Exhibit
  10.20

HOLMES
  FUNDING LIMITED

REPORT
  AND ACCOUNTS

FOR
  THE YEAR ENDED 31 DECEMBER 2005

Registered
  in England and Wales No. 3982428

---




Holmes Funding Limited

Report of the directors

The Directors submit their
  report together with the accounts for the year ended 31 December 2005.

Principal activity and
  review of the year

The principal activity
  of the Company is to acquire an interest in a portfolio of mortgage loans and
  enter into financial arrangements with other group companies in that connection.
  No future changes are envisaged.

The legal structure of
  the Company is to invest in a beneficial interest in the assets of Holmes Trustees
  Limited (the Trust), which assets comprise mortgage loans secured
  on residential property in England, Scotland and Wales. The Company receives
  a share of income from the Trust in proportion to its share of the total mortgage
  assets of the Trust.

On 8thDecember
  2005 the Company purchased a further beneficial interest in the assets of the
  Trust of £3.80 billion. This purchase was financed by a loan from Holmes
  Financing (No. 9) plc. Holmes Trustees Limited and Holmes Financing (No. 9)
  plc are both group undertakings.

Dividend

The loss for the year on
  ordinary activities after tax amounted to £24,204,000 (2004: £12,295,000
  profit).

The Directors do not recommend
  the payment of a dividend (2004: £nil).

Directors and their
  interests

The Directors who served
  throughout the year were:

Mr D M Green 
  Mr M McDermottWilmington Trust SP Services
  (London) Limited

At the year end and the
  previous year end, Holmes Holdings Limited held one share in the Company. Holmes
  Holdings Limited and M. McDermott jointly held the other share.

Wilmington Trust SP Services
  (London) Limited and M. McDermott jointly held one share in the holding company,
  Holmes Holdings Limited, at the year end. The other share in Holmes Holdings
  Limited was held by Wilmington Trust SP Services (London) Limited. M McDermott
  is also a Director of Wilmington Trust SP Services (London) Limited.

None of the other Directors
  had a beneficial interest in the shares of the Company or of the holding Company,
  Holmes Holdings Limited, and its subsidiaries at the year end.

Directors responsibility
  statement

The directors are responsible
  for preparing their report and financial statements. The directors have chosen
  to prepare accounts for the company in accordance with International Financial
  Reporting Standards (IFRSs). Company law requires the directors to prepare such
  financial statements in accordance with International Financial Reporting Standards,
  the Companies Act 1985 and Article 4 of the IAS Regulation.

International Accounting
  Standard 1 requires that financial statements present fairly for each financial
  year the companys financial position, financial performance and cash flows.
  This requires the faithful representation of the effects of transactions, other
  events and conditions in accordance with the definitions and recognition criteria
  for assets, liabilities, income and expenses set out in the International Accounting
  Standards Boards Framework for the preparation and Presentation
  of Financial Statements. In virtually all circumstances, a fair presentation
  will be achieved by compliance with all applicable International Financial Reporting
  Standards. Directors are also required to:

| | properly
        select and apply accounting policies;                                                                                                                                                                                                                                                                                                 
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | present
        information, including accounting policies, in a manner that provides
        relevant, reliable, comparable and understandable information;                                                                                                                                                                                           
| | provide
        additional disclosures when compliance with the specific requirements
        in International Financial Reporting Standards is insufficient to enable
        users to understand the impact of particular transactions, other events
        and conditions on the entitys financial position and financial performance;
        and
| | prepare the accounts
      on a going concern basis unless, having assessed the ability of the company
      to continue as a going concern, management either intends to liquidate the
      entity or to cease trading, or have no realistic alternative but to do so.                                                                               

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Holmes Funding Limited

Report of the directors
  - continued

The directors are responsible
  for keeping proper accounting records which disclose with reasonable accuracy
  at any time the financial position of the company, for safeguarding the assets,
  for taking reasonable steps for the prevention and detection of fraud and other
  irregularities and for the preparation of a directors report which comply
  with the requirements of the Companies Act 1985.

Legislation in the United
  Kingdom governing the preparation and dissemination of financial statements
  differs from legislation in other jurisdictions.

Auditors

In accordance with Section
  386 of the Companies Act 1985, the Company has elected to dispense with the
  obligation to appoint auditors annually. Accordingly, Deloitte & Touche
  LLP are therefore deemed to have been re-appointed as auditors of the Company.

By Order of the Board



For and on behalf ofAbbey National Secretariat
  Services Limited, Secretary

24 February 2006

Abbey National House, 2
  Triton Square, Regent's Place, London NW1 3AN

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Holmes Funding Limited

Independent auditors
  report to the members of Holmes Funding Limited

We have audited the individual
  company financial statements (the financial statements) of Holmes
  Funding Limited for the year ended 31 December 2005, which comprise the income
  statement, the balance sheet, the cash flow statement and the related notes
  1 to 21. These financial statements have been prepared under the accounting
  policies set out therein.

Respective responsibilities
  of directors and auditors

The directors' responsibilities
  for preparing the Annual Report and the financial statements in accordance with
  applicable United Kingdom law and International Financial Reporting Standards
  (IFRSs) as adopted for use in the European Union are set out in the statement
  of directors' responsibilities.

Our responsibility is to
  audit the financial statements in accordance with relevant United Kingdom legal
  and regulatory requirements and International Standards on Auditing (UK and
  Ireland).

We report to you our opinion
  as to whether the financial statements give a true and fair view in accordance
  with the relevant framework and are properly prepared in accordance with the
  Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you
  if the company has not kept proper accounting records, if we have not received
  all the information and explanations we require for our audit, or if information
  specified by law regarding directors remuneration and transactions with
  the company and other members of the group is not disclosed.

We read other information
  contained in the directors report and consider the implications for our
  report if we become aware of any apparent misstatements or material inconsistencies
  with the financial statements.

Basis of audit opinion

We conducted our audit
  in accordance with International Standards on Auditing (UK and Ireland) issued
  by the Auditing Practices Board. An audit includes examination, on a test basis,
  of evidence relevant to the amounts and disclosures in the financial statements.
  It also includes an assessment of the significant estimates and judgments made
  by the directors in the preparation of the financial statements, and of whether
  the accounting policies are appropriate to the circumstances of the company
  consistently applied and adequately disclosed.

We planned and performed
  our audit so as to obtain all the information and explanations which we considered
  necessary in order to provide us with sufficient evidence to give reasonable
  assurance that the financial statements are free from material misstatement,
  whether caused by fraud or other irregularity or error. In forming our opinion
  we also evaluated the overall adequacy of the presentation of information in
  the financial statements.

