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 THE
        TRANSITION PERIOD FROM N/A TO N/A                                                           
|     |  |                                                                                                             
|     |  | Commission
        file number:333-14002                                                                    
|     |  |                                                                                                             

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|                                                             |                                 |                                
|------------------------------------------------------------ | ------------------------------- | -------------------------------
|Holmes
      Financing (No. 5) 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)              
|                                                             |                                 |                                

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

|Title of each class                                                     | Name
      of each exchange 
      on which registered
|----------------------------------------------------------------------- | ------------------------------------------------------
|$35,000,000
      Series 2 Class B Asset Backed Floating Rate Notes (1) | None                                                  
|$52,000,000 Series
      2 Class C Asset Backed Floating Rate Notes (1) | None                                                  
|$24,500,000 Series
      2 Term AA Advance (2)                          | None                                                  
|£36,500,000
      Series 2 Term BBB Advance (2)                         | None                                                  
|Funding Interest
      in the Mortgages Trust (3)                       | None                                                  
|                                                                        |                                                       

|(1) | Holmes Financing
      (No. 5) PLC is the registrant for the Series 2 Issuer Notes.                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Holmes Funding
      Limited is the registrant for the Term Advances, and has issued those term
      advances to Holmes Financing (No.5)PLC. The Term Advances are the primary source of payments on the Series
      2 Issuer Notes.
|(3) | Holmes Trustees
      Limited is the registrant for the Funding Interest in the Mortgages Trust
      and is holding the Funding Interest on behalf of Holmes Funding Limited.                                                        

Indicate by
  check mark 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 17       
  Item 18 Financial
  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                                             | 29  
|Item
      5.                                         | Operating
      and Financial Review and Prospects                           | 30  
|Item
      6.                                         | Directors,
      Senior Management and Employees                             | 31  
|Item
      7.                                         | Major
      Shareholders and Related Party Transactions                      | 32  
|Item
      8.                                         | Financial
      Information                                                  | 33  
|Item
      9.                                         | The
      Listing                                                            | 33  
|Item
      10.                                        | Additional
      Information                                                 | 33  
|Item
      11.                                        | Quantitative
      and Qualitative Disclosures About Market Risk             | 39  
|Item
      12.                                        | Description
      of Securities Other Than Equity Securities                 | 39  
|                                                      |                                                                              |     
|PART
        II                                       |                                                                             
|Item
      13.                                        | Defaults,
      Dividend Arrearages and Delinquencies                        | 39  
|Item
      14.                                        | Material
      Modifications to the Rights of Security Holders               | 39  
|Item
      15.                                        | Controls
      and Procedures                                                | 39  
|Item
      16A                                        | Audit
      Committee Financial Expert                                       | 39  
|Item
      16B.                                       | Code
      of Ethics                                                         | 39  
|Item
      16C.                                       | Principal
      Accountant Fees and Services                                 | 39  
|Item
      16D.                                       | Exemptions
      from the Listing Standards for Audit Committees             | 39  
|Item
      16E.                                       | Purchases
      of Equity Securities by the Issuer and Affiliated Purchasers | 39  
|Item
      17.                                        | Financial
      Statements                                                   | 40  
|Item
      18.                                        | Financial
      Statements                                                   | 40  
|                                                      |                                                                              |     
|PART
        III                                      |                                                                             
|Item
      19.                                        | Exhibits                                                                     | 40  

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PRESENTATION OF INFORMATION

This Annual Report on Form
  20-F relates to Holmes Financing (No. 5) PLC (the Issuer) and the
  following securities (the Issuer Notes), which were issued pursuant
  to a trust deed dated November 8, 2001 (the Issuer Trust Deed),
  between the Issuer and The Chase Manhattan Bank, London Branch, as note trustee
  (the Note Trustee):

|• | $35,000,000 Series 2
      Class B Asset Backed Floating Rate Notes Due July 2040
|- | ---------------------------------------------------------------------------------
|• | $52,000,000 Series 2
      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 November 8, 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:

|• | £24,500,000 Series
      2 Term AA Advance 
|- | -------------------------------------------
|• | £36,500,000 Series
      2 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 beneficiaries. The alternative accounts are accounts into
  which payments by some mortgage borrowers are paid initially.

