costs incurred (for example, from entering
  into spot currency or interest rate swaps) if the Issuer cannot
  immediately enter into a replacement 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 currency 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 currency swap
  relates. Furthermore, any termination payment or additional payment or additional
  amounts required to be paid by the Issuer following termination of an issuer
  currency 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 currency swap relates. Therefore, if the Issuer
  is obliged to make a termination payment to the relevant issuer dollar currency
  swap provider, the issuer Swiss franc currency swap provider and/or the issuer
  euro currency swap provider, as the case may be, or to pay any other additional
  amount as a result of the termination of the relevant issuer currency 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.

The Issuer relies on
  third parties 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, the issuer Swiss franc 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.

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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. At the closing date, the term advances with the
  lowest term advance rating include the issuer term BBB advances. As a result
  of using principal to repay interest and senior expenses in this manner, there
  will be less principal available to repay the issuer term BBB advances.

Funding will be obliged to
  keep a ledger that records any principal applied to pay interest and senior
  expenses. When the amount recorded on the ledger is equal to the principal amount
  outstanding of the term BBB advances, then Funding will use principal receipts
  that would have been applied to repay the term advance with the next lowest
  ranking term advance rating to pay interest on the term advances and senior
  expenses where there is a shortfall of money to pay those amounts. At the closing
  date, the term advances with the next lowest term advance rating include the
  issuer term AA advances. When the amount recorded on the principal deficiency
  ledger exceeds the principal amount outstanding on the term AA advances, Funding
  will use principal receipts that would have been applied to repay the term AAA
  advances to pay those amounts.

During the term of the transaction,
  however, it is expected that any principal deficiencies 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 (at the closing date, these include the issuer term
  AA advances), and so on down to the term advances with the lowest term advance
  rating.

If there are insufficient
  funds available because of such income or principal deficiencies, then one or
  more of the following consequences may occur:

|• | the interest and other net income of Funding
        may not be sufficient, after making the payments to be made in priority,
        to pay, in full or at all, interest due on the issuer term BBB advances
    and the issuer term AA advances;                                                                                                                                                                                                                                                                     
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|• | there may be insufficient funds to repay any
        of the issuer term BBB advances and the issuer term AA advances prior
        to their finalrepayment dates unless the other net income of Funding
        is sufficient, after making other prior ranking payments, to reduce any
        principal deficiency in respect of the term BBB advances and term AA
    advances;                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|• | if the amount of principal
      deficiencies exceeds the principal amount outstanding of any of the term
      advances (and the principal deficiencies cannot be covered by the other
      income of Funding), then the Issuer may not receive the full principalamount
      of any or all of the issuer term advances and, accordingly, noteholders
      may not receive the full face value of the class C Issuer Notes, the class
      B Issuer Notes and the class A Issuer Notes, as the case may be; and/or
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|• | the Issuer may be unable to pay, in full or
    at all, interest due on Issuer Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                  

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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 does not provide
  credit enhancement for the Funding share of the trust property.

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, 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 June 8, 2005, approximately 35.78 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 anothersource, 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.

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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. 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 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 and delayed cashbacks may adversely affect the funds available
  to the Issuer to repay the Issuer Notes

The seller has made, and in
  the future may make, an equitable assignment of the 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 which the seller had agreed to pay to that
  borrower after completion of the relevant loan.

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If the seller fails to advance
  the drawing or pay the delayed cashback, then the relevant borrower may set
  off any damages claim 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 immediately preceding risk factor.

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: 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, the claim is likely to be in an amount equal to the amount due under the delayed 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. 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.

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.

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

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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 four principal mortgage-related regulated activities:
  (i) entering into; (ii) administering; (iii) arranging; and (iv) advising on
  “regulated mortgage contracts”, 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”).

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.

Consumer Credit Regulation
  and Proposed UK Consumer Credit Reform

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

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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.

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.