Opinion

In our opinion:

| | the
        financial statements give a true and fair view in accordance with those
        International Financial Reporting Standards asadopted
        for use in the European Union, of the state of the company's affairs as
        at 31 December 2005 and of its loss forthe
        year then ended; and
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                  
| | the
        financial statements have been properly prepared in accordance with the
        Companies Act 1985.                                                                                                                                                                                                  

Deloitte & Touche
  LLPChartered Accountants and
  Registered Auditors 
  London 
  24 February 2006

---




Holmes Funding Limited

Income StatementFor the Year ended
  31 December 2005

|                                                                     |       |  | Year
        ended 31 |  | Year
        ended 31 | 
|-------------------------------------------------------------------- | ----- |  | --------------------- |  | --------------------- | 
|                                                                     | Notes |  | December
        2005 |  | December
        2004 | 
|                                                                     |       |  | £000                  |  | £000                  | 
|Interest
      and similar income                                    | 3     |  | 681,090               |  | 804,668               | 
|Interest
      expense and similar charges                           | 4     |  | (668,979)             |  | (752,827)             | 
|                                                                     |       |  |                       |  |                       | 
|Net
      Interest Income                                            |       |  | 12,111                |  | 51,841                | 
|Other
      operating expenses                                       | 5     |  | (34,642)              |  | -                     | 
|Administrative
      expenses                                        |       |  | (8,952)               |  | (51,640)              | 
|Impairment
      (losses)/gains on loans and advances                |       |  | (3,094)               |  | 17,362                | 
|(Loss)/profit
      before tax                                       | 6     |  | (34,577)              |  | 17,563                | 
|Tax                                                                  | 7     |  | 10,373                |  | (5,268)               | 
|                                                                     |       |  |                       |  |                       | 
|Net
      (loss)/profit attributable to equity holders of the parent | 17    |  | (24,204)              |  | 12,295                | 
|                                                                     |       |  |                       |  |                       | 

All activities of the Company
  are classed as continuing

The Company has no recognised
  income or expenditure other than the results for the current and previous year
  as set out above. Accordingly no statement of recognised income and expense
  has been included.

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Holmes Funding Limited

Balance Sheet
  As at 31 December 2005

|ASSETS                                            |       |  |                     |  |                     | 
|------------------------------------------------- | ----- |  | ------------------- |  | ------------------- | 
|                                                  |       |  | 31
        December |  | 31
        December | 
|                                                  | Notes |  | 2005                |  | 2004                | 
|                                                  |       |  | £000                |  | £000                | 
|Cash
      and cash equivalents                   | 8     |  | 1,394,436           |  | 2,890,818           | 
|Beneficial
      interest in mortgage portfolio   | 9     |  | -                   |  | 13,168,370          | 
|Loans
      and advances due from related parties | 10    |  | 14,370,052          |  | -                   | 
|Deferred
      tax assets                         | 11    |  | 7,436               |  | 1,372               | 
|Other
      assets                                | 12    |  | 10,667              |  | 27,670              | 
|                                                  |       |  |                     |  |                     | 
|Total
      assets                                |       |  | 15,782,591          |  | 16,088,230          | 
|                                                  |       |  |                     |  |                     | 
|                                                  |       |  |                     |  |                     | 
|LIABILITIES                                       |       |  |                     |  |                     | 
|                                                  |       |  |                     |  |                     | 
|Loans
      due to group companies                | 13    |  | (15,640,539)        |  | (15,510,323)        | 
|Derivative
      financial instruments            | 14    |  | (26,253)            |  | -                   | 
|Current
      tax liabilities                     | 7     |  | (20)                |  | (22)                | 
|Other
      liabilities                           | 15    |  | (132,859)           |  | (580,860)           | 
|                                                  |       |  |                     |  |                     | 
|Total
      liabilities                           |       |  | (15,799,671)        |  | (16,091,205)        | 
|                                                  |       |  |                     |  |                     | 
|Equity                                            |       |  |                     |  |                     | 
|Capital
      and reserves                        |       |  |                     |  |                     | 
|Share
      capital                               | 16    |  | -                   |  | -                   | 
|Retained
      earnings                           | 17    |  | 17,080              |  | 2,975               | 
|                                                  |       |  |                     |  |                     | 
|Total
      equity and liabilities                |       |  | (15,782,591)        |  | (16,088,230)        | 
|                                                  |       |  |                     |  |                     | 

The financial statements
  were approved by the board of directors and authorised for issue on 24 February
  2006. They were signed on its behalf by:

M McDermott
  
  Director

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Holmes Funding Limited

Cash Flow Statement
  For the Year ended 31 December 2005

|                                                              |       |  | Year
        ended       |  | Year
        ended       | 
|------------------------------------------------------------- | ----- |  | ------------------------ |  | ------------------------ | 
|                                                              | NOTES |  | 31
        December 2005 |  | 31
        December 2004 | 
|                                                              |       |  | £000                     |  | £000                     | 
|                                                              |       |  |                          |  |                          | 
|Net
      cash from operating activities                      | 18    |  | 784,631                  |  | 749,888                  | 
|                                                              |       |  |                          |  |                          | 
|Movement
      in other receivables                           |       |  | 2,550                    |  | (2,941)                  | 
|Movement
      in other payables                              |       |  | 14,001                   |  | 94,556                   | 
|Interest
      paid                                           |       |  | (715,372)                |  | (701,891)                | 
|                                                              |       |  |                          |  |                          | 
|Cash
      flows from operating activities                    |       |  | (698,821)                |  | (610,276)                | 
|                                                              |       |  |                          |  |                          | 
|                                                              |       |  |                          |  |                          | 
|Amounts
      advanced to related parties                     |       |  | (3,936,991)              |  | -                        | 
|Amounts
      repaid by related parties                       |       |  | 2,258,562                |  | -                        | 
|Purchase
      of beneficial interest in mortgage portfolio   |       |  | -                        |  | (3,983,790)              | 
|Receipts
      from beneficial interest in mortgage portfolio |       |  | -                        |  | 4,174,679                | 
|                                                              |       |  |                          |  |                          | 
|Cash
      flows from investing activities                    |       |  | (1,678,429)              |  | 190,889                  | 
|                                                              |       |  |                          |  |                          | 
|                                                              |       |  |                          |  |                          | 
|Amounts
      received from group companies                   |       |  | 3,796,807                |  | 3,983,790                | 
|Amounts
      paid to group companies                         |       |  | (3,666,590)              |  | (2,583,504)              | 
|Amounts
      paid to related parties                         |       |  | (33,980)                 |  | (40,566)                 | 
|                                                              |       |  |                          |  |                          | 
|Cash
      flows from financing activities                    |       |  | 96,237                   |  | 1,359,720                | 
|                                                              |       |  |                          |  |                          | 
|                                                              |       |  |                          |  |                          | 
|Net
      (decrease)/increase in cash during the year         |       |  | (1,496,382)              |  | 1,690,221                | 
|                                                              |       |  |                          |  |                          | 
|Cash
      and cash equivalents brought forward               |       |  | 2,890,818                |  | 1,200,597                | 
|                                                              |       |  |                          |  |                          | 
|Cash
      and cash equivalents carried forward               |       |  | 1,394,436                |  | 2,890,818                | 
|                                                              |       |  |                          |  |                          | 