Capitalized terms used
  herein and not defined have the same meaning ascribed to such terms in the Registration
  Statement on Form S-11 relating to the securities (file number 333-14002).

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:

|•                                                                                       | Certificate Relating
      to Financial Information pursuant to the First Issuer Trust Deed dated April
      30, 2005.
|--------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------
|                                                                                        |                                                                                                                        
|The following
      documents are filed as exhibits to this Annual Report on Form 20-F:
|                                                                                        |                                                                                                                        
|•                                                                                       | Report and Accounts for
      Holmes Financing (No. 5) PLC for the year ended December 31, 2004.                       
|                                                                                        |                                                                                                                        
|•                                                                                       | Report and Accounts for
      Holmes Funding Limited for the year ended December 31, 2004.                             
|                                                                                        |                                                                                                                        
|•                                                                                       | Report and Accounts for
      Holmes Trustees Limited for the year ended December 31, 2004.                            

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, Credit Suisse First Boston Corporation, Salomon Smith
  Barney Inc., Lehman Brothers Inc., 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:

|• | 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;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                               

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

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

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 A advances will be extinguished, which would cause
  a loss on the class B notes and the class M 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 A 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 A advances (after
  paying amounts of a higher order of priority as required by the Funding priority
  of payments).

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.

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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
  M 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.

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

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

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

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

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.

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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 principal
  repayments due on a new term AA advance. This principle is subject to a number
  of exceptions, however, which are designed primarily to provide some protection
  that scheduled repayments of principal on the issuer term advances will not
  materially affect payments of principal on the previous term advances and in
  turn would not be materially affected by payments of principal on any new term
  advances.

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

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

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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 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 startup loan
  agreements with the start-up loan provider and the security trustee. Funding
  used part of the proceeds of these start-up loans to fund the first reserve
  fund.

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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 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

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

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

The rate of prepayment of loans is influenced by a wide variety of economic, social and other factors, including prevailing mortgage market interest rates, the availability of alternative financing programs, local and regional economic conditions and homeowner mobility. For instance, prepayments on the loans may be due to borrowers refinancing their loans and sales of properties by borrowers (either voluntarily or as a result of enforcement action taken). In addition, if the seller is required to repurchase a loan or loans under a mortgage account and their related security because, for example, one of the loans does not comply with the loan warranties in the mortgage sale agreement, then the payment received by Trustees will have the same effect as a prepayment of all of the loans under the mortgage account. Because these factors are not within its control or the control of Funding or Trustees, the Issuer cannot give any assurances as to the level of prepayments that the portfolio may experience.

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

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

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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.

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;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 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:

| | 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 the Issuer 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 Holmes Financing (No. 4) PLC until that series 2 term AAA advance
    is fully repaid;                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                 
| | then, the series 3A1 term AAA advance
    made by the Issuer 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 Holmes Financing
    (No. 4) PLC, until all of those term AAA advances are fully repaid;
| |                                                                                                                                                                                                                                                                                                                                                                 
| | then, the series 3 term AAA advances
        made by Holmes Financing (No. 1) PLC until those series 3 term AAA advances
    are fully repaid;                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                 
| | then, the series 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 Holmes Financing (No. 4) PLC until that series 1 term AAA advance
    is fully repaid;                                                                                                                                                                                                                      

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| | 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 Holmes Financing
        (No. 4) PLC, the series 3A2 term AAA advance made by the Issuer, 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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;
|- | ----------------------------------------------------------------------------------

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|• | 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 principal amount of loans comprised
    in the trust property in any interest period; or
|  |                                                                                                                                                                                                                                                                   
|• | any variation in the frequency with which the
    interest payable in respect of the loan is 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

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.

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
        principal deficiency 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 principal deficiency 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

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|• | 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 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 2 Issuer Notes
  may be subject to risk if the trust property deteriorates

If the loans comprising the trust property do not perform as expected, then the series 2 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 the Issuer Notes

Investors will pay for the Issuer Notes (other than the Series 2 class A2 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 Issuer Notes (other than the Series 2 class A2 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.