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 might
  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
  just 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 UK consumer credit
  legislation is currently the subject of substantial change. In December 2003,
  the DTI published a White Paper proposing amendments to the CCA and to secondary
  legislation made under it. In June 2004, secondary legislation was made on:
  (i) amending requirements as to documentation of credit agreements, coming into
  force on 31 May 2005; (ii) pre-contract disclosure, coming into force on 31
  May 2005; and (iii) replacing the formula for calculating the maximum amount
  payable on early settlement with a formula more favourable to the borrower,
  coming into force on 31 May 2005 for new agreements, or 31 May 2007 or 31 May
  2010 (depending on the term of the agreement) for agreements existing before
  31 May 2005.

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In order to implement the
  changes proposed in the DTIs White Paper, the UK Government has decided
  to to amend the CCA by introducing a Consumer Credit Bill, which has recently
  had its second reading in Parliament. Major provisions contained in the Bill
  include: (a) removing the financial limit for consumer lending, whilst retaining
  the limit at £25,000 for lending for business purposes to individuals,
  unincorporated bodies and partnerships of up to 3 partners; (b) strengthening
  the licensing regime; (c) reforming the law on extortionate credit as it applies
  to both new and existing agreements; and (d) introducing alternative dispute
  resolution procedures outside the courts for consumer credit agreements. The
  Bill is expected to include further amendments to the CCA, and further secondary
  legislation made under the CCA is anticipated.

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.

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 specif ic 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.

It is currently unclear
  to what extent mortgage loans will be included in the scope of the proposed
  directive, which may be substantially amended before it is brought into effect.
  The proposal is unlikely to come into force before 2006 as the co-decision procedure
  of the European Parliament and of the Council, from the publication of the proposal
  to the coming into force of the new consumer credit directive, is likely to
  take at least two years, and member states will then have a further two years
  in which to bring implementing legislation into force. Until the final text
  of the directive is decided and the details of the United Kingdom implementing
  legislation are published, the form and the effect of any ultimately implemented
  directive on our ability to make payments when due on the Issuer Notes, cannot
  be determined.

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 FinancialServices 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 servicer 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. Any such non-recovery, claim or set-off ultimately may adversely
  affect our ability to make payments on the Issuer Notes.

In August 2002, the Law Commission
  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 simplif y 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 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.

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

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.

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

On June 3, 2003 the Council
  of the European Union adopted a Directive (2003/48/EC) regarding the taxation
  of savings income. Subject to a number of important conditions being met, it
  is proposed that member states will be required from no earlier than 1 July
  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 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 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

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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.

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

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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 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 to inter 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.

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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

The Basel Committee on
  Banking Supervision announced on 11 May 2004 that it had achieved consensus
  on the remaining issues concerning the framework of the New Basel Capital Accord
  and published the text of the new framework on 26 June 2004. The framework is
  designed to place enhanced emphasis on markets discipline and sensitivity to
  risk. The text of the framework will serve as the basis for national rule-making
  and approval processes to continue and for banking organisations to complete
  their preparations for implementation of the New Basel Accord. The Committee
  confirmed that it is currently intended that the various approaches under the
  New Basel Accord will be implemented in stages, some from year-end 2006, the
  most advanced at year-end 2007.

The new capital framework
  proposed consists of three “pillars”: (i) minimum regulatory capital
  requirements, (ii) supervisory review of an institution's internal assessment
  process and capital adequacy and (iii) effective use of disclosure to strengthen
  market discipline.

Consequently, noteholders
  should consult their own advisers as to the consequences to, and effect on,
  any noteholder of the proposed implementation of the New Basel Capital Accord.

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.

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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 10.18 to this Annual Report on Form 20-F. The certificate of compliance
  contains a statement that during the period from July 5, 2001 to April 30, 2005,
  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, 2005, there did not
  exist and had not existed since July 5, 2001, any Note Event of Default (as
  defined in the Issuer Trust Deed).

Item 5. OPERATING
  AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

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.