---




Holmes Funding Limited

Notes to the Financial
  Statements

1. Accounting policies

Adoption of International
  Accounting Standards

The financial statements
  have for the first time, been prepared in accordance with International Financial
  Reporting Standards (IFRS) adopted by the International Accounting
  Standards Board (IASB), and interpretations issued by the International
  Financial Reporting Interpretations Committee of the IASB. The date of transition
  to IFRS for the Company and the date of its opening IFRS balance sheet was 1
  January 2004.

As allowed by IFRS 1 First-time
  adoption of International Financial Reporting Standards the Company has
  not restated its 2004 income statements and balance sheets to comply with IAS
  32 and IAS 39. The main impact of this is that the comparatives will not show
  the derecognition adjustment or the fair value of derivatives. This is further
  described in the notes below.

The principal accounting
  policies applied in the preparation of financial statements are set out below.
  These policies have been consistently applied to all years presented, unless
  other otherwise stated.

Basis of preparation

The financial statements
  have been prepared in accordance with International Financial Reporting Standards.

The financial statements
  have also been prepared in accordance with IFRSs adopted for use in the European
  Union and therefore comply with Article 4 of the EU IAS Regulation.

The financial statements
  have been prepared under the historical cost convention, as modified by the
  revaluation of available-for-sale financial assets, financial assets and financial
  liabilities held at fair value through profit or loss and all derivative contracts.

Presentation of the
  profit and loss account

Because the nature of the
  business is to receive and provide interest-bearing loans and advances the Directors
  are of the opinion that it is more appropriate to use net interest income rather
  than turnover in presenting the profit and loss account.

Interest income and
  expense

Interest income and expense
  is accrued on a time basis, by reference to the principal outstanding and at
  the effective interest rate applicable, which is the rate that exactly discounts
  estimated future cash receipts through the expected life of the financial asset
  to that assets net carrying amount. Interest income and expenditure is
  shown gross on the face of the income statement.

Financial assets

The entity classifies its
  financial assets as loans and receivables which are held at amortised cost.
  These include loans and advances to related parties shown on the face of the
  balance sheet and cash and cash equivalents shown on the face of the balance
  sheet.

Loans and advances due
  from related parties

The Companys beneficial
  interest in the mortgage portfolio held by Holmes Trustees Limited has been
  legally acquired from Abbey National plc. The sale of the beneficial interest
  does not pass the derecognition criteria as described in IAS 39 Financial
  Instruments: Recognition and Measurement and therefore no beneficial interest
  in a mortgage portfolio is shown in the balance sheet as at 31 December 2005.
  This is further described in the paragraphs below.

The loans and advances
  due from related parties are held at amortised cost.

---




Holmes Funding Limited

Notes to the Financial
  Statements

1. Accounting policies
  - continued

Derecognition

As a result of IAS 39 Financial
  Instruments: Recognition and Measurement the legal transfer of the beneficial
  interest in the Trust mortgage portfolio from Abbey National plc to the Company
  fails the criteria for derecognition. As no transfer has occurred for accounting
  purposes the beneficial interest has not been recognised in the Companys
  financial statements and remains on the balance sheet of Abbey National plc.

The beneficial interest
  in the mortgage portfolio is replaced by a related party loan included in Loans
  and advances from related parties on the Companys balance sheet. The related
  party loan is recorded at the book value of the beneficial interest in the mortgage
  portfolio to Abbey National plc at the time of transfer less any subsequent
  transfers and repayments of capital, less deferred consideration due. A provision
  for losses is maintained by the Company to cover default of these loans and
  subsequent reduction in interest receivable on the intercompany loan.

As the Company has chosen
  to prospectively apply the provisions of IAS39 the comparative figures continue
  to show the beneficial interest in the mortgage portfolio, and associated income
  and expenditure thereon. Details of the impact of the transition to IAS 39 can
  be found in the notes to the accounts.

Deferred consideration

Under the terms of the
  mortgage sale agreement, Abbey National plc, as the originator of the mortgage
  loans, legally retains the right to receive excess income (deferred consideration)
  arising on those loans, after certain higher priority payments have been met.

On application of IFRS,
  deferred consideration is treated as a reduction in the interest due from Abbey
  National plc on the related party loan arising on the failure to derecognise
  the sale of the beneficial interest in the mortgage portfolio. Any deferred
  consideration due at the end of the year is treated as a reduction in the capital
  balance of the amounts due from related parties. Incremental elements of deferred
  consideration are spread on an effective interest rate basis; all other elements
  are accounted for as incurred.

Derivative financial
  instruments

Derivatives are initially
  recognised at fair value on the date on which a derivative contract is entered
  into and are subsequently remeasured at their fair value. Fair values are obtained
  using valuation techniques, including discounted cash flow models and option
  pricing models as appropriate. All derivatives are carried as assets when fair
  value is positive and as liabilities when fair value is negative.

Income taxes, including
  deferred income taxes

Income tax payable on profits,
  based on the applicable tax law in each jurisdiction is recognised as an expense
  in the period in which profits arise. The tax effects of income tax losses available
  to carry forward are recognised as an asset when it is probable that future
  taxable profits will be available, against which these losses can be utilised.

Current tax assets and
  liabilities are only offset when they arise in the same tax reporting group
  and where there is both the legal right and the intention to settle on a net
  basis or to realise the asset and settle the liability simultaneously.

Deferred taxation is provided
  on all timing differences that have not reversed before the balance sheet date
  at the rate of tax expected to apply when those timing differences will reverse.
  Deferred tax assets are recognised to the extent that they are regarded as recoverable.