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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 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
  A2 issuer Swiss franc currency swap provider and the series 3 class Al issuer
  euro 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 2A2
    term AAA advance and the issuer series 3A1 term AAA advance. On each interest
    payment date in relation to the Issuers obligations under the issuer
    Swiss franc currency swap in relation to the series 2 class A2 Issuer Notes
    and the issuer euro currency swap in relation to the series 3 class Al Issuer
    Notes the Issuer will pay the interest received from Funding to, as applicable,
    the series 2 class A2 issuer Swiss franc currency swap provider and the series
    3 class Al issuer euro 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 from the relevant
    issuer currency swap provider on the interest payment date in respect of
    the series 2 class A2 Issuer Notes or the series 3 class Al Issuer Notes,
    as applicable. These interest payment dates occur annually up to and including
    the earliest of (i) the interest payment dates falling in October 2004 and
    October 2006, respectively, (ii) the occurrence of a trigger event or (iii)
    enforcement of the issuer security, and quarterly on and following the interest
    payment date occurring immediately thereafter.

If the series 2 class A2
    issuer Swiss franc currency swap provider and/or the series 3 class Al issuer
    euro 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
    Notes 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 Swiss franc currency swap and the issuer euro currency swap in respect of the series 3 class Al Issuer Notes may affect the Issuers
    ability to make payments on the Issuer Notes 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

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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 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.

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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.

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:

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|• | 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 final repayment 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 principal amount 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.                                                                                                                                                                                                                                                                                                                                                                                                                                   

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.

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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 another source, such as ISAs, pension policies,
    personal equity plans or endowment policies, as well as the financial condition
    of the borrower, tax laws and general economic conditions at the time. There
    can be no assurance that the borrower will have the funds required to repay
    the principal at the end of the term. If a borrower cannot repay the loan
    and a loss occurs on the loan, then this may affect repayments of principal
    on the Issuer Notes if that loss cannot be cured by amounts standing to the
    credit of the first reserve fund or the application of excess Funding available
    revenue receipts.

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

The sale by the seller to Trustees of the mortgages has taken effect, and any such sale in the future will take effect, in equity only. 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.                                                                                           

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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.

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.

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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 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

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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 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;
|--- | ---------------------------------------------------------------------------------------------------------------
|    |                                                                                                                

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|(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.

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

There has been significant
  opposition from the European Parliament to the original form of the proposed
  directive. On 13 February 2004, the Committee of Legal Affairs and the Internal
  Market published the European Parliament's amendments to the proposed draft.
  These amendments included excluding any credit agreement secured by a mortgage
  on land. On 20 April 2004 the European

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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

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

|• | a borrower may challenge
        a term in an agreement on the basis that it is an unfair term
    within the regulations and therefore not binding on the borrower; and                                                                 
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                            
|• | the Office of Fair Trading,
        the Financial Services Authority and any other qualifying body (as
        defined in the regulations) may seek to prevent a business from using
        or recommending
    the use of unfair terms.

The regulations will not
    generally affect individually negotiated or core terms which
    set out the main subject- matter of the contract, such as the borrower's
    obligation to repay the principal.
    However, they may affect terms that are not considered to be core terms,
    such as the right of the lender to vary the interest rate.

For example, if a term
  permitting a lender to vary the interest rate (as the 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 simplify the legislation on unfair terms. It
  is not proposed that there should be any significant increase in the extent
  of controls over terms in consumer contracts. Some changes are proposed, however,
  such as that the legislation should not affect core terms in so far as they
  are not substantially different from what the borrower should reasonably expect
  and are transparent. However, it is not obligatory for any of the Law Commission's
  reports to be considered for enactment as legislation by the UK government.
  It is therefore too early to tell how the proposals, if enacted, would affect
  the loans.

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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.

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

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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 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).