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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       | SPV Management Limited | Executive Director of SPV    
|                       | Tower 42               | Management Limited           
|                       | 25 Old Broad Street    |                              
|                       | London EC2N 1HQ        |                              
|                       |                        |                              
|SPV Management Limited | SPV Management Limited | Management of special purpose
|                       | Tower 42               | companies                    
|                       | 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         |                              
|                       |                        |                              
|Funding                |                        |                              
|                       |                        |                              
|Name                   | Business Address       | Business Occupation          
|                       |                        |                              
|Martin McDermott       | SPV Management Limited | Executive Director of SPV    
|                       | Tower 42               | Management Limited           
|                       | 25 Old Broad Street    |                              
|                       | London EC2N 1HQ        |                              
|                       |                        |                              
|SPV Management Limited | SPV Management Limited | Management of special purpose
|                       | Tower 42               | companies                    
|                       | 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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|Trustees               |                        |                              
|---------------------- | ---------------------- | -----------------------------
|                       |                        |                              
|Name                   | Business Address       | Business Occupation          
|                       |                        |                              
|Martin McDermott       | SPV Management Limited | Executive Director of SPV    
|                       | Tower 42               | Management Limited           
|                       | 25 Old Broad Street    |                              
|                       | London EC2N 1HQ        |                              
|                       |                        |                              
|SPV Management Limited | SPV Management Limited | Management of special purpose
|                       | Tower 42               | companies                    
|                       | 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.

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. SPV Management 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. SPV Management 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.

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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 July 5, 2001.

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.

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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
  333-13576).

D. EXCHANGE CONTROLS

None.

E. TAXATION

United Kingdom Taxation

The following section summarizes
  the material UK tax consequences of the purchase, ownership and disposition
  of the Issuer Notes based on current law and practice in the UK. The summary
  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

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. On
  the basis of the United Kingdom Inland Revenues published interpretation
  of the relevant legislation, this requirement is satisfied providing the Issuer
  Notes are listed by the Financial Services Authority and admitted to trading
  on the London Stock Exchange.

As discussed in more detail
  under Direct
  Assessment of non-UK holders of Issuer Notes to UK tax on interest
  below, a noteholder who is resident in the US for US tax purposes and not resident
  in the UK for UK tax purposes will not be subject to UK tax by direct assessment
  in respect of any payments on the Issuer Notes 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 taxation treaty dated July 24,
  2001 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. Noteholders who are entitled to greater benefits under
  the double taxation treaty dated December 31, 1975 between the US and the UK
  (the Old Treaty) are able to elect for the provisions of
  the Old Treaty to continue to apply to them for a period of 12 months from the
  date on which the provisions of the Treaty otherwise would have effect under
  paragraph (2) of Article

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29 of the Treaty (in respect
  of UK taxes withheld at source: 12 months from May 1, 2003; in respect of UK
  corporation tax: 12 months from April 1, 2003; in respect of UK income tax not
  withheld at source and UK capital gains tax: 12 months from April 6, 2003).

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
  and remain at all times listed on a recognised
  stock exchange, as defined in Section 841 of the
  United Kingdom Income and Corporation Taxes Act 1988 (ICTA).
  On the basis of the United Kingdom Inland Revenues published interpretation
  of this 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 that country and are admitted to trading on a recognised stock exchange in
  that country. The London Stock Exchange is a recognised stock exchange for this
  purpose. The Inland Revenue 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 the Inland Revenue with the tax authorities of other jurisdictions.

On June 3, 2003 the Council
  of the European Union adopted a Directive (2003/48/EC) regarding the taxation
  of savings income. Subject to a number of important conditions being met, it
  is proposed that member states will be required, from a date not earlier than
  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 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).

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 UK tax purposes in
  the UK unless (i) 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 (subject to exemptions
  for interest received by certain categories of agent such as some brokers and
  investment managers) or (ii) such noteholder is a company and 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 tax
  may be levied on the UK branch or agency or the UK permanent establishment,
  as applicable.

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, including interest, and (in respect
  of all accounting periods commencing on or after October 1, 2002) all foreign
  exchange gains and losses 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 or for related expenses
  on a similar basis.