Cash and cash equivalents

For the purposes of the
  cash flow statement, cash and cash equivalents comprise balances with less than
  three months maturity from the date of acquisition, including cash and
  non restricted balances with central banks, treasury bills and other eligible
  bills, loans and advances to banks, amounts due from other banks and short term
  investments in securities

Financial Liabilities

Financial liabilities are
  measured at amortised cost. These include Loans and advances to group companies
  on the face of the balance sheet, accrued interest shown within other liabilities
  and derivative financial instruments on the face of the balance sheet.

---




Holmes Funding Limited

Notes to the Financial
  Statements

1. Accounting policies
  - continued

Loans and advances due
  to group companies and related parties

Loans and advances due
  to group companies and related parties are held at amortised cost.

Provisions

Provisions are made against
  loans and advances which comprise the related party loan which replaces the
  beneficial interest in the mortgage portfolio under IFRS. These provisions include
  the incurred but not reported provisions (IBNR) which arise when as a result
  of regular appraisals of the assets, it is considered that recovery is doubtful.
  Provisions made during the year, less amounts released and recoveries of amounts
  written off in previous years are charged to the profit and loss account.

Financial Risk factors

The Companys activities
  expose it to a variety of financial risks including, fair value interest rate
  risk, credit risk and liquidity risk. The Companys overall risk management
  programme focuses on the unpredictability of financial markets and seeks to
  minimise potential adverse effects on the Companys financial performance.
  The Company uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried
  out by the central risk management function of the Abbey Group. Authority flows
  from the Abbey National plc Board of Members to the Chief Executive Office and
  from him to his direct reports. Delegation of authority is to individuals. Formal
  standing committees are maintained for effective management or oversight. Their
  authority is derived from the person they are intended to assist.

Cash flow and fair value
  interest rate risk

Interest rate repricing
  information is shown in the table below at 31 December 2005. It provides an
  estimate of the repricing profile of the Companys financial assets and
  liabilities. For the major categories of assets and liabilities, the table shows
  the values of interest earning assets and liabilities, which reprice within
  selected time bands. Items are allocated to time bands by reference to the earlier
  of the next interest rate repricing date and the legal maturity date. This leads
  to an apparent timing mismatch where the anticipated maturity date is different
  from the legal maturity date and hedges have been structured accordingly. The
  tables do not purport to measure market risk exposure.

|                                                     | <
        1 year |  | 1-2
        years |  | 3-5
        years |  | Over
        5 |  | Non-      |  | Total        | 
|---------------------------------------------------- | ---------------- |  | ----------------- |  | ----------------- |  | -------------- |  | --------- |  | ------------ | 
|                                                     |                  |  |                   |  |                   |  | years          |  | interest  |  |              | 
|                                                     |                  |  |                   |  |                   |  |                |  | bearing   |  |              | 
|                                                     | £000             |  | £000              |  | £000              |  | £000           |  | £000      |  | £000         | 
|Cash
      and cash equivalents                      | 1,394,436        |  | -                 |  | -                 |  | -              |  | -         |  | 1,394,436    | 
|Loans
      and advances due from related
   parties | 12,813,042       |  | 747,099           |  | 1,101,300         |  | 50,630         |  | (342,019) |  | 14,370,052   | 
|Deferred
      tax assets                            | -                |  | -                 |  | -                 |  | -              |  | 7,436     |  | 7,436        | 
|Other
      assets                                   | -                |  | -                 |  | -                 |  | -              |  | 10,667    |  | 10,667       | 
|                                                     |                  |  |                   |  |                   |  |                |  |           |  |              | 
|Total
      assets                                   | 14,207,478       |  | 747,099           |  | 1,101,300         |  | 50,630         |  | (323,916) |  | 15,782,591   | 
|                                                     |                  |  |                   |  |                   |  |                |  |           |  |              | 
|                                                     |                  |  |                   |  |                   |  |                |  |           |  |              | 
|Loans
      due to group companies                   | (15,640,539)     |  | -                 |  | -                 |  | -              |  | -         |  | (15,640,539) | 
|Derivative
      financial instruments               | (26,253)         |  | -                 |  | -                 |  | -              |  | -         |  | (26,253)     | 
|Current
      tax liabilities                        | -                |  | -                 |  | -                 |  | -              |  | (20)      |  | (20)         | 
|Other
      liabilities                              | -                |  | -                 |  | -                 |  | -              |  | (132,859) |  | (132,859)    | 
|Total
      Liabilities                              | (15,666,792)     |  | -                 |  | -                 |  | -              |  | (132,879) |  | (15,799,671) | 
|                                                     |                  |  |                   |  |                   |  |                |  |           |  |              | 

Interest rate sensitivity

As a result of the interest
  rate swap the Companys total interest income and expenditure on financial
  assets and liabilities is based on the same rate of sterling LIBOR, it therefore
  has no material sensitivity to changes in interest rates.

---




Holmes Funding Limited

Notes to the Financial
  Statements

1. Accounting policies
  - continued

Liquidity risk

The table below analyses
  the Companys assets and liabilities into relevant maturity groupings based
  on the remaining period at balance sheet date to contractual maturity date:



|                                                     | Up
        to 1 |  | 1-3      |  | 3-12        |  | 1-5
        years |  | Over
        5 |  | Total        | 
|---------------------------------------------------- | --------------- |  | -------- |  | ----------- |  | ----------------- |  | -------------- |  | ------------ | 
|                                                     | month           |  | months   |  | months      |  |                   |  | years          |  |              | 
|Cash and cash equivalents                            | 1,394,436       |  | -        |  | -           |  | -                 |  | -              |  | 1,394,436    | 
|Loans and advances
      due from
   related parties | (135,356)       |  | (21,823) |  | 248,276     |  | 1,596,161         |  | 12,682,794     |  | 14,370,052   | 
|Deferred tax assets                                  | -               |  | -        |  | -           |  | -                 |  | 7,436          |  | 7,436        | 
|Other assets                                         | 527             |  | 975      |  | 4,194       |  | 4,971             |  | -              |  | 10,667       | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 
|Total assets                                         | 1,259,607       |  | (20,848) |  | 252,470     |  | 1,601,132         |  | 12,690,230     |  | 15,782,591   | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 
|Loans due to group
      companies                   | -               |  | -        |  | (1,017,901) |  | (3,997,096)       |  | (10,625,542)   |  | (15,640,539) | 
|Derivative financial
      instruments               | -               |  | -        |  | -           |  | -                 |  | (26,253)       |  | (26,253)     | 
|Current tax liabilities                              | -               |  | -        |  | (20)        |  | -                 |  | -              |  | (20)         | 
|Other liabilities                                    | (132,859)       |  | -        |  | -           |  | -                 |  | -              |  | (132,859)    | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 
|Total liabilities                                    | (132,859)       |  | -        |  | (1,017,921) |  | (3,997,096)       |  | (10,651,795)   |  | (15,799,671) | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 
|Net liquidity gap                                    | 1,126,748       |  | (20,848) |  | (765,451)   |  | (2,395,964)       |  | 2,055,784      |  | 269          | 
|                                                     |                 |  |          |  |             |  |                   |  |                |  |              | 

Credit risk

The maximum exposure to
  credit risk is the carrying amount of the Loans and advances due from related
  parties of £14,370,052,000. The loans and advances from related parties
  are secured on residential property in England and Wales.