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

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

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

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

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

Capital Adequacy

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

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

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

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 November 8, 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 November 8, 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 Management Limited 
|                       | Tower 42               |                                                  
|                       | 25 Old Broad Street    |                                                  
|                       | London EC2N 1HQ        |                                                  
|                       |                        |                                                  
|SPV Management Limited | SPV Management Limited | Management of special purpose companies          
|                       | Tower 42               |                                                  
|                       | 25 Old Broad Street    |                                                  
|                       | London EC2N 1HQ        |                                                  
|                       |                        |                                                  
|David Green            | Abbey National House   | Finance Director, Banking, Abbey
    National plc
|                       | 2 Triton Square        |                                                  
|                       | Regents
    Place     |                                                  
|                       | London NW1 3AN         |                                                  
|                       |                        |                                                  
|Funding                |                        |                                                  
|                       |                        |                                                  
|Name                   | Business
      Address | Business
      Occupation                        
|                       |                        |                                                  
|Martin McDermott       | SPV Management Limited | Executive Director of SPV Management
    Limited 
|                       | Tower 42               |                                                  
|                       | 25 Old Broad Street    |                                                  
|                       | London EC2N 1HQ        |                                                  
|                       |                        |                                                  
|SPV Management Limited | SPV Management Limited | Management of special purpose companies          
|                       | Tower 42               |                                                  
|                       | 25 Old Broad Street    |                                                  
|                       | London EC2N 1HQ        |                                                  
|                       |                        |                                                  
|David Green            | Abbey National House   | Finance Director, Banking, Abbey
    National plc
|                       | 2 Triton Square        |                                                  
|                       | Regents
    Place     |                                                  
|                       | London NW1 3AN         |                                                  
|                       |                        |                                                  
|Trustees               |                        |                                                  
|                       |                        |                                                  
|Name                   | Business
      Address | Business
      Occupation                        
|                       |                        |                                                  
|Martin McDermott       | SPV Management Limited | Executive Director of SPV Management
    Limited 
|                       | Tower 42               |                                                  
|                       | 25 Old Broad Street    |                                                  
|                       | London EC2N 1HQ        |                                                  

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|SPV Management Limited | SPV Management Limited | Management of special purpose companies      
|---------------------- | ---------------------- | ---------------------------------------------
|                       | Tower 42               |                                              
|                       | 25 Old Broad Street    |                                              
|                       | London EC2N 1HQ        |                                              
|                       |                        |                                              
|David Green            | Abbey National House   | Finance Director, Banking, Abbey National plc
|                       | 2 Triton Square        |                                              
|                       | 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.

C.INTERESTS OF EXPERTS AND COUNSEL

Not applicable to annual
  reports on Form 20-F.

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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 November 8, 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.

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 333-14002).

D. EXCHANGE CONTROLS

None.

E. TAXATION

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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 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).

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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 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.

For holders within the charge to UK corporation tax (other than authorised unit trusts and investment trusts), the series 2 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 exchange rate, as appropriate, during each such

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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 2 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 2 Issuer Notes will constitute variable rate Issuer Notes
    for this purpose. For the avoidance of doubt, references to Trustees in
    this paragraph are to Holmes Trustees Limited only.

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.

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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 2 class B Issuer Notes and series 2 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 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

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preferential treatment
  for net long-term capital gains. The ability of US holders to offset capital
  losses against ordinary income is limited.

Market Discount
  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 U.S. Internal Revenue
    Service could possibly seek to characterize the series 2 class B Issuer Notes
    and the series 2 class C Issuer Notes as ownership interests in the issuer
    series 2 term AA advance and the issuer series 2 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 regulations applied, then a US holder may be considered to recognize gain or loss as if the holder had sold for fair market value his interest in the related advance. Moreover, for periods following such termination, the integration rules would no longer apply to the related advance except in the discretion of the US Internal Revenue Service.

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

F. DIVIDENDS AND
  PAYING AGENTS

Not applicable to annual
  reports on Form 20-F.

G.  STATEMENT BY
  EXPERTS

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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

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.

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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 333-14002).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                           
|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 333-14002).                                        
|    |                                                                                                                                                                                                                                                           
|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).                                                                                           
|    |                                                                                                                                                                                                                                                           
|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).                                                                               

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|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 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).
|    |                                                                                                                                                                                                           
|21. | Exhibit 10.19: Report and Accounts for Holmes Financing (No. 5) 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. 5) 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 333-14002).
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                               
|• | 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 333-14002).                                        
|  |                                                                                                                                                                                                                                                                               
|• | 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 filed 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. 5) 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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