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For holders within the charge
  to UK corporation tax (other than authorised unit trusts and investment trusts),
  the series 3 Issuer Notes will (in respect of all accounting periods commenced
  prior to October 1, 2002) be qualifying assets for the purposes of the taxation
  of foreign exchange gains and losses. Any changes in the sterling value of such
  Issuer Notes as a result of changes in the sterling/US dollar exchange rate
  or the sterling/euro excha nge rate, as appropriate, during each such accounting
  period in which such a holder holds such Issuer Notes will generally be taxed
  or relieved by reference to the holders accounting treatment of such Issuer
  Notes.

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 series 3 Issuer Notes will not be qualifying corporate
  bonds within the meaning of Section 117 of the United Kingdom 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 purpose of UK
  capital gains tax.

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 the Inland Revenue 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 series 3 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 profit and loss accounts as increased
  by the amounts of any non-deductible expenses or losses. Examples of non-deductible
  expenses and losses include general provisions for bad debts. In respect of
  Funding, the profit in the profit and loss account will not exceed 0.01 per
  cent., of the Funding available revenue receipts. In respect of the Issuer,
  the profit in the profit and loss account will not exceed 0.02 per cent., of
  the interest on the issuer term advances under the issuer intercompany loan.
  See the risk factor Tax
  payable by Funding or the Issuer may adversely affect the Issuers ability
  to make payments on the Issuer Notes.

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. For the avoidance
  of doubt, references to Trustees in this paragraph are to Holmes
  Trustees Limited only.

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United States Taxation

General

The following section summarizes
  the material federal income tax consequences of the purchase, ownership and
  disposition of the series 3 class A2 Issuer Notes, series 3 class B Issuer Notes
  and series 3 class C 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 (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 real property loans in the hands of domestic savings and loan
  associations, real estate investment trusts, or REMICs under sections 7701(a)(19)(C),
  856(c)(5)(A) 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

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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.

US Issuer Notes as debt
  of Funding

The US Internal Revenue
  Service could possibly seek to characterize the series 3 class A2 Issuer Notes,
  series 3 class B Issuer Notes and series 3 class C Issuer Notes as ownership
  interests in the issuer series 3A2 term AAA advance, the issuer series 3 term
  AA advance and the issuer series 3 term BBB 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
  regulatio ns 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.

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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

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. As foreign private issuers, the Issuer, Funding and Trustees are not
  required to make filings with the Commission by electronic means, although we
  are entitled to do so. 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

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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

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:

|1. | 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 333-13576).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                           
|2. | 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 333-13576).                                        
|   |                                                                                                                                                                                                                                                           
|3. | Exhibit 10.1: Periodic Report for the period from December 9, 2003 to January 8, 2004 (incorporated by reference from the Form 6-K previously filed on January 20, 2004).                                                                                 
|   |                                                                                                                                                                                                                                                           
|4. | Exhibit 10.2: Periodic Report for the period from January 9, 2004 to February 9, 2004 (incorporated by reference from the Form 6-K previously filed on March 1, 2004).                                                                                    
|   |                                                                                                                                                                                                                                                           
|5. | Exhibit 10.3: Periodic Report for the period from February 10, 2004 to March 8, 2004 (incorporated by reference from the Form 6-K previously filed on March 22, 2004).                                                                                    
|   |                                                                                                                                                                                                                                                           
|6. | Exhibit 10.4: Periodic Report for the period from March 9, 2004 to April 8, 2004 (incorporated by reference from the Form 6-K previously filed on April 30, 2004).                                                                                        
|   |                                                                                                                                                                                                                                                           
|7. | Exhibit 10.5: Periodic Report for the period from April 9, 2004 to May 10, 2004 (incorporated by reference from the Form 6-K previously filed on May 26, 2004).                                                                                           