Accounting for derivative
  financial instruments and hedging activities

The Company holds derivatives
  to hedge interest rate risk associated with the beneficial interest on the mortgage
  portfolio. These derivatives are held with Abbey National Treasury Services
  plc, a related party, and require the Company to pay a weighted average of the
  mortgage interest earned on the beneficial interest in the mortgage portfolio
  and receive payments based on a rate linked to three month sterling LIBOR. These
  derivatives are held at fair value on the balance sheet.

Fair value estimation

Where quoted market prices
  are not available, a discounted cash flow model is used based on a current yield
  curve appropriate for the remaining term to maturity.

2. Business and geographical
  segments

All of the Companys
  income is derived from activities in the same business and geographical segment.
  There were no discontinued operations during the period.

3. Interest and similar
  income

|                                                            | Year
        ended 
        31 December |  | Year
        ended 
        31 December | 
|----------------------------------------------------------- | --------------------------------------- |  | --------------------------------------- | 
|                                                            | 2005                                    |  | 2004                                    | 
|                                                            | £000                                    |  | £000                                    | 
|Income
      from beneficial interest in mortgage portfolio | -                                       |  | 742,873                                 | 
|Interest
      receivable from related parties              | 592,444                                 |  | -                                       | 
|Swap
      interest receivable                              | 7,296                                   |  | (4,130)                                 | 
|Bank
      interest receivable                              | 81,350                                  |  | 65,925                                  | 
|                                                            |                                         |  |                                         | 
|Interest
      receivable                                   | 681,090                                 |  | 804,668                                 | 
|                                                            |                                         |  |                                         | 

In 2005 due to the transition
  to IFRS accounting and the replacement of the beneficial interest in the mortgage
  portfolio by the loans and advances due from Abbey National plc to the Company,
  the income previously due to the Company from the beneficial interest in the
  mortgage portfolio is replaced by interest receivable on the related party loan.

The mortgage portfolio
  is held on trust by Holmes Trustees Limited, a group undertaking for the benefit
  of Abbey National plc.

---




Holmes Funding Limited

Notes to the Financial
  Statements

4. Interest expense and
  similar charges

|                                                     | Year
        ended 
        31 December |  | Year
        ended 
        31 December | 
|---------------------------------------------------- | --------------------------------------- |  | --------------------------------------- | 
|                                                     | 2005                                    |  | 2004                                    | 
|                                                     | £000                                    |  | £000                                    | 
|Interest
      payable on loans from group companies | 667,587                                 |  | 749,606                                 | 
|Interest
      payable on start up loans             | 1,392                                   |  | 3,221                                   | 
|                                                     |                                         |  |                                         | 
|Interest
      payable                               | 668,979                                 |  | 752,827                                 | 
|                                                     |                                         |  |                                         | 

5. Other operating expenses

|                                      | Year
      ended 
      31 December |  | Year
      ended 
      31 December | 
|------------------------------------- | ----------------------------------- |  | ----------------------------------- | 
|                                      | 2005                                |  | 2004                                | 
|                                      | £000                                |  | £000                                | 
|Net
      loss on hedging derivatives | 34,642                              |  | -                                   | 
|                                      |                                     |  |                                     | 

6. Profit for the period

The profit for the period
  has been arrived at after charging:

|                                      | Year
      ended 
      31 December |  | Year
      ended 
      31 December | 
|------------------------------------- | ----------------------------------- |  | ----------------------------------- | 
|                                      | 2005                                |  | 2004                                | 
|                                      | £000                                |  | £000                                | 
|Net
      loss on hedging derivatives | 34,642                              |  | -                                   | 
|                                      |                                     |  |                                     | 

Auditors remuneration

Auditors remuneration
  for the current and previous years has been bourne by Abbey National plc, the
  controlling party of the Company.

The Company had no employees
  (2004: none) other than its Directors.

No emoluments were paid
  to the Directors by the Company during the year (2004: £nil)

7. Tax

|                            | Year
        ended |  | Year
        ended | 
|--------------------------- | ------------------ |  | ------------------ | 
|                            | 2005               |  | 2004               | 
|                            | £000               |  | £000               | 
|Current
      tax:          |                    |  |                    | 
|UK
      corporation tax    | (20)               |  | (22)               | 
|                            |                    |  |                    | 
|Deferred
      tax (note11) | 10,393             |  | (5,246)            | 
|                            |                    |  |                    | 
|                            | 10,373             |  | (5,268)            | 
|                            |                    |  |                    | 

Corporation tax is calculated
  at 30% (2004: 30%) of the estimated assessable profit for the year.

The charge for the year
  can be reconciled to the profit per the income statement as follows:

|                                                            | Year
        ended 2005 |  | Year
        ended 2004 | 
|----------------------------------------------------------- | ----------------------- |  | ----------------------- | 
|                                                            | £000                    |  | £000                    | 
|(Loss)/profit before
      tax                              | (34,577)                |  | 17,563                  | 
|                                                            |                         |  |                         | 
|Tax at the UK corporation
      tax rate of 30% (2004: 30%) | 10,373                  |  | (5,268)                 | 
|                                                            |                         |  |                         | 
|Tax expense and
      effective tax rate for the year       | 10,373                  |  | (5,268)                 | 
|                                                            |                         |  |                         | 



---




Holmes Funding Limited

Notes to the Financial
  Statements

8. Cash and cash equivalents

|                                     | 31
        December |  | 31
        December | 
|------------------------------------ | ------------------- |  | ------------------- | 
|                                     | 2005                |  | 2004                | 
|                                     | £000                |  | £000                | 
|Guaranteed
      Investment Contract | 1,326,844           |  | 2,050,263           | 
|Share
      of Trust cash            | 67,592              |  | 840,555             | 
|                                     |                     |  |                     | 
|                                     | 1,394,436           |  | 2,890,818           | 
|                                     |                     |  |                     | 

The Guaranteed Investment
  Contract pays interest based on LIBOR.

9. Beneficial interest
  in mortgage portfolio

|                                                           | 31
      December |  | 31
      December | 
|---------------------------------------------------------- | ----------------- |  | ----------------- | 
|                                                           | 2005              |  | 2004              | 
|Cost                                                       |                   |  |                   | 
|At
      1 January                                         | -                 |  | 13,364,715        | 
|Additions                                                  | -                 |  | 3,983,790         | 
|Capital
      repayments                                   | -                 |  | (4,174,679)       | 
|                                                           |                   |  |                   | 
|At
      31 December                                       | -                 |  | 13,173,826        | 
|                                                           |                   |  |                   | 
|                                                           |                   |  |                   | 
|Provisions:                                                |                   |  |                   | 
|At
      1 January                                         | -                 |  |                   | 
|General                                                    | -                 |  | 22,061            | 
|Specific                                                   | -                 |  | 676               | 
|Transfer
      from profit and loss account                | -                 |  | (17,362)          | 
|Irrecoverable
      amounts written back/(off)             | -                 |  | 81                | 
|                                                           |                   |  |                   | 
|At
      31 December                                       | -                 |  | 5,456             | 
|                                                           |                   |  |                   | 
|                                                           |                   |  |                   | 
|Being:                                                     |                   |  |                   | 
|General                                                    | -                 |  | 4,570             | 
|Specific                                                   | -                 |  | 886               | 
|                                                           |                   |  |                   | 
|                                                           | -                 |  | 5,456             | 
|Net
      book value:                                      |                   |  |                   | 
|                                                           |                   |  |                   | 
|At
      31 December                                       | -                 |  | 13,168,370        | 
|                                                           |                   |  |                   | 
|                                                           |                   |  |                   | 
|Repayable:                                                 |                   |  |                   | 
|On
      demand or at short notice                         | -                 |  | 46,164            | 
|In
      not more than three months                        | -                 |  | 15,145            | 
|In
      more than three months but not more than one year | -                 |  | 229,763           | 
|In
      more than one year but not more than five years   | -                 |  | 1,458,608         | 
|In
      more than five years                              | -                 |  | 11,424,146        | 
|                                                           |                   |  |                   | 
|At
      31 December                                       | -                 |  | 13,173,826        | 
|                                                           |                   |  |                   | 
|                                                           |                   |  |                   | 
|Fixed
      rate                                           | -                 |  | 2,784,954         | 
|Variable
      rate                                        | -                 |  | 10,388,872        | 
|Less
      provisions                                      | -                 |  | (5,456)           | 
|                                                           |                   |  |                   | 
|                                                           | -                 |  | 13,168,370        | 
|                                                           |                   |  |                   | 

The mortgage portfolio in
  which the Company legally holds a beneficial interest is held on trust for the
  Company and originator of the mortgage loans by Holmes Trustees Limited, a group
  undertaking. The Companys legal beneficial interest in the Trust mortgages
  held at 31 December 2005 amounted to £14,712,071,000. Observed provisions
  on the beneficial interest in the mortgage portfolio amounted to £2,180,000
  at 31 December 2005. IBNR provisions on the beneficial interest in the mortgage
  portfolio amounted to £4,332,000 at 31 December 2005.

During the year the company
  increased its legal interest in the Trust property in one tranche of £3,796,807,000,
  financed by a loan from Holmes Financing (No. 9) plc, a group company.

The mortgage loans are
  secured on residential property in England and Wales. At 31 December 2005 the
  total mortgage asset held on trust for the beneficiaries amounted to £28,691,079,898
  (2004: £28,987,230,878).

---




|Holmes Funding Limited                                     |                     |  |                     | 
|---------------------------------------------------------- | ------------------- |  | ------------------- | 
|                                                           |                     |  |                     | 
|Notes to the Financial
      Statements                    |                     |  |                     | 
|                                                           |                     |  |                     | 
|10. Loans and advances
      due from related parties      |                     |  |                     | 
|                                                           |                     |  |                     | 
|                                                           | 31
        December |  | 31
        December | 
|                                                           | 2005                |  | 2004                | 
|                                                           | £000                |  | £000                | 
|                                                           |                     |  |                     | 
|Loans
      and advances due from related parties          | 14,370,052          |  | -                   | 
|                                                           |                     |  |                     | 
|                                                           | 14,370,052          |  | -                   | 
|                                                           |                     |  |                     | 
|                                                           |                     |  |                     | 
|                                                           |                     |  |                     | 
|                                                           | 31
        December |  | 31
        December | 
|                                                           | 2005                |  | 2004                | 
|                                                           | £000                |  | £000                | 
|Repayable:                                                 |                     |  |                     | 
|On
      demand or at short notice                         | (135,356)           |  | -                   | 
|In
      not more than three months                        | (21,823)            |  | -                   | 
|In
      more than three months but not more than one year | 248,276             |  | -                   | 
|In
      more than one year but not more than five years   | 1,596,161           |  | -                   | 
|In
      more than five years                              | 12,682,794          |  | -                   | 
|                                                           |                     |  |                     | 
|                                                           | 14,370,052          |  | -                   | 
|                                                           |                     |  |                     | 



Loans and advances due
  from related parties represents an intercompany loan, generated as a result
  of the beneficial interest in the mortgage portfolio failing the derecognition
  criteria described in IAS 39. The intercompany loan replaces the beneficial
  interest in the mortgage portfolio legally held by the company, and represents
  the substance of the transaction for accounting purposes.

If the derecognition criteria
  had been met the company would have shown a beneficial interest in a mortgage
  portfolio of £14,712,071,000 as at 31 December 2005 all of which are secured
  on residential property.

The loans and advances
  due from related parties are all designated in sterling and are either non interest
  bearing, at fixed rates or at variable rates of interest, based on the standard
  variable rate of the administrator, Abbey National plc.