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|8.  | Exhibit 10.6: Periodic Report for the period from May 11, 2004 to June 8, 2004 (incorporated by reference from the Form 6-K previously filed on June 16, 2004).                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                          
|9.  | Exhibit 10.7: Periodic Report for the period from June 9, 2004 to July 8, 2004 (incorporated by reference from the Form 6-K previously filed on July 28, 2004).                                          
|    |                                                                                                                                                                                                          
|10. | Exhibit 10.8: Periodic Report for the period from July 9, 2004 to August 9, 2004 (incorporated by reference from the Form 6-K previously filed on September 1, 2004).                                    
|    |                                                                                                                                                                                                          
|11. | Exhibit 10.9: Periodic Report for the period from August 10, 2004 to September 8, 2004 (incorporated by reference from the Form 6-K previously filed on September 29, 2004).                             
|    |                                                                                                                                                                                                          
|12. | Exhibit 10.10: Periodic Report for the period from September 9, 2004 to October 8, 2004 (incorporated by reference from the Form 6-K previously filed on October 29, 2004).                              
|    |                                                                                                                                                                                                          
|13. | Exhibit 10.11: Periodic Report for the period from October 9, 2004 to November 8, 2004 (incorporated by reference from the Form 6-K previously filed on December 1, 2004).                               
|    |                                                                                                                                                                                                          
|14. | Exhibit
      10.12: Periodic Report for the period from November 9, 2004 to December
      8, 2004 (incorporated by reference from the Form 6-K previously filed on
      December 29, 2004).           
|    |                                                                                                                                                                                                          
|15. | Exhibit 10.13: Periodic Report for the period from December 9, 2004 to January 10, 2005 (incorporated by reference from the Form 6-K previously filed on January 31, 2005).                              
|    |                                                                                                                                                                                                          
|16. | Exhibit 10.14: Profit and Loss Accounts and Balance Sheets for the period ended January 15, 2004 (incorporated by reference from the Form 6-K previously filed on March 1, 2004).                        
|    |                                                                                                                                                                                                          
|17. | Exhibit 10.15: Profit and Loss Accounts and Balance Sheets for the period ended April 15, 2004 (incorporated by reference from the Form 6-K previously filed on May 21, 2004).                           
|    |                                                                                                                                                                                                          
|18. | Exhibit 10.16: Profit and Loss Accounts and Balance Sheets for the period ended July 15, 2004 (incorporated by reference from the Form 6-K previously filed on August 17, 2004).                         
|    |                                                                                                                                                                                                          
|19. | Exhibit 10.17: Profit and Loss Accounts and Balance Sheets for the period ended October 15, 2004 (incorporated by reference from the Form 6-K previously filed on June 10, 2005).                        
|    |                                                                                                                                                                                                          
|20. | Exhibit 10.18: Certificate Relating to FinancialInformation pursuant to the First Issuer Trust Deed dated April 30, 2005 (incorporated by reference from the Form 6-K previously filed on June 13, 2005).
|    |                                                                                                                                                                                                          
|21. | Exhibit 10.19: Report and Accounts for Holmes Financing (No. 4) PLC for the year ended December 31, 2004.                                                                                                
|    |                                                                                                                                                                                                          
|22. | Exhibit 10.20: Report and Accounts for Holmes Funding Limited for the year ended December 31, 2004.                                                                                                      
|    |                                                                                                                                                                                                          
|23. | Exhibit 10.21: Report and Accounts for Holmes Trustees Limited for the year ended December 31, 2004.                                                                                                     
|    |                                                                                                                                                                                                          
|24. | Exhibit 12.1: Certificate pursuant to section 302 of the Sarbanes-Oxley Act 2002.                                                                                                                        
|    |                                                                                                                                                                                                          
|25. | Exhibit 13.1: Certificate pursuant to section 906 of the Sarbanes-Oxley Act 2002.                                                                                                                        

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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:                         
|Name:                       
|Title:                      
|                            
|HOLMES FUNDING LIMITED      
|                            
|                            
|By:                         
|Name:                       
|Title:                      
|                            
|HOLMES FINANCING (NO. 4) PLC
|                            
|                            
|By:                         
|Name:                       
|Title:                      
|                            
|                            
|Dated:    June
    30, 2005 