The fair value of the loans
  and advances due from related parties at 31 December 2005 was £14,573,830,089.

|11. Deferred Tax
      Asset                                  |                    |  |                    | 
|------------------------------------------------------------- | ------------------ |  | ------------------ | 
|                                                              |                    |  |                    | 
|The movement on the
      deferred tax account is as follows: |                    |  |                    | 
|                                                              |                    |  |                    | 
|                                                              | Year
        ended |  | Year
        ended | 
|                                                              | 2005               |  | 2004               | 
|                                                              | £                  |  | £                  | 
|Current
      tax:                                            |                    |  |                    | 
|At
      1 January                                            | 1,372              |  | 6,618              | 
|Tax
      effect of prospective IFRS adjustments              | (4,329)            |  | -                  | 
|Income
      statement credit                                 | 10,393             |  | (5,246)            | 
|                                                              |                    |  |                    | 
|At
      31 December                                          | 7,436              |  | 1,372              | 
|                                                              |                    |  |                    | 



The deferred tax asset
  arises as a result of the Company being taxed under the special regime for securitisation
  companies in Finance Act, 2005.

12. Other assets

|             | 31
        December |  | 31
        December | 
|------------ | ------------------- |  | ------------------- | 
|             | 2005                |  | 2004                | 
|             | £000                |  | £000                | 
|             |                     |  |                     | 
|Other assets | 10,667              |  | 27,670              | 
|             |                     |  |                     | 
|             | 10,667              |  | 27,670              | 
|             |                     |  |                     | 

The carrying amount of
  other assets approximates to their fair value.

Other assets due after
  one year at 31 December 2005 total £4,971,000 (2004: £14,637,000)

---




|Holmes Funding Limited                           |                     |  |                     | 
|------------------------------------------------ | ------------------- |  | ------------------- | 
|                                                 |                     |  |                     | 
|Notes to the Financial
      Statements          |                     |  |                     | 
|                                                 |                     |  |                     | 
|13. Loans from group
      undertakings          |                     |  |                     | 
|                                                 |                     |  |                     | 
|                                                 |                     |  |                     | 
|                                                 | 31
        December |  | 31
        December | 
|                                                 | 2005                |  | 2004                | 
|                                                 | £000                |  | £000                | 
|                                                 |                     |  |                     | 
|Loans
      from group undertakings              | 15,640,539          |  | 15,510,323          | 
|                                                 |                     |  |                     | 
|These
      borrowings are repayable as follows: |                     |  |                     | 
|Less
      than one year                         | 1,017,901           |  | 1,001,462           | 
|Due
      two to five years                      | 3,997,096           |  | 5,623,173           | 
|Due
      over five years                        | 10,625,542          |  | 8,885,688           | 
|                                                 |                     |  |                     | 
|                                                 | 15,640,539          |  | 15,510,323          | 
|                                                 |                     |  |                     | 

Interest payable on the
  loans from group undertakings is based on LIBOR.

The carrying amount of
  loans from group undertakings approximates to their fair value.

14. Derivative Financial
  Instruments

The company holds derivatives
  to hedge interest rate risk associated with the beneficial interest on the mortgage
  portfolio. These derivatives are held with Abbey National Treasury Services
  plc, a related party, and require the company to pay a weighted average of the
  mortgage interest earned on the beneficial interest in the mortgage portfolio
  and receive payments based on a rate linked to three month sterling LIBOR. The
  derivatives are held at fair value on the balance sheet and any gains and losses
  taken to the income statement.

|15. Other liabilities                             |                     |  |                     | 
|------------------------------------------------- | ------------------- |  | ------------------- | 
|                                                  |                     |  |                     | 
|                                                  | 31
        December |  | 31
        December | 
|                                                  | 2005                |  | 2004                | 
|                                                  | £000                |  | £000                | 
|                                                  |                     |  |                     | 
|Amounts
      due to related parties              | -                   |  | 403,205             | 
|Amounts
      due to group companies              | 39                  |  | 39                  | 
|Accrued
      interest payable to group companies | 131,262             |  | 177,273             | 
|Other
      liabilities                           | 1,558               |  | 343                 | 
|                                                  |                     |  |                     | 
|                                                  | 132,859             |  | 580,860             | 
|                                                  |                     |  |                     | 
|                                                  |                     |  |                     | 
|The amounts are repayable
      as follows:       |                     |  |                     | 
|                                                  |                     |  |                     | 
|                                                  | 31
        December |  | 31
        December | 
|                                                  | 2005                |  | 2004                | 
|                                                  | £000                |  | £000                | 
|                                                  |                     |  |                     | 
|Less
      than 1 year                            | 132,820             |  | 177,655             | 
|2
      to 5 years                                | -                   |  | -                   | 
|Over
      5 years                                | 39                  |  | 403,205             | 
|                                                  |                     |  |                     | 
|                                                  | 132,859             |  | 580,860             | 
|                                                  |                     |  |                     | 

Included in amounts due
  to related parties is the start up loan balance 2005: £nil (2004: £33,980,000).
  Interest payable on the start up loans is based on LIBOR, all other balances
  are non interest bearing. Amounts due over 5 years are paid in order of priority
  when cash is available after other commitments have been met.

The carrying amounts of
  the other liabilities approximates to their fair value.

---




|Holmes Funding Limited                                               |                     |  |                     | 
|-------------------------------------------------------------------- | ------------------- |  | ------------------- | 
|                                                                     |                     |  |                     | 
|Notes to the Financial
      Statements                              |                     |  |                     | 
|                                                                     |                     |  |                     | 
|16. Share capital                                                    |                     |  |                     | 
|                                                                     | 31
        December |  | 31
        December | 
|                                                                     | 2005                |  | 2004                | 
|                                                                     | £                   |  | £                   | 
|Authorised:                                                          |                     |  |                     | 
|100
      Ordinary shares of £1 each                                 | 100                 |  | 100                 | 
|                                                                     |                     |  |                     | 
|Issued
      and fully paid:                                         |                     |  |                     | 
|2
      Ordinary shares of £1 each                                   | 2                   |  | 2                   | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  |                     | 
|17. Retained earnings                                                |                     |  |                     | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  | £000                | 
|                                                                     |                     |  |                     | 
|Balance
      at 1 January 2004                                      |                     |  | (15,270)            | 
|Net
      profit for the year                                        |                     |  | 12,295              | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  | (2,975)             | 
|IFRS
      1 prospective adjustment:                                 |                     |  |                     | 
|Derivative
      fair value movement                                 |                     |  | 9,856               | 
|Change
      in basis of amortisation of deferred start up costs     |                     |  | (10,394)            | 
|Change
      in basis of provisions valuation                        |                     |  | 1,789               | 
|Deferred
      consideration on provisions                           |                     |  |                     | 
|and
      change of basis of amortisation of deferred start up costs |                     |  | 13,177              | 
|Deferred
      tax on change in provisions                           |                     |  | (4,329)             | 
|                                                                     |                     |  |                     | 
|Effect
      of transition to IFRS                                   |                     |  | 10,099              | 
|                                                                     |                     |  |                     | 
|Balance
      at 1 January 2005                                      |                     |  | 7,124               | 
|Net
      loss for the year                                          |                     |  | (24,204)            | 
|                                                                     |                     |  |                     | 
|Balance
      at 31 December 2005                                    |                     |  | (17,080)            | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  |                     | 
|                                                                     |                     |  |                     | 
|18. Notes to the
      cash flow statement                           |                     |  |                     | 
|                                                                     |                     |  |                     | 
|                                                                     | Year
      ended 31 |  | Year
      ended 31 | 
|                                                                     | December
      2005 |  | December
      2004 | 
|                                                                     | £000                |  | £000                | 
|                                                                     |                     |  |                     | 
|(Loss)/profit
      from operations                                  | (34,577)            |  | 17,563              | 
|                                                                     |                     |  |                     | 
|Adjustments
      for:                                               |                     |  |                     | 
|Losses
      on derivatives                                          | 34,642              |  | -                   | 
|Movement
      in provisions                                         | 2,844               |  | (17,281)            | 
|Interest
      payable                                               | 668,979             |  | 749,606             | 
|Interest
      receivable                                            | 112,743             |  | -                   | 
|                                                                     |                     |  |                     | 
|Net
      profit before working capital changes                      | 784,631             |  | 749,888             | 
|                                                                     |                     |  |                     | 





---




Holmes Funding Limited

Notes to the Financial
  Statements

19. Related party transactions

The related party disclosures
  in this note apply to related parties, which comprise the following entities
  and individuals:

Abbey National plc, the
  controlling partyWilmington Trust SP Services
  (London) Limited, a corporate director 
  Holmes Financing (No. 1) plc, a group company 
  Holmes Financing (No. 2) plc, a group company 
  Holmes Financing (No. 3) plc, a group company 
  Holmes Financing (No. 4) plc, a group company 
  Holmes Financing (No. 5) plc, a group company 
  Holmes Financing (No. 6) plc, a group company 
  Holmes Financing (No. 7) plc, a group company 
  Holmes Financing (No. 8) plc, a group company 
  Holmes Financing (No. 9) plc, a group company

Trading transactions

During the year, the LLP
  entered into the following transactions with related parties who are members
  of the group:



|                                                    | Interest   |  | Interest |  | Fees    |  | Amounts         |  | Amounts         | 
|--------------------------------------------------- | ---------- |  | -------- |  | ------- |  | --------------- |  | --------------- | 
|                                                    | receivable |  | payable  |  | payable |  | owed
        by |  | owed
        to | 
|                                                    |            |  |          |  |         |  | related         |  | related         | 
|                                                    |            |  |          |  |         |  | parties         |  | parties         | 
|                                                    | 2005       |  | 2005     |  | 2005    |  | 2005            |  | 2005            | 
|                                                    | £000       |  | £000     |  | £000    |  | £000            |  | £000            | 
|                                                    |            |  |          |  |         |  |                 |  |                 | 
|Abbey National plc                                  | 592,444    |  | -        |  | 1,293   |  | 15,764,488      |  |                 | 
|Wilmington Trust SP
      Services (London) Limited | -          |  | -        |  | 113     |  | -               |  |                 | 
|Holmes Financing (No.
      1) plc                  | -          |  | 66,524   |  | -       |  | -               |  | 913,307         | 
|Holmes Financing (No.
      2) plc                  | -          |  | 43,572   |  | -       |  | -               |  | 760,341         | 
|Holmes Financing (No.
      3) plc                  | -          |  | 30,648   |  | -       |  | -               |  | 551,593         | 
|Holmes Financing (No.
      4) plc                  | -          |  | 93,366   |  | -       |  | -               |  | 1,854,709       | 
|Holmes Financing (No.
      5) plc                  | -          |  | 48,685   |  | -       |  | -               |  | 965,221         | 
|Holmes Financing (No.
      6) plc                  | -          |  | 119,818  |  | -       |  | -               |  | 2,098,514       | 
|Holmes Financing (No.
      7) plc                  | -          |  | 94,589   |  | -       |  | -               |  | 1,901,105       | 
|Holmes Financing (No.
      8) plc                  | -          |  | 159,153  |  | -       |  | -               |  | 2,919,011       | 
|Holmes Financing (No.
      9) plc                  | -          |  | 11,232   |  | -       |  | -               |  | 3,808,039       | 
|                                                    |            |  |          |  |         |  |                 |  |                 | 

There were no related party
  transactions during the year, or existing at the balance sheet date, with the
  company or parent companys key management personnel.

20. Parent undertaking
  and controlling party

The immediate parent of
  the Company is Holmes Holdings Limited, a company incorporated in Great Britain
  and registered in England and Wales.

Wilmington Trust SP Services
  (London) Limited, a company incorporated in Great Britain and registered in
  England and Wales holds all of the shares in the Company (one jointly with M
  McDermott as nominee) as trustee under a discretionary charitable trust dated
  17 February 1999 for the benefit of nurses employed in the UK and for charities.

The controlling party of
  the Company is Abbey National plc, a company incorporated in Great Britain and
  registered in England and Wales.

The controlling party is
  Banco Santander Central Hispano S.A., a company incorporated in Spain. Banco
  Santander Central Hispano, S.A. is the parent undertaking of the largest group
  of undertakings for which group accounts are drawn up and of which the company
  is included. Abbey National plc is the controlling party of the smallest group
  of undertakings for which the group accounts are drawn up and of which the Company
  is included.

Copies of all sets of group
  accounts, which include the results of the Company, are available from Abbey
  National Secretariat, Abbey National House, 2 Triton Square, Regents Place,
  London, NW1 3AN.

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Holmes Funding Limited

Notes to the Financial
  Statements

21. Explanation of transition
  to IFRSs

Holmes Funding Limited
  has chosen to prepare accounts in accordance with IFRSs for the year ended 31
  December 2005.

Up to 31 December 2004,
  the Group prepared its financial statements in accordance with UK Generally
  Accepted Accounting Principals (UK GAAP").

Key standards IAS 32 Financial
  Instruments: Disclosure and Presentation, IAS 39 Financial Instruments:
  Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures
  have been applied prospectively from 1 January 2005. All other standards are
  required to be applied retrospectively.

No reconciliation of profit
  attributable to shareholders, shareholders funds, income statement or balance
  sheet under IFRS for the year to 31 December 2004 has been presented as all
  applicable IFRS adjustments have only been applied prospectively.

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