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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 333-13576).
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                               
|• | 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 333-13576).                                        
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.1: Periodic Report for the period
        from December 9, 2003 to January 8, 2004 (incorporated by reference from
    the Form 6-K previously filed on January 20, 2004).                                                                                         
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.2: Periodic Report for the period
        from January 9, 2004 to February 9, 2004 (incorporated by reference from
    the Form 6-K previously filed on March 1, 2004).                                                                                            
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.3: Periodic Report for the period
        from February 10, 2004 to March 8, 2004 (incorporated by reference from
    the Form 6-K previously filed on March 22, 2004).                                                                                            
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.4: Periodic Report for the period
        from March 9, 2004 to April 8, 2004 (incorporated by reference from the
    Form 6-K previously filed on April 30, 2004).                                                                                                
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.5: Periodic Report for the period
        from April 9, 2004 to May 10, 2004 (incorporated by reference from the
    Form 6-K previously filed on May 26, 2004).                                                                                                   
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.6: Periodic Report for the period
        from May 11, 2004 to June 8, 2004 (incorporated by reference from the
    Form 6-K previously filed on June 16, 2004).                                                                                                   
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.7: Periodic Report for the period
        from June 9, 2004 to July 8, 2004 (incorporated by reference from the
    Form 6-K previously filed on July 28, 2004).                                                                                                   
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.8: Periodic Report for the period
        from July 9, 2004 to August 9, 2004 (incorporated by reference from the
    Form 6-K previously filed on September 1, 2004).                                                                                             
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.9: Periodic Report for the period
        from August 10, 2004 to September 8, 2004 (incorporated by reference
    from the Form 6-K previously filed on September 29, 2004).                                                                                      
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.10: Periodic Report for the period
        from September 9, 2004 to October 8, 2004 (incorporated by reference
    from the Form 6-K previously filed on October 29, 2004).                                                                                       
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.11: Periodic Report for the period
        from October 9, 2004 to November 8, 2004 (incorporated by reference from
    the Form 6-K previously file d on December 1, 2004).                                                                                       
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.12: Periodic Report for the period
        from November 9, 2004 to December 8, 2004 (incorporated by reference
    from the Form 6-K previously filed on December 29, 2004).                                                                                      
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.13: Periodic Report for the period
        from December 9, 2004 to January 10, 2005 (incorporated by reference
    from the Form 6-K previously filed on January 31, 2005).                                                                                       
|  |                                                                                                                                                                                                                                                                               
|• | Exhibit 10.14: Profit and Loss Accounts and
        Balance Sheets for the period ended January 15, 2004 (incorporated by
    reference from the Form 6-K previously filed on March 1, 2004).                                                                                 

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|• | Exhibit 10.15: Profit and Loss Accounts and
        Balance Sheets for the period ended April 15, 2004 (incorporated by reference
    from the Form 6-K previously filed on May 21, 2004).                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                               
|• | Exhibit 10.16: Profit and Loss Accounts and
        Balance Sheets for the period ended July 15, 2004 (incorporated by reference
    from the Form 6-K previously filed on August 17, 2004).                                  
|  |                                                                                                                                                                                                                               
|• | Exhibit 10.17: Profit and Loss Accounts and
        Balance Sheets for the period ended October 15, 2004 (incorporated by
    reference from the Form 6-K previously filed on June 10, 2005).                                 
|  |                                                                                                                                                                                                                               
|• | Exhibit 10.18: Certificate Relating to Financial
        Information pursuant to the First Issuer Trust Deed dated April 30, 2005
        (incorporated by reference from the Form 6-K previously filed on June
    13, 2005).
|  |                                                                                                                                                                                                                               
|• | Exhibit
      10.19: Report and Accounts for Holmes Financing (No. 4) PLC for the year
      ended December 31, 2004.                                                                                                         
|  |                                                                                                                                                                                                                               
|• | Exhibit
      10.20: Report and Accounts for Holmes Funding Limited for the year ended
      December 31, 2004.                                                                                                               
|  |                                                                                                                                                                                                                               
|• | Exhibit
      10.21: Report and Accounts for Holmes Trustees Limited for the year ended
      December 31, 2004.                                                                                                              
|  |                                                                                                                                                                                                                               
|• | 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.                                                                                                                                       

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